Commercial real estate (CRE) has had a tough few years, with high interest rates and worries about the market slowing down.
But experts say 2025 could be the year things turn around just not as fast as some expected.
According to Hessam Nadji, CEO of Marcus & Millichap, “2025 is a turning point for commercial real estate investment.” He’s confident because of things like job growth, steady spending, and low unemployment.
Nadji believes the market is getting better, especially since there’s not much new construction happening in most areas.
The biggest problem for CRE has been office buildings. Since the pandemic, office space values have dropped by 41%, according to SMBC data.
However, things are slowly getting better. Alan Todd from Bank of America found that rents are stable now, and vacancy rates are starting to go down.
One of the biggest factors helping CRE bounce back is that the Federal Reserve is planning to lower interest rates in 2025.
This will help make things easier for people refinancing loans and encourage more investment in CRE.
Many experts are also excited about the future of data centers and retail properties.
Andrew Alperstein from PWC says data centers are a hot topic right now, especially with all the talk about artificial intelligence.
He believes rents will keep growing strong in this space.
As for retail properties, Nadji believes things are looking up here too, with low vacancy rates and steady revenue growth expected.
In short, CRE is recovering, and 2025 is looking like a promising year to invest in the market again especially in areas like data centers and retail.