The Real Estate Roundtable’s Sentiment Index for 3Q 2025 is out, and it shows an improvement over the second quarter in how senior executives view overall CRE conditions, asset values and access to capital.
“Participants expect modest, sector-led growth, yet acknowledge lingering headwinds for weaker property types,” the report commented.
The index’s score for overall market conditions rose 13 points to 67 between the second and third quarters, and 73 % of respondents expected improvement to continue over the coming year. Specifically, 10% thought the current environment is less favorable than a year ago, 56% saw an improvement and 34% saw no change. The Current Index (now 63) and the Future Index (now 71) also recorded 13-point improvements.
Each score was also up compared to the previous year by two, one and three points respectively. The belief that operating conditions have largely stabilized with firming occupancy and demand and values that appear to have bottomed, providing a boost to the Future Index.
For the year ahead, 13% of respondents expected general conditions to be much better, 60% saw them somewhat better, 24% about the same and 3% somewhat worse.
The report showed, however, that expectations and reality may not match. In 3Q 2024, 70% of respondents expected a bounce in general market conditions over the year ahead, while in 3Q 2025, only 56% believed it happened.
There were also indications of interest in markets outside the U.S. “Investors are starting to look towards Europe, as living assets have been hot and the office sector is hotter than the U.S.,” one respondent noted. “Global investors are cautious now, and some are reallocating away from the U.S., said another.
In the U.S., one respondent identified multifamily and industrial as standout sectors. However, another said, “industrial is working through an overall oversupply issue – a classic real estate cycle – and now no one wants to buy vacancy.” Others said multifamily depended on the submarket, with some overbuilt, but it is still better “even in the toughest markets” than office. New York City office was the exception and was “doing extremely well," according to the report. Strip retail around large residential areas was said to be performing well.
“Data centers continue to be attractive, and people feel good about the asset class. However, there will be issues, like power costs, and investors don’t fully grasp the operating nuances,” stated a respondent.
Other comments displayed continuing caution: “Most asset classes face headwinds; we are essentially holding our ground and concentrating on limiting downside risk,” said one.
There was also divergence about asset values. Half of respondents considered them unchanged from a year ago, but 32% saw an increase and 18% a decrease. Third quarter 2024 expectations for higher values in 3Q 2025 were not met. “We came into 2025 with a lot more optimism than we have right now,” a respondent admitted.
For the year ahead, however, 59% expect an improvement in asset values, 32% see stability, and just 9% anticipate a drop. Some identified a continuing bid-ask spread. Others noticed more competition for deals and more movement from auction to close.
Views on capital availability vary according to whether it is equity or debt. Debt capital has risen 65% since last year, with 48% expecting it to improve, while 55% predict equity will be more available.
“There is a growing disconnect between debt and equity providers. Fundamentals seem to have found a floor, but from equity’s perspective, this will be a slow recovery, not a GFC-style boom,” said one respondent.
“Debt has come back and everyone is hungry,” said another. However, another noted that the high cost of debt still rules out some deals even with capital available and aggressive lenders.
“Fundraising is slow even for strong deals. Capital is dribbling back, and continuation vehicles are becoming the go-to solution for managers who need more time,” a respondent commented. Another noted an interest in loan-on-loan financing for better capital treatment -- a nontraditional lending arrangement where a lender provides financing to a different lender, which then uses such funds to provide loans to borrowers.
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