The commercial real estate market in the U.S. is showing signs of recovery, with some calling 2025 the best opportunity to invest in 15 years.
Investors have started pouring money back into the market, partly thanks to significant deals like the $3.5 billion refinancing of Rockefeller Center in New York City this past October.
This was the largest office financing deal ever, replacing an old 20-year loan for the iconic property, which includes office space, Radio City Music Hall, restaurants, and even the famous ice-skating rink.
Big Money Is Coming Back
After years of struggles caused by the pandemic, funding is finally returning to the $22.5 trillion commercial real estate market.
This is big news for landlords and investors alike. Short-term loans are now more common, giving property owners breathing room to manage their debt or sell buildings as needed.
“Capital is back, but it’s not cheap,” said Michael Acton from AEW Capital Management. Average financing rates have climbed from about 3.5% in 2021 to nearly 6.7% this year, making borrowing more expensive.
The Challenges Aren’t Over
Not everything is rosy, though. Many older office buildings still struggle need to help with lower rents, fewer tenants, and dropping property values. Prices for some offices in big cities are down over 50% compared to three years ago.
Still, there’s hope. High-demand properties, like trophy office towers with top-notch amenities, are fetching record rents of over $100 per square foot in some cities.
Why Now Might Be the Best Time
This could be a golden opportunity for investors, with property values lower than before COVID-19. “Yields are the highest they’ve been in over a decade,” Acton said. “If you’re looking to invest, this is probably the best entry point in 15 or 20 years.”
Landlords are racing to secure new financing or modify old loans, with over $1 trillion in commercial real estate loans coming due in the next two years. Shorter loans are popular, giving landlords more flexibility to refinance if rates drop.
Looking Ahead
The road to recovery will take time, but with funding flowing back and values at historic lows, investors see 2025 as a promising year to jump into commercial real estate.
Acton says, “If you don’t have capital, you’ve got a real problem.” The time to act might be now for those ready to invest.