T
he Counselors of Real Estate (CRE), a global organization of property advisers, has identified the top challenges and opportunities for the real estate industry in 2025. According to CRE's global chair Anthony DellaPelle, commercial real estate is experiencing increased optimism due to lower interest rates and a potential US economic soft landing.
However, several challenges lie ahead, including geopolitical uncertainty, loan maturities, debt repricing, and high financing costs. The US elections will have a significant impact on regulation, trade, corporate taxes, immigration policy, and sustainability. Unpredictability is complicating real estate transactions, with investors waiting for greater clarity on economic growth, inflation, and interest rates.
High financing costs are a major concern, with interest rates remaining elevated despite recent drops. This has led to cautious deal assessments and market valuations, causing owners to hesitate selling and potential buyers to be wary of high prices. CRE predicts that buyers will focus on higher-cap-rate deals, with a more aggressive market reentry unlikely for another two years.
Loan maturities deadlines are also a pressing issue, with nearly $1.8 trillion in commercial real estate loans set to mature before the end of 2026. Lenders are extending these loans, but this temporary relief may soon reach its limits as banks grapple with regulatory constraints and insufficient capital reserves.
Geopolitics and regional wars will continue to impact the industry, contributing to supply chain disruptions, inflation, labor shortages, and higher cap rates. Insurance costs are surging due to extreme weather, inflation, and increased property values, particularly affecting residential, hospitality, and senior living properties.
Housing affordability continues to erode due to rising costs and an inventory shortage of 4.4 million units. Multifamily rent growth has slowed, but rents have still climbed 45% over the past 15 years. Despite increased construction, development is uneven, concentrated in major metros, and insufficient to meet demand.
Artificial intelligence innovations are rapidly evolving in real estate, with a focus on data accuracy, granularity, and timeliness. While AI can optimize certain processes, commercial real estate still faces challenges with fragmented data and location-specific nuances. Sustainability is also becoming increasingly important, with experts pointing to the need for increased sustainability and climate resiliency in buildings.
The CRE report highlights several other key issues, including office conversions, price gap expectations, and the urgency for prioritizing sustainability and climate resiliency in real estate strategies.
