Commercial Real Estate Sentiment Rises to 67 as Market Stabilizes

September 8, 2025 | Author:  David J. Murphy

Commercial real estate executives reported increased confidence in the third quarter of 2025, with The Real Estate Roundtable’s sentiment index climbing to 67 from 54 in the previous quarter, according to the organization’s Q3 2025 sentiment survey.

The 13-point increase represents the largest quarterly gain in recent periods. The index measures confidence among senior executives at real estate firms managing over $4 trillion in combined assets.

Key Findings

Half of respondents said asset values remained unchanged from a year ago. Among the remainder, 32% reported increases while 18% saw declines. Looking ahead, 59% expect prices to rise over the next twelve months.

Only 10% of executives said general market conditions were worse than a year ago, down from higher percentages in previous quarters. Fifty-six percent reported improved conditions, while 34% said conditions remained the same.

Debt capital availability improved significantly, with 65% of respondents reporting better access compared to last year. Equity capital showed less movement, with 50% saying availability was unchanged.

Sector Performance Varies

Multifamily housing and data centers led sector performance. New York City office properties outperformed other office markets, with one respondent calling Park Avenue “still the number one market in the country.”

Industrial properties face oversupply issues after years of rapid expansion. “We made too much, values pulled back, and now no one wants to buy vacancy,” one executive said.

Office markets in Los Angeles, San Francisco, and Chicago continue to struggle, while strip retail near residential areas has performed better than expected.

Capital Markets Split

The survey revealed a divide between debt and equity markets. Bank lending spreads have compressed over the past six months, with lenders competing more aggressively for deals.

Equity fundraising remains challenging. “There was a record amount of equity raised a few years ago, and a lot of that still hasn’t been deployed,” one participant noted.

Several executives mentioned that distressed property opportunities have been “fewer and far more selective than expected,” contrary to earlier predictions of a wave of forced sales.

Expectations Adjust Downward

Current conditions fell short of what executives predicted twelve months ago. In last year’s Q3 survey, 70% expected improved conditions by now, but only 56% of current respondents said conditions actually improved.

“We came into 2025 with a lot more optimism than we have right now,” one respondent said. Another noted values are “at best holding steady from a year ago and at worst, slightly down.”

Insurance costs and property taxes have affected values in multifamily and hotel sectors, according to multiple respondents.

Regional Differences Matter

Survey participants emphasized local market variations. “There is no ‘one-size-fits-all’ answer; it all depends on where you are, how favorable your product is, and the date of your loan maturity,” one executive stated.

Looking forward, 73% of participants expect general market conditions to improve over the next year, though most anticipate gradual rather than rapid recovery.

The survey was conducted by Ferguson Partners in September 2025 and included responses from executives at companies including BXP, Kimco Realty, KKR, and Highwoods Properties.

David J. Murphy is the managing attorney of the law firm of Murphy PC in Boston, Massachusetts.  He regularly represents real estate developers and investors in real estate development projects.