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As we enter 2025, commercial real estate (CRE) presents a unique landscape for investors. After a volatile few years marked by the pandemic, economic shifts, and rising interest rates, CRE is poised for selective recovery.
Oxford Economics suggests that the next 12–18 months could be an opportune window for commercial real estate investment, particularly in sectors like industrial, hotel, and multifamily residential properties. The report projects that from 2025 to 2027, 80% of global CRE markets will see either neutral or excess returns. Although the share of markets with excess returns is expected to decrease, this will be balanced by an increase in neutral returns.
By 2025, interest rates are expected to have stabilized or slightly decreased, which could rejuvenate CRE investments, especially if the Federal Reserve succeeds in balancing inflation control with economic growth. Lower rates are likely to reduce borrowing costs and improve transaction volumes across CRE segments, making 2025 a potential turning point for renewed investor confidence.
Industrial Properties: The industrial sector continues to thrive, driven by e-commerce and supply chain resilience efforts. Vacancy rates remain low, and demand is high for logistics and warehousing spaces. This sector is a stable bet for investors seeking long-term gains, particularly in high-demand urban and suburban areas. Overseas investments will provide the best opportunities, specifically in Switzerland, the Netherlands, Sweden, Germany and Portugal.
Hotel Properties: Although growth is slowing, Oxford Economics forecasts that overnight stays will end 16% above 2019 levels. The focus has been on luxury travel, but as inflation cools and travel becomes accessible to the larger population, value travel will move to the forefront.
Multifamily Properties: With ongoing demand for housing, multifamily assets in urban areas look promising, although rising construction costs and regulatory changes may impact profitability. Investors are focusing on regions with strong job growth and stable population influx to ensure steady occupancy and rental income.
Retail Properties: According to Oxford Economics, rental growth has re-emerged in some markets after a multi-year absence, and as inventory remains low and household incomes recover, landlords will have leverage with pricing.
Economic conditions, including the U.S. presidential election and global economic growth, will play a crucial role in shaping CRE. Local and national policies could impact tax incentives, lending practices, and sector-specific regulations.
In sum, 2025 could mark a cautious but optimistic reentry point for CRE investments, with industrial, hotel and multifamily sectors offering stable opportunities, while office and retail properties may require a selective and adaptive approach. Europe, North America, and Asia-Pacific are expected to lead in CRE recovery.
Justin Langlois, CCIM is a Commercial Real Estate Advisor with Stirling Investment Properties servicing Baton Rouge, Louisiana and surrounding markets. Please reach out to Justin to discuss your real estate investment strategies.