By: Head of Data Strategy at LightBox, Manus Clancy
February was a turbulent month for the financial markets. U.S. stocks posted losses, with the Nasdaq recording its biggest monthly drop in nearly a year. The Nasdaq 100 saw several selloffs of more than 1% and a few of more than 2%. However, a sharp decline in long-dated Treasury yields provided some relief for would-be CRE buyers and property owners.
As with January, there were a host of headlines out of Washington, D.C. that kept CRE analysts on edge. Office lease terminations moved from concept to reality as details emerged on specific space reductions in Chicago, Denver, and Washington D.C., underscoring the impact of GSA downsizing. Meanwhile, new tariffs on imports from Canada and Mexico officially took effect today (March 4th), adding another layer of uncertainty to already fragile economic conditions. The policy shift has sparked concerns over higher costs for steel, aluminum, and other key building materials, which could put additional pressure on the construction sector.
Concerns about the impact of tariffs escalated throughout February, along with a sharp dip in U.S. consumer confidence and reports of headwinds in the housing market. These February developments kept a lid on market enthusiasm and momentum.
Treasury Rates Decline Over the Second Half of the Month
After the disappointing CPI print on February 12 showing a rise in pricing that was an acceleration over December’s rate, the yield on the 10-year Treasury peaked at just over 4.65%. But concerns were rekindled later in the month that the U.S. economy could be slowing, leading to a sharp decline in yields on long-dated Treasuries. The yield on the 10-year, ended the month at 4.24%—a 34 basis point decline month-over-month.
The yield curve between the 3-month and 10-year inverted late in February, raising the possibility that the U.S. could be headed for a recession but also raising hopes that the next Fed rate cut could come sooner rather than later.
All of this provided some relief for the CRE market. Ongoing struggles with high vacancies and falling valuations in office continue, although signs of stabilization are surfacing in downtown markets across the U.S. In Denver, one of the city’s largest office towers at 1225 17th St. sold for only a 1% discount to its 2019 price, signaling resilience in certain office submarkets, despite broader market challenges.
Apartment Sales Show No Sign of Letting Up
The apartment sales market remained strong in February, with 12 transactions exceeding $100 million and another four nearing that threshold. Investor interest remains robust, with capital continuing to flow into multifamily assets with strong operating fundamentals.
The largest deal of the month was AvalonBay’s $620 million acquisition of an eight-property portfolio in Texas, totaling over 2,700 units at an average price of $230,000 per unit. This deal underscores institutional investors’ confidence in high-growth Sunbelt markets, where strong rental demand and demographic trends continue to drive activity.
Other notable nine-digit sales took place in Bethesda, MD; Foster City, CA; Union, NJ; and Chicago, IL—with a diverse mix of buyers. The 12 big-ticket sales involved a diverse group of buyers, reflecting continued demand across multiple markets.
Hotel Sales Pick Up
The often moribund (lately) hotel investment market saw renewed activity in February, with several high-profile sales. Investors continue to focus on urban hospitality assets, though many deals are still pricing at discounts to previous valuations.
The Westin Washington, D.C. City Center at 1400 M St NW sold for $92 million, representing a 40% loss from its 2012 sale price of $153 million. The sharp discount highlights ongoing valuation challenges for urban hotels that are still recovering from post-pandemic shifts in business travel and tourism.
In Nashville, the Embassy Suites at Vanderbilt traded for $57.5 million to Reade Hotel Capital, equating to $276,000 per key—a 13% discount from its 2015 sale price. Meanwhile, the SoHo 54 Hotel in New York changed hands for $56 million, or $350,000 per key, in a deal led by Manga Hotels.
While hotel transactions remain below pre-pandemic levels, these recent sales suggest investors are selectively re-entering the sector, particularly in high-traffic urban locations where travel demand is gradually rebounding.
Looking Ahead: Market Resilience Amid Uncertainty
While lower rates provided some much-needed relief in February, investors remain in wait-and-see mode, especially in asset classes facing structural challenges like office and urban hotels. The resilience demonstrated by recent office and multifamily transactions suggests that well-located, high-quality properties continue to attract capital, but the broader market remains fragmented. Distressed asset sales, particularly in the office sector, could pick up in the coming months as lenders and owners are forced to come to terms with struggling properties.
Meanwhile, federal policy uncertainty looms large over CRE, with the newly enacted tariffs on Canada and Mexico introducing fresh concerns over rising construction costs. The next few months will be critical in determining whether the recent decline in long-term rates is enough to reignite transaction volumes across sectors—or if the industry remains stuck in a holding pattern.
For now, the market is treading water, but the current is shifting. Capital is still in motion, just more selectively. The smart money isn’t waiting for certainty—it’s preparing for opportunity.
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