Skip to main content
PGIM Real Estate LogoPGIM Real Estate Logo
    • Company Overview
    • Innovation
    • Leadership
    • Locations
    • Contact Us
    • Careers
  • Overview
    • Real Estate Equity
    • Real Estate Debt
    • Public REIT Securities
    • Defined Contribution
    • Agriculture
    • Sustainable Investing
    • Global Data Centers
  • Overview

    Property Sectors

    • Multifamily
    • Affordable
    • Commercial
    • Agriculture

    Capabilities

    • Core
    • Core Plus & Structured Debt
    • Agency

    Servicing

    • Loan Services
    • BorrowerConnect
    • PruXchange
  • Insights
  • Innovation
  • Sustainability
  • News
Real Estate Debt
Real Estate Debt

Bryan McDonnell explores why real estate capital is poised for an active 2025BryanMcDonnellexploreswhyrealestatecapitalispoisedforanactive2025

Jan 10, 2025

6 mins

Share
  • Mail
  • LinkedIn
  • Twitter
  • Copy URL
  • Print
Download here

Share

As a global investment management firm, PGIM Real Estate’s deep knowledge of local real estate equity and debt markets spans the globe. Buoyed by its history of real estate financing and commercial investing, it’s positioned to provide an in-depth review of the market, as well as what’s to come.

Bryan McDonnell, chair of global debt and agriculture for PGIM Real Estate, shares insights on how the commercial real estate market performed in 2024 and the challenges that the industry overcame. He also details how 2025 is shaping up, including how CRE professionals can maximize and capitalize on market activity.

Q: What was the biggest factor in commercial real estate in 2024 for your business and how are you approaching 2025?

The headlines suggested that there wasn’t a lot of capital available in 2024, but for PGIM Real Estate and the broader capital markets, that fundamentally wasn’t true. The lack of transactions was driven much more by a borrower’s unwillingness to accept current rates than it was about lack of capital. This affected how the year played out, but transactions did become more active as the year progressed, especially when the Federal Reserve cut rates in September. Banks and CMBS lenders cleaned up some of their deals and with spreads tightening in the corporate bond market, it made the real estate market more attractive. Borrowers remained hesitant, but looking ahead to 2025, we believe the market will be very active and borrowers will also be ready. We’re bracing for a very busy 2025.

Q: What will be some of the largest areas for growth in 2025?

We see opportunity in the transitional lending space, specifically short-term bridge, construction or renovation loans. There’re uncompleted projects in the market, causing banks and debt funds to back out, and they are getting refinanced to other lenders. I think that’s further supported by the banks’ aggressive approach to third party borrowing for back leverage. Lenders are lending at 250 to 350 basis points but then add back leverage and we’re quickly seeing double digit returns.

More broadly, we believe nonbank lenders will continue to gain market share in 2025 and through this next cycle. Private credit entering the real estate ecosystem over the past several years has been very healthy for the market overall, and the dynamic of private credit is not going to end anytime soon. There’s much more room for growth and, in fact, we’re closer to the beginning of that growth than to the end of it.

Q: How should commercial real estate professionals prepare themselves to thrive in the coming year?

They need to be focused, and they need to have speed. This is a market where CRE professionals have to operate very quickly and get things done. I also think lenders need to be convinced on what they want to do and also operate swiftly. If they waffle, they’ll be left behind.

They also need to be prepared to do follow-on deals, which can be challenging. If a borrower can approach a lender with a deal–and then have two or three or more right behind it–the lenders who react quickest to service, it will be further ahead. Additionally, I also think that the private credit heyday isn’t over and that it will continue to grow its market share. Lastly, there is pent-up demand. Business plans have been held up since COVID and now that rates have landed, you will see these projects unlocked. But it’s nothing the market can’t handle.

It’s amazing how fast we’re back into a competitive environment and it’s really important for lenders to have that discipline in understanding that not all markets are the same–and figure out how to play that out.

This interview was originally published with GlobeSt.com on December 30, 2024.

The views expressed in this presentation are of PGIM Real Estate as of December 2024 and may not be reflective of their current opinions and are subject to change without notice. Neither the information contained herein, nor any opinion expressed shall be construed to constitute investment advice or as an offer to sell or a solicitation to buy any securities mentioned herein. Any projections or forecasts presented herein are subject to change. 

Download here

Meet the Team

  • Bryan McDonnell
    Bryan McDonnell

    Chair of Global Debt and Agriculture

Learn more
Commercial Financing

PGIM Real Estate is a top 10 commercial real estate lender, providing loans for transitional, value-add and stabilized properties across all sectors. 

Learn more

  • About Us

    • Company Overview
    • Leadership
    • Locations
    • Contact
    • Careers
    • Client Portals
  • Investments

    • Overview
    • Real Estate Equity
    • Real Estate Debt
    • Public REIT Securities
    • Defined Contribution
    • Agriculture
    • Sustainable Investing
    • Senior Housing
    • Mexico Industrial
  • Financing Solutions

    • Overview
    • Multifamily
    • Affordable
    • Commercial
    • Agriculture
    • Core
    • Core Plus & Structured Debt
    • Agency
    • Loan Services
  • ESG

    • ESG Overview
    • Environmental
    • Social
    • Governance
  • Insights & News

    • Insights
    • News
  • Other Resources

    • Form CRS
PGIM Real Estate Logo
  • Terms & Conditions
  • PGIM Privacy Center
  • Accessibility Help
  • Cookie Preference Center

Disclosure Statement (California)opens in a new window     Disclosure Statement (Japan)       Disclosure Statement (UK)opens in a new window      Disclosure Statement (Luxembourg)opens in a new window      

For Professional Investors only. All investments involve risk, including the possible loss of capital.

The content and materials presented here are for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation in respect of any products or services to any persons who are prohibited from receiving such information under the laws applicable to their place of citizenship, domicile or residence. PGIM Real Estate is the real estate investment management business of PGIM, the principal asset management business of Prudential Financial, Inc. (“PFI”), a company incorporated and with its principal place of business in the United States. PGIM is a trading name of PGIM, Inc. and its global subsidiaries. PGIM, Inc. is a registered investment adviser with the U.S. Securities and Exchange Commission (“SEC”). Registration with the SEC does not imply a certain level of skill or training. 

In the United Kingdom, information is issued by PGIM Private Alternatives (UK) Limited with registered office: Grand Buildings, 1-3 Strand,  Trafalgar Square, London, WC2N 5HR. PGIM Private Alternatives (UK) Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) of the United Kingdom (Firm Reference Number 181389). These materials are issued by PGIM Private Alternatives (UK) Limited to persons who are professional clients as defined under the rules of the FCA. In the European Economic Area (“EEA”), information is issued by PGIM Luxembourg S.A. with registered office: 2, boulevard de la Foire, L1528 Luxembourg. PGIM Luxembourg S.A. is authorized and regulated by the Commission de Surveillance du Sector Financier in Luxembourg (registration number A00001218) and operating on the basis of a European passport. In certain EEA countries, this information, where permitted, may be presented by either PGIM Private Alternatives (UK) Limited or PGIM Limited in reliance of provisions, exemptions, or licenses available to either PGIM Private Alternatives (UK) Limited or PGIM Limited under temporary permission arrangements following the exit of the United Kingdom from the European Union. PGIM Limited and PGIM Private Alternatives (UK) Limited  have their registered offices at: Grand Buildings, 1-3 Strand, Trafalgar Square, London WC2N 5HR. PGIM Limited is authorized and regulated by the Financial Conduct Authority (“FCA”) of the United Kingdom (Firm Reference Number: 193418). PGIM Private Alternatives (UK) Limited is authorized and regulated by the Financial Conduct Authority (“FCA”) of the United Kingdom (Firm Reference Number: 181389). These materials are issued by PGIM Luxembourg S.A., PGIM Limited or PGIM Private Alternatives (UK) Limited to persons who are professional clients as defined in the relevant local implementation of Directive 2014/65/EU (MiFID II) and/or to persons who are professional clients as defined under the rules of the FCA. 

In Japan, information is provided by PGIM Real Estate (Japan) Ltd., a Japanese asset manager that is registered with the Kanto Local Finance Bureau of Japan. In Hong Kong, information is issued by PGIM (Hong Kong) Limited, a regulated entity with the Securities and Futures Commission in Hong Kong to professional investors as defined in Section 1 of Part 1 of Schedule 1 of the Securities and Futures Ordinance (Cap. 571). In Singapore, information is issued by PGIM (Singapore) Pte. Ltd., a regulated entity with the Monetary Authority of Singapore under a Capital Markets Services License to conduct fund management and an exempt financial adviser.

In Australia, information is issued by PGIM (Australia) Pty Ltd (“PGIM Australia”) for the general information of its wholesale clients (as defined in the Corporations Act 2001). PGIM Australia is an Australian financial services (“AFS”) licence holder (AFS licence number 544946). 

PFI of the United States is not affiliated in any manner with Prudential plc, incorporated in the United Kingdom or with Prudential Assurance Company, a subsidiary of M&G plc, incorporated in the United Kingdom. Prudential, PGIM, their respective logos and Rock design are service marks of PFI and its related entities, registered in many jurisdictions worldwide.

The information on this website is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. In making the information available on this website, PGIM, Inc. and its affiliates are not acting as your fiduciary.

©2024 PFI and its related entities.

 

Links

Links from this website to a non-PGIM website may be provided for the user’s convenience only. PGIM does not control or review these third-party sites nor does the provision of a link imply any endorsement of our association with such non-PGIM sites. Your linking to any websites from this website is at your own risk. To the extent that any information on this website relates to a third party, this information has been provided by that third party and is the sole responsibility of such third party and, as such, PGIM accepts no liability for such information. Subject to the terms of applicable service or other agreements, we will remove any link from this website upon request from the owner of the linked website.

Links from this website to affiliates are provided for the user’s convenience only. Each affiliate’s website is issued or approved solely by the applicable affiliate and unless stated otherwise on such affiliate’s website, is not issued by PGIM, Ltd. or any other non-U.S. entity. Each affiliate is solely responsible for the content of its respective website. The laws governing any affiliate and its respective websites may differ from the laws governing pgim.com and the relevant website's terms and conditions and policies may differ from those of pgim.com.

©2024 PFI and its related entities.

 

NMLS ID# - 172545

PGIM Real Estate Logo
PGIM Real Estate Logo

You are viewing this page in preview mode.

Edit Page