From Bull to Bear? – June 30, 2025

Commercial real estate leaders surveyed by DLA Piper were generally more optimistic in February of this year than they were three months later

At the recent Connect Los Angeles 2025 conference, industry leaders made the point that the course of 2025 at the midpoint hasn’t been what was expected at the start of the year. The belief coming out of 2024 was that the Federal Reserve would continue the process of lowering its benchmark interest rate and the economy would begin to normalize—and with it, commercial real estate transaction volume.  

Instead, the Federal Open Market Committee maintained the status quo for at least another month, probably longer, and economic indicators have been a mixture of resilience and early warning signs. Yet, there’s a growing sentiment that it’s time to take advantage of the opportunities that arise. 

That mindset also informed the results of DLA Piper’s newly released annual Real Estate State of the Market Survey. The law firm conducted the survey of commercial real estate leaders in two phases: Wave 1, fielded between February and March, which was then followed by a subsequent brief Wave 2 Survey conducted in May to explore the effects of U.S. trade policy announcements on the industry’s outlook. 

Wave 1 responses showed a near equilibrium between bullish (52%) and bearish (48%) sentiment, representing a significant recovery from 2023, when 86% of respondents were bearish. However, DLA Piper says that initial optimism has since been tempered: in Wave 2, the percentage of respondents who felt bullish about the market dropped to 34%, while those who felt bearish rose to 66%. 

“In early 2025, the market was in the process of regaining its footing after years of volatility,” said Bryan Connolly, chair of DLA Piper’s U.S. real estate practice. “Pricing was beginning to adjust and stabilize, there were large amounts of capital ready to be deployed, and interest rates had come down from prior peaks. External factors since then have injected a heightened sense of caution into the market, but we continue to see measured confidence in opportunities for the months ahead.” 

It’s instructive to focus on the Wave 2 results, while also looking at how those results differ from what the survey’s first wave indicated. Fifty-four percent of respondents predicted that current and proposed tariffs will have a negative impact – including 16 percent who anticipated a “very negative” impact – and just 5 percent expected them to have a positive impact. Forty-one percent of respondents expected no impact from the tariffs. 

Interest rates remained a concern in both waves. Sixty percent of respondents in Wave 1 identified high interest rates as a top concern for the year ahead and 66% said the same in Wave 2. In Wave 2, 41% reported they expect interest rates to increase in the next 12 months, a big jump from 17% in Wave 1 and from 6 percent in the 2024 DLA Piper Survey. 

At the same time, executives surveyed by DLA Piper expressed optimism about resilient asset classes. In Wave 1, these included multifamily (51% of respondents), data centers (44%), logistics/warehousing/cold storage (38%), and Class A/Trophy office (27%). More than 20% of respondents in both surveys listed affordable and senior housing as attractive, and 60% in Wave 1 expected return-to-office mandates to have a material positive impact on the office industry. 

Availability of equity capital as a reason for confidence jumped from 5% in Wave 1 to 15% in Wave 2, with 53% of respondents in Wave 2 believing more equity will be available within the next 12 months. 

“While volatility and uncertainty may have increased, fundamentals ultimately still matter,” said Connolly. “We’re seeing investors focus less on the outside noise and more on identifying asset classes and locations that signal long-term value and resilience. That level of discipline is what could define success for commercial real estate in the second half of 2025.”