This article was also written by Danielle Shainbrown & Nicole Komin from Bellwether Advisors.
The commercial real estate market is experiencing a notable shift as we move through 2025, with several encouraging developments balanced against ongoing operational challenges. Stabilized interest rates and evolving lending practices are creating new opportunities for property owners and investors, while construction and supply chain issues continue to require strategic planning. While volatility in materials and labor costs has been a challenge for years, it has also prompted contractors and developers to become more strategic, factoring in potential fluctuations early in budgeting and incorporating escalation clauses to better manage risk.
Interest Rates: Relief & Renewed Lending Activity
The most significant positive development has been the Federal Reserve’s decision to begin cutting interest rates, bringing the federal funds rate to 4.00-4.25% (see Federal Reserve Board – Federal Reserve issues FOMC statement). This marks the first rate cut since December 2024 and signals the Fed’s confidence in cooling inflation and economic stability.
Locally in Buffalo, we’re seeing this translate into more competitive lending conditions. Lenders are becoming increasingly creative with financing structures, particularly for owner-occupied commercial real estate deals; a trend we haven’t witnessed for several years. This renewed lending flexibility is providing opportunities for clients who have been unable to secure funding or gap financing over the past few years and have paused or cancelled their projects as a result.
As financing becomes more accessible, attention is turning back to the practical realities of delivering projects on time and within budget; areas still heavily influenced by material and labor constraints.
Construction Costs & Supply Chain Pressures Persist
While interest rate improvements are encouraging, construction costs present a more complex picture. We have not seen the post-COVID decline in construction costs that many hoped for, though there has been periodic stabilization of costs over the past few years.
Material shortages, tariff uncertainty, and extended shipment times remain significant concerns for project planning and execution. What previously took 2-4 weeks for delivery of materials like steel and timber now requires 12-16 weeks. Key supply chain issues include lead times for major electrical components like switchgear and transformers and ongoing problems obtaining parts for elevators and air-handling equipment.
These extended timelines have contributed to longer overall project completion times. More significantly, they have resulted in project proformas, and budgets relied upon for lender underwriting being rendered obsolete mid-way through a project, jeopardizing the very funding that has slowly started to flow again.
To mitigate these risks, contractors and developers are increasingly incorporating escalation and force majeure clauses into contracts to protect against unforeseen cost spikes. Proactive communication between owners, contractors, and lenders can help ensure projects remain viable even when pricing shifts mid-construction.
Proactive Planning & Project Management
Our recommendations for managing these challenges include pre-ordering materials as early as possible, especially long-lead items, developing relationships with contractors early during pre-construction to understand current field conditions and material availability, build buffer time into project schedules to account for potential delays, and work with your architect to consider alternative materials or suppliers where specifications allow.
We also recommend taking the time during pre-construction to make sure drawings are fully developed and vetted, minimizing surprises once construction gets underway. Firms are also becoming more selective about which projects to pursue, focusing on those that align with available labor, reliable supply sources, and stable pricing conditions to avoid excessive backlog strain.
Labor Shortages Continue to Shape the Industry
Despite current challenges, there are several positive indicators for the commercial real estate market, including continued government investments driving growth in manufacturing and energy sectors, and the increasing adoption of artificial intelligence and advanced computing fueling data center construction, creating new opportunities in the industrial and technology real estate sectors.
Lower interest rates and more creative lending approaches are also reopening financing opportunities that were limited during the high-rate environment of 2022–2024. However, sustained labor shortages, particularly in skilled trades, continue to pressure project schedules and costs, underscoring the need for workforce development and training investments across the industry.
Looking Ahead: Resilience Through Strategy & Partnership
The commercial real estate market is at an inflection point, with improving financial conditions offset by operational challenges. Success in this environment will depend on careful planning, strong partnerships, and the ability to adapt quickly to changing conditions.
While we’re encouraged by the positive trends in lending and interest rates, maintaining realistic expectations about construction costs and timelines will be crucial for project success. Ultimately, lessons from recent years have reinforced that strategic foresight, flexible contracts, and proactive project management are key to building resilience.
About the Authors
This article was authored by Danielle Shainbrown and Nicole Komin, partners and co-founders of two complementary firms serving the commercial real estate industry in New York state and beyond. Bellwether Advisors, LLC provides full-service real estate guidance, including project leadership for commercial real estate, with a mission to facilitate comprehensive, open-book processes that protect clients’ interests, time, and vision, and commercial property management. As a women-owned business enterprise (WBE), Nicole and Danielle bring over 25 years of combined experience in commercial real estate, serving as owner’s representatives, advisors, and property managers who manage every phase of the development process from conception through post-occupancy. Shainbrown Komin, PLLC is a women-owned, full-service boutique law firm focused on corporate, small business, and real estate law. The firm combines the experience and sophistication of a large law firm with the personal touch of a boutique practice, offering services including legal advice, contract development and review, mergers and acquisitions, risk management, corporate advisement, and policy guidance.
Together, the firms provide integrated expertise that spans both the operational and legal aspects of commercial real estate development, offering clients comprehensive support throughout the entire project lifecycle. Their hands-on experience with projects ranging from medical facilities and religious institutions to corporate headquarters gives them unique insight into current market conditions and emerging trends.
For more insights on commercial real estate trends and market analysis, or to discuss how these developments might impact your specific projects and investment strategies, contact Danielle Shainbrown at dshainbrown@bellwetheradvisors.com and Nicole Komin at nkomin@bellwetheradvisors.com.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
