Predicting the future of commercial real estate in 2025 is a challenging task. While there are positive signs such as growing capital markets and investment confidence, uncertainties like tariffs and Federal Reserve policies create caution.
To provide some clarity for the upcoming year, Cushman & Wakefield has released their “10 Critical Questions for 2025” report. Here are some key questions and insights to consider:
1) Will capital markets thrive in 2025?
The answer is mostly yes. According to Cushman & Wakefield analysts, rate cuts have encouraged more capital investments while increased confidence will likely lead to more CRE investments. Additionally, alternative assets have become increasingly popular with open-end core funds representing over 7% of total transaction volume in the U.S.
2) What impact will a second term for President Trump have on the economy and CRE?
It’s difficult to predict how an election might affect property performance but one concern has been tariffs. However, despite similar threats during his first term, President Trump only implemented modest increases from 1% to 2%. Corporate bond spreads also suggest a positive outlook for corporate earnings which could lead to a soft economic landing.
4) Can we expect improved conditions for CRE debt in 2025?
Concerns about debt may decrease by then according to Cushman & Wakefield analysts who believe that gradual easing by the Fed will help bring down short-term yields which should lower costs of borrowing even as CMBS loans increase along with private credit options like debt funds or insurance companies while banks remain selective about what they support.
9) Will demand continue strong growth within apartments?
Multifamily absorption rates are expected be at their second-highest level since before COVID-19 hit this year so far through next year according our research team’s latest forecast . Furthermore,
the surge seen over recent years appears slowing down meaning “multifamily fundamentals poised strengthen going into ’25,” said CWK researchers.
Additionally, rising mortgage costs could lead to increased demand for apartments.
10) Can the data center market maintain its momentum despite power accessibility challenges?
The answer is yes in emerging and tertiary markets where there is potential for hyperscalers and colocation operators. However, saturated city centers may not be as viable even with strong infrastructure, incentives and fiber networks. The report suggests that smaller markets can provide more land and power capacity to support future growth while the renewed interest in nuclear energy (specifically small modular reactors) could potentially power data centers in areas with limited access to electricity.
Overall, these are some important considerations for commercial real estate professionals as we look towards 2025. While there are uncertainties ahead, there are also positive signs of growth within various sectors of the industry.
