Fed Cuts Rates by Quarter Point as Commercial Real Estate Sees Path to Recovery

September 18, 2025 | Author:  David J. Murphy

The Federal Reserve lowered interest rates by 0.25 percentage points on Wednesday. The federal funds rate now sits at 4% to 4.25%. This marks the Fed’s first rate adjustment since December.

Stephen Miran, the Fed’s newest governor, wanted a bigger cut. He voted for a half-point reduction. The other ten committee members supported the quarter-point move.

Major Brokers See Investment Growth

CBRE projects 15% growth in commercial real estate investment volume this year. Richard Barkham, CBRE’s global chief economist, sees the market at a turning point. “We’re in the trough, and we’re looking forward to the upswing,” he said. CBRE’s full analysis.

JLL expects the window for maximum returns to stay open longer. Ben Breslau, JLL’s Global Chief Research Officer, notes that capital will need to be deployed. JLL’s global outlook.

Marcus & Millichap takes a cautious stance. The 10-year Treasury yield sits in the low-4 percent band, down from 4.8% earlier in 2025. Marcus & Millichap’s research.

Property Types Face Different Realities

Data centers dominate growth. Vacancy will hit 2.8% in 2025. Prelease rates reached 90%. AI computing drives demand.

Office properties struggle most. National vacancy stands at 19%. Yet office space net absorption has been positive for five straight quarters. Manhattan leasing increased notably.

Multifamily shows stabilization. Rising occupancy and rent growth are expected in 2025. Sun Belt markets face oversupply. Gateway cities see stronger performance.

Industrial properties maintain steady demand. Third-party logistics companies drive leasing. CBRE raised its forecast of 3PLs’ market share to 40%.

What Brokerage Firms Expect

Cushman & Wakefield highlights CMBS market strength. Non-agency CMBS issuance jumped 160% year-over-year through Q2 2024.

The Fed signals two more cuts this year. This would bring rates to 3.5%-3.75% by December.

Nuveen favors shorter-duration fixed income. The firm notes private real estate posted positive returns for four consecutive quarters.

Invesco Real Estate calculates a 69% probability of positive property values in two quarters.

Banks Ready to Lend

The April 2025 Federal Reserve Loan Officer Opinion Survey shows easing underwriting standards. Banks loosened from the tight conditions of 2023-2024.

Community banks still face challenges. Construction loans remain scarce. Banks stay selective on development financing.

Risks Remain

Inflation hasn’t reached the Fed’s 2% target. Some Fed officials worry about cutting too soon. The 10-year Treasury could rise again despite Fed cuts.

Trade policy creates uncertainty. A recession remains possible. JPMorgan’s Ginger Chambless sees geopolitical tensions as the main risk.

Investment Window Opens

Major brokers agree on timing. The early cycle offers the best opportunities. Values have reset.

CBRE’s 2025 outlook emphasizes asset quality. Transaction volume should increase as debt becomes more available.

The Fed’s rate cut starts a new chapter for commercial real estate. Recovery will vary by property type. Data centers and industrial properties lead. Office faces continued challenges. Quality assets in growth markets win.

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.