CRE still muted; rate cuts will help multifamily

by Alex Thomas and Ean Rottler

Key takeaways

• Limited commercial real estate activity. 71% of CRE investors kept new CRE investments on pause in 3Q25.
• Multifamily to benefit from Fed cuts. 56% of CRE investors expect multifamily to benefit most from rate cuts, given the prevalence of short-term debt in the sector.  
• Cap rates need to increase by ~90 bps for investors to aggressively deploy capital. Transactions will stay muted, barring rate relief or a 10%–15% decline in asset values.

The Burns + CRE Daily Fear and Greed Index, created in collaboration with CRE Daily, reflects sentiment across CRE sectors, including multifamily, industrial, retail, and office. 

The 3Q25 survey findings are available for download.

Download the 3Q25 chartbook here

CRE activity remains sluggish.

71% of investors kept their CRE investment exposure unchanged in 3Q25, flat from the prior quarter and still the highest in our survey’s 2-year history.

Capital costs remain a significant barrier to CRE activity as interest rates stay elevated, particularly at the long end of the curve. More investors (26%) say capital access is tightening rather than easing, though this share continues to shrink quarter over quarter.

Across all sectors, today’s cap rates remain too low to justify major new investment.

In all 4 core sectors, cap rates need to rise between 70 bps and 110 bps for investors to consider aggressive expansion. Two investors note today’s challenges:

“Returns in CRE do not currently support deploying additional capital.”

“There is currently a negative spread between cap rates and the cost of capital.”

A roughly 90 bps rise in cap rates would translate into a 10%–15% drop in asset values, but investors don’t expect values to fall in any sector over the next 6 months (see page 9 in the report). As a result, CRE activity is likely to stay muted in the near term unless there is meaningful rate relief.

Sector snapshot:

• Multifamily growth slowed slightly, but 56% of investors say it would benefit most from rate cuts from the Federal Reserve. Multifamily relies more heavily on short-term debt (which is more sensitive to benchmark interest rates) than other CRE sectors.
• Industrial continues to be the most resilient sector, per our index. Investors expect a +3% rise in asset values over the next six months—more than any other sector.
• Retail sentiment dipped more than any sector quarter over quarter, reflecting concerns over trade policy and goods inflation.
• Office remains the weakest sector but is no longer contracting per our index. Values may have bottomed: investors are no longer expecting declines in Office asset values.

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