Research
Featured Topics:
- 2025 Commercial Real Estate Outlook
- CPI inflation
- Commercial Property Prices
- Interest Rates
- Non-Bank CRE Borrowing
- NAHB Housing Market Index
- Independent Landlord Rental Performance
- Engineering & Construction Industry Outlook
- Housing Inventory Rebound
- NMHC Quarterly Survey of Apartment Conditions
1. 2025 COMMERCIAL REAL ESTATE OUTLOOK
• According to Deloitte’s 2025 look-ahead, the current outlook for Commercial Real Estate is dominated
by expectations surrounding global interest rates, renewed revenue sentiment, and the potential for
industry-wide shifts in areas such as AI, climate resilience, and regulation.
• Rates are projected to fall across most major economies in 2025 — however, so is growth. Deloitte’s
forecast projects that Real US GDP will fall from a projected 2.4% annual growth rate in 2024 to 1.1%
in 2025. The Fed’s interest rate pivot has boosted CRE market sentiment. Still, uncertainty around the
timing and volume of rate cuts will keep some capital deployment at bay until things become clearer.
• Revenue growth is expected to recover, with 88% of global executives surveyed by Deloitte anticipating
higher revenue next year compared to 2024. For context, 60% of executives forecasted declines coming
into 2024. In the year ahead, roughly two in three respondents expect revenue to increase by more than
5%.
• Data and technology, including AI development, are seen as key drivers of growth in the coming years.
81% of executives plan to increase their technology investments.
• Climate resilience also continues to be an increasing focus of CRE leaders. 76% of survey respondents
plan to invest in significant energy retrofits over the next 12-18 months.
2. CPI INFLATION
• According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 0.2% month over
month in October and 2.6% year-over-year, each roughly in line with expectations.
• Core-CPI, which removes the more volatile food and energy components, accelerated 0.3% month-over-month, boosted by shelter costs, which accounted for half of the gain in overall CPI. Meanwhile, the
energy component held flat while the food index climbed by 0.2% in the month.
• Other notable increases included used vehicles, which rose 2.7% month-over-month, and airfares, which
jumped 3.2% during the month.
• Inflation-adjusted wages increased modestly, rising 0.1% month-over-month and 1.4% from one year ago.
• With CPI arriving roughly in line with expectations, the reaction from the interest rate futures market was negligible. At their upcoming December policy meeting, the FOMC is projected to make one additional
quarter-percentage-point cut before the end of the year.
3. COMMERCIAL PROPERTY PRICES
• According to the MSCI-RCA Commercial Property Price Index, national commercial real estate prices fell
just 0.1% month over month and -1.5% year-over-year through October. This performance represents a
gradual recovery of commercial prices as the market reaches a cyclical inflection point.
• Apartment prices fell by 0.3% from September and 6.1% year-over-year through the end of October.
Retail property prices fell 0.1% from September and 1.9% year-over-year.
• Industrial again emerged as the only major asset group to post a monthly or annual increase, rising 0.6%
month-over-month and an impressive 7.6% over the past 12 months.
• The Office sector as a whole fell by 0.1% month-over-month, but suburban office prices climbed by 0.1%.
All office segments continue to post year-over-year declines — but suburban office prices have gradually
improved this year, resulting in a positive three-month moving average for the broader office sector.
4. INTEREST RATES
• According to the Chicago Mercantile Exchange’s Fed Watch Tool, there is a 55.5% chance that the FOMC
will follow through with a 25-basis point cut at their December policy meeting, reflecting a relatively
split futures market. The forecast has declined from just a week earlier when futures markets priced in
an 82.5% probability of cut.
• The split sentiment reflects monetary doves who, on the one hand, reference a recent labor market
slowdown and shift in the Fed’s dual mandate focus to predict further accommodation. On the other
hand, monetary hawks note strong economic growth and Fed officials’ relative caution over cutting too
fast as evidence that rates may remain where they are as we turn to the new year.
• At the FOMC’s November meeting, the committee voted to cut the Federal funds rate by 25 basis
points, following up on their 50-basis point cut in September that began their pivot to accommodative
monetary policy.
5. NON-BANK CRE BORROWING
• A recent Altus group survey investigated the experiences that commercial real estate borrowers have
had with non-bank lenders and polled their expectations, recommendations, and challenges.
• Borrowers polled expressed a desire for greater efficiency and consistency from their lenders. Bank
borrowers expressed higher overall satisfaction with their CRE lenders, while non-bank borrowers
referenced flexibility and service as the top factors for their choice.
• Non-bank borrowers reported fewer steps to secure financing than bank borrowers. However, their
deals tended to move more slowly. Moreover, some expressed higher levels of concern about managing
market risks and challenges they expect to face in the coming years.
6. NAHB HOUSING MARKET INDEX
• The latest data from the National Association of Home Builders’ Housing Market Index shows that it
reached its highest level in seven months during November, exceeding expectations.
• The index received a post-election bump, as builders expressed confidence that the Republican sweep
of Congress and the White House will increase the likelihood of significant regulatory relief and boost
construction activity.
• The current sales conditions indicator rose on the month, as did the gauge that measures sales
expectations for the next six months. Prospective buyer traffic also posted a modest gain from October.
• There was also a modest decline in the share of builders cutting prices and their amounts. 31% of
homebuilders slashed prices in November, compared to 32% in October, while the average price reduction
was 5%, slightly below the 6% rate posted in October.
7. INDEPENDENT LANDLORD RENTAL PERFORMANCE
• According to the latest report from Chandan Economics, the on-time payment rate in independently
operated rental units remained flat at 85.5% in November compared to the previous month.
• On-time collections are down by 70 bps from a year earlier. Moreover, compared to the post-pandemic
peak of 88.2% set in April 2023, on-time payments are down by 279 bps, reflecting some sustained
performance deterioration. • Still, there are signs that on-time collections are stabilizing. For the past five months of data, on-time
payment rates have held between a low of 85.3% and a high of 85.7%.
• Trends within key rental subsectors reveal a slight performance gradient. Of the three tracked property
sub-types, properties with 2-4 rental units and single-family rentals (SFR) led the way in November 2024,
with the two subsectors holding an on-time payment rate of 85.7%, respectively. Multifamily properties
sat slightly lower at 85.1%.
• Measured by State, western-located properties continue to outperform the rest of the country. In
November 2024, on-time payment rates stood highest in Alaska (93.7%), followed by Nevada (91.9%),
Utah (91.4%), Colorado (91.4%), and New Mexico (91.1%).
8. ENGINEERING & CONSTRUCTION INDUSTRY OUTLOOK
• According to Deloitte’s 2025 Engineering and Construction Industry Outlook, the improving interest
rate outlook, technological integration, and navigating the policy landscape will guide the industry over
the next year.
• Falling rates are expected to boost construction demand across various segments and create growth
opportunities in 2025. However, labor market challenges persist. The engineering and construction
sector faces a significant talent shortage, posting an average of 382k job openings between August
2023 and July 2024.
• Cost overruns from inflation and interest rates will incentivize firms to focus on value creation and
sustaining growth through strategic divestitures and rebalancing capital allocation. Large construction
firms may optimize portfolios by divesting noncore assets and doubling down on core investments.
• Like other sectors, adopting AI and other digital tools to enhance productivity and address labor gaps
will be crucial to the engineering and construction field. Technologies such as digital twins, robotics, and
generative AI will continue to transform operations in the industry.
• The policy outlook is also key. Recent federal investments through the Infrastructure Investment and
Jobs Act (IIJA), the Inflation Reduction Act (IRA), and the CHIPS and Science Act will continue to trickle
into markets in the coming year. The activity is expected to drive growth in the manufacturing and
energy sectors and generate downstream demand for engineering and construction firms
9. HOUSING INVENTORY REBOUND
• According to a recent analysis by ResiClub, 54 of the nation’s 200 largest housing markets have inventory
levels above their pre-pandemic levels, a significant jump from just 17 at the end of 2023.
• From October 2019 to October 2021, the number of US actively listed homes fell from 1.2 million to just
566k, a 53% drop in just two years.
• However, inventory is gradually recovering, reaching 954k through October 2024, still a large but more
modest 21% below the 2019 benchmark.
• Smaller markets have tended to be the ones to see the most recovery. Huntsville, AL, Killeen-Temple, TX,
and Lubbock, TX, have experienced the strongest post-pandemic recoveries but rank 108, 119, and 162,
respectively, in national metro size.
• The Bridgefield-Stamford-Norwalk, CT metro remains the furthest below pre-pandemic levels, followed by
Connecticut’s largest metro area, Hartford-East Hartford-Middletown. Peoria, IL, ranks the third furthest
below 2019 levels.
10. NMHC QUARTERLY SURVEY OF APARTMENT CONDITIONS
• According to the Q3 NMHC Survey of Apartment Conditions, Multifamily financing and sales volume
reached their highest level since 2022 during the third quarter.
• 43% of respondents reported higher sales in Q3 2024 compared to 32% during the previous quarter. With
the Fed’s first interest rate cut only coming in September, the early pace of thawing deal activity is an
encouraging indicator for the sector.
• The equity financing gauge rose from an index level of 49 in the previous quarter to 67 in the Q3 reading.
In October 2023, the reading stood at just 18.Optimism increased around debt financing, with 62% of
respondents seeing now as a better time to take out a Multifamily mortgage, compared to just 37% who
expressed this sentiment in Q2.
• Looking market to market, 38% of respondents listed “primary markets” like New York, San Francisco, Los
Angeles, and Miami as benefiting from sales activity better than the secondary or tertiary markets that
dominated initial post-pandemic activity. Still, roughly 45% saw no change.
