The commercial real estate market is showing signs of renewed activity, as transaction velocity has gradually increased, reflecting a positive shift in investor sentiment and market momentum. However, recent economic developments and shifting forecasts suggest that rather than continuing to decrease, interest rates may soon stabilize before potentially rising again.

During the Federal Reserve’s aggressive rate hikes in 2022 and 2023, many investors paused aggressive commercial property acquisitions. The resulting higher borrowing costs made financing less attractive, causing a slowdown in market activity. Throughout this period, there was widespread speculation that interest rates on acquisition financing would eventually peak and begin to decline, prompting many investors to adopt a “wait-and-see” approach. The prevailing sentiment was that holding off on acquisitions would ultimately lead to better long-term returns, as lower interest rates would reduce capital costs, enhancing both cash flow and asset valuations.

Over the past four quarters, as borrowing rates have modestly decreased, a growing number of investors are returning to the acquisition market. This resurgence in investor activity has encouraged more property owners to list their assets for sale, contributing to an uptick in transaction velocity.

As we approach the fourth quarter of the year, this trend appears to be gaining momentum as rates are more attractive and lender spreads are compressing.

However, recent shifts in economic forecasts are now calling into question the assumption that interest rates will continue to fall, bringing into question the wait-and-see approach.

Rising inflation concerns, partly driven by new tariffs, onshoring initiatives, and geopolitical uncertainties, suggest that a prolonged period of low interest rates may not materialize as expected.

If inflation reemerges from these risks, despite central banks’ efforts to control it through tightening monetary policy, the Federal Reserve could be forced to raise interest rates again beginning as early as mid-2026. Such an increase could indirectly lead to higher borrowing costs, prompting many investors to reevaluate their strategies and consider accelerating their acquisition or disposition plans before borrowing costs rise once more.

Given these evolving conditions, investors who are waiting for a significant improvement in market fundamentals may find that the optimal window for acquiring commercial real estate at favorable borrowing rates could close sooner than anticipated. If inflation pressures resurface and the Federal Reserve raises rates in response, borrowing costs could rise as early as 2026. Therefore, for those with a cautious outlook, the current window of relatively low and stable interest rates may already represent the best opportunity to act.