Key Takeaways
- CRE Market Uncertainty Heightens Risk: With mixed performance across sectors and declining investor sentiment, CRE stakeholders face growing pressure to control costs and reduce exposure.
- Property Tax Complexity Demands Precision: Accurate and timely parcel-level tax data is critical to avoid penalties, especially for multifamily, SFR and BPL portfolios with complex ownership structures.
- Flood Risk is Evolving—and Underestimated: Ongoing FEMA map changes and emerging flood zones require accurate data to protect investments and maintain compliance.
- Create One Risk Profile: Consolidating tax and flood servicing through LERETA and our streamlines workflows, improves visibility and drives efficiency across mixed-asset portfolios.
As we approach mid-year 2025, activity and investor sentiment with commercial real estate presents a mixed bag. There are opportunities and continued challenges, depending on the sector, but one thing remains constant: investors and subservicers are facing increased pressure to control costs and mitigate risk in order to effectively—and profitably—manage their commercial portfolios.
Various CRE Sectors Delivering Various Outcomes
According to the Morgan Stanley Capital International Real Assets report, as of this April, commercial real estate (CRE) transaction volume in the U.S. totaled approximately $22 billion, a slight decline from April 2024. Specifically in decline are sales volumes for the hotel sector (down 52%) and the warehouse sector (down 34%) due, in part, to continued economic uncertainties and challenges with building materials amid tariff disruptions. On the bright side, however, the multifamily sector saw a 20% year-over-year increase with $9.2 billion in sales as of April. This isn’t surprising given that the rental housing market remains strong as many otherwise would-be homeowners are stalled on the sidelines with higher home prices, elevated interest rates and sticky inventory constraints.
On the sentiment front, there’s obvious concern. The CRE Finance Council’s Q1 2025 sentiment survey shows a 30.5% decline in optimism within the CRE financing market. Among those surveyed, 80% said they expect worsening economic conditions for CRE over the next year, a significant increase from 12% in the previous quarter.
Paying Close Attention to Property Taxes and Flood Servicing Improves Outcomes
The varying, and evolving, CRE trends facing investors and subservicers are contributing to the growing pressures they face, including the need for operational efficiency, complex risk management challenges and ever-tighter margins. A lot of what affects CRE activity and contributes to its success is beyond the control of investors and subservicers. However, property taxes and flood servicing, with the right tools and the right vendor partner, is within their control and, therefore, worth the time and investment to improve outcomes. Whether managing multifamily portfolios, single-family rental (SFR) developments, or business-purpose loans (BPLs), the need for streamlined, accurate and timely property tax and flood servicing is more important than ever.
Accurate and Timely Data is Key in Commercial Property Taxes
Having accurate and timely tax reporting data is foundational to avoid costly errors with missed or under-paid tax payments, increased compliance risk and decreased efficiencies. Unlike residential properties which are typically more straightforward, commercial assets can often span hundreds of parcels and involve complex zoning and/or ownership structures. Misidentified parcels and not having technology in place to track ongoing changes in parcel configurations can lead to inaccurate payments and resulting penalties. A tax partner that can conduct parcel audits and provide fresh parcel data over time is a subservicer’s best friend. For investors, understanding the complete parcel picture while researching and conducting due diligence on development opportunities can make or break a deal, informing how the deal is valued and structured. The same goes for unique zoning nuances which must be accurately identified in order to properly assess development opportunities.
The often-complex ownership structures with commercial properties further add to the need for best-in-class data that is up to date all the time. There can be multiple holding companies, stakeholders and legal entities involved in a single commercial property, making centralized property tax data and advanced reporting tools essential. For investors with multiple-property portfolios, the complexities are even greater and the need for accurate data even higher. Working with a property tax partner like LERETA that can provide automated multi-property oversight, navigate nuanced ownership entities and handle exceptions with local-market expertise, allows investors to proceed with confidence and subservicers to save time, money and human resources.
All Loans, One System: The Push for Consolidation
With portfolios increasingly split between residential and commercial loans, many subservicers are increasingly looking for a single-platform solution. LERETA offers a unified tax and flood solution across asset types. For subservicers managing both residential and commercial, consolidating on a singular platform that can manage both commercial and residential assets allows for consistent data visibility, simplified workflows and the ability to benefit from economies of scale. This is especially valuable in the SFR and BPL spaces, where loans may fund dozens of new builds but require individual property and parcel-level tracking. With your entire portfolio on a singular platform, risk assessments and profiles can be built across all assets using the same data sources and systems.
Flood Data Gaps Are a Growing Risk
Flood risk is quite literally changing each year with FEMA making updates to its flood risk maps on an ongoing basis. Markets like Texas, California and, last year, surprisingly, North Carolina, have seen frequent flood risk updates and emerging risks outside of standard flood zones. Yet there remains a disconnect between loan holders, subservicers and property managers when it comes to flood certifications.
Investors and subservicers often lack access to life-of-loan updates. As a result, they’re ordering their own flood certs to ensure they’re adequately insured and protected from liability. For investors, the stakes are high: properties in disaster zones may face rent suspensions or refinancing delays. They also want to ensure they have the most current, complete and independently verifiable data on flood risk when assessing an opportunity.
CRE Investors and subservicers don’t just need data—they need trusted partners with automation, agility and scale. Whether managing flood risk, identifying complex parcels or streamlining property tax payments, LERETA helps clients control costs, mitigate risk and simplify operations—all with one partner offering the most advanced tools in the industry.
