This past fall, the Counselors of Real Estate (CRE), an international consortium of real estate problem solvers, released its top 10 issues likely to affect the commercial real estate industry in 2025. Last week I reviewed numbers 1 through 5. Here are numbers 6 through 10.
6. Increasingly Unaffordable Housing
Rising costs and shrinking inventory is leading to increasingly unaffordable housing for many Americans, putting more pressure on the multifamily sector. As apartment construction continues to decline and demand from younger renters increases, affordability will continue to be a challenge in 2025.
7. Rise in Artificial Intelligence
In 2025, commercial real estate professionals will continue to confront AI-related challenges such as fragmented data and location-specific distinctions. In addition, the need for more computing power will increase demand for data centers and partnerships with local utility providers.
8. Impact of Extreme Weather
Considering the tremendous impact of extreme weather events, 2025 could be the year when the need for resilient properties takes on greater urgency. The recent fires in Los Angeles underscored this need. For property owners, this could mean boosting investment in green technologies and other resilience-enhancing measures.
9. Lingering Office Vacancies
Amid the ongoing post-COVID recovery of the office market, some property owners in 2025 and beyond must embrace adaptive reuse by converting more office buildings to residential, health care and educational use. While this reuse can help resolve the glut of empty office space and lack of affordable housing in some markets, it remains a potentially costly and complex approach.
10. Narrower Buyer-Seller Price Gap
Stronger rent growth and interest rate declines will narrow the gap between what buyers want to pay and what sellers expect to receive. However, with loan maturities looming, sellers may need to adjust their pricing expectations as refinancing pressures grow.
