Commercial Real Estate Activity in the Region Declined Modestly Over the Past Two Quarters
The Federal Reserve Bank of Kansas City released its KC Fed Commercial Real Estate (CRE) Index today. The value of the index showed a modest decrease from 0.13 to -0.23 during the third quarter of 2025. After rising over two years beginning in 2023, the level of regional CRE activity has now fallen for two consecutive quarters.
“Most aspects of commercial real estate activity softened in recent months. Limited property sales, declining property prices and waning development activity weighed most heavily on regional CRE activity,” according to Nicholas Sly, vice president at the Federal Reserve Bank of Kansas City. “Though CRE activity has softened recently, it remains near its historic norm across the KC Fed region.”
The KC Fed CRE Index fell to a level slightly below its historical average
Note: An index value of zero corresponds to overall conditions being at their historical average and differences from zero are measured in terms of standard deviations from the historical norm
Table 1: Individual drivers of overall change in the KC Fed CRE Index
Notes: Contributions may not add to the total change in the index due to rounding. The contribution of each metric is calculated as the change in the standardized value of the variable from the previous quarter multiplied by the coefficient of the variable in the index.
Chart 2: Alignment in market participants’ views about CRE conditions was unchanged
Note: Values correspond to measures of Shannon entropy, with higher numerical values indicating more mixed responses and lower signal quality of the KC Fed CRE Index. Index shown inverted.