The Fed Cuts Rates: What CRE Investors Need to Know

On September 17, 2025, the Federal Reserve cut its benchmark rate by 25 basis points to a target range of 4.00%–4.25%. It’s the Fed’s first cut in nine months, and the dot plot projections suggest two more cuts are likely before year’s end.

For commercial real estate investors, this isn’t just a headline — it’s a signal that monetary policy is entering a new phase, one shaped as much by a weakening labor market as by inflation.

Why the Fed Pulled the Trigger

Fed Chair Jerome Powell was unusually candid: “I can no longer say” the labor market is “very solid.” That’s because the job market has been overstated for years.

• The Bureau of Labor Statistics recently revised prior payroll data down by 818,000 jobs in 2023 and 911,000 in 2024.
• That’s about 70–75k fewer jobs per month than first reported — meaning job creation has been weaker than the headlines suggested.
• By mid-2025, adjusted payroll growth is flat to negative.

At the same time, inflation remains “somewhat elevated,” with tariffs starting to push goods prices higher. The Fed is now balancing risks: protect employment without losing more ground on inflation.
Sources: US Bureau of Labor Statistics; Berkadia; CoStar News

The Fed’s Outlook: Slower, Lower
The FOMC’s dot plot shows policymakers expect rates to drift lower but not collapse:

• 2025: Two more cuts, putting rates closer to 3.625%–3.875%.
• 2026–2027: Gradual declines into the low 3% range.
• 2028 & Longer Term: Stabilization around 2.75%–3.00%, a higher “neutral rate” than pre-COVID.

This suggests the cheap-money era is over. Even with cuts, capital will cost more than it did in the 2010s.

CRE Implications

1. Debt Costs Easing
   • Borrowers should see incremental relief as rates step down.
   • Refinancing activity may pick up, helping thaw frozen capital markets.
2. Transaction Momentum
   • As CoStar noted, lower rates inject confidence. Some investors are already stepping off the sidelines, particularly in multifamily and well-capitalized sectors.
   • Office, while still under stress, may at least get a sentiment boost.
3. Demand Risk Remains
   • Weak job growth could weigh on tenant demand in retail and office.
   • Industrial and housing markets may be better positioned, but overall absorption depends on whether the labor market stabilizes.
4. Inflation’s Long Shadow
   • The Fed doesn’t expect inflation to return to 2% until 2028. That means construction, operating expenses, and cap-ex will stay elevated.

The Bottom Line
The Fed’s rate cut is a turning point, but not a cure-all. For CRE, the key takeaway is this:

• Yes, debt will get cheaper — good news for refinancing and transactions.
• But weaker job growth could soften demand — especially for space tied directly to employment trends.
• And inflation remains sticky — costs won’t normalize overnight.

In short, lower rates may grease the wheels, but the real story is the shifting balance of risk between employment and inflation. Investors who can underwrite conservatively today — assuming modest rent growth, elevated costs, and slower absorption — will be best positioned when capital markets reopen more fully.

Justin Langlois, CCIM is a Commercial Real Estate Advisor with Stirling Investment Advisors, specializing in investment sales and landlord strategy across the Gulf South. Contact Justin to talk leasing strategy, portfolio value, or end-of-year positioning.