The Federal Open Market Committee (FOMC) voted at its May meeting to maintain the range for the federal funds rate between 4.25% to 4.50%. Despite uncertainty, the announcement noted that indicators suggest economic activity has continued to expand at a solid pace. The unemployment rate remains steady at 4.2%, with payroll jobs averaging 155,000 per month over the last three months. While inflation is above the 2% target, it has dropped significantly since mid-2022. Personal Consumption Expenditures (PCE) rose 2.3% in the 12 months ending in March and, excluding food and energy, increased 2.6%. GDP was 2.5% last year, but declined in the first quarter, likely driven by businesses bringing in imports ahead of potential tariffs.

“The tariff increases announced so far have been significantly larger than anticipated,” Fed Chair Jerome Powell said. “All of these policies are still evolving, however, and their effects on the economy remain highly uncertain. As economic conditions evolve, we will continue to determine the appropriate stance of monetary policy based on the incoming data, the outlook, and the balance of risks.”

The Fed will release a new Summary of Economic Projections following the next FOMC meeting June 17-18.

Strong Listing and Contract Pipeline in Commercial Real Estate

“Although the last few weeks have been a roller coaster because of geopolitical and economic uncertainties, a recent lull in the news cycle has allowed commercial real estate investors to continue moving ahead with their acquisition and financing plans,” said Matt Swerdlow, Senior Director in the Capital Services Group for Ariel Property Advisors, a GREA partner based in New York City.

In recent weeks, the Capital Services team has seen a 300% uptick in its loan activity and closed a number of transactions nationwide including:

• Manhattan. A $50 million, 10-year CMBS loan to refinance a portfolio of 13 multifamily properties including 330 residential units and five commercial units across Manhattan’s Chelsea, East Village, Kips Bay, Upper East Side, and Upper West Side neighborhoods.
• Dallas. A $7.9 million loan with a national bridge lender for the acquisition of an apartment complex.
• New Jersey. A $5.25 million construction loan with a national construction lender for a 20-unit mixed-use building in Bergen County.
• Philadelphia. A $4.7 million loan with a community bank to refinance a 35-unit mixed-use property.
• Washington, D.C. A $3.4 million loan with a commercial bank to refinance a 14-unit free market multifamily property.

Upfront Work Crucial for Borrowers to Benefit from Lower Rates

Despite recent volatility, treasury rates have been trending downward since the beginning of the year, making it important for borrowers to be prepared to act quickly to take advantage of potential opportunities.

Swerdlow said, “To really capitalize on favorable interest rate movements, a borrower needs to be at the right place at the right time in order to rate lock. In many cases, this includes going through the first half of due diligence and receiving 3rd party reports back in order to be in a position to strike.”

While treasuries are currently trending down, the reality is that without being in the pipeline, borrowers are typically 30 to 45 days away from locking a rate, he said.

Multifamily Market Drives Strong Investment Sales Activity Nationwide

The loans arranged by the Capital Services Group represent the robust growth in commercial real estate activity that began in the first quarter and is continuing nationwide in the second quarter, especially in the multifamily sector.

In New York City, Q1 2025 multifamily volume totaled $2.21 billion, a 62% year-over-year increase with sales largely concentrated in free market assets in Brooklyn and prime Manhattan, according to Ariel’s Q1 2025 Multifamily Quarter in Review New York City. Transaction volume rose 5% from Q1 2024 to 269.

Housing markets that are undersupplied like New York City saw the highest year-over-year rent increases in March, while regions with an abundance of new supply saw negative rent growth, according to Yardi Matrix. This year will see the second-highest number of multifamily units delivered in a single year since the Great Financial Crisis, with the highest number since that time delivered in 2024, the research firm reported.

Significant Loan Maturities in 2025 Present Refinancing Hurdles

In 2025, $957 billion of the $4.8 trillion in outstanding commercial mortgages held by lenders and investors will mature, which includes loans that were set to mature in 2024 but were extended to 2025, Mortgage Bankers Association data shows. The timing is particularly problematic for borrowers who secured loans when rates were low and will be refinancing into a higher rate environment.

Nonperforming commercial real estate loans for the top 300 banks rose to $30.72 billion in 2024, a 31% year-over-year increase but less than a third of the record $96.39 billion in bad loans on the books in 2009 during the Great Recession, according to a Real Estate Alert article citing an analysis of Trepp Bank Navigator data. These nonperforming loans accounted for 1.4% of the top 300’s commercial real estate loan book.

While the article stated that “amend-and-extend is alive and well,” we are seeing that lenders are starting to force the disposition of assets. We expect this policy to continue and, therefore, anticipate seeing increased sales throughout 2025.