Monday Market Moves | Week of 28 July 2025
Welcome to Monday Market Moves, the weekly series from Essex Capital Markets briefing you on Chicago commercial real estate capital markets – including insights on the Multifamily Real Estate market in 2025. We cover key trends in CRE debt, refinancing, and capital structures to help investors, borrowers, and lenders navigate today’s evolving environment.
This Week – Finding Equilibrium: CRE Prices Flatten as Deal Volume Surges
Market Snapshot (as of July 25, 2025)
– S&P 500: 6,388.64 (+0.40%)
– FTSE NAREIT All-REITs: 781.47 (–0.29%)
– 10-Year Treasury Yield: 4.376% (almost unchanged)
– 30-Day Average SOFR: 4.303% (unchanged)
CRE Market Finds Balance: Flat Prices & Surging Volume
After years of volatility, the commercial real estate (CRE) market is showing signs of stabilizing. In June, U.S. property values held steady, with MSCI’s all-property price index unchanged month-over-month and down just 0.7% year-over-year. This essentially flat pricing suggests that CRE may finally be adjusting to higher interest rates and moving past the pandemic disruptions of recent years. Stability may not be flashy, but in today’s market flat feels like a win – a sign that the sector is regaining its footing. At the same time, deal activity is ramping up: second-quarter CRE transaction volume surged, defying expectations. Revised data indicate Q2 volume could be nearly 29.6% higher than a year ago. Investors who sat on the sidelines are coming back to the table, and deals are getting done across multiple sectors.
Monthly U.S. CRE transaction volume (blue bars) and average cap rates (red line). Deal volume rebounded in Q2 2025 while cap rates have leveled off around the mid-6% range.
This uptick in activity was broad-based. Retail, industrial, and office properties led the charge with robust volume growth in Q2 (retail deal volume up 37% year-over-year, industrial up 15%, and office up 11.5%). By contrast, apartments and hotels saw far fewer sales than a year ago (each down ~45% YoY) due to 2024’s unusually large portfolio transactions not repeating. Importantly, pricing is stabilizing alongside volume – the average cap rate on sales dipped to 6.48% in June (25 bps lower than May) as buyer demand improved. Notably, cap rate compression was sharpest in segments that have struggled: office cap rates fell 32 bps and multifamily 18 bps, signaling investors are cautiously re-entering those markets. In short, capital is flowing again, and the market appears to be finding a new equilibrium between pricing and higher borrowing costs.
Sector Highlights: Retail & Industrial Resilient, Office & Multifamily Finding Footing
– Retail: The retail sector is a standout performer in this recovery. Property values rose 3.5% year-over-year – the strongest of any major sector – and held steady through Q2. Deal volume followed suit, jumping 37% from last year as investors bet on shopping centers and storefronts in high-demand locations. Despite broader economic headwinds, retail real estate continues to display staying power, buoyed by robust consumer spending and retailers’ push into omnichannel fulfillment.
– Industrial: Industrial properties remain on a solid growth trajectory. Prices ticked up 1.6% annually (with small gains month-to-month), and Q2 industrial transaction volume climbed about 15% year-over-year. Warehouse and logistics assets are still in high demand thanks to e-commerce and supply chain reconfiguration. Interestingly, industrial cap rates edged up slightly even as other sectors saw declines – a sign that risk is being priced consistently and the sector’s fundamentals are on firm ground.
– Office: The office market remains the most challenged but is showing hints of improvement. Office property values in June were ~1.9% lower than a year prior, with central business district (CBD) offices down more (~4.2% YoY) compared to suburban offices (~2.1% YoY). The good news is that the performance gap between downtown and suburban offices has narrowed to its closest since mid-2022, suggesting the worst may be over for office valuations. In Q2, office investment picked up modestly (+11.5% YoY volume), and average office cap rates compressed to about 7.25% (down 32 bps in a month). Market sentiment toward high-quality offices is turning cautiously optimistic – Cushman & Wakefield reports renewed interest in Class A CBD office assets now that prices have reset lower. Office is not out of the woods, but investors with a value-add mindset are tiptoeing back in.
Multifamily: Apartment properties are stabilizing after a frothy few years. June marked the first annual price increase for multifamily (albeit just +0.1%) since 2022. Values have flattened out in recent months after a correction that left prices ~18% below their 2022 peak. MSCI credits this recent stability in part to last year’s interest rate cuts, which eased financing costs and relieved some pressure on cap rates. On the sales front, multifamily deal volume did fall about 14% in Q2 compared to an unusually strong Q2 2024 – but context is key. The year-ago quarter was inflated by Blackstone’s $10B mega-portfolio purchase, and year-to-date 2025 multifamily sales are actually 5% above the first half of last year. In fact, individual apartment asset sales (excluding big portfolios) jumped 15% year-over-year in Q2 to $28B, nearly on par with pre-pandemic averages. A lot of that activity is happening in secondary and Sunbelt markets, but gateway cities are participating too. Major metros like Chicago, New York, DC, LA, San Francisco and others collectively saw a 6% uptick in multifamily sales, while smaller metros saw an 18% surge. The apartment sector remains the largest and most liquid piece of the CRE market, and despite some headwinds, demand for well-located, professionally managed rental housing is keeping this sector resilient.
Midwest Spotlight: Chicago CRE Showing Momentum
Chicago’s commercial real estate trends are broadly mirroring the national story, with a few local twists. Industrial and multifamily are leading the way in the Windy City. Demand for warehouse/distribution space remains robust – Chicago’s central location and transit infrastructure make it a top choice for regional logistics hubs. On the housing side, urban apartment occupancy is high and rents are growing, underpinned by strong renter demand and relatively limited new construction. This has kept Chicago’s multifamily fundamentals healthy and attracted continued investment flows (Chicago was among the major markets that contributed to the rise in apartment sales volume last quarter). Even retail is rebounding in Chicago’s prime corridors, as retailers open new concepts in neighborhoods like Fulton Market and the West Loop, drawn by the influx of residents and office workers in those live-work-play districts.
Meanwhile, Chicago’s development scene is adapting to changing needs. Notable downtown districts – Fulton Market, Bronzeville, the West Loop – are buzzing with redevelopment. Older office buildings and underutilized sites are being converted or reimagined as apartments, mixed-use projects, coworking spaces, and hotels. These adaptive reuse projects are revitalizing once-static areas and creating new opportunities across the city’s landscape. Local officials have also rolled out incentives and public-private partnerships to spur investment, particularly focusing on adding affordable housing and reviving the central business district. Developers with creative strategies and strong financing partners are capitalizing on these programs to move projects forward.
That said, challenges persist. Office vacancies in Chicago, especially in older and outdated buildings, remain elevated. High borrowing costs and rising insurance and construction expenses continue to put pressure on new developments and refinances. Lenders are still selective, and credit is tighter than it was a few years ago. However, the outlook is improving: market players note that with the right approach – be it repurposing an obsolete property or structuring deals with prudent leverage – projects are getting financed and done. In short, Chicago’s CRE market is finding ways to thrive through a combination of innovation, strategic investment, and solid partnerships, even as it navigates the same headwinds facing the broader industry.
Capital & Debt Markets: Financing Conditions Ease Cautiously
Interest rates – a critical factor for CRE debt – have steadied. The 10-year Treasury yield is hovering around 4.4%, and short-term rates like SOFR are holding in the low-4% range. We’re no longer seeing the rapid rate spikes that defined 2022–2023. Analysts say the market has largely adjusted to this higher-cost capital environment. In fact, the slight drop in cap rates last month suggests that buyers are once again willing to underwrite deals at today’s interest rates, now that the outlook on rates is more stable. The Federal Reserve’s modest rate cuts late last year provided some breathing room, and those effects are visible in sectors like multifamily where pricing pressure has eased.
On the lending front, there’s a sense that credit conditions are beginning to thaw – albeit selectively. The nation’s major banks reported Q2 earnings with a tone of cautious optimism for CRE. Credit losses (especially on office loans) are leveling off and came in lower than feared, leading bank executives to conclude that “valuations appear to be stabilizing” in troubled asset classes. According to Manus Clancy of LightBox, “CRE lending hasn’t thawed across the board, but this quarter showed that some banks are stepping back into the market with discipline. The worst-case fears…haven’t materialized, and lenders are starting to recalibrate”. In practice, banks and alternative lenders are open for new business again, but under much tighter underwriting standards. Well-capitalized borrowers and strong projects can find financing – liquidity “is back — but only for borrowers with strong fundamentals,” as one banking report put it. We’re seeing this in real time: loan origination volumes are inching up, and even large development loans (like a recent $173M construction financing for a Fulton Market apartment tower) are getting done as lenders gain confidence that today’s property values are solid footing for tomorrow’s loans. Overall, while the cost of debt remains relatively high, access to debt is improving. This is good news for commercial mortgage brokers and borrowers alike, as more deals pencil out when financing is available on workable terms.
Industry Trend: Transparency Takes Center Stage in Multifamily
In the multifamily world, a noteworthy positive development is how industry leaders are responding to tenant and regulator concerns. Greystar, the largest apartment operator in the U.S., just rolled out a new rent and fee transparency tool on its website to give renters a fuller picture of leasing costs. Prospective tenants can now use Greystar’s “Total Monthly Leasing Price” calculator to see all recurring charges – rent, pet fees, trash collection, parking, etc. – bundled into one clear monthly estimate. This goes beyond the industry’s typical practice of advertising base rent only. “The Total Monthly Leasing Price Calculator goes beyond the industry’s typical base-rent listing to give renters a clearer view of total costs,” explained Greystar’s Toni Eubanks, adding that the company sees it as “a natural evolution in transparency and an opportunity to help move the industry forward.”
This move comes as regulatory pressure grows around so-called “junk fees.” The Federal Trade Commission and several states have been scrutinizing rental housing fees, pushing landlords to disclose all costs upfront. The industry is adapting and moving toward a renter-friendly direction when it comes to hidden fees, using technology to build trust. For renters, this means fewer surprises in the leasing process; for owners and brokers, it’s a chance to differentiate through honesty and service. Overall, it’s a welcome trend toward greater transparency and consumer confidence in the multifamily sector.
Bottom Line
Flat might not be flashy, but in the current climate it counts as progress. The latest data show a commercial real estate market slowly but surely finding its balance. Prices have stopped falling and even notched small gains in resilient sectors. Transaction volumes are rebounding, bringing much-needed liquidity and optimism back to the industry. Yes, the recovery is uneven – office is lagging and pockets of stress remain – but the overall trajectory is improving. As interest rates stabilize and buyers, sellers, and lenders recalibrate expectations, opportunities are emerging. “An uncommon buying opportunity” is how one global CIO described the current moment. Investors with dry powder, and borrowers with solid fundamentals, are poised to benefit from pricing that is more realistic and financing that is gradually becoming more accessible. In sum, the commercial real estate outlook is more positive now than it has been in years: select sectors are outperforming, credit is flowing carefully, and even long-neglected properties are getting a second look. Cautious optimism is the theme for the second half of 2025 – the market appears to be on the road to a sustained recovery, albeit at a deliberate pace.
Sources:
Commercial Real Estate Daily (CRE Daily) report
GlobeSt/Multifamily Dive report by Erik Sherman
Daily Herald (Chicago) commentary
LightBox Capital Markets insights
Bisnow (Greystar announcement)
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