Real estate · Industry brief

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Proposed regulations (REG-116506-25) from the Treasury Department and IRS would significantly expand reporting requirements for Qualified Opportunity Funds and Qualified Opportunity Zone Businesses under the One Big Beautiful Bill Act. The regulations mandate detailed census tract-level investment, property, employment and compliance data collection, with reporting failures subject to daily penalties ranging from $500 to $2,500 (up to $250,000 for large funds in cases of intentional disregard). The proposal also establishes new procedures for QOF self-certification as a one-time event, clarifies revocation of inadvertent certifications, and creates voluntary decertification procedures including investor notification requirements within 15 days. The regulations would apply to tax years ending after final publication in the Federal Register, requiring fund managers to assess their data capture capabilities and update Form 8996 filing practices.

The Federal Reserve raised its federal funds target to 3.75%–4.00%, with rates likely to remain higher for longer; this will pressure highly leveraged and refinancing-exposed properties but improving CRE fundamentals and limited new supply may help offset the impact. The CMBS market restarted strongly after Labor Day with nearly $4 billion in new securitizations, though rate volatility and Treasury yields above 5% could affect pricing and investor appetite. Multifamily operating conditions weakened in 2025 despite slower expense growth, with revenue rising only 2.8% and median NOI growth declining to 1.8%, constraining property values and refinancing capacity. Data-center expansion is driving enormous financing demand, with $44.4 billion of data-center-backed ABS and CMBS issued since early 2025, though the scale may exceed traditional securitization capacity. U.S. mall values surged 13% over the past year, more than double the broader CRE market, driven by limited supply and successful shifts toward luxury retail and entertainment, though recovery remains asset-specific. Office CMBS delinquencies reached a second consecutive record at 9.08% in August, driven by maturity defaults and refinancing difficulties, with Fitch expecting office delinquencies to approach 10% by year-end.