With the new year just around the corner, you might find yourself wondering what lies in store for the commercial real estate world in 2025. It’s impossible to forecast future events with absolute certainty. As the philosopher Søren Kierkegaard said, “Life can only be understood backwards; but it must be lived forwards.”
Still, we can offer some educated guesses about what the upcoming year will bring based on projections offered by industry analysts and experts. Here are a few notable commercial real estate trends to watch in 2025.
1. Real estate investors and owners expect a potential revenue rebound in 2025.
The vast majority (88 percent) of commercial real estate owners and investors worldwide expect their organizations’ revenues to increase during the upcoming year, according to Deloitte’s 2025 commercial real estate outlook.
Additionally, 60 percent of the real estate professionals who responded to Deloitte’s annual survey anticipate year-over-year growth exceeding 5 percent. By contrast, survey respondents expected revenues to decline in 2024 and 2023.
Federal Reserve Bank Chair Jay Powell sparked optimism about an upturn for the commercial real estate industry this past summer by declaring it was time for policy adjustment, according to the 2025 Emerging Trends in Real Estate report from PwC and the Urban Land Institute (ULI).
“With that pronouncement at the Fed’s annual Jackson Hole Economic Symposium in late August, Powell clearly communicated to markets that inflation had been tamed and the COVID era of tightening was ending,” the report states.
The Fed has already cut the federal funds rate (FFR) by a significant amount this fall and is expected to reduce it by an additional 100 basis points (bps) in 2025. As a result, commercial real estate professionals are hopeful about the new year, according to the PwC and ULI report, which notes that “the Fed policy change sends a powerful signal to investors and borrowers that financial conditions will only improve from here.”
The outlook isn’t entirely rosy, however. Commercial real estate owners and investors still have concerns about macroeconomic trends such as potential interest rate increases, tax policy alterations, cybersecurity threats, and the cost of capital, according to Deloitte.
2. E-commerce will continue to drive demand for industrial property.
The rise of e-commerce will continue in 2025; its continued popularity could make it a $7 trillion industry, according to The Commercial Real Estate Outlook for 2025 from U.S. News & World Report.
Subsequently, the industrial properties needed to support e-commerce operations will also enjoy high demand. This includes trucking terminals, distribution centers, warehouses, call centers, data centers and server farms.
3. Generative artificial intelligence (genAI) adoption will increase in the commercial real estate industry.
Since OpenAI introduced ChatGPT roughly two years ago, generative AI has become a transformative force across various industries, including commercial real estate. Seventy-six percent of the owners and investors surveyed by Deloitte reported that their organizations are researching, piloting or in the early days of deploying AI processes and solutions.
GenAI tools can automate tedious tasks and allow human workers to focus on higher-value pursuits; as a result, businesses that have made the most progress in AI adoption are more likely to expand in 2025. Deloitte’s outlook reports that 35 percent of companies with AI fully in production anticipate a significant increase in headcount during the next 12 to 18 months, compared with 8 percent of organizations that have no interest in artificial intelligence.
For more information about AI and the commercial real estate industry, please see our previous blog: “How Will AI Change Commercial Real Estate?”
4. Sustainability will be a top priority for tenants, consumers and regulators.
Businesses looking for commercial space to rent will continue to prioritize energy efficiency and environmental friendliness, according to U.S. News & World Report. Green practices will also benefit commercial property owners in the long run by leading to lower heating and cooling costs in addition to attracting higher-quality tenants and ensuring compliance with regulations related to sustainability.
It’s no surprise that 76 percent of the commercial real estate owners and investors surveyed by Deloitte confirmed plans to undertake deep energy retrofits in the next 12 to 18 months. For more information, please see our previous blog: “How to Make a Commercial Building More Energy Efficient.”
If you want to explore the commercial real estate market in Chicago and beyond, the Avalon Realty Associates team is here to help. Connect with our experienced real estate brokers today by calling 847-506-1000 or emailing info@avalonreal.com.
You can also connect with us via our Contact Us page or view property listings online.