New Report Indicates Commercial Real Estate Executives Largely Optimistic About the Year Ahead with Emerging Opportunities Tempered by Potential Market Risks

February 25, 2025 – Commercial real estate executives have entered 2025 with a renewed sense of optimism – the highest level in five years, fueled by expectations of lower interest rates, increased availability of distressed assets, a gradual shift back to in-office work, and a rise in foreign investment, according to a new report published today by Seyfarth Shaw LLP. The report, based on the findings of the global law firm’s 10th Annual Real Estate Market Sentiment Survey, highlights the top concerns, investment priorities, and key drivers of change identified by commercial real estate (CRE) executives. The 2025 survey examines the industry’s current market sentiment as it navigates a new presidential administration, technological advances, shifting market fundamentals, and “new but old” workplace norms. A copy of the full survey is available here.

"This annual survey provides market participants with valuable insight into what’s top of mind for real estate owners and investors heading into 2025,” said Paul Mattingly, national chair of Seyfarth’s Real Estate department. “Backed by 10 years of data and the insight of a world-class team of lawyers from one of the largest practices in the US, the survey offers a comprehensive analysis of evolving market trends that go beyond the numbers to help those stakeholders make informed decisions. While challenges remain in the real estate market, we share the continued optimism reflected by the executives who participated."

While optimism abounds, Seyfarth’s report found it tempered by ongoing concerns over inflation, the rising costs and limited availability of property insurance, and escalating construction expenses. CRE executives also remain cognizant of the impact of interest rate volatility and navigating potential policy changes under the new presidential administration on their investment strategies.

Yet, despite lingering economic uncertainties, stronger market fundamentals and the growing influence of artificial intelligence are positioning the industry for meaningful shifts.

Among the survey’s many key findings:

Growth Areas:  Multifamily investment, industrial assets, data centers and well-located brick-and mortar retail top the list for CRE executives’ investment strategies for 2025.

Rate Realism: While the outlook remains uncertain, the vast majority of our respondents believe there will be rate reductions in 2025, offering some relief to the market.

AI Aspirations: Despite the buzz, AI adoption in the real estate industry has been slow to gain significant traction, although there’s a stronger interest this year in leveraging AI.

Price and Interest: Pricing remains the primary market driver, though there is a growing sense that prices are stabilizing and cap rates are compressing, albeit at a slower pace.

Resilient Remote Realities: While remote and hybrid work is likely here to stay, the push for in-office attendance is achieving its goal of bringing employees back to the office.

Conversion Conundrum: While some conversions are being undertaken, the market seems to need a greater catalyst on the zoning, incentives and tax credit fronts from municipalities, states and the federal government to accelerate the pace of conversions.

Foreign Focus: While generally optimistic about foreign investment for 2025, survey results may reflect an acknowledgement of a “bottom.” Uncertainty lingers and most only see foreign investment increasing slightly.

Seyfarth’s Real Estate department, recognized as one of the largest real estate practices in the US, surveyed commercial real estate executives in January 2025.

About Seyfarth’s Real Estate Department

Seyfarth is home to a world-class real estate team that serves sophisticated clients across several industries. Recognized as one of the largest real estate practices in the US, we have built an integrated team that serves local, regional, and national clients on the acquisition, financing, development, leasing, restructuring, servicing, and disposition of noteworthy real estate assets and portfolios. This experience extends across comprehensive array of asset classes, including office, industrial, multifamily, retail, health care, and data center projects. We leverage our size and depth to partner with clients and to invest in material enhancements in how commercial real estate law is practiced.

About Seyfarth

With more than 900 lawyers across 18 offices, Seyfarth Shaw LLP provides top tier advisory, litigation, and transactional legal services to clients worldwide.