The Federal Open Market Committee (FOMC) voted at its December meeting to lower the target range for the federal funds rate by 1/4 percentage point to 3.50% to 3.75%, marking the third consecutive rate cut since September. One FOMC member voted to lower the target range by 1/2 percentage point, while two members preferred no change. In the December Summary of Economic Projections, Fed participants forecasted that at the end of 2026 the fed funds rate would be 3.4% and unemployment rate 4.4%, unchanged from September. The median projections for GDP rose to 2.3% and PCE inflation fell to 2.4% at the end of next year.

“With today’s decision, we have lowered our policy rate 3/4 percentage point over our last three meetings,” said Fed Chair Jerome Powell. “This further normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2% once the effects of tariffs have passed through. The adjustments to our policy stance since September bring it within a range of plausible estimates of neutral and leave us well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook and the balance of risks.”

Commercial Real Estate Activity Surges in 2025

Matt Dzbanek, Senior Director in the Capital Services Group, said he welcomed another 25 basis point cut.

“The Fed has cut rates by 175 basis points since September 2024, which has supported an accommodative interest rate environment, leading to strong acquisition and financing activity in commercial real estate throughout the year,” he said.

Nationally, commercial and multifamily mortgage loan originations surged in the third quarter of 2025, climbing 36 percent year-over-year and 18 percent from the previous quarter, according to the Mortgage Bankers Association. The dollar volume of loans rose year-over-year for office (up 181%), retail (up 100%), hotels (up 66%), multifamily (up 27%) and industrial (up 5%).

Loan originations rose 83% for investor-driven lenders; 52% for depository lenders; 40% for Fannie Mae and Freddie Mac; and 5% for CMBS loans. Life company loans declined by 4%, however.

Record Year for Capital Services Group Driven by NYC Surge and National Reach

Fueled by robust investment sales and refinancings in New York City and across the nation, the Capital Services Group saw a record year with the dollar volume of the Group's financing activity doubling from 2024, Dzbanek said.

New York City’s investment sales rose to $20 billion in the first nine months of the year, a 19% year-over-year increase, Ariel Property Advisors’ New York City Q1-Q3 2025 All Asset Report shows. Multifamily sales led all asset classes with $6.6 billion in dollar volume.

Multifamily acquisitions and refinancings also dominated the Capital Services team’s pipeline this year with recent closings including:

• An $8.1 million LP & Co-GP equity package for the acquisition of a 70-unit Class-A multifamily in New Jersey.
• An $8 million bank loan with a 5.88% rate for a free market mixed-use building in Manhattan with 11 units.
• A $3,995,000 refinance loan with a 6.25% rate from a credit union for an eight-union mixed-use property in Brooklyn.
• A $3,750,000 refinance loan with a 6.13% rate from a savings bank for a 12-unit multifamily in Brooklyn.
• A $2,248,000 bank loan with a 6.60% rate for the acquisition of a 32-unit garden-style apartment building in Houston.
• A $2,065,000 refinance loan with a 5.98% rate from an agency lender for a 34-unit multifamily complex in Arkansas.

As the MBA report noted, Dzbanek said that private credit has become a large player in the New York City market. For example, a $68.1 million debt and equity package the team arranged in October to finance the acquisition and residential conversion of a Manhattan office building attracted more than two dozen term sheets from private lenders aggressively competing for the business.

New balance sheet lenders also entered the New York City market this year, targeting smaller to mid-size multifamily buildings with solid fundamentals.

Market Entering New Year Positioned for Growth

The commercial real estate market showed exceptional resilience in 2025, driven by increased investment activity and mortgage originations.

Looking ahead, the national multifamily sector will see increased liquidity in 2026, thanks to the Federal Housing Finance Agency boosting Fannie Mae and Freddie Mac loan purchase caps to $88 billion apiece for a total of $176 billion, up from $146 billion in 2025.p>

The market is entering the new year positioned for continued momentum and strong transactional activity.