As we close out 2024 and look ahead to 2025, the real estate landscape is poised for meaningful shifts. Inflation is expected to stabilize, though it may fall short of the Federal Reserve’s 2% target due to policy changes. Meanwhile, alternative capital sources are stepping up, as stricter regulations and $1.8 trillion in maturing real estate debt compel balance sheet clean-up. Asset prices appear to have bottomed, and trading volumes are improving, with many properties selling below replacement costs, signaling prices will continue to rebound. At the same time, distressed sales are on the rise, particularly in the office sector, where they accounted for nearly 10% of Q3 transactions, with more activity anticipated in 2025. Here are some of the key asset class trends we’re tracking for the year ahead.

Explore these insights and more in Colliers’ 2025 Outlook Report.

Multifamily

• Insurance Costs Sinking Deals: Insurance costs remain a challenge, and as rates fluctuate, deals are being repriced, causing buyers to walk away from hard deposits. While there are ways to mitigate insurance costs, 2024’s active hurricane season keeps these expenses at the forefront for buyers and sellers.
• NOI Erosion: With rising labor costs, materials, and utilities, operational expenses have surged for multifamily properties. Along with increased development and a decline in occupancy, particularly in the Sunbelt region, NOI is under pressure. However, stabilizing fundamentals should improve conditions in 2025.

Office

• Inventory Reduction: As the market bifurcates, more property owners will look to redevelop underperforming assets, converting them to meet demand. Older, high-vacancy buildings are poised to be removed from the national inventory, a shift that could positively impact market fundamentals.
• AI Isn’t Replacing Workers—Yet: AI’s workplace impact is still unfolding. While it has been used to automate tasks and drive efficiency, it hasn’t yet driven transformative change. However, with rapidly advancing innovation, AI is set to play a more prominent role, aligning with the retirement of Baby Boomers and a shift in the working-age population.

Industrial

• Smaller Warehouses, Bigger Opportunities: Warehouse developers will position themselves for the next cycle, with a growing number of construction starts expected by late 2025 in markets where the supply and demand balance has returned. While high costs and policy uncertainties may delay some projects, smaller, well-located developments will likely move forward.
• Automation Adoption: Warehouse automation technology is advancing rapidly to meet growing supply chain demands. Data analytics will play an enhanced role in improving warehouse efficiency, including predicting demand fluctuations and identifying bottlenecks. Additionally, AI and collaborative robots will take on a larger role in working alongside humans.

Retail

• Space Crunch: With construction costs now 30%–40% above pre-pandemic levels, new retail developments are limited. Less than 20 million square feet of retail space will be delivered in 2025, well below historical averages, prompting retailers to innovate within existing spaces.
• Brick-and-Mortar Momentum: Physical retail remains essential to consumers, with shopping center occupancy at a decade-high of 95.6%. Brick-and-mortar locations are vital drivers of omnichannel strategies, blending in-store and online shopping. Retailers that integrate experience and convenience are best positioned to thrive in 2025.