NEW YORK, April 23, 2025 -- The CRE Finance Council (CREFC), the industry association representing the $6.2 trillion commercial and multifamily real estate finance sector, today released its First-Quarter 2025 (1Q25) Board of Governors (BOG) Sentiment Index survey results. Conducted from March 31 to April 7, 2025, the survey captured a dramatic shift in market sentiment that coincided with President Trump's "Liberation Day" tariff announcements on April 2.
The 1Q25 Sentiment Index fell 30.5% to 87.9 from 126.6 in 4Q24 – the second-largest drop on record and exceeded only by the onset of the pandemic in 1Q20. Specifically, the decline brings the index below the baseline of 100 for the first time since the pandemic era. The precipitous decline reflects growing concerns over economic uncertainty triggered in large part by recent trade policies that have led to heightened market volatility.
Key Highlights From 1Q25 Index Core Questions:
- Economic Outlook: Sentiment turned sharply negative, with 80% expecting worse economic conditions over the next 12 months, up from just 12% last quarter; only 7% expect improvement (down from 42%).
- Federal Policy: A decisive shift with 59% expecting negative impacts from government actions (up from 2% last quarter) and only 11% expecting positive impacts (down from 74%).
- Rate Impact: Notably split sentiment with an equal 30% seeing positive and negative impacts, suggesting divided perspectives on whether potentially lower rates might offset other negative factors.
- CRE Fundamentals: Sharp deterioration with 50% expecting worsening conditions (up from 12%) and only 17% expecting improvement (down from 65%).
- Transaction Activity: Expectations moderated significantly with only 35% expecting increased demand (down from 86%) and 20% expecting less demand (up from 0%).
- Financing Demand: While still positive overall, expectations dropped dramatically, with 48% expecting more demand (down from 91%) and 13% expecting less (up from 2%).
- Market Liquidity: Considerably more pessimistic with only 15% expecting better conditions (down from 81%) and 26% expecting worse conditions (up from 0%).
- Overall Sentiment: The industry outlook deteriorated sharply, with 43% now negative (up from 0%) and only 22% positive (down from 77%).
Additional Topical Insights:
The survey revealed that geopolitical tensions and trade disputes dominated risk concerns, with 59% of respondents including these factors among their top risks. For federal government lease terminations by the Department of Government Efficiency (DOGE), 67% expect moderate negative impacts on office sector performance. Additionally, 60% of post-Liberation Day respondents were either very or extremely concerned about tariff impacts on construction costs and CRE development. Among the bright spots, 80% of respondents expect CMBS issuance volumes to either hold steady or post a moderate decline despite market volatility, following a strong first quarter.
Lisa Pendergast, President and CEO of CREFC, commented: "The CRE finance industry finds itself at a genuine crossroads. The dramatic drop in our Sentiment Index clearly signals concern, but beneath the headline numbers we see pockets of cautious optimism, particularly regarding how lower interest rates might finally break the transaction logjam that has persisted through much of 2024. What makes this quarter's survey particularly revealing is the stark contrast to last quarter's record high sentiment, demonstrating how quickly market psychology can shift with changing economic policies."
For more information about the 1Q25 BOG Sentiment Index and the full survey results, please click here or contact Raj Aidasani at raidasani@crefc.org.
About CREFC and the Board of Governors Sentiment Index
The CRE Finance Council (CREFC) is the trade association for the commercial real estate finance industry. More than 400 companies and 19,000 individuals are members of CREFC. CREFC's members play a critical role in the U.S. economy by financing office buildings, industrial properties, multifamily housing, retail facilities, hotels, and other types of commercial and multifamily real estate.
Over 50 senior executives in the commercial real estate finance markets represent CREFC's Board of Governors. These leaders come from every sector of the commercial real estate lending and mortgage-related debt investing markets, including balance sheet and securitized lenders, loan and bond investors, mortgage bankers, private equity firms, loan servicers, rating agencies, attorneys, accountants, and others.
CREFC's BOG Sentiment Index aims to gauge quarter-over-quarter shifts in market conditions for the CRE finance market. The survey, first administered in 2017, consists of nine core questions and additional topical questions. Responses to the core questions are equally weighted and summed to create a single index value.
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