The commercial real estate market appears poised for a resurgence as financing activity gains momentum ahead of 2025, signaling what some experts believe could be the most attractive investment environment in nearly two decades.

Financing Makes a Comeback

Following a pandemic-driven slowdown, the $22.5 trillion commercial real estate sector experienced a notable recovery in 2024, with loan originations climbing to $539 billion—a 26% increase from the prior year, according to the Mortgage Bankers Association. Non-traditional lenders, including debt funds and private credit providers, have stepped up to fill the void left by traditional banks. However, most financing remains short-term, reflecting persistent uncertainty around property valuations and elevated borrowing costs.

Notable Transactions Signal Market Strength

October 2024 saw landmark deals such as a record-setting $3.5 billion, five-year loan secured by Rockefeller Center, led by Bank of America and Wells Fargo. Similarly, the Fontainebleau Miami Beach hotel completed a $1.2 billion refinancing, boosting 2024 hospitality CMBS issuance to over $24 billion—the highest level since the Great Recession. These deals underscore lenders’ willingness to finance high-quality assets while limiting long-term exposure.

Challenges Persist for Office Properties

Despite overall positive financing trends, the office sector continues to face headwinds. MSCI data reveals that older office properties in central business districts have seen values decline by 50.7% since 2021 due to high vacancy rates and the remote work shift. However, top-tier office properties remain resilient, commanding rents exceeding $100 per square foot nationwide and up to $247 in premium markets.

The Looming Debt Maturity Wall

A significant challenge ahead is the $1 trillion in commercial real estate loans set to mature by 2026. Rising interest rates, with average borrowing costs climbing from 3.5% in 2021 to 6.74% in 2024, add further pressure. Given declining property valuations and limited access to long-term financing, many property owners are turning to short-term loans to navigate the uncertainty and preserve liquidity.

Key Takeaway: Seizing the Opportunity

With property yields at multi-decade highs and inflation-adjusted prices near historic lows, industry veterans like Michael Acton of AEW believe this could be the best entry point in 15 to 20 years. Blackstone’s Nadeem Meghji echoes this sentiment, emphasizing that periods of uncertainty often create the best investment opportunities. When market sentiment is down and recovery seems unclear, it may be the ideal time to deploy capital strategically.