**BH Properties’ Jim Brooks Sees Opportunities for Private Capital Amid Market Shifts**
As the commercial real estate (CRE) industry heads toward the midpoint of 2025, notable changes in the macroeconomic landscape are reshaping market conditions. These shifts will be central to discussions at the ninth annual “View from the Top” panel during Connect Los Angeles 2025 on June 18. Ahead of the event, Connect CRE spoke with Jim Brooks, President of BH Properties, to better understand the trends influencing today’s CRE market.
**Q: We’re approaching mid-2025. How has the macroeconomic outlook evolved over the past six months as it pertains to commercial real estate?**
**A:** Over the past six months, we’ve experienced several economic pressures. The cost of capital remains elevated. The Federal Reserve’s decision to hold benchmark interest rates between 5.25% and 5.50% has maintained high borrowing costs. This has led to a 15% year-over-year decline in loan originations. With nearly $1 trillion in commercial and multifamily debt maturing later this year, refinancing risk looms large.
Traditional lenders, such as major banks, are still largely on the sidelines. However, private capital and debt funds have emerged as alternative sources of financing. For buyers leveraging debt for enhanced returns, securing favorable terms remains challenging, with many paying a premium.
Additionally, global trade policies, including tariffs and rising import costs for construction materials, are weighing on foreign investment and delaying projects. Many developments are paused, awaiting more economic clarity. Despite these headwinds, we’ve seen transactional activity improve compared to 2024—thanks to better lending conditions, narrowing bid-ask spreads, and renewed investor confidence.
**Q: What are the key challenges and opportunities related to executing transactions in this environment?**
**A:** It depends on your role in the market. As an investor, significant opportunities exist for private capital. With institutional players still largely inactive, there’s reduced competition for assets from distressed sellers who may be either unwilling or unable to infuse more capital or refinance. These acquisitions often allow for a reset in basis, resulting in more economically viable properties. And this isn’t limited to just office assets—re-purposing vacant retail anchors, such as standalone big-box stores, has proven to be a successful strategy that leverages the resilience of retail.
From a lending perspective, with banks addressing legacy assets and showing limited appetite to lend, private capital and debt funds are stepping in. These alternative sources are offering flexible (albeit costlier) solutions. There are also growing opportunities in adaptive reuse, particularly conversions from office to residential where local zoning supports mixed-use developments.
Challenges remain. The elevated cost of capital continues to constrict activity. Many assets are locked into 2020–2021-era debt terms, making refinancing today a trigger for equity dilution or forced sales. Meanwhile, bid-ask spreads are still slowing deal flow, with sellers anchored to pre-2022 valuations and buyers insisting on higher cap rates. The lack of current comparable sales data also poses difficulties for accurate appraisals, which are crucial in the financing process.
**Q: How could a series of rate cuts by the Federal Reserve impact the CRE climate?**
**A:** Lower interest rates would ease the cost of capital, which would significantly benefit borrowers—especially those with floating-rate or maturing debt—by allowing them to refinance under more favorable terms. Additionally, developers would be more inclined to initiate or resume projects that are currently on hold due to financial constraints.
**Join the Discussion at Connect Los Angeles 2025**
On June 18, industry-leading experts will gather at Connect Los Angeles 2025 at the Intercontinental Los Angeles Downtown, for the ninth edition of this premier event. Attendees will gain invaluable insights into the current CRE market, connect with top-tier professionals, and engage in conversations you won’t find elsewhere.
Don’t miss the opportunity to hear directly from leaders like Jim Brooks and others who are helping shape the future of commercial real estate.
