Archives for 2025

CRE Pricing Turns the Corner, but Recovery Remains Uneven

December 8, 2025 by CARNM

Commercial real estate values are stabilizing rather than sharply rebounding, with office emerging as an unexpected bright spot in the third quarter, according to Trepp’s latest Property Price Index (TPPI).

Despite pressures from tariffs, inflation and elevated financing costs, steady job growth and low unemployment continue to support demand across most sectors. Trepp noted that the Q3 results show “a market that is stabilizing rather than snapping back,” with strength in office and industrial balancing softer performance in multifamily and lodging.

Overall, CRE prices ticked up modestly in Q3. The TPPI rose 0.25% quarter-over-quarter and 2.89% year-over-year, placing values about 3.7% above June 2022 levels. The value-weighted composite increased 0.43% in the quarter and 2.25% annually but remains roughly 8% below its 2022 peak. Smaller and mid-sized assets are now effectively above prior highs, while larger institutional properties continue to work through a pricing reset, according to Trepp.

Office was Q3’s strongest performer. The value-weighted office index climbed 1.97%, a notable gain even though prices remain about 15% below their 2022 peak. After two years of depressed pricing, the improvement suggests that firmer return-to-office mandates and targeted leasing activity are translating into higher valuations. Price discovery and distress continue, but in some markets, cap rates have adjusted enough to attract opportunistic and value-add capital. Performance remains bifurcated, with trophy and amenity-rich buildings capturing most of the upside, according to the report.

As far as other asset classes go, multifamily stayed essentially flat, with the equally weighted index up just 0.02% on the quarter and modestly above levels seen a year ago. Larger properties continue to lag, reflecting the impact of high borrowing costs and affordability pressures.

Retail pricing held steady. The equally weighted index rose 0.28% quarter-over-quarter and 2.77% year-over-year, supported by resilient consumer spending and stable fundamentals across necessity-based centers.

Industrial values continued to rise, but at a slower pace. Annual gains ranged from 1.98% to 3.43%, as demand remains driven by e-commerce, nearshoring and modern logistics needs. However, higher-value assets showed signs of cooling as companies optimize inventory levels and occupancy costs.

Lodging showed slight stabilization, inching up 0.15% in Q3, but remains the weakest sector with values nearly 14% below mid-2022 levels.

Source: “CRE Pricing Turns the Corner, but Recovery Remains Uneven”

Agents Find a ‘Green Advantage’ in Commercial Real Estate

December 4, 2025 by CARNM

A new NAR survey finds that sustainability can be a competitive edge for commercial buildings, as clients increasingly prioritize energy efficiency, resilience and certified green features.

Sustainability isn’t just a trend—it’s becoming a competitive differentiator in commercial real estate. Client expectations for sustainable features are rising fast, according to the National Association of REALTORS®’ 2025 REALTORS® Commercial Sustainability Report, a survey of more than 2,000 real estate professionals.

Commercial clients aren’t focused only on traditional amenities. They’re asking more about things like kilowatt-hours and operating costs, indoor air quality and even a building’s resilience to extreme weather. In some cases, they’re willing to pay more for sustainability features.

“Commercial real estate agents recognize the importance of sustainability when purchasing, leasing or selling properties,” says Jessica Lautz, NAR’s deputy chief economist. “Properties with green building certifications tend to have higher property values and are more energy efficient than buildings without a certification.”

Nearly a third of real estate pros responding to the survey say green certifications can raise commercial property values in their markets, though another 45% admit they’re unsure.

What Clients Care About Most

When choosing where to buy or lease, clients are evaluating a wide range of features. Agents say the most important sustainable building features to their clients include:

Utility and operating costs
Indoor air quality
Energy-efficient windows/doors
Resilience to extreme weather events, like wildfires, heat, floods or hurricanes
Efficient use of lighting
Smart/connected building systems
Water-conserving landscaping

The Counselors of Real Estate, a global organization of property advisers and an NAR affiliate, identified “portfolio risk”—ranging from extreme weather to air quality—as one of the top 10 commercial real estate issues to watch in 2026. The group reports commercial pros are increasingly using predictive analytics, climate-risk software, drone surveys and smart building systems to better understand investment vulnerabilities.

“Going forward, risk and resiliency expertise is likely to develop as a specific subset within commercial real estate,” John Hentschel, CRE’s global chair, noted in the report.

Repurposing Gains Momentum

Adaptive reuse is entering more conversations in commercial real estate. About one-third of brokerage firms report they have experience repurposing commercial buildings—most commonly converting office buildings to nonresidential spaces; offices to residential spaces; or retail/mall properties to new nonresidential uses. Repurposing buildings with sustainable features can help reduce waste, revitalize aging properties and help meet a local market’s shifting real estate needs.

“More commercial practitioners are exploring adaptive reuse to transform vacant or underused properties into new spaces, often for residential use,” Lautz says. “Repurposing buildings can be an innovative way to sustainably increase both housing supply and new community spaces.”

How CRE Pros Can Stay Ahead

Before agents can fully leverage sustainability as a competitive advantage, they may want to first navigate the biggest pain points clients are raising. Real estate pros responding to the survey identified the following top challenges that are currently shaping sustainability conversations:

Improving energy efficiency in existing buildings
Valuing solar panels and understanding their impact on a transaction
Lack of information and materials available to REALTORS®
Limited data on building performance history
Understanding lending options for sustainable properties
Extreme weather and climate-related risks (e.g., drought, heat, wildfires, sea-level rise)
Valuing green or sustainability-certified buildings
Liability concerns around misrepresenting green features

With these issues increasingly influencing commercial transactions, real estate professionals can strengthen their market edge, such as by:

Marketing green features more consistently. Fifty-five percent of commercial agents say promoting energy efficiency in listings adds value, yet only 13% are aware if their Commercial Information Exchange includes green data fields. Among those whose CIE does include them, just over half use them to highlight energy information, sustainable features and green certifications. Awareness varies regionally, with the Northeast most familiar with green data fields and the South least aware.

Request utility and operations data early. Tenant inquiries are becoming more detailed. More than half of real estate pros surveyed report that their clients are now asking specifically about energy-efficient features and EV charging availability.

Pursue sustainability education or certification. Thirty-seven percent of the real estate pros surveyed say they’ve completed some form of educational or professional training focused on sustainable commercial features, such as those that highlight energy-efficient appliances, renewable energy systems or eco-friendly building materials. The Institute of Real Estate Management’s ESG Skill Badge is a good place to start.

Source: “Agents Find a ‘Green Advantage’ in Commercial Real Estate“

Retail Leads October CRE Gains as Office Stabilizes and Industrial Normalizes

November 19, 2025 by CARNM

The CRE landscape showed diverging trends in October, with retail continuing to outperform, office recovery remaining selective, industrial normalizing after a supply surge, and multifamily adjusting to late-cycle supply pressures, according to Crexi’s October CRE report.

Retail was the strongest-performing sector for the month. Sold pricing jumped 8.49% from September to $237.93 per square foot, a 19.13% year-over-year increase. The gain extends a three-month run of elevated growth since July, reflecting sustained investor confidence despite broader economic uncertainty. Sale cap rates rose slightly, increasing six basis points to 6.63%, suggesting a modest softening in sentiment and pricing expectations.

While retail vacancy rose 50 basis points month over month, it remains 330 basis points tighter than a year earlier, supported by experiential concepts and omnichannel strategies. At 5.5%, retail vacancy is still near historic lows. Effective rents climbed 2.03%, and asking rents were essentially unchanged at $19.06 per square foot. According to the report, the widening gap between asking and effective rents indicates landlords are pushing through increases in high-demand locations while keeping headline rates stable to attract tenants.

In the office sector, leasing concessions remain elevated, though higher-quality assets continue to draw buyers. Sale prices rose 2.09% month over month and 13.38% year over year to $177.14 per square foot—the strongest annual pricing gain since the pandemic. Sale cap rates compressed 8 basis points, pointing to selective “risk-on” bidding for premium assets. The 38-basis-point compression from October 2024 marks one of the strongest year-over-year improvements across all property types. Despite this, effective lease rates fell 1.65% as landlords rely on concessions to retain tenants while maintaining face rates for valuation and financing purposes. Vacancy decreased 250 basis points from September.

Industrial conditions continued to normalize after significant deliveries earlier in the cycle. For-sale pricing declined 3.58% from September to $104.66 per square foot but remained 1.63% higher than a year ago. Sale cap rates dipped two basis points, underscoring continued investor interest. Vacancy climbed 280 basis points to 25.8%, driven by new supply rather than weakening demand. Effective rents increased 0.94%, while asking rents stayed flat.

Multifamily is nearing the peak of its supply wave, with construction starts down 74%. The sector posted the strongest monthly pricing increase in October, with sale prices up 4.74% to $209.34 per square foot—a 1.26% year-over-year gain. Sale cap rates fell five basis points to 6.38%, suggesting renewed investor interest. Listed vacancy increased 120 basis points month over month and 70 basis points year over year to 14.3%, reflecting absorption of record new supply rather than demand erosion, according to the report.

Source: “Retail Leads October CRE Gains as Office Stabilizes and Industrial Normalizes”

The Top 10 Issues to Watch in Commercial Real Estate in 2026

November 16, 2025 by CARNM

At NAR NXT, the Counselors of Real Estate shares its annual look at the top-of-mind issues pressing on commercial real estate in the year ahead.

The commercial real estate market is entering a year of opportunity and challenge, influenced by economic uncertainty, shifting population trends and continued technological innovation. The Counselors of Real Estate, a global organization of property advisers and an affiliate of the National Association of REALTORS®, each year offers an analysis of the trends and risks that will shape real estate decisions in the coming year. On Sunday at NAR NXT, The REALTOR® Experience, John Hentschel, global chair of The Counselors of Real Estate, unveiled the organization’s 2026 “Top 10 Issues” report. Here are highlights of the 10:

1. Fiscal & Monetary Policy

The U.S. economy remains resilient despite a record $37 trillion in national debt and ongoing uncertainties—from AI to geopolitical tensions. Yet, jobs, consumer spending, inflation and the stock market have remained relatively strong over the past year, the report reads. Rising investments in onshore manufacturing and tariff revenue may further help. But the report notes that commercial real estate has been uneven, with certain sectors struggling more than others—notably the for-sale housing and B and C office markets.

Takeaway: Barring unforeseen events and policy changes, real estate will continue to be a key driver of growth and stability for the economy, in the year ahead.

2. Portfolio Risk

Managing risk in commercial real estate has become more data driven. Investors now weigh numerous factors beyond property type and location risks, including potential threats within financing and valuation; insurance; extreme weather and natural disasters; regulatory environments; and even air quality. They’re increasingly turning to technology like predictive analytics, climate-risk software, drone surveys and smart building systems to gauge risks to investments. On-site inspections also remain essential.

Takeaway: Risk analysis is now driving key decisions on which projects to prioritize, informing buy-sell-hold strategies, refinancing and more. “Portfolio risk is something that has moved more to the forefront for investors, lenders, auditors and occupiers,” Hentschel says. “Going forward, risk and resiliency expertise is likely to develop as a specific subset within commercial real estate.”

3. The Changing Nature of Real Estate: Back to the Fundamentals

Cap rate compression may have been a major driver to profitability in the past, but it can’t be any longer, the report says. Owners and operators are finding they have to do a better job at managing assets more efficiently. Finding the “right” building and managing it well is more critical than simply choosing the “right sector.”

Takeaway: Focus on the basics—location, demand drivers, tenant satisfaction and operational management have become key to growing income streams.

4. Capital Sources & Flows

The slowdown in transaction volume is making it more challenging to raise money for new real estate investments and leading to less money coming back to investors on their existing investments. Plus, foreign investors have been more cautious, and real estate is increasingly competing against investment in infrastructure, particularly energy and digital infrastructure.

Takeaway: Investors and real estate professionals will continue to find the market for fundraising more challenging and competitive. They will need to work hard to find capital and should be prepared to discuss liquidity, long-term viability and why a property is a smart investment.

5. Transformation of Real Estate Through Technology

AI is quickly reshaping commercial real estate, increasing demand for data centers and being integrated into tools designed for financial analysis, underwriting and building operations. Innovators are setting out to simplify and speed up tasks that once took more time and effort to complete. Owners and operators in the future will use AI tech tools for such functions as better organizing data, reviewing contracts and strengthening cybersecurity. Gaining access to the data within a building’s multiple systems, however—such as lighting, access controls and HVAC—has proven challenging.

Takeaway: To prepare for future AI solutions, property owners and operators need to get control of data inputs from multiple systems being gathered by a “fragmented ecosystem of investors, asset managers, property managers, contractors and building systems,” the CRE report warns. “Companies and individuals will have to work harder to understand and innovate—or get left behind in this new fast-paced cycle of AI-driven innovation.”

6. The Future of Real Estate

The rapid integration of AI into commercial real estate offers access to unprecedented data and tools for improved decision-making, Hentschel says. That shift will change the way commercial real estate professionals and investors make decisions—from conventional statistical analysis to the “Bayesian approach.” Named for Thomas Bayes, an 18th century mathematician who studied probabilities, the Bayesian approach factors in probabilities and updates expected outcomes as new evidence becomes available.

Takeaway: Real estate decisions must go beyond “location, location, location.” “We have so much more data and more tools,” the report notes, adding that success will depend on disciplined thinking—using insights to carefully weigh risks, opportunities and long-term outcomes.

7. Global Chess: The Crisis of Confidence & Uncertainty

Market uncertainty—from interest rates, tariffs, global shifts and more—can slow investment and demand. “The most certain thing right now is the uncertainty—and it’s pervasive,” the report says.

Takeaway: The market requires navigating a “what-if” environment. “Business decisions will need to be weighed carefully, even if they appear to be the right choice today,” the report reads. “There may be a resetting of return expectations across asset classes, depending partly on the movement of interest rates and inflation. Volatility in the marketplace always makes what could have been an easy decision a lot more complicated.” Commercial real estate expertise will grow even more valuable in helping identify opportunities and in navigating these more volatile markets, the CRE report notes.

8. Housing Attainability

Rising costs and housing shortages are making it more difficult for renters, first-time buyers, middle-income families and seniors to find suitable housing. In Rhode Island alone, according to the report, 40,000 new housing units are needed to meet current and projected demand. Yet the state hasn’t built more than 3,000 units in any single year in over two decades.

Takeaway: No single solution exists. Incremental, creative and collaborative solutions across public and private sectors are essential to improve housing access and affordability. For example, land use and zoning policies and entitlement requirements could help make building faster and cheaper. “Everyone has a role to play, and it’s everyone’s responsibility to push or pull the lever at his or her disposal,” the report says.

9. Pricing Risk

More than $950 billion in commercial loans mature in 2025; maturing loans will remain at peak levels for another two years. This will create pricing and refinancing challenges, particularly in private debt markets. Banks are extending loans to avoid taking back properties, but private debt can carry more uncertainty due to more limited transparency in the underwriting.

Takeaway: Opportunistic buyers are waiting for distressed property that they can pick up at discounts, but it’s been slow to materialize. The continued offloading of this “debt bomb” will likely lead to transaction activity remaining flat in 2026 and 2027 and then a gradual improvement in 2028 as pricing gaps narrow and the market grows more competitive. The CRE report says the industry will need to embrace a holistic approach to valuation and pricing risk, identifying the underlying factors that support value over the long haul.

10. Flow of People

Population growth, migration and household formation are slowing, creating challenges for both residential and commercial real estate. For example, household formation among Millennials is slowing down, and Gen Z has not yet fully entered the market. Also, international immigration has experienced a sharp decline. Overall, household growth in the first quarter of 2025 slowed to 1.26 million annually, well below the 1.93 million average between 2019 and 2022, according to Harvard’s Joint Center for Housing Studies.

Takeaway: With slower population growth, developers and investors will need to rethink strategies and consider renewing their focus on locations with more density than the pandemic-fueled craze of suburban greenfields. “Commercial property owners and developers will need to focus on locations that are able to attract and retain workers, particularly the younger workforce,” the CRE report says. “The ‘build it and they will come model’ is going to be inherently riskier in this slower growth environment.”