Early this year, CRE investors started hitting pause as economic and policy uncertainty soared. In its latest investor report, SitusAMC Insights said it expects this trend to intensify, noting investors' recommendations to hold increased six percentage points to 76% during the second quarter.
Investors surveyed by SitusAMC recommended holding for all property types, except neighborhood and community retail and all rental housing subtypes, including student housing, affordable housing, senior housing and apartments, which all remained a recommended buy. Suburban office was the only property type with a sell recommendation, according to SitusAMC’s report.
CRE and multifamily originations increased 48% quarter-over-quarter and 66% year-over-year during the second quarter, driven by increases in office, health care and industrial lending. Alternative lenders are the biggest players in the market and are becoming increasingly active as banks and life companies pull back amid regulatory constraints, according to the report.
Investors surveyed by SitusAMC list increasing capital availability and looser underwriting standards, even as deal activity continues to drop. The increase in availability was more pronounced for equity capital, while the decline in underwriting discipline was more prominent for debt.
“Investors in our survey overwhelmingly report that there is ample capital sitting on the sidelines and with tariffs being negotiated and uncertainty around interest rates abating, believe the CRE market has stabilized and is poised for growth,” said the report.
Despite a 10 bps decline in the second quarter, overall CRE total returns remained among the highest in three years, with apartments seeing five consecutive quarters of positive returns, according to NCREIF’s NPI Classic. Meanwhile, despite investor optimism, industrial performance and fundamentals were weak, with returns declining 30 bps to about 1%, the lowest over the past year. Retail had the strongest returns among the property types at 1.9%, and office returns nudged down slightly, though they remained positive, according to NCREIF. Office was the only property type with negative returns in the second quarter.
Overall CRE deal volume rose 6% in June to about $38 billion, the most active month for deal activity so far in 2025, although transaction volume was down 16% year-over-year and 20% from its eight-year average. Retail, multifamily and industrial all experienced double-digit gains in June, partially offset by an 18% decline in office activity and a nearly 47% decrease in hotel activity.
Property prices for overall CRE, as measured by MSCI Real Assets’ National All-Property CPPI, were essentially flat in June following four months of slight losses. Prices have declined 0.7% since June 2024 and 12% since the Fed began its aggressive interest rate policy in June 2022, said SitusAMC.
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