CREFC’s 3Q 2025 BOG Sentiment Index Rises Again as Rate Backdrop Turns Supportive and Market Activity Builds
October 20, 2025
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New York, October 20, 2025 – The CRE Finance Council (CREFC), the industry association representing the $6.2 trillion commercial and multifamily real estate finance sector, today released its Third-Quarter 2025 (3Q25) Board of Governors (BOG) Sentiment Index survey results.
The index rose 9.3% to 122.8 from 112.3 in 2Q25, reaching its highest level since 4Q24 and solidifying the market's recovery momentum.
Conducted from September 18–28, 2025, the survey captured broad-based optimism driven by a dramatic shift in interest-rate sentiment and near-universal expectations for robust financing demand. The results reflect growing confidence that the Federal Reserve's recent easing cycle will unlock pent-up transaction activity across the commercial real estate sector.
Key Highlights from 3Q25 Index Core Questions:
- Interest Rate Impact: The survey's most dramatic shift showed 78% now expect positive impacts from mortgage and cap rates on CRE finance businesses, with 0% expecting negative effects, marking a clear reversal from earlier in 2025.
- Financing Demand: Near-unanimous optimism with 95% expecting increased borrower demand over the next 12 months.
- Transaction Activity: 86% anticipate increased investor demand for CRE/multifamily assets, up from 65% last quarter, signaling conviction in market recovery across property types.
- Market Liquidity: Two-thirds (65%) expect improved liquidity conditions ahead, nearly double the 38% from last quarter, indicating renewed confidence in capital availability.
- Economic Outlook: Views stabilized with equal proportions (27%) expecting improvement and deterioration, while 46% anticipate steady conditions.
- Federal Policy: A majority (57%) now expect positive impacts from government actions, with only 16% anticipating negative ones.
- CRE Fundamentals: 46% expect improving fundamentals; only 14% expect deterioration, reflecting confidence in underlying property performance.
- Overall Industry Sentiment: 62% hold positive outlooks for CRE finance businesses over the next 12 months, with only 5% remaining negative, marking continued improvement in market psychology.
Additional Topical Insights:
The survey revealed nuanced views on emerging risks and opportunities. Half of respondents (50%) identified a broader economic slowdown from trade tensions as the greatest tariff-related threat to CRE, while 19% focused on higher development costs, and 14% expect minimal impact. Despite concerns about multifamily stress emerging in open-ended comments, the sector paradoxically leads investment preferences at 31%, followed by data centers and digital infrastructure (22%), and retail's surprising resurgence (19%).
Office strategy remains highly selective, with 57% prioritizing premium Class-A properties, while only 17% pursue opportunistic distressed plays. Following the Fed's September 17 rate cut, consensus has formed around continued but measured easing, with 50% expecting 50 basis points of additional cuts by year-end and 42% anticipating 25 basis points. Nearly 60% expect delinquencies to rise above 8% by year-end (47% see 8–10%; 11% see >10%). Lisa Pendergast, President and CEO of CREFC, commented: