How Lower Rates Shape Commercial Real Estate in 2025

After several turbulent years of rising borrowing costs, the Federal Reserve has finally started cutting interest rates in 2025. For commercial real estate (CRE) investors, this shift is more than welcome — it’s a chance to re-enter the market, refinance debt, and explore growth opportunities that were put on hold.

What Lower Rates Mean for CRE

• Easier refinancing: Investors carrying high-interest loans from 2022–2023 now have opportunities to refinance and improve cash flow.
• New development opportunities: Projects that didn’t pencil out under higher rates may now be viable again.
• Renewed buyer interest: With cap rates stabilizing, buyers are beginning to return to the market — particularly in multifamily and industrial sectors.

Risks Still Linger

• Office struggles: Vacancy remains high in many U.S. downtowns, and lenders are cautious.
• Bank exposure: Regional banks still hold significant CRE loans that may become distressed.
• Construction costs: While rates are falling, labor and materials remain expensive, limiting some developers’ ability to capitalize.

The CPA Advantage

This new rate environment creates opportunities — and risks — that require financial expertise:

• Debt restructuring: CPAs can help model scenarios for refinancing or restructuring loans.
• Tax planning: Lower interest expenses may shift tax liabilities — requiring proactive strategies to offset income.
• Cash flow analysis: Determining whether to hold, sell, or acquire new assets hinges on accurate financial forecasting.

At Shahbaz & Associates, we help real estate investors navigate the numbers so they can focus on seizing the right opportunities in a changing market. Schedule a strategy session today to make the most of 2025’s interest rate environment.