Fed Meeting Reaction: What CRE Investors Should Watch

The Federal Reserve cut interest rates by 25 basis points on September 17, 2025, a widely anticipated move that lowered the federal funds rate for the first time this year.

Among commercial real estate investors, the significance of the federal funds rate is often debated. On the heels of this decision, Crowd Street is sharing a quick take on how the Fed’s latest move could affect the sector — and what other factors we’re watching this week.

How the Fed Acted: The Federal Reserve cut interest rates by 25 basis points, ending a nine-month pause. The decision reflected slowing job growth and downward revisions to labor data,^1^ even as inflation remains above target.^2^ Officials signaled two more cuts could follow this year. In its policy statement, the Fed indicated that labor market data will guide its path forward, noting that “downside risks to employment have risen.”^3^

What a 25 BPS Cut May Mean for CRE: A quarter-point cut should ease costs for borrowers with floating-rate debt, like construction loans, SOFR- or Prime-linked financing. It may also act as a liquidity catalyst for banks. But the Fed doesn’t set fixed rates. Permanent loans, mortgages, and cap rate math are anchored to long-term yields, which move on inflation expectations and growth outlooks, not the fed funds rate.^4^

What CRE Investors Should Watch: CRE underwriting largely depends on the 10-year treasury, the benchmark that shows the strongest historical correlation with cap rates and property values.^5^ Last week, it held around 4.0–4.1%, down from summer highs above 4.5%.^6^ Mortgage rates followed suit, dropping to 6.35% and showing how quickly lower Treasury yields can ripple into borrowing costs.^7^ For investors, these figures will likely matter more than the Fed’s 25 bps cut.

The Bigger Picture: For CRE, the key is how Fed policy, inflation, labor data, and other signals ripple through the bond market into long-term rates. While Fed rate cuts can ease pressure for floating-rate borrowers, a declining 10-year Treasury and falling mortgage rates reduce borrowing costs more broadly and can potentially help steady valuations. The recent dip in both may be interesting for CRE — both for investors with looming maturities and those looking for new deal flow.^8^

As always, signs of optimism for CRE investors should be weighed against current risks, including weak labor market data, persistent inflation, and tariffs. For more on CRE markets, see Crowd Street’s recent article on the multifamily sector.