Will Interest Rates Rise or Fall in 2025? Commercial Real Estate Leaders Weigh In
The commercial real estate market is in a state of flux. After years of rock-bottom interest rates, the Federal Reserve’s battle against inflation has sent rates soaring. This has cooled commercial real estate activity across the board, except in the fiercely competitive realm of distressed properties.
With the new year looming, many minds within the industry are occupied by one pressing question: will we see those high rates fall in 2025?
In an attempt to gauge the prevailing sentiment, we reached out to prominent figures in the commercial real estate landscape and posed a simple question: Will rates be above or below 4 percent by July 1, 2025?
The overwhelming consensus? Brace for continued turbulence; pessimism reigns supreme.
“Above, but a man can dream,” was the sentiment shared by Sam Charney, founder of Charney Companies – a sentiment echoed by many.
Jared Epstein, president of Aurora Capital Associates, summed up the prevailing mood succinctly: “Unfortunately, above.” Rick Gropper, co-founder of Camber Property Group expressed a shared outlook, stating, “Above, sadly.”
Michael Phillips, chairman of Jamestown, echoed this lack of optimism, though perhaps in a slightly more hopeful tone: “We can dream.”
He wasn’t alone in his cautious optimism. Craig Deitelzweig, CEO of Marx Realty, dared to offer a glimmer of hope, predicting rates to be “slightly below” the 4 percent mark.
Then came the pragmatists, blurring the lines with carefully crafted humor. Tredway CEO Will Blodgett responded with a roundabout answer: “Yes,” he said, they will either be below or above 4 percent. The shrug-worthy, albeit truthful, response.
Others opted for a different type of wit, acknowledging the unpredictable nature of the market.
Hal Fetner, CEO of Fetner Properties, pointed to the unknowability of the situation when he explained: “If I knew exactly the answer to that, I would probably change my response as to whether I’m buying in 2025.”
A few took a more analytical route, focusing on the 10-year Treasury yield – often seen as a barometer of future mortgage rates.
Carr Properties’ CEO, Oliver Carr, took a measured stance – predicting the 10-year Treasury yield to be “below 4 percent.” David Levinson, chairman of L&L Holding, projected a similarly cautious outlook: “The 10-year Treasury will be in the 4 percent range, give or take 10 basis points.”
Anthony Malkin, who chairs Empire State Realty Trust, offered a differing perspective: “10-year Treasury will be higher,” effectively injecting a note of uncertainty into the equation. Muss Development President Jason Muss, similarly provided an intricate prediction: “Above — if referring to 10-year [Treasury] or SOFR [secured overnight financing rate]. Way above if you are asking about ultimate pricing after a spread is applied.”
As we navigate the twists and turns of the commercial real estate market, one thing remains certain: uncertainty monopolises the conversation.
GFP Realty Chairman Jeff Gural approachably summed up the current climate, admitting: “My guess is above, but I really have no idea,” while briefly adding, “Gregg Schenker, president of ABS Partners Real Estate, agreed. “I have no way to know.” This sentiment, practically spoken across the board.
Despite this wave of uncertainty, leading commercial real estate owners have shared their insights, offering a glimpse into the swirling currents shaping the future. While the crystal ball remains cloudy, one thing is for sure: the industry braces for a wild ride.
