February 2025 Market Update
Economic Overview:
- Federal Reserve officials agreed they would need to see inflation come down more before lowering interest rates, and expressed concern about the impact that tariffs would have in making that happen, according to meeting minutes released today.
- Policymakers on the Federal Open Market Committee unanimously decided at the meeting to hold their key policy rate steady after three consecutive cuts totaling a full percentage point in 2024.
- Members said that the current policy provides “time to assess the evolving outlook for economic activity, the labor market, and inflation, with the vast majority pointing to a still-restrictive policy stance. Participants indicated that, provided the economy remained near maximum employment, they would want to see further progress on inflation before making additional adjustments to the target range for the federal funds rate.“
- The current U.S. inflation rate is 3% for the 12-month period ending in January 2025, up slightly from the 2.9% reported last month. The consumer price index (CPI), which measures changes in prices, increased 0.5%, according to the latest release from the Bureau of Labor Statistics (BLS).
Commercial Real Estate Market Overview:
- According to CBRE’s 2025 U.S. Investor Survey, property investors are allocating more capital into the U.S. commercial real estate market. This optimism is driven by attractive pricing opportunities, even amidst challenges from fluctuating interest rates.
- “Investors are positioning themselves to take advantage of favorable pricing and strong market fundamentals,” said Kevin Aussef, Americas President of Investment Properties for CBRE. “Interestingly, investors are more confident about their own prospects than the broader market outlook, viewing the current pricing reset as an opportunity to gain a first-mover advantage as recovery progresses.”
Defeasance Market:
- The defeasance market continues to trudge forward, there is some traction as sales and refinancing seem to be showing life even though any rate drop has paused.
- The majority of the asset classes being considered includes; Self Storage, Multifamily, Retail, Hospitality, NNN, Industrial as well as some smaller balance notes (i.e. less than 5 million). Retail and Self storage continue to be the most active asset types.
