Despite elevated 10-year Treasury yields, commercial real estate investment activity is proceeding at a robust pace, with CBRE maintaining its projection for 10% annual growth in investment volume. The office sector is anticipated to post the strongest gains, with investment volume expected to rise by 19% for the year.
Capitalization rates have demonstrated stability in the face of bond market volatility, with only modest compression anticipated in select sectors—less than previously forecasted. “We believe that returns will largely be income driven this cycle as long-term interest rates remain elevated,” CBRE reported, emphasizing the importance of disciplined underwriting and asset management.
According to CBRE, the new tax and spending law generally strengthens commercial real estate fundamentals, supporting investment activity through business and consumer incentives, deductions, credits and favorable tax treatment. These policies reinforce the outlook for healthy property market fundamentals and sustained deal activity for the remainder of the year.
The firm also cautions that unresolved trade policy could weigh on growth and inflation more than initially anticipated. Greater clarity on tariffs may help lift investment volume. “With continued growth and healthy fundamentals, investors can realize the best returns of the cycle by acquiring assets in the coming quarters, as is historically the case just after a peak in cap rates,” CBRE noted. Looking ahead, cap rates are expected to remain largely stable, though rising government deficits could push Treasury yields higher and slow investment sales activity.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.