CRE Issues to Consider in 2025

Forecasting what might happen to commercial real estate in 2025 isn’t easy. While capital markets and investment confidence are growing, tariffs and Fed uncertainty continue to generate caution.

To add clarity to the upcoming year, Cushman & Wakefield recently issued its “10 Critical Questions for 2025.” Here are some of the questions—and insights—for consideration for the coming year.

#1—Will capital markets take off in 2025?

The answer is yes, for the most part. Cushman & Wakefield analysts observe that rate-cutting is moving capital off the sidelines, while greater confidence will likely spur CRE investments. Furthermore, “alternatives are drawing increased interest and now make up over 7% of open-end core funds, ” representing 25% of total transaction volume in the U.S.

#2—What does a Trump 2.0 presidency mean for the economy and CRE?

The report indicated the difficulty in predicting how the election might impact property performance. One concern has been tariffs. However, despite similar threats in 2016, President-Elect Donald Trump implemented modest increases, raising the tariff rate from 1% to 2%.

Meanwhile, compression rates in corporate bond spreads suggest an improved outlook for overall corporate earnings and a soft economic landing.

#4—Are CRE debt conditions expected to improve in 2025?

Ongoing panic about debt-related matters could become more muted in 2025. The Cushman & Wakefield analysts explain that even with bond-market volatility, “the Fed’s easing cycle will unfold gradually, helping bring in the short end of the yield curve.” This should help put downward pressure on CRE debt costs even as CMBS, private credit, debt funds, and insurance company lenders’ appetite grows. Banks are likely to remain more selective in what they’ll support.

#9—Will the demand for apartments maintain its momentum?

The report indicated that 2024 will likely be the second-best year for multifamily absorption since 2020. Furthermore, the surge in apartment construction over the past two years is slowing down, meaning that “multifamily fundamentals are poised to strengthen going into 2025,” the Cushman & Wakefield analysts said.

Additionally, continued increased mortgage costs are anticipated to spur apartment demand.

#10—Can the data center boom sustain momentum amid power accessibility challenges?

The answer is that emerging and tertiary markets can provide the infrastructure for hyperscalers and colocation operators. Saturated city and town centers, not so much, despite robust infrastructure, incentives and fiber networks. The report explained that those who build and run data centers can find more land and power capacity in these smaller markets to “support future growth and meet demand.” Additionally, renewed U.S. interest in nuclear energy (especially through small, modular receptors) could be used to power data centers in areas with limited power access.