November 2025 Market Update
Economic Climate:
According to Vanguard, the U.S. economy has regained momentum after the end of the 43-day federal shutdown — they lift their 2025 growth estimate to about 1.9%.
Third-quarter 2025 data suggests growth remained solid: private business investment and consumer demand held up relatively well, and many states saw income growth.
Inflation has moderated somewhat (though still elevated compared with long-term targets): the preferred inflation metric for the central bank — core PCE — is modestly below the headline CPI.
Some analysts expect that after a likely Q4 drag due largely to the government shutdown, the economy could rebound in early 2026 — potentially aided by stabilized data flows and what could be interest-rate cuts by the Federal Reserve (Fed) in the first half of 2026.
On balance, many economists currently see the odds of a full-blown recession over the next 12 months as moderate (not high)
Commercial Real Estate Outlook:
Lending activity has picked up again: in Q3 2025, CRE lending accelerated as interest-rate conditions stabilized and credit spreads narrowed—helping revive deal flow across property types.
Investor confidence and capital-market activity are rising. According to a recent global index of real-estate capital markets, “bidder competitiveness” increased in October, consistent with growing liquidity and renewed interest in CRE investments.
However, gains are inconsistent: across the broader CRE market, fundamentals remain uneven — some sectors (industrial, well-located small-scale assets) outperform, while others (older office buildings, non-core retail) still struggle.
Defeasance update:
With a large “maturity wall” of CRE loans — a substantial share of roughly $4.8 trillion total CRE debt remains outstanding, and many loans are coming due through 2026 — defeasance is becoming a more likely exit path for borrowers facing refinancing pressure.
Given still-elevated interest rates and Treasury yields, replacing loan collateral with Treasuries (the defeasance route) is relatively more attractive — the cost of building the replacement-security portfolio is lower than in prior low-rate periods.
Overall, the outlook points to a steady uptick in defeasance volume over the next 12–18 months, influenced by interest-rate movements, Treasury yields, and sector-specific fundamentals.
