What will happen to commercial real estate values in 2025?

The results matter for two reasons. The first is that the April 2025 survey was conducted during March 31 to April 11 when public market reaction to tariff policy announcements were the most volatile. If bank lenders felt the need to materially change their posture toward CRE lending amid tariffs and market volatility, the survey would have been a prime opportunity to communicate that. Instead, the responses were little changed from the previous quarter and reinforced the direction of less tightening compared to a year or two ago.  

The second reason relates to the strong long-term historical relationship between the SLOOS results and CRE capital value growth. From January 2000 to April 2025, the correlation between the net percent of banks tightening their CRE loan underwriting standards and the annual unlevered capital appreciation return of properties in NCREIF’s Open-End Diversified Core Equity (ODCE)⁴ Index two quarters later has been strongly negative at -0.79.³ Tighter underwriting standards (i.e., high positive net scores on the survey) have been highly correlated with low or negative property value change. Looser underwriting standards (i.e., low positive scores to negative net scores on the survey) have been highly correlated with positive property value gains. The strength of this lagged relationship means that the SLOOS survey historically has provided value as a leading indicator of short-term capital value changes for CRE.

What the results might say about the direction of CRE values in 2025 

Based on linear regression analysis, the 9.0% result from the April 2025 survey suggests that unlevered capital values two quarters from now would be higher than today with annual growth in the single digits (i.e., 3.9%). Importantly, the regression analysis suggests that at a confidence level of 95%, the probability of annual unlevered ODCE capital values posting positive gains two quarters from now is 69%.⁴ If that were to occur, it would reinforce the recent bottoming of unlevered ODCE values in 4Q-2024, despite high levels of tariff-related volatility experienced in the first part of 2025.

Conclusion: Stay measured amid volatility

As we’ve stated previously, Invesco Real Estate is taking a measured approach to tariff-induced market volatility. While continuous trading in the public markets can drive hyper-responsiveness, we believe private markets have the benefit of digesting information more deliberately, without the emotional spikes. We’ll continue to monitor the SLOOS survey each quarter to gauge sentiment of senior bank loan officers. And while sentiment can change, the April 2025 results reinforce our posture of taking a measured approach to tariff-induced volatility.