April 2025 Market Update
Economic Climate:
The US dollar’s weakness against its major peers during the first quarter of 2025 is anticipated by Goldman Sachs Research to persist. Over the next 12 months, the US currency is forecast to fall about 10% versus the euro, and around 9% against the Japanese yen and British pound (as of April 8).
According to Gallup, Several measures of Americans’ economic mood, including their perceptions of the U.S. economy and their own finances, have weakened in April compared with prior readings in some cases, substantially. Most notably, since January, Americans’ six-month outlooks for economic growth and the stock market have turned from positive to negative, while their forecasts for inflation, interest rates and the job market have dimmed.
Commercial Real Estate Market Overview:
- In 2025, retail entered the lowest vacancy rate of any commercial real estate sector, according to a recent CBRE report. Demand is expected in suburban locations and Sun Belt cities as institutional capital returns to this sector. CBRE also expects industrial real estate leasing to return to pre-pandemic levels and benefit from e-commerce growth.
- Vacancies, however, are likely to remain higher in older properties, with tenants favoring high-quality properties. But geopolitical concerns could also prompt “nearshoring” and bolster demand for industrial properties.
- About $1.5 trillion in commercial real estate debt will come due in 2025. Refinancing could be particularly challenging for multifamily property owners, with that sector making up about 40% of the maturing debt. As borrowers wait for interest rates to come down or seek new equity injections, they may seek short-term debt or loan extensions to buy some time. This according to CBRE.
- In this landscape, investors may also find opportunities to acquire distressed real estate properties and renegotiate more favorable loan terms. However, soon-to-mature loans could significantly impact negotiations and terms surrounding loan assumptions in the acquisitions and dispositions.
Defeasance Market:
- The defeasance market continues to see moderate activity, some sales and refinancing seem to be showing life.
- The asset classes seeing the most activity includes; Self Storage, Multifamily, Retail, Hospitality, NNN, Industrial as well as some smaller balance notes (i.e. less than 5 million).
