CRE Investors Show Growing Optimism: ValTrends Report 4Q 2025

Sentiment toward commercial real estate (CRE) continues to rise among investors as market conditions stabilize and capital dynamics shift, according to “Increasing Optimism,” the latest ValTrends report from SitusAMC. This quarterly analysis from SitusAMC Insights explores critical developments in the economy, CRE property sectors, capital markets and the investment environment. Download the free 4Q 2025 report here.  

For the third consecutive quarter, CRE remained the most preferred asset class in  SitusAMC’s proprietary investor survey, maintaining the highest level of preference over the past year and staying above its historical average.  

“The growing optimism for CRE is a testament to its resilience in uncertain times,” said Peter Muoio, PhD, Head of SitusAMC Insights. “While other asset classes are facing heightened volatility, CRE’s consistent income profile, diversification benefits and potential as an inflation hedge remain compelling to investors.”  

Capital Discipline Eases, Availability Rises 

SitusAMC’s quarterly survey revealed a notable shift in capital dynamics. Both equity and debt availability reached their highest levels in three years, though they remain below long-term averages (LTAs). Importantly, capital discipline has loosened, with equity discipline hitting a record low not seen since 2014, and debt discipline at its lowest point since 2015. Despite this, underwriting standards remain conservative compared to long-term norms. 

“Investors are finding more opportunities to deploy capital, particularly in stabilized assets,” noted Jen Rasmussen, PhD, Vice President of SitusAMC Insights. “There’s an increased willingness to provide debt for high-performing properties, and equity investors are eagerly waiting for the right acquisition opportunities.” 

CRE Market Heating Up: Investor Preferences Shift Toward Buying 

As interest rates adjust, investor preferences for buying and selling CRE assets are on the rise. In the fourth quarter, the recommendation to buy jumped from to 30% from 22%, while the preference to sell increased to 7% from 4%. The inclination to hold assets decreased significantly, falling to 63% from 74%, signaling a potential increase in deal flow. This shift in sentiment marks the highest buy preference since the Federal Reserve’s tightening cycle began in mid-2022. 

Transaction volumes reflected this growing optimism. December saw a 65.5% increase in deal volume compared to November, suggesting that the CRE market is starting to gain momentum. While this surge may be temporary, it is expected that deal activity will settle into a higher range, driven by investor confidence. 

Office Market Shows Signs of Recovery 

One of the most notable shifts in investor sentiment this quarter is the resurgence of interest in the office sector. After several years of declining optimism, office preferences surged by 18 percentage points in the fourth quarter, reaching 22% -- the highest preference for the sector since the onset of the pandemic. Despite ongoing challenges, such as weak fundamentals and lower occupancy levels, many investors believe the office market has hit bottom and offers opportunities for acquisitions, especially as assets are repriced to reflect current market conditions. 

“The office market is showing early signs of recovery, with increased tenant activity and optimism around repositioning opportunities,” said Rasmussen. “Investors are particularly focused on converting underperforming office assets into residential spaces, which could offer a new avenue for value creation.” 

Returns, Volume & Pricing: Mixed Performance Across Sectors 

The fourth-quarter CRE returns showed limited change, with overall returns slightly below long-term averages. The office sector remained the weakest performer, with returns of just 0.9%, reflecting ongoing challenges. Retail, however, posted strong quarterly returns, with a 30 basis point increase, marking its highest level in over a year. Industrial returns also increased slightly, driven by strong capital returns, while apartment returns dipped for the first time in two years. 

“The mixed performance across property types reflects the ongoing adjustments in the market,” said Muoio. “While some sectors like office and apartment continue to struggle, others like retail and industrial are benefiting from strong demand and market resilience.” 

Looking Ahead: Growing Confidence in CRE 

The overall outlook for CRE remains positive, as investors increasingly favor it over other asset classes. Despite some challenges, such as refinancing risk in the debt market, liquidity is expected to return as interest rates ease. CRE’s stability, combined with its long-term potential for appreciation, positions it as an attractive investment option in an uncertain economic environment. 

“Increasing Optimism” offers an extensive analysis of investor sentiment, performance metrics, capital market dynamics and sector-specific trends. For more details on the fourth-quarter performance, download the free, 25-page ValTrends report here. 

Learn more about SitusAMC Insights’ research, analytical tools or RERC data products on our website.