The commercial real estate industry is entering 2025 with a sense of guarded optimism. While many in the sector anticipate favorable shifts, such as lower interest rates and increased office occupancy, cost pressures and market challenges remain key concerns. Bisnow’s 2025 predictions survey, which gathered insights from over 1,400 readers, sheds light on the landscape ahead.
Lower Interest Rates: A Shared Expectation
An overwhelming majority of survey respondents—nearly 90%—predict at least one Federal Reserve interest rate cut in 2025. Of these, 46% anticipate exactly two rate cuts, and nearly 25% expect more than two. These expectations reflect growing confidence compared to last year’s survey, where only 82% foresaw any rate cuts for 2024.
This optimism is not without basis. The Federal Reserve has already implemented three rate cuts since September 2024, reducing rates by a full percentage point. However, Fed Chair Jerome Powell cautioned that the pace of rate cuts may slow in 2025, suggesting a more measured approach moving forward.
Still, some industry leaders remain skeptical. Apollo Global Management Chief Economist Torsten Sløk, for instance, calculated a 40% chance that rates might increase again this year. While most believe relief is on the horizon, uncertainty lingers, especially as cost pressures remain a significant concern.
Cost Pressures Continue to Dominate
Even with potential rate cuts, higher interest rates compared to earlier years, rising insurance costs, property taxes, and inflation are among the top challenges for commercial real estate professionals. One Maryland-based multifamily veteran summed it up: “Making ends meet will be the name of the game in 2025.”
Survey respondents echoed these concerns. At least 100 individuals cited interest rates as their greatest challenge for the year, while others highlighted tariffs, labor costs, and the rising expenses of property operations. To address these issues, many are focusing on cost containment and efficiency improvements while hoping for longer-term financial relief.
Buy, Hold, or Sell? Strategic Investment Decisions
When asked about the best investment strategy for 2025, most respondents leaned toward holding or buying properties. Only 11% of respondents viewed selling as the optimal approach, while 46% supported holding assets and 43% endorsed buying opportunities.
The reluctance to sell reflects market dynamics where sellers are unwilling to part with properties at discounted prices, even as buyers aggressively seek deals. A Denver-based retail broker captured this tension, stating, “Buyers want a deal, and sellers don't want to let go of their property at a discount when market cycles are gearing to ramp back up.”
Despite these challenges, many investors are eyeing opportunities in distressed assets, particularly in the office and multifamily sectors. “I am currently a buyer, so I am looking for cheap deals on distressed assets due to financing conditions,” said a Chicago-based investor.
The Office Sector: A Turning Point?
The office market continues to grapple with the ongoing return-to-office (RTO) trends. Kastle Systems’ RTO metric hovered in the low 50% range throughout 2024. However, just over 50% of Bisnow respondents believe this figure will surpass 60% in 2025. An additional 23.5% anticipate reaching that threshold by 2026, reflecting renewed optimism compared to previous years.
This shift in sentiment aligns with increasing pressure from corporate leaders. Companies like Amazon and others are actively advocating for a return to full office attendance, with a fall survey by KPMG showing that 83% of executives expect their organizations to require five-day office attendance within the next three years.
To adapt, landlords and property owners are investing heavily in building improvements and amenities. A New York-based broker noted that leasing office space will remain a significant challenge but emphasized that sinking more capital into properties is necessary to attract tenants.
Multifamily and Life Sciences Lead the Comeback
While office spaces show signs of potential recovery, survey respondents identified multifamily properties as the asset class poised for the most significant rebound in 2025, capturing 44% of the vote. Life sciences properties followed with 17.5%, reflecting ongoing interest despite oversupply and reduced venture capital funding in the sector.
Multifamily properties are rebounding from oversupply issues that emerged during the pandemic, particularly in Sun Belt markets. A New Jersey-based life sciences developer highlighted the challenge of finding deals that “pencil out” in this climate, emphasizing the need for creative financing solutions and off-market opportunities.
M&A and IPO Activity on the Rise
Merger and acquisition (M&A) activity in commercial real estate is also expected to grow in 2025. Nearly 60% of respondents anticipate an increase in CRE-related IPOs and M&A deals, while another 30% expect activity to remain consistent with 2024 levels.
This optimism aligns with broader trends in the U.S. economy. The EY-Parthenon Deal Barometer predicts a 10% increase in overall M&A activity this year, reflecting improved market confidence and capital availability.
Adapting to a New Normal
Despite challenges, 2025 presents opportunities for those willing to adapt and innovate. As one Southeastern hospitality professional observed, “Financing will open up with lower rates, but a limited number of opportunities means we’ll have to be aggressive.”
The road ahead may not be without obstacles, but persistence, focus, and creative problem-solving will be key for commercial real estate professionals navigating this dynamic year.
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