The Federal Reserve cut interest rates by 25 basis points this week — the first rate reduction since 2024. While widely anticipated, the move carries significant implications for the commercial real estate market and the investors we work with every day.
What It Means For CRE
Even before the Fed’s announcement, U.S. CRE deal volume was up 15% year-over-year in the first half of 2025. Momentum was already building, but this rate cut provides additional support: lowering borrowing costs, boosting underwriting conditions, and encouraging investors to re-engage.
The impact will vary by sector:
- Office: Class A and B assets, which have undergone significant repricing, could see renewed investor interest as financing economics improve.
- Multifamily: With heavy reliance on short-term debt and pressure from new supply, the sector is particularly sensitive to Fed policy. Lower rates provide some needed relief.
- Distressed Owners: For those struggling with higher debt service and operating costs, even a modest cut can shift financials back into the black.
The Bigger Picture
The Fed’s decision reflects growing concern about the labor market, with recent revisions showing nearly 1 million fewer jobs than previously reported. While the cut signals confidence that inflation is moderating, it also highlights underlying economic uncertainty.
As CBRE research points out, reduced borrowing costs could drive CRE investment volume up 15% in 2025, compared with prior expectations of 10%. Still, this is not a cure-all. Commercial real estate remains more influenced by the long end of the yield curve, and macroeconomic weakness could offset some of the benefits.
Our View
This cut won’t transform the market overnight — but it represents an important turning point. Lower rates improve capital flows, unlock opportunities in repriced assets, and restore confidence across the investment landscape.
For investors, the key will be to separate short-term enthusiasm from long-term fundamentals. As always, disciplined underwriting and sector-specific strategy remain essential.
At Landair, we’re actively advising clients on how to position themselves in this evolving rate environment — whether through acquisitions, refinancing, or repositioning existing assets.
Fresh air? Maybe. But for CRE investors, it’s also a reminder to stay alert and strategic as the market adjusts.
Connect with us to explore opportunities and strategies for your commercial real estate in NYC.
info@landairnyc.com
646-559-4700
This article is adapted from Bisnow’s reporting on the Fed’s first rate cut of 2025.
