December CRE Headlines Worth Watching

Last month, we highlighted a run of positive developments for (commercial real estate): rate cuts, declining long-term yields,^1^ a resolved government shutdown, and strong quarterly reporting from leading CRE firms.^2^

This month, new data show how that mix of conditions is beginning to manifest in institutional portfolios. For the first time in three years, large investors have been net buyers of commercial real estate, purchasing $4.6 billion more in U.S. property than they’ve sold.^3^

A range of factors is driving this shift, from the improving backdrop described above to worries about an AI-driven bubble in public equities.^4^ Investors are also reporting healthier bid-ask spreads and better supply dynamics.^5^

For CRE investors, it’s a welcome sign, though it’s worth keeping last month’s Urban Land Institute findings in view.^6^ Macro concerns still weigh heavily on investor sentiment. Conditions are improving, but uncertainty remains as we head into a new year for CRE.

As we navigate this mix of conditions, the headlines below offer a quick read on the winter’s key developments in a busy period for CRE.

This article is not inclusive of all industry news. We encourage all investors to consider a variety of available real estate news channels as they consider opportunities.

Headlines:

Commercial Real Estate Is Getting Too Cheap to Ignore

Commercial property is one of the few U.S. assets that looks fairly valued, the WSJ writes, as institutional investors pour into the category.

Why It Matters: After a multi-year lull, commercial real estate is back on the menu for institutional buyers. MSCI data show large investors have purchased $4.6 billion more U.S. property than they’ve sold so far in 2025 — the first time in three years they’ve been net buyers. As the WSJ writes, this suggests CRE looks fairly valued, especially compared to what many see as overheated public equities. For longtime CRE investors, it may also point to a long-awaited development: the post-COVID supply glut is being absorbed, which could open the door to future rent growth.

Office-to-Residential Conversions Are Booming and New York Is the Epicenter

Developers in New York have converted nearly 30 million square feet of office space into residential living, with the pace of transformation picking up in recent years.

Why It Matters: After the pandemic, office vacancies in major metros spiked, topping 20% in New York City. In CRE, the question was what to do with so much unoccupied urban office space. Could return-to-office mandates alone rescue the category? Today, developers are converting larger portions of that unused space into residential units, helped by zoning changes and local tax incentives. These efforts are creating new multifamily opportunities in high-occupancy markets like New York and may help absorb the remaining surplus of office space.

The Labor Market Appeared to Be Holding up Before the Government Shut Down

Market watchers were relieved to see that the labor market was holding up better than expected before the government shutdown. Employers added 119,000 positions in September, more than twice as many as expected.

Why It Matters: In 2025, what many expected to be a bounce-back year for CRE was slowed by an uneven macro environment: delayed rate cuts, new tariffs, and a weakening labor market. The latest jobs report offered some relief. After several months of downward revisions, September came in stronger than expected, with 119,000 new positions — more than twice the forecast. The prospects of a December rate cut improved on the news, and the 10-year Treasury yield fell in the days that followed. The economy still faces a mix of pressures, but the uptick was a welcome sign for investors heading into the new year.