NEW YORK— Optimism is surging across the commercial real estate finance industry, according to the CRE Finance Council’s (CREFC) latest Board of Governors Sentiment Index, which jumped 27.8% in the second quarter of 2025 — one of the strongest quarterly gains on record.
The index rose to 112.3 in Q2, up from 87.9 in Q1, marking a decisive shift back into positive territory after a steep decline earlier this year. The results, announced today by CREFC, reflect an industry regaining confidence amid signs of economic stability, improved capital markets, and growing demand across the real estate sector.
“The turnaround in our Sentiment Index highlights the CRE finance industry’s resilience and adaptability,” said Lisa Pendergast, President and CEO of CREFC. “What’s especially encouraging is the breadth of the recovery – from robust borrower demand to optimism around AI-driven data centers. Challenges remain, but the market is regaining its footing.”
Key Highlights from the Q2 2025 Index:
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Economic Outlook: Only 27% of respondents expect worsening conditions in the next year, down sharply from 80% last quarter. A combined 73% anticipate stability or improvement.
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Federal Policy: 49% of executives now expect government actions to have a positive impact, up from just 11% in Q1.
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Interest Rates: Optimism around rates grew, with 38% citing a positive impact, while negative expectations fell.
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CRE Fundamentals: Just 19% see fundamentals worsening, down from 50% last quarter.
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Transaction Activity: Investor demand is rebounding, with 65% expecting an increase and only 3% forecasting a decline.
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Financing Demand: A striking 86% expect greater borrower demand, with 0% predicting a pullback.
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Market Liquidity: 92% expect liquidity to improve or hold steady, up from 74%.
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Overall Sentiment: Nearly half of respondents (49%) now have a favorable market view, more than doubling from Q1.
Emerging Trends and Risks:
Respondents flagged geopolitical risk (36%) and macroeconomic slowdown (28%) as top concerns. However, 71% reported an increasing appetite for CRE lending and investment in the second half of 2025.
A major driver of optimism is the growing impact of AI-driven data center demand, with 72% expecting a positive effect on the broader commercial real estate market. Interest rate expectations also moderated: 78% of respondents anticipate at least one 25 basis-point cut before year-end, and 87% expect the 10-year Treasury yield to close 2025 at or below 4.50%.
CREFC’s Board of Governors Sentiment Index, launched in 2017, tracks quarterly changes in commercial real estate finance sentiment based on responses to nine core questions and various topical insights. The Board is composed of nearly 50 senior executives across the CRE debt ecosystem, including lenders, investors, servicers, and advisors.
CREFC represents the $6.2 trillion commercial and multifamily real estate finance sector and includes over 400 companies and 19,000 individuals.
