Outlook for 2025 Budget, Reconciliation, and Tax Legislation

Senate Republicans are mapping out an ambitious two-step reconciliation strategy for 2025, planning to first address defense, energy, and border security before tackling a tax package later in the year. The initial focus is to secure an early win that could help build momentum for the more complex task of extending the expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA). (Tax Notes, Dec. 4)

Why It Matters

  • This approach marks a notable shift from House Republicans’ earlier plan to address tax issues within the first 100 days of President-elect Trump’s term. (Washington Post, Dec. 4)
  • Instead, Senate Republicans want to divide the legislative work to make each package more manageable, leveraging early victories to build momentum for harder battles. (PoliticoPro, Dec. 4)

Reconciliation Plan

  • GOP senators, including Thom Tillis (R-NC) and Shelley Moore Capito (R-WV), emphasized the importance of consensus and coordination within the party, acknowledging that a slim House majority could complicate passage. (Tax Notes, Dec. 4)
  • Sen. Capito noted that a smaller, earlier reconciliation package—focused on defense, energy, and border security—could help set the stage for tackling the more politically challenging tax bill.
  • The initial bill could include measures that all Republican factions can support, such as limited deficit reduction and targeted energy policy reforms.
  • Failure to act on tax reform by the end of 2025 will lead to the expiration of many provisions from the 2017 tax law, resulting in tax increases for most individuals and some businesses. (Bloomberg, Dec. 3)
  • Rep. Jason Smith (R-MO), chairman of the House’s Ways and Means committee, voiced his opposition to delaying tax reform under Sen. Thune’s plan, noting the difficulty of advancing two budget reconciliation packages, which are immune to filibusters in the Senate. (The Hill. Dec. 5 | CNBC, Dec. 4)
  • “The important thing is getting all the policies done as quickly as possible, and what we ultimately all agree on [is] we’re all going to have to be in unison on that, but no final decision has been made,” said House Majority Leader Steve Scalise (R-LA) regarding the reconciliation timeline. (PoliticoPro, Dec. 4)

View from Senate

  • Sen. Chuck Grassley (R-IA) pointed to the complexity of the tax package as the reason for its placement as the second bill.
  • “We want to help lower energy costs, we want to help the military. We want to hit the ground running,” said Sen. Lindsey Graham (R-SC). (The Hill, Dec. 4)
  • Sen. Rand Paul (R-KY) cautioned against using reconciliation to increase spending, emphasizing the need to reduce overall expenditures.

What’s Next

  • Senate Republicans, led by incoming Senate Majority Leader John Thune (R-SD), will work closely with House Speaker Mike Johnson (R-LA) and the White House to finalize the contents and timing of both reconciliation bills.
  • Passage of a budget resolution, which is the first key step in the reconciliation process, will be crucial to move forward—a challenge in itself given the slim GOP majority in the House.

The two-bill reconciliation strategy reflects Senate Republicans’ cautious approach to the legislative calendar. By securing an earlier, more straightforward win, the GOP hopes to gain the momentum needed to navigate a complex tax debate later in 2025.

The Roundtable’s Jeffrey DeBoer Recognized as One of DC’s “Top Lobbyists” for 2024

Real Estate Roundtable President and CEO Jeffrey DeBoer has been recognized as one of the “Top Lobbyists” in Washington, D.C. for 2024, according to the prominent policy news publication, The Hill. This marks the seventh consecutive year that DeBoer has received this honor. (The Hill, Dec. 5)

  • The Hill noted that their list details “some of the best in the business and those that have been “go-to advocates during a year defined by unprecedented political events, legislative logjams, federal spending cut crusades and big rulemaking swings by the outgoing Biden administration.”
  • DeBoer stated, “I am truly honored to be recognized by The Hill for my work, especially in a city with more than 12,000 lobbyists. This recognition, though, really is a testament to the overall Roundtable team, leadership, and membership.”

DeBoer added, “This acknowledgment underscores the importance of the fact-based advocacy work we do to advance policies that foster solid real estate asset values, spur job opportunities, economic growth and strengthen communities nationwide.”

Corporate Transparency Act Enforcement Blocked by Federal Court

On Tuesday, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, blocking enforcement of the Corporate Transparency Act (CTA), questioning its constitutionality and its impact on small businesses. The ruling prevents the federal government from enforcing CTA requirements until further notice. (Forbes, Dec. 4)

Impact of Ruling

  • The CTA, effective January 1, 2024, mandates that over 32 million “reporting companies” disclose beneficial ownership information to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
  • Due to the far-reaching scope of the CTA, The Roundtable has long raised concerns about the regulatory burden and cost the CTA would impose on many commercial and residential real estate investment businesses.
  • The preliminary injunction halts enforcement of the upcoming January 1, 2025, deadline for filing ownership reports.
  • The decision marked the second time a judge has deemed the law unconstitutional. An Alabama federal judge reached a similar conclusion in March (Reuters, Dec. 4 | Roundtable Weekly, March 8)
  • The injunction is temporary; not a final decision. The pause on enforcement could be overturned if the ruling is challenged successfully on appeal.

Court’s Decision

  • In Texas Top Cop Shop v Garland et al., Judge Amos L. Mazzant III found the CTA’s federal oversight of corporate ownership to be overreaching, infringing on constitutional rights typically overseen by states. (Bloomberg, Dec. 3)
  • Judge Mazzant also highlighted the heavy compliance costs — projected at $22 billion in the first year alone — without adequate privacy safeguards.
  • The plaintiffs, including small business owners and a trade association, argued that the CTA compels speech and association, infringing on First Amendment protections. They also raised concerns about privacy violations under the Fourth Amendment, given the extensive personal information required.
  • The Court agreed that a nationwide injunction was necessary due to the sweeping impact of the CTA.

Roundtable Opposition

  • The Roundtable has consistently opposed beneficial ownership rules under the CTA, the burdensome reporting requirements, and the negative impact on real estate partnerships and capital formation.
  • In May, The Roundtable and more than 100 business organizations expressed strong support for bicameral legislation that would repeal the Corporate Transparency Act (CTA) and its onerous beneficial ownership burdens. (Roundtable Weekly, May 10)
  • RER continues to work with policymakers to identify a balanced position that would inhibit illicit money laundering activity but would not place unnecessary compliance costs and regulatory burdens on the real estate industry. (Roundtable Weekly, June 7 )

The Roundtable’s Real Estate Capital Advisory Committee (RECPAC) will continue to closely monitor developments related to the enforcement of the CTA and challenges to the law.

Trump Tariffs Could Impact Housing Affordability 

On Monday, President-elect Donald Trump pledged to impose a 25 percent tariff on all goods from Mexico and Canada, and an additional 10 percent tariff on imports from China. These measures could have significant repercussions for the U.S. economy, including housing affordability. (WSJ, Nov. 25 | Reuters, Nov. 26)

Response to Illegal Drugs, Immigration

  • Trump’s social media posts stated that the threatened tariffs are necessary to stop illegal immigration and fentanyl trafficking. He couched the levies on imports as temporary, staying in effect “until drugs and migrants stopped coming over the border.” (New York Times, Nov. 26)
  • The U.S. imports the most goods from Mexico, China, and Canada, in that order.  (U.S. Census Bureau, Sept. 2024).
  • Trump said he plans to impose the new tariffs on his first day in office. (AP, Nov. 26). Mexico, the U.S.’s largest export partner after Canada, vowed to retaliate with its own tariffs and spark a possible trade war. (Washington Post, Nov. 26)

Potential Impacts on Housing, Construction

  • “Overly broad and poorly designed tariffs could unintentionally increase housing costs for millions of renters and home buyers,” said Jeffrey D. DeBoer, President and CEO of The Real Estate Roundtable. “Building safe and desirable housing cost-effectively is tied closely to the price of imported materials like steel, cement, concrete, lumber, glass, and more. Tariffs that increase construction costs would slow bringing new supplies to the market and increase prices to purchase and rent homes.”
  • “We need to boost the nation’s housing supply — through new construction, converting obsolete buildings, strengthening the low-income housing tax incentive, reforming local zoning laws, and other bipartisan strategies,” DeBoer continued. “We look forward to working with the Trump Administration on policies to spur economic growth, create jobs, and in this case, improve housing affordability and availability.”
  • The proposed tariffs would be additional to Biden-era tariffs, which themselves derive from import taxes dating back to the first Trump Administration.
  • For example, in May, President Biden increased the tariff on steel products from China to 25 percent— while also increasing tariffs to varying degrees on semiconductors, solar panels, batteries and other specific Chinese imports. (White House fact sheet, May 14). It appears that President-elect Trump will seek an additional 10 percent on top of these.
  • Similarly, in August, President Biden raised tariffs on imports of Canadian softwood lumber to 14.54 percent, according to the National Association of Home Builders (NAHB).  It appears that President-elect Trump plans to raise this import tax further to 25 percent.
  • Lumber tariffs have a detrimental impact on housing affordability, according to NAHB. “In effect, the lumber tariffs act as a tax on American businesses, home buyers, and consumers.”

Potential Impacts on the Broader Economy       

  • Investor Uncertainty: Uncertainty surrounding trade policies risks dampening investor confidence, which could weigh on real estate property values and slow transaction activity. (Bisnow, Nov. 24)
  • Energy costs: A 25 percent tariff on all imports from Canada would drive up energy costs. Canada is the top external supplier of crude oil to the U.S., with oil, gas, and other energy products making up its largest exports. (Bloomberg, Nov. 26)

Trump did not specify how he plans to impose the tariffs, although many have expected him to rely heavily on the International Emergency Economic Powers Act. That law gives the president broad authority to regulate U.S. commerce after declaring a national emergency. (PoliticoPro, Nov. 24)

View from the CEO: Priorities for the CRE Industry in 2025

With control over the White House and both chambers of Congress decided, attention has turned to how President-elect Donald Trump’s second term will affect the commercial real estate industry.

Looking Ahead

  • As Roundtable President & CEO Jeff DeBoer noted to BisNow last week, the new administration represents a chance to strengthen policymakers’ understanding of the critical role CRE plays in the economy. (BisNow, Nov. 12)
  • Anytime that there’s a turning of the page, there’s an opportunity to emphasize new issues, or to bring priority to older issues that maybe have been pushed out by previous leaders,” DeBoer told BisNow. DeBoer also highlighted key policy priorities for commercial real estate to move forward in the coming administration, including housing, tax, capital markets, and energy.

Housing Policy

  • Interagency task force: The Roundtable is calling for a federal task force focused on expanding the housing supply, particularly affordable housing. This task force would coordinate efforts across agencies to streamline building processes and reduce regulatory barriers, incentivizing new development across the U.S.
  • Property conversions: The administration should support federal incentives for (such as low interest loans) converting obsolete office buildings into residential housing. Modeled after tax credits for historic preservation, bipartisan legislation like the Revitalizing Downtowns and Main Streets Act could help relieve the national housing shortage. (Roundtable Weekly, July 12)
  • Tariff concerns: Proposed tariffs on materials like lumber, steel, concrete, glass and appliances could impact housing supply: “By putting tariffs on housing materials, you will be indirectly increasing costs for buyers and renters and making it more difficult to solve this housing crisis,” said DeBoer.

Tax Policy

  • With key provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) expiring soon, tax legislation will likely be central to President-elect Trump’s first 100 days.
  • Capital gains: Long-standing elements of the tax code, including the reduced rate for capital gains, the ability to reinvest through like-kind exchanges, and step-up in basis of assets at death, are critical for real estate businesses and encourage productive investment and economic growth. RER will continue to advocate that these provisions be maintained.
  • Section 199A: The qualified business income deduction for pass-through businesses, known as Section 199A, ensures that small businesses can compete on a level playing field with public corporations. RER supports extending the deduction, which is currently set to expire.
  • Foreign investment: Restrictions on foreign investment discourage capital formation and could hinder growth in real estate at a time when increasing the supply and availability of capital is critical to the industry’s recovery. Policymakers should avoid imposing additional restrictions or tax burdens on foreign investors, and consider repealing or reforming the Foreign Investment in Real Property Tax Act (FIRPTA).

Capital Markets

  • Strengthening capital flows in real estate is a top priority, as lending and credit availability have remained relatively weak since the pandemic and are only recently starting to see improvement.
  • Interest rates: Policymakers should carefully consider the inflationary effects of fiscal policies to maintain a favorable interest rate environment. Avoiding increased capital requirements, such as Basel III Endgame proposal, is also necessary to prevent hindering growth.

Energy Policy

  • With the rise of data centers, AI and other energy-intensive sectors, addressing energy capacity and permitting is a critical bipartisan need and “very important” to RER’s agenda, as DeBoer noted.

RER is committed to working proactively and productively with President-elect Trump and the 119th Congress to support the needs of the economy and commercial real estate industry.

RECPAC Fall Meeting Spotlights Upcoming Policy Opportunities and Challenges in Real Estate Capital Markets

The Real Estate Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) convened this week in New York to address market conditions, pressing policy issues, including Basel III Endgame, shifts in capital markets, and the evolving political and regulatory landscape.

Fall RECPAC Meeting

  • RECPAC met Tuesday, under the leadership of RECPAC Co-Chairs Bryan McDonnell (Head of U.S. Debt and Chair of Global Debt, PGIM Real Estate), Rex Rudy (EVP, Head of Commercial Real Estate, US Bank), Miriam Wheeler (Global Head Real Estate Finance, Goldman Sachs Asset Management), and Working Group Chair Michael Lascher (Global Head of Real Estate Debt Capital Markets, Blackstone) to discuss the new political landscape and top policy priorities for 2025.
  • Roundtable Chair Kathleen McCarthy (Global Co-Head, Blackstone Real Estate) kicked off the meeting and welcomed RECPAC members to the meeting, sharing her insights on real estate credit and capital markets. Other discussions included:
  • Overview of Real Estate Capital Markets: Mark Gibson (CEO, JLL Capital Markets, Americas) provided an overview of current economic and real estate market conditions, investment capital flows, interest rate trends, and their impact on financing.
  • Political and Regulatory Landscape: Wayne Berman (Head of Government Affairs, Blackstone) discussed the new political landscape, and its implications for financial services and tax policy, credit, and capital market issues.
  • U.S. Economic Outlook: David Mericle (Chief US Economist, Goldman Sachs) presented his views on the U.S. economic outlook, including growth prospects and recession risks.
  • Global Real Estate Credit Markets Roundtable: Nick Seidenberg (Managing Director, Eastdil) led a discussion on global real estate credit markets, joined by Jeff Krasnoff (CEO, Rialto Capital), Bryan McDonnell (Chair, Global Debt and Agriculture, PGIM), Rex Rudy (EVP, U.S. Bank), Miriam Wheeler (Global Head, Real Estate Financing, Goldman Sachs), and Greg Wolkom (Group Head, Real Estate Syndicated Finance and REIT Finance, Wells Fargo).

Committee on Foreign Investment in the U.S (CFIUS)

  • This week, the U.S. Department of the Treasury, as Chair of the Committee on Foreign Investment in the United States (CFIUS), finalized a previously proposed rule expanding both the types of military installations covered by its regulations governing reviews of real estate transactions and the number of military installations subject to those reviews. (Axios, Nov. 18)
  • Under the proposed rule issued in July, foreign land transactions within a mile of 40 additional military installations and within 100 miles of 19 additional military sites would trigger a CFIUS review. (Roundtable Weekly, July 12)
  • The finalized rule, which impacts transactions entered into on or after December 9, 2024, continues the trend toward reviews of more real estate transactions based on their proximity to a growing list of military installations deemed “sensitive,” and also allows for greater growth by changing the definition of “military installations” that can become subject to these regulations in the future. (Morgan Lewis, Nov. 18)
  • Nearly 60 military installations will be added to an existing list of military installations and approximately 10 existing installations will be extended for CFIUS jurisdiction purposes.
  • During their annual conference this week, CFIUS mentioned that the renewable energy industry has been a particular area of focus triggering jurisdiction over real estate transactions, due to the critical infrastructure component. (The National Law Review, Nov. 20)

Basel III Endgame

Federal Reserve Vice Chair for Supervision Michael Barr
  • Barr, the Fed’s top regulatory official, said the central bank will not be moving ahead with its plan to hike capital requirements for big banks, also known as Basel III Endgame, or move on any proposals to overhaul rules affecting bank liquidity and long-term debt over the next two months. (Politico Pro, Nov. 20)
  • “I expect to work with my new colleagues at the OCC and the FDIC in the coming year on those measures to get their policy input, their perspectives,” Barr said.
  • Earlier this year, RER raised industry concerns about the negative impact of the Basel III proposal in a Jan. 12 letter to the Fed and other agencies. The comments outlined how the proposal would decrease real estate credit availability, increase borrowing costs for commercial and multifamily real estate properties, and negatively impact the U.S. economy, concluding with a call to federal regulators to withdraw their proposed rulemaking. (Roundtable Weekly, Sept. 19)
  • New regulators are expected to lead the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB) when President-elect Trump takes office in January 2025.

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to engage with policymakers on any further changes to the Basel III Endgame proposal and other federal policy issues impacting credit capacity and capital formation.

The Post-Election Energy Landscape for CRE

Green foreground with buildings in background

The 2024 election results signal a return to energy policies supported by President-elect Trump and a shift from Biden era climate programs. For the commercial real estate (CRE) industry, these changes present opportunities to emphasize the “business case” for high performance, energy efficient buildings.

Anticipated Energy Policy Shifts

  • De-Regulation: Former Congressman Lee Zeldin (R-NY), the pick to lead the EPA, remarked on “the opportunity to roll back regulations” on power plant emissions, abolish fees on oil and gas development, and lift rules that drive automakers to manufacture electric vehicles. (The Washington Post, Nov. 19)
  • Climate Disclosures: The SEC will likely withdraw its controversial rule for public companies to report climate-related financial risks in 10-K forms. (Bloomberg, Nov. 7) Companies may still need to report and disclose emissions under state laws like those in California (if they survive litigation).
  • Clean Energy Tax Incentives: The incoming administration has vowed to dismantle the Inflation Reduction Act (IRA) that provides credits and deductions for solar projects, battery storage, EV charging stations, and energy efficient buildings. However, many clean energy projects benefit Red States and House Speaker Mike Johnson (R-LA) said he intends to use “a scalpel not a sledgehammer” in reviewing the IRA in light of Republican support. (POLITICO, Sept 18).
  • City, State Grants: Federal funding will likely be eliminated to support city and state efforts to enact building performance standards (BPS). (Roundtable Weekly, Sept 6) Localities may continue to adopt these laws imposing energy use and emissions limits on buildings even without federal support, and The Roundtable will continue to urge policymakers to follow our 20-Point Guide for fair and reasonable BPS laws.
  • Grid Reliability: Given the increased demands on the electric grid from AI, bipartisan bills to streamline the federal permitting process to approve interstate transmission lines – carrying electricity produced in rural areas and delivering it to cities long distances away – could finally become a priority. (Roundtable Weekly, Oct. 25)

The “Business Case” for Energy Efficiency

Department of Energy building in Washington, DC
  • By emphasizing the economic benefits of energy efficient buildings, the industry can remain resilient and forward-looking amid “policy volatility” arising from the power changes in Washington.
  • Energy efficient buildings improve our economy. They create jobs for American workers, enhance U.S. energy independence, help make the power grid more reliable, and attract overseas investments to our shores.
  • Non-regulatory, voluntary federal guidelines – developed and enhanced with The Roundtable’s support – help real estate companies make the case for energy efficiency.

They also include our collaboration with the Department of Energy and other agencies through the Better Climate Challenge, the national Zero Emissions Building definition, the Buy Clean initiative, and programs that highlight the environmental benefits of commercial-to-residential property conversions.

Post Election, CRE Shows Signs of Recovery Heading into 2025

The commercial real estate sector is at a critical inflection point, with numerous positive indicators signaling substantial progress on recovery and growth since the pandemic’s initial disruption to the industry.

Key factors driving the change are easing interest rates, continued return-to-office momentum, property conversions and rising office demand from tech and AI sectors, though some challenges remain.

Driving Factors in CRE’s Recovery

  • Interest rates have continued to ease, with the Federal Reserve cutting rates by another 0.25 percentage points last week. While inflation has shown some lingering signs of persistence, Fed Chair Jerome Powell indicated that interest rates are likely to continue to come down slowly and deliberately in the coming months. (Roundtable Weekly, Nov. 8, AP, Nov. 14)
  • CRE lending has also improved, with buyers and owners taking advantage of lower interest rates. Total commercial and multifamily originations increased by 59% year-over-year across many property types including healthcare, retail, multifamily and industrial, though office lending remains relatively stagnant. (GlobeSt, Nov. 12) (Bisnow, Nov. 11)
  • Office leasing has seen an uptick, with several major brokers, including JLL and CBRE, reporting significant increases in office leasing revenue. Larger lease sizes and a rising return-to-office trend have been key contributors, with the average number of in-office days required per week by employers up 50% compared to last year​. (CoStar, Nov. 11)
  • Regional office visit data indicates that October 2024 was the busiest in-office month since the pandemic for major hubs like Atlanta, Dallas, Houston, Denver, Washington, D.C., Chicago, and San Francisco. (GlobeSt., Nov. 15)
  • Office leasing has been further buoyed by growing demand from tech and AI companies. Tech firms leased 9.9 million square feet of U.S. office space during the third quarter, the highest level in nearly three years—supporting activity in high-value office locations such as San Francisco, Seattle, and New York. (WSJ, Nov. 12)

Property Conversions

  • Property conversions have been a bright spot in 2024, with 73 projects already completed this year and another 30 scheduled to be completed by year-end.
  • The vast majority are office-to-residential conversions—71 million sq. ft., or 1.7%, of U.S. office inventory was planned for or already undergoing conversion, helping to increase the supply of housing, boost downtown vibrancy and ease office vacancy rates. (CBRE, Nov. 11)

What’s Next: RER’s Real Estate Capital Policy Advisory Committee (RECPAC) will be meeting in person next week on November 19, 2024 in New York to discuss the economic outlook, capital and debt markets and much more.

CRE Leaders Gather to Discuss Elections, Economy, Housing and More

Roundtable Chair Kathleen McCarthy (Global Co-Head of Blackstone Real Estate, Blackstone)

This week’s Fall Roundtable meeting came at a pivotal time for commercial real estate, as key policy issues take center stage in Washington. Discussions focused on national policies impacting the industry, including the implications of the recent elections, challenges in capital and credit markets, expiration of the 2017 tax bill, and the federal government’s role in supporting housing supply and regulating energy usage. (Bisnow, Nov. 11)

The meeting also covered topics such as return-to-office trends, office-to-residential conversions, and liquidity concerns. (The Roundtable’s  Fall 2024 Policy Priorities and Executive Summary)

Speakers & Policy Issues

Roundtable members engaged in policy issue discussions with the following guests:

  • Reince Priebus, former White House Chief of Staff (President Trump) and the longest-serving chairman of the Republican National Committee in modern history, gave his perspective on the recent elections, dynamics on Capitol Hill, and potential focus of the new administration in 2025.
(L-R) Roundtable President & CEO Jeffrey DeBoer & Reince Preibus
  • Sen. Tim Scott (R-SC) is the current ranking member and presumed next chair of the influential Senate Banking, Housing, and Urban Affairs Committee and a senior member of the Senate Finance Committee. Sen. Scott advocated for expanding business and homeownership, enhancing financial literacy, and improving affordable housing by reducing regulations and advancing zoning reforms to foster economic growth and equity in communities.
Sen. Tim Scott (R-SC)
  • The Honorable Tom Barkin (President & Chief Executive Officer, Federal Reserve Bank of Richmond), provided a candid assessment of economic recovery and the challenges ahead. He also questioned the fundamental demand for office space as companies reassess their needs in a post-pandemic environment. (Reuters, Nov. 14)
(L-R) RER Board Secretary Jodie McLean (CEO, EDENS) and Tom Barkin
  • Rep. Richard Neal (D-MA) (Ranking Member, House Committee on Ways and Means), addressed the significance and major takeaways of the recent election and the outlook for tax and trade policy going forward. He discussed affordable housing incentives, such as the Low Income Housing Tax Credit (LIHTC) and the bipartisan Revitalizing Downtowns and Main Streets Act (H.R.9002), and extending tax provisions like Section 199A, capital gains. (RER’s Tax Policy Priorities)
Rep. Richard Neal (D-MA)

Next on The Roundtable’s meeting calendar is the all-member State of the Industry (SOI) Meeting, which will include policy advisory committee meetings, on January 22-23, 2025 in Washington, DC. 

Sentiment Index Reaches Three Year High, Signaling Industry Optimism for Gradual Recovery

The Real Estate Roundtable’s Q4 2024 Sentiment Index reached an overall score of 73, up 9 points from the previous quarter and marking its highest score since Q4 2021. The three year high reflects industry leaders’ cautious optimism that commercial real estate markets are stabilizing, showing signs of recovery and becoming well positioned for activity in 2025.

The Index, which measures commercial real estate executives’ confidence and expectations about the industry environment, is scored on a scale of 1 to 100 by averaging the scores of Current and Future Economic Sentiment Indices. Any score over 50 is viewed as positive.

Roundtable Perspective

  • Roundtable President and CEO Jeffrey DeBoer said, “The notable increase in sentiment this quarter reflects a combination of factors, primarily the Federal Reserve’s rate cuts and expected future monetary easing. This action coupled with positive shifts in office leasing demand and a broader return-to-office trend are leading to greater price discovery and transaction volume. Housing supply constraints, access to energy sources, high operating expenses continue to present major challenges.”
  • Compared to one year ago, sentiment on current conditions is up by 37 points, perception of future conditions is up by 20 points, and overall conditions are up by 29 points.
  • In comparison to last quarter, sentiment on current conditions is up by 10 points, perception of future conditions is up by 7 points, and overall conditions are up by 9 points.
  • Roundtable Chair Kathleen McCarthy (Global Co-Head of Blackstone Real Estate, Blackstone) commented on the Q4 Sentiment Index results: “The improved sentiment reflects the continuing recovery in commercial real estate, which is supported by improving liquidity in the market. This recovery will play out over time, and it is critical that we continue to support policies that help drive economic growth in communities throughout the U.S.”

Topline Findings

  • All indices of The Roundtable’s Q4 Index are up, compared to the previous quarter and one year ago.
  • The Q4 2024 Real Estate Roundtable Sentiment Index reached an overall score of 73, up 9 points from the previous quarter and marking the highest score since Q4 2021. The Current Index registered 69, rising 10 points from Q3 2024. Meanwhile, the Future Index hit 77, an increase of 7 points from the previous quarter and the highest level seen since 2011.
  • Leaders in the industry are cautiously optimistic that the commercial real estate industry is showing signs of recovery and is well positioned for activity in 2025. Over three-quarters (77%) of Q4 survey participants said conditions are better now compared to this time last year, and 88% of respondents expect general market conditions to improve one year from now.
  • Although there is some concern that multifamily assets will plateau in certain geographic areas, the market is optimistic about industrial development, Class A offices, shopping centers, and data centers. A significant 98% of Q4 survey participants expressed optimism that asset values will be higher (79%) or the same (19%) one year from now, indicating some semblance of expected stability. 71% of Q4 survey participants believe asset values are higher (38%) or about the same (33%) today compared to a year ago.
  • 61% and 66% of respondents believe the availability of equity and debt capital, respectively, has improved compared to one year ago. There is even more optimism for the future, with 80% and 79% of participants believing the availability of equity and debt capital, respectively, will be better one year from now. While commentary indicates that the capital markets are starting to open, the cost of capital remains elevated from previous levels.

Data for the Q4 survey was gathered by Chicago-based Ferguson Partners on The Roundtable’s behalf in October. See the full Q4 report.