The Fed Holds Rates Steady — What It Means for Commercial Real Estate

The Fed Holds Rates Steady — What It Means for Commercial Real Estate

June 18, 2025

The Federal Reserve left its benchmark interest rate unchanged at 4.25–4.50%. This marks the fourth straight meeting with no movement, signaling a cautious approach as inflation remains sticky and geopolitical risks continue to rise.

While the Fed hinted at potential cuts later this year, commercial real estate (CRE) professionals are left navigating a high-rate environment that continues to challenge debt servicing, refinancing, and deal flow.

A Market in “Purgatory”

As described by some in the industry, the current landscape feels like a form of purgatory. CRE borrowers are caught between maturing debt and higher rates, with no near-term relief. Roughly $2 trillion in CRE loans are scheduled to mature by the end of 2025, many of which were originated at significantly lower interest rates. The refinance gap remains wide.

Extensions Are the New Norm

Lenders are increasingly offering short-term extensions or interest-only periods to well-performing properties. Borrowers with weaker assets — particularly in the office and lodging sectors — are finding fewer options.

Transactions Inch Forward, Slowly

Despite the uncertainty, there’s been a modest uptick in underwriting and deal flow. Investors and debt funds are actively exploring opportunities, but deal velocity is still constrained by capital costs and underwriting caution.

What to Watch

• Rate Cuts Likely in Q4: The Fed has suggested two cuts are still on the table before year-end, most likely starting in September.

• Inflation Remains the Wild Card: With tariffs and energy costs still pressuring prices, the Fed’s ability to pivot may depend on more than just jobs or growth.

• CRE Outlook Mixed by Sector: Industrial and multifamily remain comparatively resilient; office, Class B/C retail, and hospitality continue to struggle.

Bottom Line

The Fed’s decision to hold rates steady extends the pressure on commercial real estate—particularly on properties facing refinancing. The remainder of 2025 will likely hinge on inflation data and whether the long-awaited rate relief actually materializes.

Weitz - Everyone needing to rework loans (banks and borrowers) is praying for a 'hail mary' in which prices stay high and rates are lowered. I don't see it coming. More likely, we are kicking the can down the road to deal with these issues in the coming months/ years. Time will tell. 

For more information on Selling Snohomish County Commercial Real Estate, contact me anytime. 

Scott Weitz

Scott@WeitzCommercial.com

t: (206) 306-4034