Emerging Trends in Real Estate® United States and Canada 2025

October 29, 2024

Resources

2025 Emerging Trends Report US & Canada (Digital) 2025 Emerging Trends Report US & Canada (PDF)

Report Summary:

Report Summary: : Now in its 46th edition, the 2025 Emerging Trends in Real Estate® report outlines new market dynamics, favored locations and property sector opportunities influencing the overall health of the industry. The skies are finally clearing over commercial real estate markets, even if some dark clouds still linger. Industry people are more sanguine than a year ago, though also realistic. Better times are ahead, but the healing will take time.

Report Summary: Now in its 46th edition, the 2025 Emerging Trends in Real Estate® report outlines new market dynamics, favored locations and property sector opportunities influencing the overall health of the industry. The skies are finally clearing over commercial real estate markets, even if some dark clouds still linger. Industry people are more sanguine than a year ago, though also realistic. Better times are ahead, but the healing will take time.

There is a decidedly mixed outlook for commercial real estate markets. In isolation, the lower interest rates will be welcomed. More transactions will be able to move forward, and more loans will be refinanced. That means more deal activity for brokers, investors, and lenders. That’s all good. However, slower economic and job growth reduces growth in net operating income. Tenant demand may fall as job growth moderates, affecting space absorption, occupancy, and rent growth. And weakening fundamentals also constrain demand for CRE assets and limit price appreciation. This is the yin and the yang of falling interest rates.

Real estate capital markets are recovering. The Fed’s new direction and clear guidance on future moves are aiding in the price discovery needed to reduce bid-ask spreads between buyers and sellers. Plus, the lower debt costs are improving deal economics for more projects. Together, these factors will encourage more investors and developers to move off the sidelines and transact, whether to buy, sell, lend, borrow, or refinance. However, in many markets, development still seems further off.

The pandemic triggered profound shifts in how tenants use different types of space: how much, where, and what kind. The changes began with the lockdown as many sectors of the economy were forced to adapt to new ways of operating, and many of those adaptations have endured in some form. By now, these shifts have either largely played out, or their direction is reasonably foreseeable. Despite the broad demand recovery, vacancy rates are rising across many property types as surging supply outpaces absorption in many markets. All this new construction is swinging the power pendulum to the tenants.

As climate change intensifies, its impact on the real estate industry is becoming more pronounced, extending beyond extreme heat to include risks like flooding, cold snaps, and wildfires. Southern regions, historically unaccustomed to severe cold, are facing new threats, with buildings and energy grids ill-equipped to handle the damage and power outages caused by plunging temperatures. At the same time, migration patterns from the Frost Belt to the Sun Belt are moderating, with climate risks increasingly influencing homebuyers' decisions alongside affordability and quality of life. Nearly half of homes nationwide are at risk from at least one type of severe climate event, making insurance harder to obtain. In response, real estate firms are incorporating climate risk into their decision-making and risk assessments, preparing for more frequent shifts in market dynamics and infrastructure resilience.

Housing affordability is no longer confined to large coastal cities. The multifamily market in 2025 will be shaped by the issue of supply, with a wave of apartment deliveries peaking in 2024 and concerns about a supply glut in high-growth Sunbelt markets. However, industry specialists anticipate that demand will remain strong due to job growth, favorable demographics and immigration. Rent growth has slowed in high-supply markets but remains positive in regions with limited new construction. An increasing number of renters are cost-burdened, underscoring the need for more market-rate and affordable housing through new policies and streamlined development.

Property Type Outlook

Stability has returned to property markets, and investors are now addressing cyclical issues like oversupply and adapting to changing consumer and tenant preferences. One exception is the rise in demand for data centers which is soaring due to the widespread growth of artificial intelligence, while other niche property types are also seeing strong growth.

Learn more about the 5 Emerging Property Trends that we expect for 2025 and beyond:

Industrial Smart Growth: The next stage of tactical network optimization
Data Centers: Navigating power and constraints and skyrocketing demand
Senior Housing: Building new muscles
Retail Resilience: Weathering every storm
Innovating the Suburbs: Is Life Sciences’ growth sustainable?

Markets to Watch

Geographic preferences are changing even if many of the broad trends have continued from recent years. Sun Belt markets still rule the rankings, particularly the largest Super Sun Belt metro areas, but some formerly high-flying smaller Magnet markets are losing altitude. Meanwhile, many Snow Belt markets are getting another look from investors and are climbing the rankings. Still, the overall market outlook remains tepid. Explore in-depth case studies on the top 5 markets, Dallas, Miami, Houston, Tampa/St. Petersburg, and Nashville, as well as thinks year’s movers and shakers, Manhattan, Detroit, Columbus, Charleston, and New Orleans.

About Emerging Trends in Real Estate®

Emerging Trends in Real Estate® is one of the most highly regarded annual industry outlooks for the real estate and land use industry, published jointly by PwC and the Urban Land Institute. By incorporating interviews and survey responses from several hundred industry professionals, the report provides an in-depth outlook by region on real estate investment, development trends, and capital markets. The report is produced in four versions: Americas, Asia Pacific, Europe, and Global. All the Emerging Trends in Real Estate® reports published since 2003 are available on Knowledge Finder.

Emerging Trends in Real Estate® is jointly sponsored by the Urban Land Institute and PwC. Since 2003, the Urban Land Institute and PwC have collaborated to produce one of the most comprehensive real estate and land use industry reports.

PwC is a global network of firms in 151 countries with more than 320,000 people who are committed to delivering quality in assurance, advisory, and tax services. Find out more about PwC at pwc.com.

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