After weathering one of the most dramatic interest rate hiking cycles in history, the CRE markets are showing clear signs of a turning point.
Over the last 12 months, the volume of office space available for lease has slowly but steadily declined in the U.S. and Canada. Meanwhile, a slowdown in speculative construction has significantly tempered the rise in industrial market availability in both countries, while multifamily vacancy rates in the U.S. has begun to decline. In a promising sign of recovery, CRE debt markets have rapidly reengaged, with new loan origination volume up more than 30% year-over-year (YOY) in the first half of 2025. Renewed debt liquidity has also helped drive rising property sales volume and supported a leveling off in price declines across nearly all the major property types.
Perhaps the most forward-looking signal of recovery is the recent surge in fundraising activity. Both private and public CRE investors are mobilizing capital at scale, with improving equity and debt fund flows pointing to renewed conviction in the sector’s long-term value. This wave of capital formation—particularly in the multifamily and industrial sectors—suggests investors are increasingly willing to look beyond any further potential near-term volatility and position portfolios to capture upside as the cycle turns.
Private Capital Leading the Charge
Efforts by large private investment managers to raise capital for investment in North American CRE are gaining traction in 2025. Year-to-date fund closings have totaled $86 billion through August. If fundraising continues at this pace, the year-end tally for 2025 would be $129 billion, up 38% from 2024, marking a clear reversal from declines in fundraising recorded in 2023 and 2024.
While aggregate fundraising levels paint a promising picture for future capital deployment, digging further into fund-level details offers even further evidence of the traction building for this new cycle. Take for example Brookfield Strategic Real Estate Partners V and Caryle Realty Partners X, which have been by far the two largest fund closings so far in 2025, totaling $16 billion and $9 billion, respectively. Both represented the largest real estate funds each firm has ever closed.
During the second quarter of 2025, Blackstone’s non-listed BREIT secured $1.1 billion, marking BREIT’s best quarter for regular way fundraising in two and a half years. When asked to characterize the fundraising environment on Blackstone’s earnings call the prior quarter, President and Chief Operating Officer Jonathan Gray described the backdrop as improving, with clear potential for further upside as more timid investors are lured off the sidelines by improving CRE returns:
“The conversations with institutional LPs around real estate have really improved over the last six months. The tone now is much more open. But it’s still a sector that has underperformed [in recent years], and you tend to see less allocation to those sectors……the underlying facts of a lack of new supply, cost of capital coming down, that’s going to be the foundation for a recovery in real estate and I think investors will want to go to it. They’ll be a little more hesitant in open-ended funds, probably more biased toward drawdown funds and fresh capital. But as we get deeper and more positive performance, I think real estate will then start to get more traction. We’re still in that sort of early recovery phase.”
Multifamily and Industrial Sectors Remain in Focus
The mix of property types being targeted by recently closed funds offers a blueprint for where institutional conviction is strongest and where the next wave of CRE investment is likely to concentrate.
Among the 20 largest non-secondary real estate equity funds closed year-to-date, 13 list either multifamily or industrial (in many cases both) as their target property types, with four of the remaining funds exclusively targeting data centers. In other words, outside of a handful of data center-focused funds, nearly all the 20 largest non-secondary equity funds closed in 2025 are prioritizing multifamily and industrial investments.
Carlyle Realty Partners X (CRP X) exemplifies the continued focus on multifamily and industrial among the largest diversified funds that have closed so far this year. A recent press release by the firm stated “CRP X continues to focus on sectors underpinned by secular demographic and technological tailwinds and attractive supply-demand dynamics, including residential, self-storage, and industrial. CRP X is expected to have no exposure to office, hotel, or retail sectors which the team has strategically avoided in prior recent vintages.”
Debt and Data Centers
The story of CRE fundraising in 2025 isn’t limited to equity strategies alone. In parallel, capital flows into debt vehicles and digital infrastructure funds have surged, underscoring a more diversified and opportunistic approach to CRE investment. At over $20 billion, the total for private debt funds targeting North American CRE raised so far in 2025 is also on pace to rank as the second strongest year for CRE debt funds on record, behind only 2021.
Blackstone’s $8 billion Real Estate Debt Strategies V, which closed in March 2025, ties with its previous iteration as the largest debt fund ever closed globally, according to Preqin. Notably, most of the largest debt funds closed this year maintain a broad and flexible range of target property types, allowing these managers to diversify their income and profit streams while still providing much needed liquidity to the growing pool of office assets facing looming debt maturities.
Another unique facet of the fundraising environment in 2025 has been the closing of numerous funds focused solely on data center acquisition and development. These include Blue Owl Capital’s $7 billion Digital Infrastructure Fund and Principal’s $3.6 billion Data Center Growth & Income Fund, both of which far exceeded their initial fundraising targets.
REITs are Reengaging with Capital Markets
REITs generally kept fundraising to a minimum during the Federal Reserve’s rate hiking cycle from mid-2022 through late 2023, wary of ramping up acquisitions when further pricing declines might still be in store, all while aiming to keep their weighted average interest rates on outstanding debt as low as possible.
However, as inflation slowed through late 2023/early 2024 and consensus began to build that the Federal Reserve’s rate hiking cycle had come to a close, REITs steadily issued more bonds to help fund a pickup in their net acquisitions which began taking shape in the later half of 2024. As of the second quarter of 2025, trailing 12-month unsecured secondary debt offerings by publicly traded U.S. REITS totaled $48 billion, nearly quadrupling the low hit in late 2022 and slightly above the pre-pandemic 3-year average.
REIT fundraising via equity issuance remains subdued, with most REIT shares still trading below net asset values and secondary equity offerings still trending well below pre-pandemic levels. Yet momentum is building. The trailing 12-month total of common share equity offerings recently hit the highest level in almost three years, signaling renewed investor confidence and a slow but steady normalization in capital flows.
The Big Picture
The previous edition of our Tide is Turning series highlighted many of the key trends emerging in commercial real estate markets, offering investors reasons to cautiously increase their exposure to this asset class in 2025. At the forefront is the generational reset in property sales pricing that increasingly appears to be in the rearview. Additionally, even most Class A buildings are trading below replacement costs across property types, providing a buffer against supply-side risks.
However, the recent pick up in equity and debt fundraising by both private and public CRE investors may be the most important signal yet that the sector is approaching an upswing. This trend serves as a leading indicator of rising investment volume, particularly in the multifamily and industrial sectors, which continue to attract significant interest from limited partners. Moreover, the uptick in fundraising reflects growing confidence among capital sources with the flexibility to invest across asset classes. These investors are increasingly embracing the long-term case for CRE, demonstrating a willingness to look past potential near-term headwinds while positioning portfolios favorably for the long term.
