“We at DelMorgan Company expect consistent investor activity across multiple U.S. real estate asset classes, positioning the market for a dynamic and active 2025.”
The first quarter of 2025 is proving to be a turning point for U.S. real estate capital markets. After a few years of volatility, heightened by global economic uncertainties and shifting interest rates, market participants are increasingly optimistic. Investor sentiment is positive across a variety of asset classes, ranging from multifamily and industrial properties to single-family and commercial real estate, all of which have seen increased deal flow, activity and upward trends.
Investor Activity Picking Up Across Asset Classes
Real estate capital markets in the United States are showing robust signs of growth, as investors are demonstrating renewed confidence across diverse property sectors. Multifamily real estate, in particular, continues to be a focal point for investors, as rental demand remains strong in both urban and suburban areas. The pandemic-induced shift in living preferences, with people moving out of high-density cities into more spacious suburban homes, appears to have stabilized, further driving investor interest in multifamily projects. With interest rates starting to stabilize, debt capital is becoming more accessible, which is encouraging private equity and real estate funds to increase their involvement in both value-add and core multifamily properties.
According to a recent report by Bloomberg, transaction volumes in the multifamily sector were up by 15% year-over-year in Q4 2024, signaling that investor appetite remains strong, especially in gateway cities like New York, Los Angeles and Miami, alongside emerging growth markets in the Southeast and Southwest. This surge in demand is also reflected in the performance of REITs with a focus on residential properties, which have seen significant upticks in share prices, further fueling optimism in this segment.
Similarly, the industrial sector continues to experience an upward trajectory. E-commerce growth, combined with a trend toward reshoring manufacturing and supply chain resilience, has fueled demand for logistics and warehouse properties. Industrial real estate is now one of the most sought-after asset classes among institutional investors. As supply chain and distribution hubs are expected to remain a critical focus for years to come, private equity funds and pension funds are more frequently allocating capital toward industrial portfolios. According to data from MarketWatch, warehouse prices in key logistics hubs such as Chicago, Dallas and Atlanta rose by an average of 8% in the last quarter of 2024.
Single Family Remains Attractive
While much attention has been given to the multifamily and industrial sectors, single-family rental (SFR) properties also remain an attractive option for investors in 2025. The shortage of affordable housing and rising homeownership costs in many parts of the U.S. have created strong demand for single-family rental homes, particularly in suburban areas. Investors are capitalizing on this demand through joint venture (JV) partnerships, pooling capital to acquire and manage single-family portfolios. According to a report by Reuters, single-family rental transactions spiked by over 12% in 2024, and this trend is expected to continue into 2025, as more investors enter the market seeking stable, cash-flowing assets.
The growing interest in SFRs has led to an increase in JV equity deals, with institutional investors, family offices and private equity funds all seeking to tap into this emerging market. LPs are becoming more involved in these investments, as single-family rental portfolios provide long-term cash flow potential and a hedge against inflation. With favorable financing conditions and growing rental yields, many investors are also using these vehicles as a diversification strategy within their broader real estate portfolios.
Commercial Real Estate: A Stabilizing Landscape
Commercial real estate (CRE) has faced challenges over the past few years, particularly in the office and retail sectors. The COVID-19 pandemic accelerated the shift to remote work, causing many office buildings to experience high vacancy rates. However, recent data suggest that this segment is stabilizing. More businesses are adopting hybrid work models, and office space demand is slowly recovering, albeit unevenly. According to Bloomberg, office leasing activity increased by 9% in major markets such as New York and San Francisco in the last quarter of 2024.
In the retail space, the rise of e-commerce has continued to push many brick-and-mortar retailers to rethink their real estate strategies. However, some sub-sectors, including grocery stores and lifestyle centers, have remained resilient. Retail real estate has seen increased JV and LP participation in redevelopment projects, as investors look to repurpose and reposition existing properties to meet changing consumer demands. Retail properties in prime locations with strong foot traffic have seen renewed interest from both domestic and foreign investors, signaling a potential upside in this segment.
Institutional Investors and JV Equity Driving the Market
One of the key drivers of the current real estate market rebound is the increased activity from institutional investors, including pension funds, insurance companies and sovereign wealth funds. These investors are committing more capital to real estate, both in the form of direct investments and through joint ventures. According to a report from Reuters, global institutional investment in U.S. real estate reached nearly $80 billion in 2024, a 10% increase from the previous year.
This growing interest is helping to fuel the momentum in the market, particularly in sectors like multifamily, industrial and single-family rentals. LPs are playing an increasingly important role by allocating capital to real estate private equity funds and direct investments. These investors are looking for stable, long-term returns and are drawn to real estate as a hedge against inflation and market volatility.
Positive Outlook for 2025
Looking ahead, the outlook for U.S. real estate capital markets in 2025 is positive. With an improving macroeconomic environment, rising investor confidence and favorable financing conditions, market activity is expected to accelerate in the coming months. Multifamily, industrial and single-family rental properties are expected to remain at the forefront of investor interest, with JV equity and LP participation playing a significant role in financing new developments and acquisitions.
We anticipate that commercial real estate, while still facing challenges in certain sectors, will benefit from the overall market recovery and stabilization in demand. The continued participation of institutional investors and the growing influence of JV partnerships are expected to be key drivers of the real estate capital markets in 2025.
As the U.S. real estate market adapts to post-pandemic realities, we expect further opportunities for investors to deploy capital across a variety of sectors. With the momentum we are seeing early in the year, 2025 could mark a period of healthy growth and continued innovation in real estate capital markets.
About DelMorgan & Co. (delmorganco.com)
With over $300 billion of successful transactions in over 80 countries, DelMorgan‘s Investment Banking professionals have worked on some of the most challenging, most rewarding and highest profile transactions in the U.S. and around the globe. In the upcoming year we expect more high-quality deal execution for more clients and welcome the opportunity to speak with companies interested in potentially selling their businesses or raising capital.