October CRE Update: What Rate Cuts Mean for Investors

September brought several major macro developments, and sectors across the economy have been working to understand their impact.

The Federal Reserve made its first rate cut of the year, marking the start of what officials expect to be a moderate easing cycle.^1^ At the same time, a government shutdown is beginning to affect markets, agencies, and workers across the country.^2^

Not every macro development matters equally. Some investors look to the federal funds rate as a key factor for (commercial real estate), while others question how much it really moves the market.^3^ The same goes for the broader set of events, from the shutdown to the new administration’s tax plan.

This month’s headlines highlight some of the developments that may be most relevant to (real estate investors) — and what stakeholders may want to watch in the weeks ahead.

As always, this list of news isn’t exhaustive. Dozens of CRE stories are published every day, and we encourage investors to follow a broad mix of real estate news as they evaluate opportunities.

A Cautious Cut in a Complicated Environment

The Federal Reserve cut the federal funds rate by 25 basis points, citing signs of a softer labor market. Economists expect one or two more cuts before the end of the year.

Why it matters: In CRE, borrowing costs are generally more sensitive to long-term Treasury yields than to short-term policy rates, so the impact of this rate cut may be limited. Still, deals with floating-rate debt may benefit from this recent and further anticipated Fed cuts.^4^ The key question for the sector is whether Fed cuts will spur refinancing and boost transaction and origination volumes. Trepp calls this a potential “incremental tailwind” for CRE.

Landlords Brace for Fallout from Government Shutdown

The federal government shutdown could disrupt federal (real estate portfolios) and expose office landlords to rent payment delays. Its impact will hinge on how long it lasts.

Why it matters: Building owners with federal tenants are expected to keep receiving rent for now, though a prolonged shutdown could pose risks. Some (REITs) have warned of potential effects on performance. Notably, no shutdown has ever lasted long enough to cause widespread disruptions in rent payments from federal lessees.

The Big Beautiful Bill’s Impact on Commercial Real Estate

The new administration’s tax bill restores full bonus depreciation, allowing companies to deduct most buildout costs in the first year. This change could translate to substantial near-term tax savings for some property owners and developers.

Why it matters: The CRE market has been hungry for new investment catalysts. Bonus depreciation could potentially boost after-tax returns^5^ by letting investors and developers recover costs faster. Many in the sector hope it will spark new transaction activity as firms move to capitalize on the incentive.

As the market continues to work through changes, we’ll be watching how liquidity, lending, demand, and deal activity develop. Expect a new piece in this series soon, with more headlines the Crowd Street team is tracking.