T
he commercial real estate industry is navigating a complex landscape, with deal-making proving to be a challenging endeavor. Despite a welcome rise in year-over-year sales in 2024, total sales still lagged behind the second-lowest level since 2013. According to MSCI Real Assets data, the 12-month trailing sales volume through February reached $438 trillion, a 15% increase from the previous year.

    As the industry grapples with these challenges, experts are looking for "green shoots" in the commercial real estate investment market for 2025. John Chang, senior vice president and national director of research services at Marcus & Millichap Real Estate Investment Services, notes that the sector's durability and ability to pace inflation make it an attractive investment option.

    Nadia Evangelou, senior economist and director of real estate research at the National Association of REALTORS, highlights multifamily housing as a bright spot in the market. Strong rental demand and a slowdown in new construction are driving investor interest in this sector. Even the office sector, which has faced significant challenges, is showing early signs of improvement.

    Chad Littell, national director of U.S. capital markets analytics at CoStar Group, applies economist Lakshman Achuthan's "three P's" framework to identify a turning point in commercial real estate sales volume. He finds that the current uptrend is pronounced, pervasive, and persistent, with transaction volumes rising 16% above 2023 levels and nearly 40% year-over-year.

    Adrienne Ortyl, director of research at AEW Capital Management, notes that real estate values appear to be at a cyclical bottom, giving buyers and sellers more confidence in pricing metrics. The broader U.S. economy remains in good shape, with property market fundamentals expected to be positive, except for the office sector.

    Kiran Raichura, chief commercial real estate economist at Capital Economics, expects only a slow recovery in investment volumes over the next year or so due to forecasts of risk-free and borrowing rates not approaching previous lows. However, retail remains his top sector pick over a five-year horizon, driven by attractive yields for well-leased, well-managed assets.

    Joe Biasi, head of research, commercial capital markets at Newmark, attributes the sluggish market activity to the interest rate environment, which has made it challenging for buyers to be aggressive in their pricing. However, he notes that a higher-than-before interest rate environment puts a ceiling on how aggressive a buyer can reasonably be.