The Fed remains cautious about the potential impact of tariffs on inflation, despite limited signs of an increase so far, and the job market continues to show relative strength. However, weakened consumer and business confidence have delayed capital projects and put off much decision-making across industries. The FOMC’s updated economic projections for 2025 still indicate two rate cuts, while unemployment and inflation estimates were revised upward. Without inflation posing a major threat, it is anticipated that the Federal Reserve will move slowly to ease monetary policy.
Key indicators of commercial real estate market health – liquidity and deal activity – show signs of stabilization in the first half of 2025. National transaction volume hit $75.4 billion in Q1 2025, up 27 percent year-over-year, signaling a recovery from 2023. However, overall transaction activity, including property count and dollar volume, declined compared to both the previous quarter and the same period last year.
Below is a summary of larger (>$10 million) commercial real estate sales located throughout Delaware that occurred from January through June 2025. The sales volume we tracked was up 119 percent in the first quarter over the same period a year prior. Researched investment sales occurring over the past six months have reflected in-place cap rates ranging from 5.42 to 8.03 percent, with a median of 7.03 percent.
- Reserve at Sawmill – is a 149-unit garden apartment complex built in 1984 on 11.33 acres in Milford that sold in February for $23.2 million, or $155,705 per unit.
- 313 Churchmans Road – is six parcels that comprise part of the Walker Farm totaling 62.03 acres which sold in March for $15,696,500, or $253,047 per acre and $18.75 per FAR, to First Industrial Realty Trust, Inc. The buyer plans to develop it into 837,000 square feet of industrial big-box warehouses in phases.
- PAM Rehabilitation Center of Dover – is a two-story, 42,140 square foot inpatient rehabilitation facility with 34 beds. It is fully leased to a joint venture between Bayhealth Medical Center, Inc. and a subsidiary of Post-Acute Medical, LLC. It sold in April for $23.5 million, or $691,176 per bed.
- 1945 Middle Neck Road – is 135.05 acres of land purchased by Amazon in April for $87.5 million to build a 5-story, 3,918,700 square foot high-tech warehouse. The sales price reflects $647,908 per acre, or $22 of FAR.
- Holly Woods & East Village Townhouses – are two student housing complexes in Newark with 25 units and a total of 135 beds that sold in May for $13.45 million, or $99,630 per bed.
- 300 N. Wakefield – a 121,600 square foot building in Newark was purchased by the in-place tenant Academia Antonia Alonso Charter Schoolin June for $27.5 million, or $226 per square foot.
While headline pricing remains steady, debt has grown more expensive, liquidity is tightening, and tariff uncertainty looms. However, the US economy remains somewhat resilient against the headwind of tariffs and geopolitical tensions. The impact of inflation, immigration policies, and tariffs has slowed new construction, while market fundamentals remain steady. While uncertainty and interest rate volatility have weighed on investment activity, this supply-demand imbalance along with asset repricing and sturdy fundamentals represent a good time to pursue investment opportunities.
The announced tariffs have not derailed real estate asset pricing so far, but momentum continues to weaken. However, with steady fundamentals, signs of rate and price stabilization, and limited new construction, market performance is expected to improve through 2025. This will largely be driven by income growth from scarcity, discipline, and rising replacement costs.