With the Federal Reserve remaining noncommittal on when — or even if — it will adjust interest rates for the remainder of 2025, the commercial real estate (CRE) market continues to operate in a holding pattern. Transaction volumes remain well below historical norms, cap rates have stayed elevated, and both buyers and sellers are largely sitting on the sidelines waiting for clearer signals.

However, should rates begin to ease as we head into the back half of the year, it could set the stage for meaningful movement in the market. Certain investors and investment strategies, in particular, stand to benefit the most when capital becomes cheaper and debt markets loosen up. Let’s explore who the likely winners would be — and what broader impacts a rate cut could have on the industry.

The Biggest Potential Winners

1. Value-Add and Opportunistic Investors

Investors chasing value-add or opportunistic deals have been some of the most constrained in the current rate environment. Elevated borrowing costs have made financing major repositioning or redevelopment projects more challenging, while risk premiums have widened. A drop in rates would improve debt coverage ratios, enhance project feasibility, and unlock inventory as sellers recalibrate pricing expectations.

Why they benefit:

Lower debt costs improve project economics on levered deals and enable investors to take on more complex transactions that have been sidelined.

2. Private Capital and Non-Institutional Buyers

While institutional players often wait for clear market cycles and economic signals, private investors — including family offices, syndicators, and private equity firms — tend to move quickly in shifting environments. If rates decline, many of these groups will be well-positioned to capitalize on motivated sellers, especially in sectors like small-balance multifamily, retail strips, and secondary market industrial assets.

Why they benefit:

Less encumbered by strict investment committees, private capital can act decisively, often acquiring distressed or mispriced assets ahead of institutional players.

3. Real Estate Investment Trusts (REITs)

Publicly traded REITs have had a difficult stretch as rising rates compressed valuations and increased borrowing costs. Lower interest rates would help stabilize REIT balance sheets, reduce refinancing risk, and potentially drive share price recoveries.

Why they benefit:

As rates fall, REIT dividend yields become more attractive relative to fixed-income alternatives, and lower debt service improves cash flow margins.

4. Borrowers with Maturing Debt

One of the most pressing challenges in today’s CRE market has been the wall of maturing loans originated during the low-rate era of 2020–2021. If rates fall, borrowers facing refinancing events in late 2025 and 2026 would gain much-needed relief in both debt service costs and valuation support.

Why they benefit:

Lower rates could reduce refinance spreads, improve DSCRs, and potentially enable borrowers to avoid deleveraging through asset sales or capital calls

Broader Market Impacts to Expect

If rates begin to decline in the coming quarters, here’s how the industry at large might respond:

• Transaction volumes would rebound, particularly in the value-add and core-plus segments.

• Cap rates would likely compress modestly, though lingering caution and pricing gaps between buyers and sellers might keep spreads elevated.

• Distressed asset sales could accelerate, as rate cuts signal a peak in capital costs and motivate lenders and owners to transact before further price recovery.

• Construction financing activity may improve, though ongoing labor and material costs will still weigh on new development feasibility.

Conclusion

While no one can perfectly predict the Federal Reserve’s next moves, it’s clear that falling rates would have a catalytic effect on commercial real estate investment activity. Value-add players, private investors, REITs, and borrowers with near-term maturities are among those best positioned to capitalize.

For those groups, the time to prepare is now — assembling capital, sharpening underwriting assumptions, and cultivating off-market opportunities ahead of potential monetary easing.

2025’s second half could mark a pivotal moment for CRE investors — if the rate environment finally turns in their favor.