The commercial real estate (CRE) sector is poised for a significant uptick in transaction volumes in 2025, following a period of subdued activity, according to IREI. This anticipated resurgence is attributed to several key factors:
- Market stabilization: The CRE repricing cycle is nearing its maturity phase, indicating a stabilization in property values. This development is expected to restore confidence among investors and stimulate transaction activity.
- Easing interest rates: Central banks’ interest rate hikes in 2022 led to wide bid-ask spreads and uncertainty in real estate valuations. As interest rates ease, financing becomes more accessible, encouraging both buyers and sellers to re-enter the market.
- Reversal of the denominator effect: The denominator effect, where declining asset values increase the proportion of real estate in investment portfolios, is reversing. This shift is prompting investors to rebalance their portfolios, leading to increased buying and selling activities.
- Pressure on private closed-end funds: Private closed-end funds are experiencing selling pressure, likely due to the need to meet redemption requests or rebalance portfolios. This trend is contributing to a higher volume of assets available in the market, facilitating more transactions.
According to a report by Oxford Economics, after several years of decade lows for global commercial real estate transaction volume, 2025 may bring higher transaction volumes.
For asset managers and investors, this projected increase in transaction volume presents a strategic opportunity to reassess and diversify portfolios. Leveraging advanced tools and platforms, such as those offered by Pereview, can provide comprehensive insights and analytics to navigate the evolving CRE landscape effectively.
In conclusion, the anticipated rise in CRE transactions in 2025 is underpinned by market stabilization, favorable interest rate movements, and strategic portfolio adjustments by investors. Staying informed and utilizing robust investment management solutions will be crucial for capitalizing on these emerging opportunities.
