By: Head of Data Strategy at LightBox, Manus Clancy
Investors were broadly hammered in March, as the month known for “coming in like a lion and going out like a lamb” exited more like a saber-toothed tiger. The U.S. stock market was turbulent in March with equities suffering their worst month since late 2022, and the Nasdaq down 12% year-to-date.
A great deal of ink has been spent on the impact of tariffs on investors’ psyches. The threat of higher supply costs has brought with it concerns that tariffs would grind the U.S. economy to a halt. The equity sell-off certainly reflects that fear.
But it’s important to note that the causes for the recent sell-off extend beyond the tariff impact. Heading into the year, U.S. stocks were trading at a recent record-high price-to-earnings ratios. Said another way, stocks were priced for perfection. In addition, investors were late in realizing how much AI spending could be a drag on big-tech earnings in the near-term. Late last year, investors chose to hear only the noise of AI sugar plums dancing in their ever-growing 401K portfolios. More recently, they have come to realize that it may be years of spending (and lower earnings) before the sugar plums ripen. In short, there have been ample reasons to take “risk off” as it pertains to the U.S. stock market.
Commercial Real Estate Defies the Odds in Q1
Yet, thus far, the commercial real estate market has been largely non-plussed. Sales activity has remained strong throughout Q1, a refreshingly sharp departure from the lackluster Q1 2023 and Q1 2024.
Normally, the U.S. CRE market thrives under three conditions: low interest rates, low volatility, and strong confidence in the forward-looking U.S. economy.
CRE borrowers and lenders saw none of those conditions in Q1. Interest rates remain naggingly high. Yes, the yield on the 10-year is 60 basis points below its recent peak of a few weeks ago, but it’s also 60 basis points above where it was in September 2024.
On the volatility front, both equity prices and Treasury yields whipsawed throughout March. On the confidence side, recent data on the sentiment of homebuilders, business leaders, and consumers all show growing concern over the potential impact of rising prices.
Together, this seemed to provide a recipe for a slowdown in the CRE market. (Did we mention that risk premiums also rose in March for both CMBS and High Yield?)
Yet the CRE market soldiered on. On the new issuance CMBS front, CREFC President Lisa Pendergast indicated on a recent LightBox CRE Weekly Podcast episode, that CMBS issuance could reach $160 billion in 2025. That would represent a multi-year high for the industry and would underscore that the wheels of CRE activity are churning.
Commercial Mortgage Alert recently reported a sharp uptick in lending activity from insurance companies—a notable shift in a market that’s been starving for capital. These aren’t the kind of headlines you’d expect if the sky were falling in CRE.
Consider how far we’ve come. From the second half of 2022 through late 2024, CRE professionals could hardly catch a break. While U.S. equities surged, the CRE market was stuck in a deep freeze—plagued by tight lending conditions, rising distress, limited liquidity, and a wave of negative sentiment tied to office vacancies and multifamily challenges.
That’s why the reversal in Q1 feels so significant. After two years of stalled deals and limited capital, early signs of renewed lender interest—especially from traditionally conservative players like insurers—signal a meaningful shift. It may not be a full recovery, but it’s a welcome change of pace for an industry that’s been stuck in neutral.
A Good Quarter but an Uncertain Path Ahead
Can this momentum continue? Maybe. Higher prices could stall the plans of those thinking about putting shovels in the ground, but owners of existing, stabilized properties are largely immune to higher supply costs. That—along with a reticence for developers to green light potential new inventory—could provide a nice tailwind for landlords.
In addition, eventually, the recent talk about a tariff-induced recession and expectations for negative GDP could force the Fed’s hand and push interest rates lower.
That being said, confidence in what comes next only lasts until the next White House press conference. Enjoy the fact that Q1 2025 was decent for the CRE market and keep your fingers crossed that it continues.
Apartment Sales Remain Strong
The Yankees once had a player—Tommy Heinrich—known as “Old Reliable” for his consistency and clutch hitting.
Old Reliable in the CRE market continues to be apartments. The number of sales taking place was impressive again in March. In addition, the data tracked by LightBox shows clearly that buyers will not hesitate to pay nine figures for desirable properties.
The largest deal of the month was a stake sale in 333 Schermerhorn Street in Brooklyn. The 62% stake in the 750-unit property put the asset’s total value at $420 million, underscoring continued investor confidence in large urban apartment assets.
Other notable nine-digit sales took place in Manhattan, Raleigh, and Richmond, highlighting that activity isn’t confined to the coastal hubs.
For these nine-figure sales, what stands out is the broad diversity of buyers and sellers. When we look at big-ticket sales each week, rarely does the same buyer or seller show up twice. This wide buyer pool speaks to underlying market resilience and suggests that multifamily remains one of the few corners of CRE still commanding deep and varied investor interest.
Signals to Watch as the Cycle Shifts
The resilience of the CRE market in Q1 shouldn’t be confused with immunity. If anything, the sector’s ability to push forward in the face of still-high rates, geopolitical noise, and economic crosswinds only raises the stakes for what comes next. Watch how the market responds if construction costs rise further or if risk spreads widen again. Keep an eye on the bid-ask spread in Q2—especially in office and multifamily—as it’s one of the best real-time gauges of sentiment and conviction.
We’re also watching for a break in one of the three core pillars: capital flows, rent growth, or buyer diversity. If even one of those starts to weaken, the CRE market’s Q1 momentum could look more like a pause than a pivot. For now, the message is this: the CRE market isn’t ignoring the noise—it’s choosing to work through it. Whether that patience is rewarded or tested will depend on how the next round of macro signals land.
For more insights from Manus Clancy, follow LightBox Insights and tune in to the CRE Weekly Digest Podcast, where he, along with Martha Coacher and Dianne Crocker, shares real-time data, market commentary, and key signals to watch across the CRE landscape.
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