At the midpoint of 2025, commercial real estate finds itself navigating an environment shaped by repricing, heightened volatility, and a climate of uncertainty—but not without its surprises. According to CBRE’s U.S. midyear capital market review, optimism is making an unexpected appearance, fueled in part by sweeping new tax legislation and a diverse set of active investors.
CBRE’s Economic Advisors Executive Director Dennis Schoenmaker, alongside Head of U.S. Capital Markets Research Darin Mellot and Senior Economist Jing Ren, discussed these trends in a recent video review. All three agreed that the market outlook is more resilient than many anticipated, with both fundamentals and investor activity showing strength across multiple sectors.
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The recent “One Big Beautiful Bill Act,” signed into law in July, is providing a significant boost to commercial real estate. The legislation permanently reinstates 100% bonus depreciation for qualifying property and raises Section 179 expensing limits, two changes that offer immediate advantages to property owners and investors. The updated rules enable accelerated write-offs for improvements such as interior buildouts, lighting, and HVAC for commercial properties, enhancing market profitability and driving investment activity. The law also extends Opportunity Zone incentives, solidifies key deductions for pass-through business income, and increases the accessibility of affordable housing financing by making low-income housing tax credits permanent and reducing bond thresholds for mixed-income developments.
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Mellot pointed out that, while tariff policy created some initial uncertainty, investor commitment remains strong—especially in multifamily and industrial assets. Interestingly, retail and office sectors are also starting to attract renewed attention. “There are a lot of very interesting and compelling opportunities in the office market,” Mellot said, specifically citing well-located Class A and upper Class B office properties in gateway and select secondary markets.
CBRE forecasts a 10% year-over-year increase in investment volume, with the office sector—long considered challenged—projected for an even more striking 19% growth by year-end. This uptick comes as all capital sources stay active and the debt markets retain their appeal despite long-term interest rates remaining a headwind.
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Cap rate compression is anticipated, yet Ren notes that it will likely be more modest than earlier projections, and, across many sectors, is expected to manifest more clearly by 2026. Investors are also keeping a wary eye on the continuing volatility of the 10-year Treasury yield, as growing federal deficits could put more upward pressure on rates and slow sales activity.
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According to Ren, cap rates are expected to stay “relatively flat in the near term.” She indicated that major shifts in investment trends may not materialize until 2026, but did point out that multifamily assets could demonstrate continued resilience, supported by strong fundamentals and steady capital inflows.
The big question at this stage of the year centers on which investment strategies will prove most effective. Ren advised investors to shift their approach when seeking returns. “With very limited capital risk compression, most of the return is to come from income, not appreciation,” she said. She recommends concentrating on properties with stable, long-term tenants and contends that maximizing property-level performance—through either improved leasing or greater operational efficiency—will be crucial for success.