Signs emerge of rising transaction activity in the coming year

Since the onset of the rate hike cycle, many investors and forecasters have faced more challenges than opportunities in commercial real estate markets around the world.

But, broadly speaking, 2025 is looking different.

Borrowing costs and real estate values in most markets have stabilized and transactions are on the rise, bolstered by institutions putting their weight of capital into an increasing number of deals. In-favor property sectors – most notably in transparent markets – saw some yield compression in 2024, though bid-ask variability is likely to persist as bond indices continue to fluctuate.

On top of this, while the risk of an economic downturn isn’t off the table, broad-based economic growth is projected; the International Monetary Fund sees the global economy growing at 3.2% in 2025, on par with 2024 levels.

These factors are contributing to a real estate market on the precipice of an improving liquidity cycle. With capital becoming more active and engaged in opportunities and borrowing costs having retreated over the past year, history suggests these scenarios have been opportune times to invest in commercial real estate markets. With that said, investors will continue to operate in a market with heightened complexity and performance will vary by location and sector even as overall transaction momentum improves.

Central banks’ initial rate cuts in 2024 spurred increased investment market activity. Inflation risk has diminished from peak levels and additional monetary easing is likely to continue through 2025 and into 2026.

Lower rates will aid investors’ refinancing efforts and boost M&A activity which has been more muted. The cost of debt has also improved since year-end 2023, and debt origination volumes are trending upward as lenders have broadened their focus