As we enter 2025, we remain amid a massive transition in the investment landscape.
Gone is the distant past of low interest rates propelling growth and asset appreciation. In its place is a more challenging environment requiring an increasingly methodical approach. But a new era of recovery is upon us.
As many central banks have begun cutting interest rates, fundamentals are improving, and global growth is strengthening. Broader themes such as meaningful demographic shifts and the rise of AI are also guiding our increasingly positive investment thesis.
These are reasons that investors should approach the new year with optimism. In fact, we’ll likely look back on 2025 as a pivotal moment of recovery in many areas of the commercial real estate sector. For investors, the time is now to reposition portfolios as the window opens in the year ahead. With that in mind, the high-conviction themes for 2025 include:
Living
An acute housing supply shortage, unprecedented home unaffordability issues and changing demographics have transformed the global living sector. We now see a pronounced proclivity to rent globally, with exciting pockets of opportunity emerging at the macro and local levels.
Retail
After years of turmoil, a transformed retail sector has emerged. Robust wage growth, strong consumer sentiment and stabilizing global inflation indicate that this turnaround should continue. These realities are converging into a compelling investment thesis.
Industrial
Despite softening fundamentals post-pandemic, the capital markets have remained bullish on the industrial sector. As such, it remains fairly—if not fully—priced. This is particularly true for assets with short-term rollovers of seasoned leases, where buyers can underwrite large NOI gains on expiring leases, given accrued market rent growth. Most markets should experience renewed rent growth as supply and demand come into balance.
Office/Debt And Alternatives
Return-to-work continued to gain traction as the supply of the most desirable office spaces remained limited. In this environment, there is an opportunity for investors to sequence their exposure to office—a process that starts with a risk-adjusted approach to tactically leveraging debt. Meanwhile, niche sectors like student housing, self-storage and digital infrastructure/data centers look attractive.
Several significant elections took place globally in 2024, most recently in the United States. With campaigning wrapped up and a new season of governing about to begin, we’re taking stock of the potential impacts of a new administration in Washington. While remaining optimistic in the near term, it remains to be seen what outcomes could result from potentially dramatic shifts in global tariffs, immigration, and broader fiscal policies. Despite this uncertainty, exiciting opportunities are on the horizon to put fresh capital to work.
Source: GlobeSt
