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Spencer Levine, the president of RAL, a family-owned New York City-based commercial real estate investment and development firm, had expected a promising year for property dealmaking.
Like many investors in the industry, Levine believed interest rates would fall, the economy would remain solid, and more commercial real estate assets would hit the market for sale after two years of diminished activity — allowing buyers like him to snap up opportunities.
Nearly halfway through, 2025 is instead turning into a bust.
“I don’t think there’s been nearly as many properties in New York that have been trading hands,” Levine said, adding that his firm had hoped to acquire antiquated office properties in the city that it could convert over to residential use.
“We have definitely seen a slowdown in transactions,” Levine added.
In the first quarter of 2025, $88.4 billion of commercial real estate was sold across the country, according to data from MSCI, a 14% increase from the same period a year earlier. The market’s nascent rebound, however, appears to now be in jeopardy.
In April, sales activity for two major segments of the property market, hotels and industrial warehouses, careened by 52% and 34% respectively, from the same month a year prior, according to MSCI.
The declines are a potential early signal, according to some experts, of how President Donald Trump’s sweeping agenda is having unintended consequences for commercial real estate.
Tariffs initiated by the new administration have disrupted global trade in ways that could affect the demand for logistics and storage spaces, potentially spooking investors in the warehouse market. Trump’s reshuffling of global alliances has also impacted business travel and tourism, placing a strain on the hotel sector that could also damage that segment’s appeal to buyers.
“If I’m buying a property, when I’m bidding, I want to underwrite every worst-case scenario and put that into my bid so that I protect myself from downsides,” said Jim Costello, the co-head of MSCI’s real assets research team. “The increase in uncertainty will increase the disconnect between buyers and sellers and, you increase the disconnect between buyers and sellers, you’ll have lower deal volume.”
“Survive until 2025” mantra fades
At the start of the year, President Trump’s return to the White House was received favorably by executives in the property industry. Trump’s family business is in real estate development and investment, and he is viewed as sensitive to the sector’s health.
Optimism about a rebound was so great that it spawned a popular saying in the industry: Survive until 2025.
Instead, tariffs on imports, including on building materials like steel, have driven up prices for goods, raising renewed concerns about inflation and the Federal Reserve’s leeway to cut interest rates.
“Rates aren’t coming down,” Barry Sternlicht, the chairman and CEO of Starwood Capital Group, told BI, adding that, six months ago, “I thought rates would be coming down and I thought that would unleash a lot of trades.”
Sternlicht said that Starwood, a real estate investment firm that manages about $115 billion in assets, has held off putting properties on the market as a result.
“We don’t put it out if we don’t think we can sell it at the right price,” Sternlicht said. “So we haven’t put stuff out.”
In its first quarter earnings statement, Starwood reported “no significant acquisitions” and “no sales of property.” In the first quarter of 2024, the company reported that it had sold 16 retail properties for $387.1 million.
In total, $26.1 billion of commercial property was sold in April nationally, according to MSCI, equal to the same month a year ago.
The investment sales market had been on a rebound, with $449.1 billion of transactions in the prior 12-month period, a 17% increase year over year, according to MSCI.
To be sure, not every market in the country has been hit as hard.
Earlier this year, Blackstone reached a deal to purchase an ownership interest 1345 Avenue of the Americas, a large Manhattan office tower. RXR, another New York City landlord, struck a deal to acquire 590 Madison Avenue for more than $1 billion in May.
New York City was the top market for commercial property sales nationally from the second quarter of 2024 through the end of the first quarter in 2025, according to CBRE, with $36 billion of deals done, a 7.7% increase over the prior 12 month period.
Some real estate executives see an opportunity in a market where sales volumes remain muted.
“New sales are off, but there is a market of refinancings that is occurring and loans coming due,” said Spencer Garfield, co-head of US real estate debt at Fortress Investment Group. ” We’ve been very busy filling in where the banks have pulled back.”
Garfield said that fewer sales transactions cloud commercial real estate values, making it more difficult for lenders and narrowing competition to cast loans.
“We feel the opportunity set is there for us, and we would probably do $4 billion of lending this year,” Garfield said. Last year, Fortress’s real estate debt platform lent out about $2.5 billion, he said.
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