CRE Fundraising in 2025: Market Highlights and Takeaways

Raising capital for commercial real estate (CRE) has been a challenge for the past few years. In 2024, fundraising hit a low of $80 billion, marking the third consecutive year of decline [Source]. That’s a sharp drop from the $155 billion raised in 2021 [Source]. Institutional investors have been cautious, holding back commitments while waiting for stability.

Despite this, market signals point to a positive shift. Investor confidence is ticking upward, and capital is starting to re-enter the market. Core real estate funds saw a record level of commitments last year, reflecting a growing preference for income-producing properties with lower risk. While challenges remain, 2025 could be the year fundraising finds its footing again.

Investment Strategies Gaining Traction

A Move Toward Stability: Core and Core-Plus

With uncertainty still lingering, institutional investors are directing funds toward core and core-plus strategies. These funds focus on stabilized assets with strong occupancy and predictable cash flow. Multifamily and industrial properties remain at the center of this approach, as demand for housing and logistics space continues to hold firm.

Value-Add and Opportunistic Funds Eyeing Discounts

While core funds lead the way, investors with a higher appetite for risk are waiting for the right moment to buy distressed properties. A significant amount of capital is sitting on the sidelines, ready to target assets where pricing has adjusted. Office conversions, retail repositioning, and multifamily renovations are likely to draw attention as values reset.

Debt Funds Filling the Lending Gap

With banks pulling back on commercial real estate loans, private credit funds have stepped in. These lenders offer bridge loans, mezzanine financing, and construction debt where traditional banks are hesitant. Real estate debt funds now have substantial lending power, offering an alternative for borrowers facing tighter credit conditions.

ESG-Focused Investments Attracting Institutional Capital

Environmental, social, and governance (ESG) considerations are playing a larger role in investment decisions. Seventy percent of institutional investors now prioritize ESG compliance in their portfolios. Tax incentives and stricter regulations around sustainability have made energy-efficient properties more attractive, especially in the office and multifamily sectors.

Where Capital Is Flowing

Multifamily and Residential: Still the Market Leader

Multifamily housing continues to lead real estate investment, with a large portion of CRE fundraising in 2024 directed toward residential assets. The U.S. needs 4.3 million more rental units over the next decade, keeping demand high. With mortgage rates making homeownership less accessible, rental markets remain strong, making multifamily a safe bet for investors.

Industrial Real Estate Holding Strong

E-commerce and supply chain shifts are driving demand for industrial space. Warehouses, distribution centers, and cold storage facilities remain hot targets. Vacancy rates in this sector are historically low, and rents are climbing. Investors are paying close attention to last-mile distribution hubs and markets with strong logistics infrastructure.

Retail: A Selective Investment Approach

Retail real estate is seeing mixed results. Grocery-anchored shopping centers, discount retail, and experiential concepts are drawing capital, while malls and fashion-focused centers continue to struggle. Investors interested in retail are targeting necessity-based locations and properties with strong foot traffic.

Office: The Sector Facing the Most Distress

Office properties are still under pressure. Vacancy rates are at record highs, and investors are hesitant to touch anything outside of prime, well-leased buildings. The one bright spot is conversion opportunities—office buildings in select markets are being repositioned into apartments, life sciences facilities, and mixed-use developments.

Alternative Asset Classes on the Rise

Niche sectors like data centers, self-storage, and senior housing are attracting new capital. Data centers alone are projected to grow from $324 billion today to $776 billion by 2034, driven by AI and cloud computing demands. Investors are also looking at life sciences real estate, betting on continued expansion in biotech and pharmaceutical industries.

Regional Trends in Fundraising

Sun Belt Markets Leading the Way

The Sun Belt continues to outpace other regions, with 80% of total U.S. population growth happening in the Southeast and Southwest [Source]. Texas, Florida, and North Carolina are drawing heavy investment as businesses and individuals migrate to lower-tax, business-friendly states.

Northeast and West Coast Adjusting to New Realities

Markets like New York, Boston, and San Francisco remain relevant, but capital flows have slowed. Multifamily investments in these cities are still strong, but office assets remain a tough sell. Investors are watching for pricing adjustments that could bring these markets back into favor.

Midwest and Secondary Markets Gaining Interest

Secondary markets are attracting investors looking for higher yields. Cities like Columbus, Indianapolis, and Denver are seeing increased investment in industrial and multifamily projects. Chicago remains a logistics hub, keeping it relevant despite broader market uncertainties.

Global Capital Inflows Steady

Foreign investors, particularly sovereign wealth funds from the Middle East and Asia, are actively deploying capital in U.S. real estate. Logistics, multifamily, and infrastructure-like properties are their primary focus. European investors are also making moves, prioritizing assets that meet ESG compliance standards.

Capital Market Trends and Risk Factors

Interest Rates and Refinancing Risks

Interest rates remain a major concern. More than $2 trillion in commercial real estate loans are set to mature by 2026, and refinancing challenges could lead to more distress. The Federal Reserve has signaled potential rate cuts, which could improve financing conditions, but lenders remain cautious.

Private Credit and Non-Bank Lenders Taking the Lead

With banks scaling back, private lenders have stepped up. Debt funds now hold record amounts of capital and are actively seeking deals. These funds are providing bridge financing, structured debt, and creative solutions for borrowers who might otherwise struggle to secure funding.

Technology Reshaping Fundraising and Investment

Online investment platforms, blockchain-backed transactions, and AI-driven underwriting are changing how capital is raised and deployed. Institutional investors are increasingly relying on investment management software to scale and open up more opportunities, while crowdfunding platforms are opening up access to a broader range of investors.

What to Expect for the Rest of 2025

The commercial real estate market is showing signs of stability after years of uncertainty. Multifamily and industrial assets remain the most attractive sectors, while distressed opportunities in office and retail are drawing opportunistic capital. Debt markets are shifting as private lenders take on a greater role, and ESG compliance is shaping investment decisions at the institutional level.

Fundraising may not return to the highs of 2021 anytime soon, but momentum is building. Investors who remain disciplined and adjust to shifting market conditions will be best positioned to deploy capital effectively in 2025.