Since 2022, commercial real estate (CRE) investors have been slogging through a brutal downturn. Mortgage rates spiked as inflation ripped higher, cap rates expanded, and asset values fell across the board. The rally cry became simple: “Survive until 2025.”

Now that we’re in the back half of 2025, it seems like the worst is finally over. The commercial real estate recession looks to be ending and opportunity is knocking again.

I’m confident the next three years in CRE will be better than the last. And if I’m wrong, I’ll simply lose money or make less than expected. That’s the price we pay as investors in risk assets.

A Rough Few Years for Commercial Real Estate

In 2022, when the Fed embarked on its most aggressive rate-hiking cycle in decades, CRE was one of the first casualties. Property values are incredibly sensitive to borrowing costs because most deals are financed. As the 10-year Treasury yield climbed from ~1.5% pre-pandemic (low of 0.6%) to ~5% at the 2023 peak, cap rates had nowhere to go but up.

Meanwhile, demand for office space cratered as hybrid and remote work stuck around. Apartment developers faced rising construction costs and slower rent growth. Industrial, once the darling of CRE, cooled as supply chains froze and then normalized.

With financing costs up and NOI growth flatlining, CRE investors had to hunker down. Headlines about defaults, extensions, and “extend and pretend” loans dominated the space.

Signs the Commercial Real Estate Recession Is Ending

Fast-forward to today, and the landscape looks very different. Here’s why I believe we’re at the end of the CRE downturn:

1. Inflation Has Normalized

Inflation has cooled from a scorching ~9% in mid-2022 to under 3% today. Lower inflation gives the Fed cover to ease policy and investors more confidence in underwriting long-term deals. Price stability is oxygen for commercial real estate, and it’s finally back.

2. The 10-Year Yield Is Down

The 10-year Treasury, which drives most mortgage rates, has fallen from ~5% at its peak to ~4% today. That 100 bps drop is meaningful for leveraged investors. A 1% lower borrowing cost can translate into 10%+ higher property values using common cap rate math.

If the 10-year Treasury bond yield can get to 3.5% and the average 30-year fixed rate mortgage can get to 5.5%, I expect to see a large uptick in real estate demand. We’re not that far away, especially if the Fed cuts by 100 basis points (1%) over the next year.

3. The Fed Has Pivoted

After more than nine months of holding steady, the Fed is cutting again. While the Fed doesn’t directly control long-term mortgage rates, cuts on the short end generally filter through. The psychological shift is also important: investors now believe the tightening cycle is truly behind us.

The below chart indicates about six Fed rate cuts until the end of 2026, totaling ~1.5%. Such market expectations will change over time, but this is where we’re at right now.

4. Distress Is Peaking

We’ve already seen the forced sellers, the loan extensions, and the markdowns. Many of the weak hands have been flushed out. Distress sales, once a sign of pain, are starting to attract opportunistic capital. Historically, that transition marks the bottom of a real estate cycle.

5. Capital Is Returning

After two years of sitting on the sidelines, capital is coming back. Institutional investors are underweight real estate relative to their long-term targets. Family offices, private equity, and platforms like Fundrise are actively raising and deploying money into CRE again. Liquidity creates price stability.

Where the Opportunities Are In CRE

Not all CRE is created equal. While office may be impaired for years, other property types look compelling:

• Multifamily: Rent growth slowed but didn’t collapse. With little-to-no supply of new construction since 2022, there will likely be undersupply over the next three years, and upward rent pressures.
• Industrial: Warehousing and logistics remain long-term winners, even if growth cooled from the pandemic frenzy.
• Retail: The “retail apocalypse” was overstated. Well-located grocery-anchored centers are performing, and experiential retail has staying power.
• Specialty: Data centers, senior housing, and medical office continue to attract niche capital. With the AI boom, data centers is likely to see the most amount of CRE investment capital.

As a capital allocator, I’m drawn to relative value. Stocks trade at ~23X forward earnings today, while many CRE assets are still priced as if rates are permanently at 2023 levels. That’s a disconnect worth paying attention to.

Don’t Confuse Commercial Real Estate With Your Home

One important distinction: commercial real estate is not the same as your primary residence. CRE investors are hyper-focused on yields, cap rates, and financing. Homebuyers, on the other hand, are more focused on lifestyle and utility. As a result, the rise in interest rates tend to have less of a negative impact in residential home prices.

For example, I bought a new home in 2023 not to maximize financial returns, but because I wanted more land and enclosed outdoor space for my kids while they’re still young. The ROI on peace of mind and childhood memories is immeasurable.

Commercial real estate, by contrast, is about numbers. It’s about cash flow, leverage, and exit multiples. Yes, emotions creep in, but the market is far more ruthless.

Risks Still Remain In CRE

Let’s be clear: calling the end of a recession doesn’t mean blue skies forever. Risks remain:

• Office glut: Many CBD office towers are functionally obsolete and may never recover.
• Debt maturities: There’s a wall of loans still coming due in 2026–2027, which could test the market again.
• Policy risk: Tax changes, zoning laws, or another unexpected inflation flare-up could derail progress.
• Global uncertainty: Geopolitical tensions and slowing growth abroad could spill into CRE demand.

But cycles don’t end with all risks gone. They end when the balance of risks and rewards shifts in favor of investors willing to look ahead.

Why I’m Optimistic About CRE

Roughly 40% of my net worth is in real estate, with ~10% of that in commercial properties. So I’ve felt this downturn personally.

But when I zoom out, I see echoes of past cycles:

• Panic selling followed by opportunity buying.
• Rates peaking and starting to decline.
• Institutions moving from defense back to offense.

I recently recorded a podcast with Ben Miller, the CEO of Fundrise, who’s optimistic about CRE over the next three years. His perspective, combined with the improving macro backdrop, gives me confidence that we’ve turned the corner.

CRE: From Survive to Thrive

For three years, the mantra was “survive until 2025.” Well, here we are. CRE investors who held on may finally be rewarded. Inflation is down, rates are easing, capital is flowing back, and new opportunities are emerging.

The end of the commercial real estate recession doesn’t mean easy money or a straight-line rebound. Unlike stocks, which move like a speedboat, real estate moves more like a supertanker – it takes time to turn. Patience remains essential. Still, the tide has shifted, and this is the moment to reposition portfolios, acquire at attractive valuations, and prepare for the next upcycle.

The key is to stay selective, keep a long-term mindset, and align every investment with your goals. For me, commercial real estate remains a smaller, but still meaningful, part of a diversified net worth.

If you’ve been waiting on the sidelines, it might be time to wade back in. Because in investing, the best opportunities rarely appear when the waters are calm—they show up when the cycle is quietly turning.

Readers, do you think the CRE market has finally turned the corner? Why or why not? And where do you see the most compelling opportunities in commercial real estate at this stage of the cycle?

Invest In CRE In A Diversified Way

If you’re looking to gain exposure to commercial real estate, take a look at Fundrise. Founded in 2012, Fundrise now manages over $3 billion for 380,000+ investors. Their focus is on residential-oriented commercial real estate in lower-cost markets. Throughout the downturn, Fundrise continued deploying capital to capture opportunities at lower valuations. Now, as the CRE cycle turns, they’re well-positioned to benefit from the rebound.

The minimum investment is just $10, making it easy to dollar-cost average over time. I’ve personally invested six figures into Fundrise’s CRE offerings, and I appreciate that their long-term approach aligns with my own. Fundrise has also been a long-time sponsor of Financial Samurai, which speaks to our shared investment philosophy.

To expedite your journey to financial freedom, join over 60,000 others and subscribe to the free Financial Samurai newsletter. You can also get my posts in your e-mail inbox as soon as they come out by signing up here.

Are you a Walmart (WMT -1.18%) person or a Costco (COST -1.18%) person?

When it comes to shoppers, the two groups tend to be mutually exclusive, with many Americans swearing by one and swearing off the other.

But for investors, the question is a bit different: They want to know which they should put money into.

And that question is more relevant today than it’s been in a while. Many economists expect President Trump’s tariffs to start pushing the price of groceries — from bananas and coffee to soda and beer — higher in the coming months. The Tax Foundation expects tariffs to impact nearly 75% of U.S. food imports.

If and when prices of groceries rise, both Walmart and Costco are expected to benefit, as many Americans will trade down to retailers that emphasize low prices. Plus, because they’re so large, both retailers have significant supply chain leverage that should allow them to push back on higher prices from suppliers — to an extent, at least.

Walmart is quite a bit larger than Costco, with a market cap of $778 billion, versus $441 billion for Costco. Walmart has more than 10,000 stores on four continents and is the world’s largest retailer by sales. Costco is the world’s third-largest retailer; it has a membership model, with roughly 900 locations and 79.6 million paid household members and 37.6 million paid executive memberships. While they sell all kinds of items, Walmart and Costco rank as grocery behemoths.

Costco stock is up roughly 6% this year as of Aug. 21 and 181% over the past five years, while Walmart stock has gained roughly 8% year-to-date and 123% over five years.

Strong inflation era results

Walmart and Costco often do well when inflation pushes prices higher and shoppers look for bargains.

From January 2022 to February 2023, when year-over-year headline inflation ranged from 6% to 9.1%, Walmart kept the increase in grocery prices to 3%, compared to average price increases of 7.5% or more at rivals like Amazon, Kroger, and Target, according to a Reuters analysis. Walmart’s size and buying power help it force suppliers to keep prices lower.

As a result, in its fiscal 2024, ended Jan. 31 of that year, Walmart grew total revenue in constant currency 6% to $648 billion and its adjusted earnings per share 5.7% higher to $6.65. In the 52 weeks following that earnings announcement, Walmart shares climbed 66%.

Costco, on the other hand, makes a large percentage of its profits from membership income — membership fees totaled about 65% of net income in the most recently reported quarter. That business model — along with a reputation for good deals — helps steady the company’s results during an inflation spike. In its fiscal 2023 (ended Sept. 3 of that year), Costco saw U.S. net sales grow 6.7% to almost $238 billion. Membership fees increased 8% that year, to $4.58 billion.

In the 52 weeks after that earnings release, Costco stock rose 63%.

And just recently, in its third quarter of 2025, the retailer reported a 10.4% increase in its membership fee income, to more than $1.2 billion. Last September Costco raised membership fees by $5, to $65 a year, yet it saw no meaningful decline in members after the increase.

Both businesses and their stocks benefit from rising overall prices because they’re able to either keep prices lower than the competition (Walmart), which drives sales, or rely on membership fees (Costco) that drive profits.

What does the future hold?

So which stock should you invest in today in anticipation of rising grocery prices in the months ahead?

Well, stock prices ultimately track earnings growth. And analysts expect Costco to increase earnings per share for the current quarter by 10% (results will be released on Sept. 25).

As for Walmart, the retail behemoth released its second-quarter results this week and they were slightly disappointing. Adjusted earnings per share of $0.68 were lower than the average analyst estimate of $0.73, and that sent the stock 5% lower on Thursday. Revenue, however, came in at $177.4 billion, almost $2 billion higher than estimates.

Thus, the picture is mixed. Rising grocery prices will impact all U.S. retailers, and both Costco and Walmart have a history of thriving when that happens. With the uncertainty of Trump’s tariff policies still high, however, Costco’s membership-driven model may put it in a more advantageous position going forward.

Matthew Benjamin does not hold any of the stocks mentioned in this article. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, Target, and Walmart. The Motley Fool recommends Kroger. The Motley Fool has a disclosure policy.

Ahhh the good old days of makeup when E.L.F. Cosmetics was smack talking in your e-mail like gangstas! Remember those days? When they’d casually slip in with a side by side pic of a NARS Blush and a pic of their own blush bragging how their version only cost a buck! Times have changed my friends and E.L.F. is no longer a dollar.

BRB let me check. Ok, cheapest we’re getting is lipliner at $2 bucks and your girl isn’t a lipliner user so that’s a bust. But yeah, E.L.F. has surpassed cheap as chips one dollar makeup a long, long, time ago in a galaxy far, far away from this one.

And like most things in this economy E.L.F. is about to increase prices again! Starting August 1st select products will be increasing by $1 due to inflation and tariffs. Despite the increase, the E.L.F. emphasizes that 75% of its products will remain at $10 or under. And their promise is they are “also keeping an eye on the tariff situation.” In my experience, once something goes up it rarely comes down. So, I have doubts that even if things improve at some point we’ll still see the price points remain the same.

The good news is that most of their latest launches are incredibly over-priced. They seem to come to a standstill at the $5 buck mark. So, if you’re in the mood for budget beauty E.L.F. Cosmetics remains affordable. But that being said, things can be murky with foundation, skincare, and other popular lines they carry like their “Halo Glow” Collection which has gone viral several times. The new Halo Glow Skin Tint SPF 50 is a whooping $18 bucks and some may question if they want to spend that much on an E.L.F. product which is known for being budget friendly.

I could be way off the mark but I feel like some of their more influencer pushed items, like Halo Glow products, seem to have a crazy markup compared to their less talked about products which seem to hover around $5. These is particularly the case with many of their lip product drops. I gotta admit $24 for their Jumbo Power Grip Primer seemed crazy to me taking into account the prices we know and loved from E.L.F. The Big Gripper is 2.7 oz at $24 and contains $30 worth of product versus their original size at 0.81 oz at $10.

The moral of the story is stock up on your favs before prices go up again this August!

Add a Comment