Impact Growth Capital Newsletter

 This week at IGC:
Market Momentum Builds in Early 2025 and CRE Positioned as a Safe Haven Amid Tariff Uncertainty

Real Time Market Snapshot

Data as of 4/9/2025

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Economics

Market Momentum Builds in Early 2025, But Caution Remains

February’s investment numbers might suggest a major rebound in commercial real estate, but a closer look reveals a more nuanced—and encouraging—picture. While headline figures were boosted by a one-off, entity-level transaction—Blackstone’s take-private of Retail Opportunities Investments Corp.—the underlying trend tells the real story: deal momentum is steadily improving. Excluding that rare billion-dollar transaction, individual asset sales climbed 5% year-over-year in February, following a strong 16% annual gain in January.

Most sectors saw increased activity last month, with the exception of development sites and industrial assets, which held flat compared to a year ago. Even where numbers slipped slightly—like the 4% year-over-year dip in both industrial and retail asset sales—it’s a far cry from the steep declines of 2022 and 2023, when rising rates dragged down volume across the board. The modest pullbacks today are more a sign of stabilization than stagnation, and they suggest a healthier baseline for the year ahead.

Liquidity is also on the rise, thanks in part to shifting dynamics in the debt markets. While regional and local banks continue to face challenges, CMBS lending is on the upswing and new capital sources are stepping in. Meanwhile, property pricing has begun to tick up—albeit slowly—with the RCA CPPI showing a 1.3% annual gain in February. That’s still behind inflation, but it marks a meaningful shift in sentiment. As we head further into 2025, the big question is no longer whether recovery is underway—but how far and how fast it can go.

Tariffs

CRE Positioned as a Safe Haven Amid Tariff Uncertainty

In the face of recent tariff upheavals that have left many investors reaching for their stress balls, commercial real estate is emerging as a potential safe harbor. Manus Clancy of LightBox points to mounting uncertainty in the equity and fixed-income markets, which has prompted capital to shift toward more stable asset classes. According to Clancy, CRE is increasingly benefiting from this flight to safety, with signs of a more sustained recovery gaining traction through the first quarter of 2025.

One factor driving this renewed confidence is the relative insulation of stabilized CRE assets from the direct impact of tariffs. Unlike new developments that are exposed to rising costs for construction materials and supply chain disruptions, existing properties face more predictable and manageable expenses. Clancy highlights sectors like multifamily housing, where operating costs—such as routine maintenance or appliance replacements—remain largely unaffected by tariff shifts. This cost stability positions income-generating assets as more attractive in a market grappling with inflationary pressure and supply-side uncertainty.

Reinforcing this trend, the LightBox CRE Activity Index climbed to 104.4 in March, marking its highest level since June 2022 and only the second time it has crossed the 100 mark in nearly three years. The index tracks national activity in listings, appraisals, and environmental due diligence—early-stage indicators of investment momentum. A 4.7% increase over the previous month and a 25.2% jump year-over-year signal a measurable uptick in investor engagement, even as broader markets contend with geopolitical and policy-related headwinds.

Looking ahead, the outlook remains cautiously optimistic. While tariffs and macroeconomic headwinds will continue to shape the investment landscape, CRE's performance in the early part of the year underscores its appeal as a relatively stable asset class. Market participants are watching closely to see if current momentum holds, but for now, commercial real estate remains well-positioned to weather the ongoing volatility.