After a challenging two-plus years, commercial real estate investors could be forgiven for feeling a bit weary. But could a cautious stance be costing you missed opportunities?
We think, yes.
The market is actually in better shape than the headlines might suggest, according to Avison Young experts. Your capital that could be deployed? It’s time to get it off of the sidelines.
What are the dynamics driving commercial real estate capital markets right now? Where are the biggest opportunities? Read on for five trends that show the future is looking bright.
1. As others hesitate, the bold and thoughtful are moving ahead.
Years of rising rates and volatility, slipping valuations, and other major impediments to deals closing have left some investors stuck in a defensive crouch. But in many cases, the worst-case scenario has not come to pass. Interest rates are trending lower. Leasing demand is steadying, and rental prices on many assets are rising.
As a result, transactional volume is up across the board, and larger deals are getting done. From late 2022 through 2024, it was hard to get financing deals over $100M done, even for excellent sponsorship. That is no longer the case.
U.S. DOLLAR VOLUME BY ASSET TYPE – TRADITIONAL VS. ALTERNATIVE
Source: Avison Young Market Intelligence, RCA, CoStar
“Beyond CMBS as a financing option, there is now more than one path to execution – a greater diversity of lenders are in the market – which fuels confidence in the directionality of where we’re headed.”
Marion Jones
Principal, Capital Markets Group
2. Early 2025 ‘re-forecasts’ are getting re-forecast again, to the upside.
Following Trump’s “Liberation Day” announcements of new trade tariffs, many economists revised growth projections sharply downward in the second quarter of 2025. Those downward revisions are now being walked back.
Many in-house economists at major real estate investment firms – and independent economists alike – have been re-forecasting their previous 2025 forecasts. We’re also seeing it in the revised earnings forecasts of major REITs, across property sectors from hospitality to data and multifamily. In fact, 18 major real estate investment trusts (REITs) in the U.S. have recently revised their 2025 earnings forecasts to show more favorable results.
The market consensus now reflects the view that while tariffs will weigh on the U.S. economy, the impact will be slower and less severe than initially feared.
“The perceived fallout from tariff negotiations didn’t pan out to be as destructive as people thought. The consensus is that while tariff policy is certainly going to be a prolonged, bumpy ride, it doesn’t have the power to derail the U.S. economy and its property sector.”
Marion Jones
Principal, Capital Markets Group
3. Capital continues to flow into alternative real estate.
One bright spot in the current landscape is fundraising for alternative real estate sectors: data centers, self-storage, manufactured housing, and single-family rental communities, among others.
U.S. DOLLAR VOLUME SHARE BY ALTERNATIVE PROPERTY TYPE
Source: Avison Young Market Intelligence, RCA, CoStar
“Overall, there’s an intense interest in alts, particularly for data center fundraising, which is surpassing that of the major food groups right now. In data center investment, we are seeing a trend of greater diversity in deal size, as well as new market entrants.”
Marion Jones
Principal, Capital Markets Group
4. Private credit is becoming more collaborative.
Compared to 2024, there is greater diversity in the pool of active lenders, ranging from money center banks to Single-Asset Single-Borrower Commercial Mortgage-Backed Security (SASB CMBS), and LifeCos. This greater diversity in lending and the resulting competition are now prompting private credit players to evolve within a dynamic marketplace.
In the real estate sector, the caricature of private credit firms as the most expensive lenders of last resort is giving way to a more relationship-driven model.
Their pricing is trending lower, and in select situations has grown more competitive with traditional bank debt – unlike in the case of CMBS, the borrower gets the benefit of dealing with a single counterparty firm.
Private credit continues to underwrite debt on behalf of, and syndicate with, institutional-grade lenders.
All in all, the first half of 2025 saw an increase in lending volume over 2024, with a greater mix of lender profiles and healthier competition.
“Private credit, now a $1.5 trillion-industry that attracts top talent across multiple sectors, is here to stay. In the real estate sector, they are increasingly sophisticated and client-centric, which is great for the competitive landscape.”
Marion Jones
Principal, Capital Markets Group
With securitized debt, there’s often less of a customer relationship: there’s no one to call. We’re seeing private credit firms taking advantage of that structural difference and going above and beyond on the service side.
5. Owner-occupiers are turning market dips into real estate wins.
When prices soften, as they have in the last few years, users of real estate often become buyers. That is what’s happening now, as owner-occupier deals increase.
Corporate users in the market are seeing opportunities to buy their own real estate, either because of the lower basis, or, in many cases, because they have dry powder in the form of cash reserves or lines of credit at interest rates that feel competitive.
“It’s something that happens every time the cycle dips and there are good basis plays to be had. Investors should take note.”
Marion Jones
Principal, Capital Markets Group
Moving out of the pause and into progress
To be sure, we can expect some continued volatility in real estate capital markets, but the greatest risk today might just be missing the pricing window that this year has opened.
Reach out to our experts to learn more about how to make the most of this opportunity.
Marion Jones
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- Principal, Executive Managing Director of U.S. Capital Markets
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- Capital Markets Group
- Debt & Equity Finance
- Investment Sales
