By: Head of Data Strategy at LightBox, Manus Clancy
September is usually Wall Street’s cruelest month, and October is notorious for volatility. After a summer of record highs, investors entered September bracing for turbulence. The warning signs were there: weak July and August jobs data raised recession fears; CPI and PPI ticked higher; homebuilder sentiment slid to multi-year lows; and the Fed’s mid-September 25 basis point rate cut failed to bring down long-dated Treasury yields.
On top of that, Washington flirted with another government shutdown and credit markets saw rare surprises with the bankruptcies of Tricolor Holdings and First Brands — jolts that left investors wondering if more pain was ahead.
With so many red flags, a pullback seemed inevitable.
Yet markets didn’t flinch. The S&P 500 hit fresh highs, Treasury yields climbed modestly but orderly, and commercial real estate activity stayed resilient. Deals got financed, lenders stayed active, and risk premiums remained tight.
Markets Shrug Off the Red Flags
All of this is to say the pieces were firmly in place for a turbulent September. Yet what we got was more of the same. The S&P 500 hit several new all-time highs. Yields on long-dated Treasuries moved higher, but the increases were modest and orderly.
On the commercial real estate front, risk premiums stayed range bound and near multi-month tights. Sales activity didn’t miss a beat. Developers of projects that are often hard to finance — like ground-up construction or property conversions — had no problem finding lenders.
Go figure.
October opened on the same note. A negative ADP jobs number landed, and the S&P 500 promptly notched yet another high. For now, stock, bond, and CRE investors are squarely in “risk-on” mode.
Yes, Chair Powell has called stocks “highly valued” and CNBC has revived talk of “exuberance.” But none of that has slowed investors’ willingness to chase returns. History shows bullish stretches can last far longer than logic suggests. Calling the top is never easy.
And for CRE participants, why would you? After the anemic stretch from late 2022 through mid-2024, lenders, buyers, sellers, and service providers are finally enjoying tailwinds.
CRE Market Holds Steady
The steady uptick in CRE economic activity has been welcome, but it’s hard to see the market breaking decisively higher or lower in the near term. Absent a true Black Swan, conditions look set to continue much as they have for the past nine months.
On the positive side, valuations haven’t become frothy like equities. Yes, some land sales for data centers have been eye-popping, but those remain outliers. Broadly speaking, values have not inflated the way they did in 2007, which should limit the downside if turbulence emerges in the wider markets.
Lenders, by and large, have also remained disciplined. The last five years have thrown curveballs — COVID, 9% inflation, the collapse in office valuations, an overheated multifamily market — and those scars have helped keep standards intact. Private equity lenders may be more aggressive, but across the board discipline is evident.
One notable pocket of activity is hospitality. After lagging other property types in the recovery, hotels are finally seeing momentum with a handful of big-ticket trades. While not enough to call a breakout, the deals suggest investors are willing to take on selective bets in a sector that has been slow to regain its footing.
The flip side: there’s little on the horizon to spark a dramatic surge. A 10-year Treasury yield at 3.5% could provide a short-lived sugar rush, but it would likely arrive hand-in-hand with recession. Be careful what you wish for.
For now, a CRE market that continues along the same track it has followed for most of 2025 wouldn’t be the worst outcome.
Waiting for the Spark
The calm we’ve seen could last…or it could crack fast. For clues, I’m watching three things this month. First, long-dated Treasury yields: if they push higher, orderly markets could turn disorderly in a hurry. Second, credit: last month’s surprise bankruptcies may have been outliers, but if more follow, confidence will take a hit. And third, earnings season. Company results later in October will either reinforce the “risk-on” mood or introduce doubt.
For CRE, the tailwinds are still blowing. But October is notorious for shifting sentiment. If something tips the balance, this could be the month we find out whether resilience holds or cracks.
Stay tuned.
For more insights from Manus Clancy, subscribe to 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.
