U
nveiled at the Institute's 2024 Fall Meeting in Las Vegas, Emerging Trends in Real Estate North America names Dallas-Fort Worth and Miami as the top markets to watch in 2025.
According to PwC and ULI Americas' report, lower interest rates will reduce borrowing costs, aid price discovery, and encourage an uptick in CRE transactions. Sentiment is improving, but caution remains, with firms adjusting strategies by market and property type. Alternative sub-sectors are gaining interest, while core sectors like housing and logistics remain attractive.
The commercial real estate market appears to be on the verge of a key cyclical change, with industry optimism growing after years of hardship. Survey respondents expect their firm's profit to be "good" or "excellent," rising 20 percentage points from last year to 65 percent this year.
Capital that has been on the sidelines is re-entering the marketplace, driven by expectations of lower interest rates and improved capital availability. The economic backdrop remains solid, with low unemployment and positive GDP growth. Over 80 percent of respondents expect commercial mortgage rates to decrease in 2025.
The report highlights several key trends for 2025:
* Falling interest rates and cheaper capital
* A new cycle marked by better liquidity and more dealmaking
* Tenants gaining power due to a surge in supply
* Moderating migration patterns, driven by affordability and quality of life
* Growing challenges surrounding housing affordability
The Top Markets list for 2025 features Dallas-Fort Worth as the top market, followed closely by Miami. Nashville dropped from its number one position last year, while Florida cities grabbed three spots in the top 10.
Panelists agree that regulatory risks remain a significant challenge, particularly in addressing affordable housing shortages. Private capital is showing interest in investing in housing, but regulatory hurdles are discouraging investment. The office sector faces challenges related to obsolete buildings and revitalizing downtowns.
The report also highlights opportunities for private capital to address key problems and find solutions related to affordable housing, obsolete office space, and revitalizing downtowns.
