2025 Real Estate Market Forecasts from Industry Thought Leaders and Analysts
LaSalle Investment Management believes real estate transaction volumes should continue their slow recovery in 2025. They see potential for the market conditions to bring more liquidity, but still forecast that the appetite to sell and capital to buy will remain below average for the coming year.
LaSalle expects to see real estate index returns trending higher, with income providing most of the total return and appreciation adding a small lift. As the supply pipeline falls to below-average levels, they believe we will see industrial rent and value growth outperform apartments and an increase in the availability of attractive options for office investment. In 2025 and beyond, LaSalle expects that navigating local regulations around climate change and residential rental affordability challenges will be a growing priority for investors.
CBRE predicts that economic growth and firming real estate fundamentals will drive a moderate recovery in real estate investment activity in 2025, even though the 10-year Treasury yield will remain above 4%. In the coming year, they expect to see a steady office revival in America’s downtowns with the office up-cycle that began in 2024 gaining traction.
CBRE notes that retail is entering 2025 with the lowest vacancy rate of any commercial real estate sector and they expect to see a growing demand in suburban locations and Sun Belt cities. They believe industrial real estate will continue to benefit from e-commerce growth in the year ahead, but expect to see leasing activity return to pre-pandemic levels. While vacancy will remain elevated in industrial properties, CBRE predicts vacancy will begin to edge down in multifamily properties due to robust tenant demand. Overall, they feel the market remains tenant favorable, but will tighten toward year-end as the still-high cost of home ownership drives demand for apartments.
Despite many uncertainties, CBRE believes the U.S. economy is poised for growth in 2025, real estate sectors will see the start of a new cycle, and investors have the opportunity to secure long-term returns that have not been available for many years.
Nareit believes there are three keys that may unlock the stifled commercial real estate market and benefit REITs in 2025: an economic soft landing, a convergence of public-private real estate valuations, and an increase in property transactions. They expect that easing monetary policy and declining interest rates will play critical roles in closing the public-private cap rate gap, likely fueling REIT outperformance into 2025. As public and private real estate values become more in sync, Nareit expects the broad CRE transaction marketplace to regain its footing and become active once again. As transactions increase, they predict that REITs will be better-positioned than some of their competitors to make acquisitions and benefit from accretive growth.
Despite this, Nareit notes that lingering and emerging risks, such as soft property fundamentals in some sectors, higher interest rates reflecting fiscal uncertainty, and the potential for changes in tariffs affecting growth, may restrain CRE performance in 2025.
Colliers expects balance to return to the industrial market in 2025, with vacancy rates peaking as new supply and tenant demand reach equilibrium and rent growth stabilizes. They note that for the first time since 2020, retailers are projected to close more stores than they opened in 2024, signaling a more cautious market stance. Yet retail occupancy rates, excluding malls, have reached a decade-high of 95.6%, demonstrating the sector’s resilience and stability. They believe with consumers prioritizing value amidst economic pressures, retailers must double down on blending convenience and experience in brick-and-mortar spaces and create seamless omnichannel journeys that empower shoppers to spend wisely. Colliers feels the multifamily sector is well-positioned for 2025, benefiting from a slowdown in new deliveries and the increasing cost of home ownership. The office vacancy rate hit a record high of 17.7% in 2024 and they project a rise of another 100 basis points, to near 19% by the end of 2025. However, they expect the pace of vacancy growth to slow by 2026 as certain markets begin to recover and the pipeline of new construction begins to diminish.
National Association of Realtors predicts in 2025 we will see stronger home sales, moderating (but still increasing) home prices, more homes hitting the market, and stabilizing mortgage rates. NAR research shows that if mortgage rates fall to 6%—as they predict will happen in 2025 homeownership could be made more affordable to about 6.2 million more prospective buyers than when rates were near 7%. With their chief economist, Lawrence Yun believing the worst of the affordability challenges are over, NAR is projecting that for residential real estate, existing-home sales will rise by 7-12% and new-home sales could see an 11% increase by the end of the year.
The Fannie Mae Economic and Strategic Research Group shared five predictions for the housing market in 2025. They expect to see the national home price growth to decelerate and the average mortgage rates to decline modestly, but remain above 6 percent. They believe existing homes sales will remain near 30-year lows and multifamily housing will remain in a holding pattern, while new home sales continue to be a bright spot in the housing market.
The multitude of market perspectives for 2025 can easily become overwhelming. Verifying both the reliability of an individual source and the validity of their predictions requires time-consuming research as well as in-depth knowledge of prior performance and market trends.
Instead of reading through every forecast report, save yourself the trouble and give Legacy a call. Our knowledgeable team is here to break down the industry forecasts and help you navigate the current market trends.
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