Few would argue that 2024 was a challenging year for commercial real estate. But what will 2025 hold?
At least one commercial real estate leader is predicting that next year will see an increase in CRE sales and development activity.
John Berg, global head of private real estate with Des Moines, Iowa-based Principal Asset Management, said that market dynamics are aligned to support recovery and growth across key commercial sectors in 2025.
“Asset valuations have stabilized, creating a solid foundation for renewed transaction activity, particularly in areas such as logistics, residential and data centers, which continue to benefit from strong structural demand drivers,” Berg said.
John Berg, Principal Asset Management
Two reasons for the optimism? Berg pointed to the easing of inflationary pressures and central banks’ transition toward monetary policies that support economic growth, which Berg says have provided much-needed clarity on capital costs.
That should unlock opportunities for investors seeking long-term value in the resilient sectors of residential housing, data centers and logistics facilities, Berg said.
That doesn’t mean that investors, developers and owners won’t face hurdles in 2025.
“Challenges remain, most notably within the office sector, where persistent headwinds are expected to create distressed sales opportunities for value-add and opportunistic strategies,” Berg said.
Berg said that the volume of loan maturities, coupled with improved transparency in asset pricing, is likely to drive recapitalizations and the creative repositioning of office assets.
“Investors who focus on sectors supported by secular trends and demographic shifts will be best positioned to navigate these complexities and capitalize on emerging opportunities,” Berg said.
The commercial real estate sector offers a promising landscape for owners seeking to reposition their portfolios and capture growth in a recovering macroeconomic environment, Berg said.
“With investor confidence bolstered by stabilizing credit conditions and a more predictable interest rate trajectory, the focus will shift toward high-conviction strategies that emphasize adaptability and resilience in a new phase of market expansion,” Berg said.
