Commercial Real Estate Trends in 2025: Notes on the Industry

As the commercial real estate sector enters 2025, industry stakeholders face a dynamic landscape characterized by economic shifts, evolving asset preferences, and the increasing integration of technology. This year marks a turning point, with the potential for significant recovery tempered by lingering challenges in financing, market alignment, and asset repositioning.

This article brings together perspectives from Matt Aitchison (Founder, Imagos Hospitality Group), Bethany Babcock (Founder & Principal, Foresite CRE), and Faraz Cheema (Managing Director, BKREA). Their insights explore how the industry is addressing the aftershocks of an uncertain 2024, the reshaping of key asset classes, how tech will transform CRE next year, and creative strategies to thrive in a challenging yet opportunity-rich market.

A Year of Transition and Volatility

The broader CRE industry in 2024 was marked by caution and a wait-and-see approach, as uncertainty around policies and interest rates kept capital on the sidelines. Reflecting on 2024, Matt Aitchison noted there was a lot of anxiety and capital sitting on the sidelines, driven by uncertainty around policy changes and interest rates. This cautious sentiment permeated the market, slowing transaction velocity and widening the gap between buyer and seller expectation, with an observed 36.4% decrease in transaction volume in the market compared to the previous year. 

While some expected a more significant recovery, Bethany Babcock observed signs of pent-up demand that may take time to fully manifest. “It’s not going to be as though the floodgates open,” she said. “There’s a path we still need to go through, but we’ll start to see movement.” She noted that many sellers are holding firm on pricing due to low vacancy levels, leaving investors to rely on occupancy rates and rent growth as value-add opportunities to make deals work.

Industry sources support this cautious optimism, suggesting that commercial property is “primed for recovery in 2025.” This is attributed to an expected stabilization of interest rates and a push for tax and labor reforms, both of which could foster greater confidence among investors. In the fourth quarter of last year, we indeed saw an uptick in absorption across asset classes, indicating renewed buyer interest and projected upward trending in transaction velocity.

Faraz Cheema highlighted 2024’s survivalist mentality as higher-for-longer interest rates reshaped financial strategies. He forecasts a significant turnover rate in 2025, with sellers driven by both distress and opportunity. Supporting this, reports indicate a growing trend of sellers in competitive urban markets seeking to offload assets to recalibrate portfolios amid rising operational costs.

Asset Classes Undergoing Transformation

The CRE market is increasingly prioritizing smaller, more flexible assets and niche sectors that provide stability amid broader volatility. Aitchison highlighted this shift, saying, “Massive hotels and big-box retail spaces are being reevaluated. The next wave is all about being nimble.” Boutique hospitality and neighborhood retail, in particular, are emerging as areas of interest due to their resilience and localized demand.

On the retail front, Aitchison remains bullish on neighborhood strip centers, citing growing institutional interest. “These assets offer untapped potential for value-add investors, as institutional capital often overlooks smaller, mismanaged properties,” he said. Limited new supply, high occupancy, and increased foot traffic support this thesis, and those who can provide value-add renovations have the potential for decent ROI as institutions continue exploring portfolio additions. 

Babcock also highlighted how retail tenants are leveraging experiential concepts to attract customers. “They’re spending a lot more on finish-outs to create destinations within shopping centers,” she said, pointing to a trend where spaces are designed to encourage social media sharing and lingering. Suburban markets, particularly in regions like San Antonio’s bedroom communities, are thriving more than central business districts due to localized demand.

Cheema added that distressed office assets, particularly in Manhattan, are ripe for creative opportunities. He outlined three paths for these properties: value-add repositioning as offices, conversion to residential or alternative uses, or demolition for redevelopment. Yet, he emphasized the technical and financial challenges of office-to-residential or office-to-data-center conversions, particularly in cities like New York and D.C., where zoning and structural constraints are significant.

Recent reports from The Wall Street Journal underline the complexity of the office sector transformation. While office vacancies remain high, tenants are demanding modernized, high-amenity spaces, creating a mismatch between supply and demand.

Financing Challenges and Creative Solutions

Despite recent interest rate cuts, financing remains expensive heading into 2025. The Federal Reserve’s benchmark rate, though reduced by 75 basis points in late 2024, is still elevated compared to pre-pandemic levels. This situation complicates deal assessments and market valuations, leading to cautious behavior among buyers and sellers.

With a significant volume of debt maturing in 2025 ($1.8 trillion set to mature by 2026) the financing landscape will require stakeholders to adopt creative strategies. Industry observers note that aligning underwriting standards with market conditions will be essential to unlocking capital. Cheema highlighted innovative approaches to refinancing, including restructuring capital stacks and seeking alternative equity sources. “It’s better to own a small slice of [an investment] than a whole lot of nothing,” he explained, emphasizing the importance of proactive engagement with debt and equity partners.

Indeed, with traditional banks reducing their exposure to CRE loans, private lenders are stepping in to fill the financing gap. The top seven private credit groups now hold $2.1 trillion in credit assets, expanding beyond traditional loans into infrastructure and real estate. This shift is reshaping project financing, particularly for long-duration, inflation-resistant assets. 

The Role of Technology in Shaping CRE

All three emphasized the growing role of technology in CRE. Aitchison pointed to the importance of trust in data, stating, “Data is always a lagging indicator, but when leveraged correctly, it’s the best weapon investors have.” Cheema underscored the importance of technological innovations, such as AI and advanced analytics, in optimizing deal-making and asset management.

Babcock described AI and analytics as “another employee in the office” for those who use it effectively. Tenants, she observed, are already analyzing their own data to understand customer behavior and optimize operations. On the brokerage side, she noted that while investors have been slow adopters of technology, many are relying on brokers, property managers, and other partners to integrate AI and analytics into the decision-making process.

On a broader scale, technology is also enabling smaller firms to compete with large brokerages. “The tools that used to be exclusive to big firms are now accessible to regional and boutique firms,” Babcock said. “The advantage is shifting toward smaller, more agile groups.”

Recent industry developments back these predictions. The integration of technologies like virtual property tours, AI-driven market analysis, and advanced CRM systems is enabling faster decision-making and expanding access to opportunities. These advancements are transforming CRE from a traditionally slow-moving market to one with greater speed and transparency.

Actionable Strategies for 2025

With all this in mind, how can CRE participants best prepare for the coming year? Our conversations included recommendations focusing on relationships, agility, and informed decision-making: 

• Networking: Aitchison stressed that “This is a relationship-based business. The people leaning into conversations and connections will weather the storms and seize opportunities.”
• Building your toolkit: Babcock emphasized the growing role of social media in business development, sharing how platforms like X have driven significant leads for her firm. “It’s measurable,” she said. “We can see exactly what deals and opportunities came from it.”
• Persistence: Cheema emphasized persistence, likening success to the “stonecutter’s creed”: consistent effort eventually yields results.

Reports from across the industry agree that the CRE market in 2025 will reward proactive and adaptive players. For example, investors who embrace flexibility in asset selection and seek opportunities in underutilized property types—such as converting offices into storage or alternative uses—are likely to gain a competitive edge.

As 2025 unfolds, the CRE market offers a mix of volatility and opportunity. By leveraging technology, maintaining strong networks, and adopting creative financing solutions, industry professionals can position themselves to succeed in an environment that demands agility and innovation. Whether navigating distressed assets, embracing new asset classes, or leveraging data-driven insights, the key to success lies in staying informed and adaptable in a rapidly evolving landscape.

Matt Aitchison, founder and CEO of Imagos Group, is a renowned boutique hotelier, commercial real estate investor, and podcast host, with a diverse portfolio spanning hotels, retail centers, medical plazas, and multifamily properties, and a track record of building a Top 1000 real estate team in the U.S.

Bethany Babcock, founder of Foresite Real Estate, is an accomplished commercial real estate professional with over 20 years of experience in property management, leasing, and investment sales, recognized for her industry leadership, national awards, and dedication to talent development through the CRE Launch Program.

Faraz Cheema, SIOR, CCIM, is a seasoned commercial real estate professional specializing in the Manhattan office market at BKREA, leveraging over a decade of financial analysis, asset management, and brokerage expertise to meet diverse client needs.