Commercial real estate outlook

Anatomy of a CRE correction: The road to revival in 2025

We anticipate the commercial real estate market entering recovery mode in 2025, fueled by strengthening fundamentals, growing investor confidence and stabilizing interest rates.

Download the outlook
January 13, 2025 | 10 minute read

This is our third installment in the “Anatomy of a CRE Correction” chartbook series. In the first iteration, released in April 2023, we acknowledged the challenges faced by the asset class but offered two reasons it was unlikely the correction would turn into a crisis: Namely, healthy fundamentals and resilient capital markets. We updated our views at the end of 2023, noting the sharp leg of the correction had ended but the market would likely need another year before a true recovery could be considered.

As we write in late 2024, it appears improvement in the CRE market is finally in the offing:

  • Measures of CRE property values show price declines have largely abated.
  • The outlook for fundamentals in many sectors is as positive as it’s been in three years.
  • Investor sentiment has improved amid economic optimism and peaking interest rates.

Of course, risks remain around geopolitics, interest rates, and both fiscal and monetary policy. In addition, much of this chartbook will be focused on the likely shape of a potential recovery—some of which may surprise readers. However, for the first time in two-and-a-half years, optimism is finally piercing the clouds over the U.S. CRE market.

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All views, opinions and positions expressed herein are that of the author and do not necessarily reflect the views, opinions or positions of FS Investments. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

Any projections, forecasts and estimates contained herein are based upon certain assumptions that the author considers reasonable. Projections are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. The inclusion of projections herein should not be regarded as a representation or guarantee regarding the reliability, accuracy or completeness of the information contained herein, and neither FS Investments nor the author are under any obligation to update or keep current such information.

All investing is subject to risk, including the possible loss of the money you invest.

Andrew Korz, CFA

Executive Director, Investment Research

Search our site