5 Economic Trends Commercial Real Estate Investors Should Watch in 2025

Here’re the economy trends that commercial real estate investors should watch

The economic and real estate cycles have been closely linked for the last 40 years. As we navigate through 2025, commercial real estate investors need to stay informed about key economic trends shaping the market in order to plan the wiser moves. Here, we picked 5 essential trends that we believe investors should not overlook in 2025:

1. Moderate Economic Growth

According to Purdue University’s predictions, the U.S. economy is poised for growth in 2025 with a predicted 2.2% GDP growth. This is to be driven by consumer spending, easing financial conditions, and productivity gains. This moderate growth is expected to support real estate fundamentals across various sectors, creating opportunities for investors.

Furthermore, the U.S. banking industry has strengthened its resilience, significantly lowering the risk of a financially driven recession due to a significant bank failure, even though commercial real estate refinancing is still a work in progress, according to CBRE’s report.

2. Interest Rates and Yields Curve

Fannie Mae’s ESR Group’s latest forecast sees mortgage rates closing 2025 and 2026 at 6.5% and 6.3%, respectively, up from the previous forecast of 6.2% and 6.0%. Investors should monitor potential rate cuts by the Federal Reserve, which could ease refinancing pressures and positively impact property valuations. Nonetheless, J.P. Morgan predicted that despite the Fed’s easing cycle in the last months of 2024, economic uncertainty persists, and the future of interest rates remains unclear.

The 10-year Treasury yield remains above 4%, influencing mortgage rates. As GlobeSt reported, President Donald Trump has advocated for reducing the yields on the 10-year Treasury indirectly, as the bond market controls long-term rates. Treasury Secretary Scott Bessent indicated a focus on lowering these yields, potentially through adjusting the Supplementary Leverage Ratio (SLR) rules from the Basel III reforms. This adjustment could encourage banks to buy more 10-year Treasuries, potentially boosting economic growth and reducing federal debt service costs.

3. Inflationary Pressures

Reuters reported that January saw the largest increase in U.S. consumer prices in almost one and a half years, raising prices for a variety of goods and services for Americans. Businesses boosting prices early in the year probably contributed to the Labor Department's higher-than-expected inflation data.

Commercial real estate is impacted by persistent inflation in a number of ways. It may result in increased operational and building expenditures. On the other hand, real estate is frequently regarded as an inflation hedge, which might eventually raise the asset's value. When making investment decisions, the relationship between growing expenses and asset valuation is crucial.

4. Technological Advancements

Artificial intelligence, cloud computing, and the digital economy are driving extraordinary growth in the data center market. This trend is creating new investment opportunities in tech-related real estate assets. Technological breakthroughs may also indicate higher efficiency in analysis and measurements, helping investors in their decision making progress.

5. Sector-Specific Predictions

• Office Market Revival

The office sector is showing signs of stabilization, with a projected 5% increase in overall leasing volume for 20259. Prime office spaces are expected to be in shorter supply, potentially driving down vacancy rates.

• Industrial and Logistics Strength

Industrial real estate continues to benefit from the e-commerce boom and sees a potential for steady growth, though leasing activity is expected to return to pre-pandemic level. Investors should focus on high-quality properties as occupiers prioritize modern facilities.

• Multifamily Resilience

Despite recent surges in completions, multifamily vacancy rates are expected to edge down in 2025 due to robust tenant demand. Economic growth and high homeownership costs are driving apartment demand.

By keeping a close eye on these 5 trends in the economy and real estate market, commercial real estate investors and professionals alike can make informed decisions and potentially capitalize on emerging opportunities in 2025.

Need more guidance on your investments, or simply have more questions on commercial real estate? Contact us at 310-943-8530 or info@cbicommercial.com.