For the first time since December 2024, the Federal Open Market Committee (FOMC) voted at its September meeting to cut the fed funds rate, lowering it by 0.25% to a range of 4.00%-4.25%. One committee member wanted an even larger rate cut, recommending to lower the target range by .50%. The Fed also released the September Summary of Economic Projections (SEP), indicating two more cuts and projecting the fed funds rate will be 3.6% at the end of this year and gradually trend downward to 3.1% by the end of 2027. Year-end forecasts for unemployment (4.5%) and inflation (3%) were unchanged from the June projections, but real GDP growth was revised upward to 1.6%.

“Changes to government policies continue to evolve, and their effects on the economy remain uncertain, said Fed Chair Jerome Powell. “Higher tariffs have begun to push up prices in some categories of goods, but their overall effects on economic activity and inflation remain to be seen. A reasonable base case is that the effects on inflation will be relatively short-lived—a one-time shift in the price level. But it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed. Our obligation is to ensure that a one-time increase in the price level does not become an ongoing inflation problem.”

Window of Opportunity for Property Owners

Matt Swerdlow, Senior Director in the Capital Services Group, welcomed the Federal Reserve's rate cut, predicting it will prompt many investors who have been on the sidelines to move forward with acquisitions.

“Buyers are in a Goldilocks moment,” Swerdlow said. “Since many fixed rate loans don’t rate lock until the week of closing, buyers can negotiate a purchase price based on yesterday’s prices but lock in financing at ‘tomorrow’s rates’. The result is a small window where one can achieve an even greater spread between going-in cap rate vs cost of capital than modeled. You just have to be in the game.“

Lenders Return as Market Liquidity Rises

While last year's rate cuts did not translate into lower Treasury rates, Swerdlow suggested that the current scenario may be different. Since the Fed signaled a sustained cutting cycle rather than a one-off adjustment, front-end relief could finally ripple through to longer maturities.

He noted that in recent weeks mortgage rates have been pushed lower to the high 4% range for the right opportunities. Ariel’s Capital Services team has also been receiving an above average amount of outreach among lenders advertising their loan terms and quoting new opportunities. This is indicative of a return to the robust capital market environment of 2021 and before.

“In fact, one of the nation’s largest banks has entered the New York City market seeking to make CRE loans with flexible terms and compete with the incumbent stock of NYC multifamily lenders,” Swerdlow said.

The Mortgage Bankers Association (MBA) reported at the end of July that commercial and multifamily mortgage loan originations were 66% higher in the second quarter of 2025 compared to a year earlier, and increased 48% from the first quarter of 2025.

The MBA report found, “Among investor types, the dollar volume of loans originated for depositories increased by 108% year-over-year. There was a 93% increase in loans for investor-driven lenders, a 72% increase in loans for life insurance companies, a 59% increase in government sponsored enterprises (GSEs – Fannie Mae and Freddie Mac) loans, and a 10% decrease in commercial mortgage-backed securities (CMBS) loans.”

Appetite Expands to Finance More Complex Deals

The Capital Services data confirm the upswing. There has been a notable pick up in financing activity this year ranging from refinance loans for multifamily properties across the U.S. to acquisition loans for more challenging assets such as hotels, office-to-residential conversions and condo developments.

For example:

• The Capital Services Group recently arranged a complex $45 million financing package with a private debt fund for the acquisition and renovation of a 166-key hotel with a 10,000-square-foot retail condominium in Midtown Manhattan. The transaction was for a hotel in foreclosure that had been vacant since the onset of the Covid-19 pandemic in 2020. The borrower acquired the property for $54,735,750 from the foreclosing lender and plans to reposition it into an updated luxury hotel.
• The team is also negotiating a $65 million debt and equity package for the acquisition of a Manhattan office building that will be converted to residential use. The transaction is possible because the New York City Council recently approved the Midtown South Mixed-Use Plan, which will rezone 42 blocks in Manhattan’s Midtown South from manufacturing to residential use. The rezoning will potentially unleash a large number of office conversions and create 10,000 units of housing.
• Also in the works is a $35 million construction loan the Capital Services Group is arranging for a condo development on Manhattan’s Lower East Side.

“Lender appetite to finance the acquisition of a vacant hotel or an office-to-residential conversion was nearly non-existent 12+ months ago,” Swerdlow said. “We’re seeing an uptick in quotes for more speculative business plans like condo construction. In 2022-2024, nearly all condo construction opportunities were underwritten to ‘rental fallbacks’ which yielded underwhelming loan amounts compared to the actual condo sellout analysis.”

The Takeaway: A Market Primed for Growth

The current market presents a compelling, multi-faceted opportunity for real estate investors. As highlighted, the current “Goldilocks moment“ allows buyers to capitalize on the arbitrage between current asset pricing and newly lowered financing costs. This window of opportunity is propelled by a surge in market liquidity and the aggressive return of lenders. Crucially, the renewed confidence extends beyond traditional assets, with capital now flowing into complex value-add and development projects that were considered unfinanceable just a year ago. This fundamental shift in lender risk appetite signals a robust and dynamic financing environment, creating new avenues for growth and returns across the real estate spectrum.