#United States #New York #commercial real estate #CREFC #Sentiment Index

CREFC's 2Q 2025 Sentiment Index Soars

The CRE Finance Council (CREFC) has released its Second-Quarter 2025 (2Q25) Board of Governors (BOG) Sentiment Index, showcasing a remarkable rebound in sentiment within the commercial real estate (CRE) sector. With a leap of 27.8%, the index now stands at 112.3, a significant recovery from the previous quarter's dip to 87.9 and a return to positive territory, surpassing the neutral benchmark of 100.

Key Findings of the Sentiment Index

Conducted between July 8 and July 22, 2025, this survey reveals an overarching sense of optimism among CRE professionals as they adapt to the shifting economic landscape. The following highlights underscore the dramatic changes in sentiment:

• - Economic Outlook: Only 27% of respondents predict worsening conditions over the next year—a dramatic shift from 80% in the last quarter. 54% anticipate stability, while 19% expect improvement.
• - Federal Policy Influence: A significant 49% of participants foresee a positive impact from government actions, a leap from 11% last quarter, with only 16% seeing a negative influence.
• - Interest Rate Impact: Sentiment around interest rates has improved, with 38% observing favorable movements—up from 30%—while negative sentiment has decreased to 27%.
• - CRE Fundamentals: Stability marks the outlook, with only 19% of respondents expecting deteriorating conditions, down from 50% previously.
• - Transaction Activity: There is a surge in investor demand, with 65% forecasting increased demand, which is a rise from 35%.
• - Financing Demand: A bullish sentiment surrounds financing, with 86% anticipating more borrower demand compared to 48% in the first quarter.
• - Market Liquidity: Nearly all respondents—92%—expect to see improved or stable liquidity in the market, reflecting restored confidence.

Overall, 49% of those surveyed hold a favorable outlook on the industry, a significant rise from just 22% last quarter.

Challenges and Opportunities Ahead

The survey also highlighted evolving risks, with geopolitical factors being the primary concern for 36% of respondents, followed by fears of a macroeconomic slowdown at 28%. However, a notable 71% indicated a growing appetite for new CRE lending or investments for the latter half of 2025, indicating a robust recovery in interest levels.

Moreover, the emergence of AI-driven data centers is anticipated to have a positive effect on the overall CRE sector, with 72% of participants expecting beneficial impacts. As expectations around interest rates continue to stabilize, 78% of respondents foresee at least one interest rate cut by the end of 2025, with most anticipating rates to drop to the 4.00% - 4.25% range. Additionally, 87% expect the 10-year Treasury yield to remain at or below 4.50%.

Conclusion

Lisa Pendergast, President and CEO of CREFC, remarked on the turnaround, emphasizing the resilience of the CRE finance industry. The breadth of recovery—from strong borrowing demand to optimism surrounding AI applications—signals a reestablishment of footing in the market. While challenges remain, the recovery trend bodes well for professionals in the commercial real estate finance sector, offering a renewed perspective on opportunities in the coming months.