Source: Emerging Trends in Real Estate Research;
US respondents only
Noting that the commercial real estate industry has reached a ‘tipping point’ and things are finally looking up, Urban Land Institute and PwC release new 2025 real estate trend forecasts for the US and Canada. did. As always, the annual report also identifies top cities to watch.
Emerging trends and the rise of metros are based on 450 interviews and 1,600 survey findings from a wide range of commercial real estate experts, but they remain “not too optimistic”, the report warns I am doing it.
Interest rates and cost of capital remain the biggest economic concerns for interviewees and respondents, most of whom are in the business of buying and selling real estate. Private landowners or commercial/multifamily developers account for 35.2% of the executives ULI and PwC concluded, while real estate advisory, asset management and service companies account for 20.1%. The next two biggest economic concerns were the availability of capital and growth in employment and income.
Related article: What happened to the capital markets?
However, the importance of the cost of capital has declined slightly from last year (to 4.30, down 40 basis points on a 1-to-5 scale), reflecting the Fed’s announcement in August that it is ready to begin cutting interest rates. The actual 50 basis point reduction occurred after most survey participants responded.
For respondents and interviewees, the three biggest social/political concerns in 2025 are housing, followed by political extremism and immigration policy, which is similar to last year, although immigration Outweighed political extremism.
The top concerns for developers in 2025 will be construction costs, labor availability, and operational costs.
New trends for 2025
1. Be careful what you wish for
The Federal Reserve has begun its long-awaited interest rate cuts, and respondents expect more economic certainty to lead to higher volumes and even some development. But CRE executives are also wary of how slower economic and employment growth (i.e., a Fed soft landing) could impact demand, NOI, and price growth. In summary, the outlook for commercial real estate is “mixed.”
2. The beginning of a new cycle
The “recovery” of capital markets is starting to allow for price discovery that has not been possible in the markets since the Fed began raising interest rates in March 2022. There is enough capital for acquisitions and refinancing at a slightly more reasonable price. As investors reduce their ‘exposures’, they will be more willing to accept ‘new exposures’. On the equity side, there is a growing consensus that prices have bottomed out.
3. Building boom, tenant boom
Respondents said demand for most property types is stronger than pre-pandemic levels. But there is a “painful reckoning” in power that is seemingly of a more permanent nature. Oversupply of many property types has created a true tenant market. However, the report reveals a growing bifurcation between newly built prime office and industrial spaces and older spaces with fewer amenities. As the development pipeline slows down, the benefits for tenants diminish. Oversupply in multifamily housing is causing rents to decline, especially in the Sunbelt. However, demand is expected to absorb supply.
4. Where are you now?
The report notes that migration in the Sunbelt region is slowing as the region’s cost advantage is eroding in many places and relocation costs (relocation costs and rising interest rates) are increasing. I am doing it. Climate change will be a greater driver of migration in coming years and may also contribute to a slowdown in migration in the Sunbelt, as many of the most catastrophic weather events occur in this region.
5. There are many solutions, but no answers.
Due to high construction costs, most new housing tends to be market-rate or luxury homes, but all types of housing are welcome, and low-income residents can fill the spaces vacated by residents who move into new housing. I have a feeling that I can do it. Building in a process called “filtering”. A federal solution to the housing crisis is needed, and both presidential candidates have pledged to address this issue during future administrations.
Source: 2025 Emerging Real Estate Trends Survey
As CRE executives prepare for the next upcycle, a second trend focuses on real estate. Respondents rated core property types on a scale of 1 to 5, with industrial ranked highest and office ranked lowest for investments. In terms of development, single-family homes ranked highest and offices ranked lowest.
Key trends in real estate types
1. Smart growth of industry
Industrial tenants will carefully curate their logistics portfolios with a focus on supply chain efficiency, network diversification, technology and sustainability. Savvy owners and developers will tailor their offerings to meet tenants’ more sophisticated desires for space. Nearshoring and onshoring drive manufacturing growth.
2. Data centers: Overcoming power constraints and demand surges
The data center business is exploding, and CRE investors are scrambling to meet demand. “Development is highly profitable compared to other forms of real estate, and long-term leases with credit tenants support high loan-to-value ratios,” the report’s authors wrote. The report found that tenant electricity demands are currently making development difficult, preventing market oversupply and keeping rents high.
3. Senior Housing: Build New Muscles
As new senior housing funding becomes available, the report calls for rethinking traditional senior housing models, particularly with the aging baby boomer generation (currently making up 20% of the population and on the rise). It recommends providing “middle market” seniors with more options.
4. Retail resilience: weathering the storm
While there has been little construction work over the past few years, demand for brick-and-mortar stores has rebounded, the report said. As a result, retail vacancies are decreasing and rents are rising. In 2024, a rash of store bankruptcies and closures appeared to threaten retail’s winning streak, but landlords were able to reclaim the space. Restaurants, experiential retail and “semi-medical” tenants are all expanding. Closing drugstores is a concern, but it also presents an opportunity for redevelopment.
5. Suburban Innovation: Growth in Life Sciences
sustainable
Life sciences continues to grow, but perhaps not as fast as real estate supply. According to the report, life sciences inventories have expanded by 20% since the outbreak of COVID-19, but many markets have not been able to keep up. There are signs that a new growth spurt in biotech is starting, raising hopes that new inventory will be absorbed soon.
Again, the top 10 emerging markets in 2025 are mostly located in the Sunbelt region. This year includes Dallas/Ft. Value; Miami; Houston. Tampa Street Petersburg Florida. Nashville, Tennessee. Manhattan. Detroit; Columbus, Ohio; Charleston, South Carolina. And New Orleans.
The top emerging markets in 2024 are: Nashville. Phoenix; Dallas/Fort Worth; Atlanta; Austin, Texas. San Diego; Boston; San Antonio; Raleigh/Durham, North Carolina. Seattle; Houston. Denver and Charlotte, North Carolina
