Explore an in-depth analysis of U.S. capital markets as they respond to shifting economic currents and policy uncertainty. During the second quarter of 2025, CRE transaction volume increased despite policy uncertainty, and both debt and transaction activity saw solid momentum. While debt and cap rate spreads remain narrow, the sustained pace of market participation suggests investors are still finding value.
Debt Capital
CRE debt issuance saw solid momentum in the first half of 2025, surpassing pre-pandemic levels. Growth in lending volume is being primarily driven by alternative lenders and refinancing transactions. Notably, banks also recorded a 72% year-to-date increase in origination volume compared to the same period in 2024.
Equity Capital Markets
Equity transaction volume had its strongest quarter since 2022, driven by solid momentum in the office and retail sectors. While most deal flow remains concentrated in smaller transactions, deals above $100 million hit their highest share since 2023.
Supply of Capital
Available dry powder continues to recede, particularly for value-add and opportunistic funds, that are more sensitive to interest rate fluctuations. NCREIF net fund redemptions have improved, but remain negative, due to diversified funds having slightly decreased their allocation to Industrial for the first time in a decade.
Pricing and Returns
CRE cap rates have been remarkably stable with the average year-over-year change in top quartile cap rates at 3 basis points, the lowest movement in at least 20 years. Returns turned positive for the fourth consecutive quarter, and all 96% of major market areas in the fund reported positive returns.
