The U.S. commercial real estate (CRE) market is entering a new cycle in 2025, according to a report by CBRE, driven by evolving consumer spending patterns, easing financial conditions, and demographic shifts favoring Sun Belt regions. As the commercial real estate landscape adapts to the ongoing transformation of the economy, particularly the rise of the digital economy, property owners and investors are increasingly focused on optimizing asset performance through technology, while also responding to shifting market dynamics across various property sectors.
The report highlights that certain segments of the CRE market, particularly data centers and logistics/distribution properties, remain robust. This continued strength is largely driven by the rapid growth of e-commerce and the increasing demand for digital infrastructure to support the digital economy. As businesses and consumers continue to embrace digital platforms for shopping, communication, and work, the need for data centers, cloud services, and efficient supply chains remains high, making logistics and distribution hubs key drivers of commercial real estate performance.
In contrast, the office and retail sectors are facing greater pressure as remote and hybrid work models continue to persist and consumer behaviors evolve. Many companies are opting for flexible work arrangements, leading to reduced demand for office space. Similarly, the retail segment has been hit by changes in consumer shopping habits, with a growing preference for online shopping over traditional brick-and-mortar retail. As a result, property owners in these sectors are facing challenges in maintaining high occupancy rates and attracting tenants.
To navigate these pressures, real estate investors are increasingly turning to PropTech tools to optimize property performance. The use of artificial intelligence (AI) analytics, predictive leasing platforms, and tenant-experience systems is becoming more widespread as investors seek to enhance operational efficiency, reduce costs, and identify new opportunities for growth. These technologies are enabling property owners to make more informed decisions, streamline operations, and respond quickly to changing market conditions, all while ensuring better experiences for tenants.
On the residential side, the report notes that new-home construction is emerging as a bright spot amid sluggish activity in the existing-home market. The ongoing demand for new homes, particularly in suburban and Sun Belt areas, has led to a boost in new residential construction. This is in part due to the migration of people from more expensive, urban areas to regions offering more affordable housing options and a higher quality of life. Builders are responding to this demand by increasing their focus on new developments, particularly in fast-growing metros where population growth is driving the need for more housing.
For property owners and investors, the shifting landscape means a sharper focus on tech-enabled asset management, which is becoming essential to stay competitive in a more dynamic market. Additionally, adaptive reuse of under-performing spaces, particularly office buildings and retail locations, is being considered as a viable strategy. Converting older office or retail properties into more in-demand spaces, such as residential units, mixed-use developments, or last-mile distribution centers, can help repurpose assets and unlock new value. Regional repositioning of portfolios is also gaining importance as investors look to capture growth in rapidly expanding metro areas, particularly in the Sun Belt, which continues to see an influx of residents and businesses.
Overall, the CRE market in 2025 presents a landscape shaped by shifting demographic trends, technological advancements, and changes in consumer behavior. Property owners and investors who can adapt to these changes by embracing technology, focusing on growth regions, and finding new uses for underperforming spaces will be best positioned for success in this new cycle.
