There’s no doubt commercial real estate faces significant headwinds as we look toward another year. The office sector continued to struggle in 2024, while an evolving economic climate, the growth of experiential consumerism and the ongoing quest to find tenants all challenged owners.
Some saw 2024 as marking the conclusion of one economic cycle, with 2025 ushering in a new and more positive period for the sector. While the CRE outlook remains speculative, that hasn’t stopped those who monitor the industry from advancing a wide-ranging assortment of forecasts for the next 12 months.
Office up
The office market is likely to find stability in the year ahead, with improvement coming late in 2025, CBRE reports. A construction slowdown and occupier sentiment shifting toward expansion should spell a 5% increase in overall office leasing volume in 2025. CBRE sees prime office space – meaning each market’s best buildings – in shorter supply, leading to prime-office vacancy reaching pre-Covid thresholds of 8.2% by 2027.
Tech niche rising
CRE watchers wonder if surging demand for warehouses will be followed by interest in other types of industrial properties. It’s not just investment in data centers driven by the growth of AI. Cold storage facilities, EV battery plants and quantum computing campuses will also likely draw increasing consideration, despite challenges each faces.
Elected officials and community groups who might otherwise be opposed have been swayed by the far-reaching economic gains such properties are able to deliver.
Amplified in-office benefits
Though more employers are mandating their employees return to office, a smarter approach would be making the workplace more appealing, says Ariel Sumry, LEED green associate and interior project designer for Perkins&Will’s Dallas studio. Custom space that amplifies the emotional and psychological benefits of face-to-face connection nurtures community and fosters collaboration unachievable in the virtual realm.
Retail rents increase
A lack of new retail construction over the past several years, sending the national availability rate under 5%, will likely spark asking rent hikes in 2025, CBRE reports. Retailers will likely seek to lock in longer-term leases on favorable locations.
Reshaping life sciences
Given fast-emerging trends in life sciences, including AI advancements and increasing attention to obesity and Type 1 diabetes, companies will need to re-evaluate portfolio strategies, lab requirements and choice of locations, JLL reports. Possible changes in lab space design may include more flexible and technologically-advanced facilities.
On the border
Demand should grow for industrial buildings near, or with access to, the border of U.S. and Mexico, given changes in trade policy, CBRE states. The company predicts demand for distribution facilities along the north-south corridors of I-29 and I-35. Markets particularly affected should be San Antonio, Austin, Dallas-Fort Worth, Oklahoma City, Kansas City, Des Moines and Minneapolis, CBRE reports.
Acoustic balance
With more employees returning to the office, and often jumping on Zoom calls, the need to control noise became an important concern this year in many workplaces. “Our clients have found not every informal interaction with their colleagues is welcomed or beneficial,” says Doug West, studio creative director at TPG Architecture. What West terms “sophisticated sound management” will become a workplace priority in the year ahead. That will mean the incorporation of sound-proofing finishes, use of higher panels to separate open office stations and installation of more phone booths. The crux of the issue is how well the office space functions for employees and for video conferencing.
More “we” space
As employers deal return-to-office decrees to their staffs, look for less “me” space and growing “we” space around offices. Corner offices will yield to collective work hubs, while strategic placement of conversation pits and conference tables will be designed to foster spur-of-the-moment team huddles and casual client meetings.
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