10 CRE Trends Shaping 2025 – What You Need to Know

2025 CRE Predictions – Prepare for a Transformative Year

As we enter 2025, the commercial real estate (CRE) industry is poised for dramatic changes. Economic shifts, technological advancements, and demographic trends are reshaping the sector, creating opportunities and challenges. Whether you're a broker, investor, or developer, understanding these trends is essential for thriving in the year ahead.

Here’s a detailed look at the most critical CRE predictions for 2025, with insights on why they matter to you and how to capitalize on them.

1. Transaction Volumes Are Set for a Comeback

What’s Happening: CRE transaction volumes are expected to recover significantly in 2025, with estimates ranging from $400 billion to $450 billion. This follows a steep decline from the record $900 billion in 2021 to just $300 billion in 2024. Federal Reserve interest rate cuts and an improving credit environment are driving this resurgence.

Why It Matters to You: Higher transaction volumes mean more activity in the market, creating opportunities for brokers, buyers, and sellers. A more active market fosters liquidity, enabling smoother deal-making and increased competition for quality assets.

Key Insight: Bob Knakal, Massey Knakal, notes, "Turnover rates in Manhattan, historically hovering around 2.6%, could spike to unprecedented levels of 5% or even 6%."

How to Leverage This Trend: Stay ahead by building relationships with potential buyers and sellers now. Position yourself as a resource for those re-entering the market and be ready to act quickly as deals surface.

2. Shadow Lending Will Play a Critical Role

What’s Happening: The shadow lending sector—comprising REIT mortgage funds, private equity debt funds, CMBS conduits, and hard-money lenders—has become increasingly important. This sector now accounts for about 15% of all CRE loans, up from just 5% a decade ago. These lenders are stepping in to fill financing gaps left by traditional banks during tight credit markets.

Why It Matters to You: Shadow lenders provide alternative financing options in a constrained lending environment. They can facilitate deals that might otherwise stall due to stricter traditional lending criteria.

How to Leverage This Trend: Familiarize yourself with shadow lending options and establish connections with these lenders. Knowing where to source creative financing can give you an edge in closing deals.

3. High-Growth, Low-Tax States Will Lead the Way

What’s Happening: States like Texas, Florida, and Tennessee continue to attract businesses and residents due to favorable tax policies, economic growth, and quality of life. Conversely, high-tax states are seeing outmigration and declining economic performance.

Why It Matters to You: Investment dollars are increasingly flowing to high-growth states, where stronger fundamentals drive better returns. As demand grows, so does competition for assets in these areas.

How to Leverage This Trend: Focus your investment and brokerage efforts on these thriving markets. Highlight the benefits of high-growth regions to clients considering relocation or expansion.

4. The Midwest Shines, with Kansas City Leading the Charge

What’s Happening: The Midwest continues to outperform due to its affordability, population growth, and pro-business policies. Kansas City, in particular, has become a standout market, attracting attention for its logistics infrastructure, skilled workforce, and vibrant economic growth.

Why It Matters to You: As coastal markets face affordability challenges, the Midwest offers a compelling alternative for investors and businesses seeking growth at a lower cost.

How to Leverage This Trend:Find Markets like Kansas City and understand their unique advantages—affordability, accessibility, and a thriving business environment. Whether working with investors or tenants, the region has long-term growth potential.

5. Bid-Ask Spread Narrowing to Drive Deal Flow

What’s Happening: The gap between sellers’ asking prices and buyers’ bids—widened significantly since mid-2022—is expected to narrow as interest rates decline and capital becomes more accessible. Cap rates are projected to stabilize in the 5.0%-8.0% range, depending on the property type and location.

Why It Matters to You: A narrowing bid-ask spread facilitates deal-making by bringing buyer and seller expectations closer together. This dynamic will unlock many previously stalled transactions.

How to Leverage This Trend: Monitor cap rate movements and debt market conditions closely. Proactively communicate with clients about market shifts that could impact their pricing strategies.

6. AI Adoption Becomes a Game-Changer

What’s Happening: Artificial intelligence is revolutionizing the CRE industry, optimizing everything from property management to investment analysis. AI is also driving demand for data centers, with infrastructure developments expected to soar in 2025 to support these computational needs.

Why It Matters to You: Early adopters of AI tools will gain a competitive edge by automating tasks, improving decision-making, and enhancing client experiences.

How to Leverage This Trend: Invest in AI-powered tools for market analysis, property valuation, and customer engagement. Position yourself as a tech-savvy advisor who leverages cutting-edge solutions for better results.

7. Housing Affordability Solutions Are Critical

What’s Happening: The U.S. housing market faces a shortfall of 4.4 million units, with multifamily rents surging 45% over the past 15 years. Over 50% of renters are cost-burdened, creating a pressing need for affordable housing solutions.

Why It Matters to You: Developers and investors focusing on affordable housing are well-positioned to capitalize on strong demand while addressing a critical societal need.

How to Leverage This Trend: Partner with municipalities to unlock land development opportunities. Advocate for policies that encourage the preservation and creation of affordable units.

8. Rising Insurance Costs Reshape Risk Management

What’s Happening: Extreme weather, inflation, and rising property values are driving up insurance premiums. Sectors like hospitality and residential are particularly vulnerable, prompting a shift toward comprehensive risk management strategies.

Why It Matters to You: Higher insurance costs can significantly impact property valuations and operating expenses. Understanding these dynamics is essential for navigating deal terms and advising clients effectively.

How to Leverage This Trend: Work with clients to explore innovative risk mitigation strategies. Ensure that insurance considerations are integrated into your financial analyses.

9. Loan Maturities Pose Opportunities and Risks

What’s Happening: Approximately $600 billion in CRE loans will mature in 2025, with an additional $1.2 trillion maturing by 2026. Lenders are extending terms where possible, but regulatory pressures may limit this strategy.

Why It Matters to You: This wave of maturities presents opportunities for acquisitions, refinancings, and restructuring deals, but it also poses risks for distressed properties.

How to Leverage This Trend: Identify properties with maturing loans and position yourself to assist owners in navigating refinancing or sale options.

🔄 Understanding the Winners’ Curse The “Winners’ Curse” refers to the tendency for buyers to overpay during market peaks, only to face declining values in subsequent downturns. Historically, this phase is followed by a period of rapid recovery and transaction growth as the market stabilizes.

In 2025, we’re emerging from this cycle's corrective phase. Bid-ask spreads are narrowing, cap rates are stabilizing, and the Federal Reserve’s actions are making capital more accessible. This environment signals a critical moment for savvy investors to act decisively.

💡 Why It Matters: Timing is everything in CRE, and understanding where we are in the 18.6-year real estate cycle gives you a clear advantage. Those who recognize the opportunities in this recovery phase are well-positioned to secure assets at favorable terms before the next upswing.

How to Leverage the Winners’ Curse Insight

• Buyers: Target properties in markets with rebounding fundamentals, where pricing is still favorable but poised for growth.
• Sellers: Take advantage of increasing transaction volumes to secure strong offers while demand accelerates.
• Brokers: Educate clients on the cycle’s implications, helping them time their moves strategically.

This post-“Winners’ Curse” moment isn’t just a theory—it’s an opportunity. The smart money knows this is the time to strike, and those who act decisively in 2025 will reap the rewards.

Conclusion: Seize the Opportunities Ahead

2025 is set to be a transformative year for the commercial real estate industry, offering both challenges and unparalleled opportunities. From increased transaction volumes to the rise of AI and evolving market dynamics, success will belong to those who are proactive, informed, and adaptable.

These nine trends aren’t just predictions—they’re a roadmap for navigating the ever-changing CRE landscape. Whether you’re preparing for a wave of loan maturities, seeking to invest in high-growth states, or leveraging shadow lending for creative financing, there’s never been a better time to position yourself for success.

Navigate 2025 with Confidence and Strategy

2025 represents a turning point for the commercial real estate industry, and those who understand the market’s nuances will gain a significant edge. With these 10 trends shaping the landscape, the path to success is clearer than ever:

• Take advantage of rising transaction volumes.
• Leverage shadow lending for creative financing solutions.
• Focus on thriving markets, such as the Midwest and high-growth states.
• Stay informed on technological advancements like AI.
• Act decisively in this pivotal phase of the real estate cycle.

And that’s where I come in.

▶️ How I Serve Sellers I help CRE property owners make informed decisions about whether to sell, hold, or refinance by conducting property performance audits that integrate AI-driven insights.

▶️ Active Investors & 1031 Exchanges I specialize in representing buyers and sellers of multifamily and commercial properties, sourcing cash-flowing investments through creativity, hard work, and an unmatched network. Whether you’re navigating the complexities of 1031 exchanges or hunting for off-market opportunities, I’m here to guide you every step of the way.

▶️ Passive Investors For those looking to enjoy the benefits of real estate without the day-to-day hassle, I focus on Midwest-focused opportunities to help you grow your portfolios with confidence.

2025 is your opportunity to grow, adapt, and thrive. Let’s work together to ensure your real estate strategy aligns with the evolving market.

💬 Ready to take action? Let’s connect and craft a plan tailored to your goals.