As U.S. tariff policy continues to create uncertainty, the future of commercial real estate values in 2025 has become a pressing question for investors and industry observers alike. A recent report by Invesco delves into this issue, drawing on the Federal Reserve’s April 2025 Senior Loan Officer Opinion Survey (SLOOS) to shed light on what lies ahead for the market.
As GlobeSt.com previously reported, U.S. banks ramped up CRE lending during the first quarter of 2025, while simultaneously easing their lending terms. This shift was not limited to commercial real estate; banks also relaxed policies for commercial and industrial loans, and reported stronger demand for both categories. Notably, more banks indicated they had eased rather than tightened underwriting standards for construction and land development loans, as well as loans secured by nonfarm nonresidential and multifamily residential structures.
Invesco interpreted the SLOOS findings as pointing to a “high probability” of rising property values in 2025. The firm paid close attention to the survey’s data collection period—from March 31 to April 11—which included April 2, dubbed “Liberation Day,” a time marked by heightened market volatility. Invesco reasoned that if the dramatic market swings had prompted banks to reconsider their lending intentions, this would have been reflected in the survey responses. However, the data told a different story: on a net basis, only 9% of banks reported tightening lending standards, a significant decrease from 20.2% in April 2024 and a dramatic drop from 67.4% in April 2023. While there was a slight uptick from January 2025’s 7.3%, the trend toward tighter standards remained far less pronounced than in previous years.
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The report also highlighted a strong historical relationship between SLOOS results and CRE capital value growth. From January 2000 to April 2025, there was a robust negative correlation of -0.79 between the net percentage of banks tightening CRE loan underwriting standards and the annual unlevered capital appreciation return of properties in NCREIF’s Open-End Diversified Core Equity (ODCE) index two quarters later. In simple terms, when banks loosened their lending standards, property values tended to rise, and when they tightened, values tended to fall. While correlation does not guarantee causation, Invesco noted that the relationship aligns with market logic.
Applying linear regression analysis to the most recent SLOOS data, Invesco projected that the 9% tightening figure suggests annual growth in CRE capital values will likely fall to around 3.9%—two quarters from now. The analysis further indicated a 69% probability of achieving this annual unlevered ODCE capital value growth, with a 95% confidence level.
As for Invesco Real Estate, it will take a “measured approach” in response to ongoing tariff-induced market volatility. The firm emphasized that private markets have the advantage of making decisions more deliberately, without succumbing to “emotional spikes” that can characterize public market reactions.
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