PwC and ULI Americas have released the real estate industry’s leading annual report, Emerging Trends in Real Estate® 2025. Now in its 46th edition, this forecast report outlines emerging market trends, prime locations, and real estate sector opportunities that will impact the overall health of the industry. This report features proprietary data and insights from more than 2,000 top real estate professionals and covers a wide range of real estate topics impacting the U.S. and Canadian markets, from climate change to AI. .
“In 2025, we expect lower interest rates to reduce borrowing costs, foster price discovery, and ultimately drive growth in CRE transactions,” said ULI Global CEO Angela Kane. said. “Sentiment is improving, but remains largely on the wrong side, as companies focus on strong long-term fundamentals and adjust strategies by market and property type. We are pleased to see early signs that capital markets are poised for recovery.” In this respect, although these core sectors remain attractive due to housing and logistics needs, there is increasing interest in a number of alternative sub-sectors. ”
“Challenges persist across the real estate sector, but there are signs of improvement after years of hardship,” said Andrew Alperstein, partner in PwC’s U.S. real estate practice. “Industry optimism increased last year, but there is also recognition that the recovery will be gradual. Looking ahead to 2025, companies are focusing on managing short-term risks to ensure this reawakening is successful. We need to adjust our growth strategy.”
Presenters at the ULI Fall Meeting agreed with research that the commercial real estate market appears to be on the brink of a significant cyclical shift.
“The time has come” is one of the overarching themes that stands out in the newly released Emerging Trends in Real Estate® 2025. The number of survey respondents who expect their company’s profits to be “good” or “excellent” has increased by more than 20 percentage points. This has increased from 41 percent last year to 65 percent this year. The 46th edition of this forecast report, published by the Institute and PwC US, focuses on emerging market trends, popular locations and opportunities in the real estate sector.
“As we look to 2025, we see a lot of green shoots on the horizon,” said Sarah Queen, head of real estate equity at MetLife Investment Management. Queen was one of four panelists who discussed the report’s findings on October 29 in Las Vegas. Capital that has been on the sidelines is once again showing interest in many types of real estate, and return profiles given the value reset are becoming more attractive to investors. Re-entering the market, Queen points out. “Overall, we are much more positive than before, but a little cautious about the future in the coming months,” she added.
The optimism that the commercial real estate industry is moving into a new cycle is mainly due to lower interest rates and, although it remains difficult, the availability of capital for acquisitions, refinances, and even development in 2025. is supported by the expectation that it is likely to improve. The economic background is also similar. It looks solid with low unemployment and positive GDP growth. More than 80 percent of respondents to this year’s Emerging Trends Survey believe commercial mortgage rates will fall in 2025, and 75 percent expect rates to fall further over the next five years.
“It feels like a completely different world than it was a year ago,” said Michael Byrne, chief investment officer and head of North American private equity and fixed income at AEW Capital Management. As some of the challenges associated with rising interest rates ease, some of the ‘fear factor’ that existed previously will be removed and the focus will be on finding growth opportunities and making appropriate new investments. It has become. On the capital raising side, Byrne said there has been interest in opportunistic investments for some time, but what’s notable is that capital is starting to show interest in core strategies.
Key trends highlighted in the report include:
Interest rates are expected to fall and capital will become cheaper in 2025. A new cycle is set to begin, characterized by increased liquidity and more trading. Despite strong demand for space, supply is expected to decline. The surge is swaying the forces in favor of tenants Migration patterns are easing, affordability and quality property remaining life are key drivers of growth Housing affordability challenges will deepen and intensify However, solutions remain elusive
Growing interest in substitutes
While industrial real estate regained the top spot as the most valued core real estate type in this year’s survey, demand for alternative real estate types and niche strategies is clearly on the rise. Two sectors that stand out are data centers and senior housing. Data centers are the only real estate sector to receive a rating higher than 4 on a scale of 1 to 5 in the 2025 report. Demand for data centers has exploded with drivers such as AI and cloud computing.
The aging baby boomer generation is increasing the demand for senior housing, creating significant ripple effects in other sectors of the economy and commercial real estate. By 2030, all baby boomers will be 65 or older, and one in five Americans will reach retirement age. An aging population will change migration patterns, consumer spending, and demand for healthcare and senior housing.
Chuck DiRocco, director of real estate research at PwC, said the challenge and opportunity is that seniors are outpacing the growth in the supply of senior housing needed. “It seems simple to investors that here’s the opportunity and here’s the gap, but it’s not that simple,” says DiRocco. A growing middle market of adult households aged 65 and older will live longer, with limited household income, increased medical costs, and insufficient funds to pay for assisted living. “So there is an opportunity here, but we need to look at this mid-market pricing point,” he says.
Affordable housing remains one of the biggest social issues in every city across the country, and addressing the shortage is a top priority for investors. “I wouldn’t say we’re on the path to a solution, but we’re making progress. There’s a lot of capital interested in investing in housing, from luxury homes to more affordable homes,” Byrne said. Masu. Panelists agreed that regulatory risk hinders private capital investment in housing and remains a major challenge.
A big question that continues to plague the office sector is what to do with aging and old buildings. Similar to what has happened in retail, occupiers are gravitating towards higher quality assets. But while owners can reimagine and redevelop retail stores, converting office buildings is more difficult. “The truth is, not all office buildings are struggling, but we’re talking about every city subway,” said Hessam Nagy, president and CEO of Marcus & Millichap. “Regardless of whether or not we are in a crisis, we are going to be in a difficult situation for quite some time.”
Restructuring of supply problems Top market list
Another important trend to watch in 2025 is changing migration patterns. Migration, which has benefited population growth in the Sunbelt and suburban markets, appears to be easing and changing. While housing affordability, cost of living and quality of life remain the main drivers of migration, the disruptions caused by climate change are likely to have a significant impact on migration patterns in the coming years.
The annual list of “Top Markets 2025 for Overall Real Estate Outlook” records some surprising developments. Nashville relinquished its lead and fell to fifth place, while Dallas-Fort Worth took the lead. Despite hurricane-related concerns and increased insurance premiums, Florida cities earned three of the top 10 spots.
Top markets in 2025:
1. Dallas-Fort Worth
2. Miami
3. Houston
4. Tampa – St. Petersburg
5. Nashville
6. Orlando
7. Atlanta
8. Boston
9. Salt Lake City
10. Phoenix
“The retail industry is watching very closely not only Millennials, but also Gen Z, where they want to live. And in many of those markets, affordability, cost of living, and quality of life are very important. ” said Jodi MacLean, CEO of EDENS. She added that when EDENS takes its retail index and overlays it with the top 10 emerging trend markets, it becomes a near-perfect overlay thanks to these key factors.
“I think it’s amazing that areas like the Bay Area and Boston that were seen as strong markets for decades have fallen out of favor and suddenly become diamonds in the rough,” Nagy said. . The shift in preferred cities is partly due to overbuilding in some Sunbelt markets, Nagy said, but also because cities like Boston, Seattle and Denver are rediscovering their appeal. It is said that the rising number of cases may also be the cause. Economic momentum.
“We’re seeing the same positive trends that everyone is sharing in the report. But I would say it’s going to be choppy, and sentiment seems to be moving almost hourly. ” added Nagy. For example, as 10-year Treasuries rose in response to the Fed’s September interest rate hike, bid-bid spreads, which had begun to tighten, are slowly creeping back into the market.
While there are improvements to come, panelists agree that the path is unlikely to be entirely smooth sailing. It will also create significant opportunities for private capital to help address key issues and find solutions related to affordable housing, aging office space, and downtown revitalization.
View the full 2025 report here through a new interactive experience.
For more information about the report, or to speak to a PwC or ULI representative about this year’s findings, please contact (email protected) (PwC) or (email protected) (ULI).
