If you want to challenge commercial real estate brokers, ask them to predict trends for the coming year at a time when a presidential election is looming, interest rate cuts are under discussion, and international conflicts are intensifying. Yet, despite the many uncertainties ahead, several SIOR experts recently offered their forecasts for 2025. Here’s what they had to say:

OFFICE

Opinions about the recovery of the office sector are mixed. “You look at most of the office markets around the country, and they’re a disaster,” says Ted Konigsberg, SIOR, president of Infinity Commercial Real Estate in Miami, and president of the SIOR Foundation. He believes that remote and hybrid work models are here to stay, which will keep vacancies high in Class B and C buildings. He is also concerned about the large amount of debt coming due for struggling office properties. “If you own Class B or C office, you are not sleeping at night,” he states.

Faraz Cheema, SIOR, managing director of Manhattan office capital markets at BKREA in New York, is equally concerned about Class B and C buildings, which are commanding significantly lower rents than before the pandemic. Consequently, the cash flow is insufficient to cover debt service. Given that “the economics don’t work,” he expects that in the next three to four years, 50% to 70% of these buildings will change ownership, with approximately two thirds of the stock converted to another building type or demolished.

Other brokers who anticipate increased sales activity in 2025 include Tom Davenport, SIOR, senior vice president of Colliers in Atlanta, and Tyler Culberson, SIOR, president and principal broker of Standard Brokerage Company in Albany, N.Y. Davenport says that pricing for distressed assets will meet “the expectations of the investment community as more opportunities hit the market.” Culberson thinks 2025 may see a narrowing of the bid-ask spread, spurring on dealmaking activity.

In contrast, John Steinbauer, SIOR, president of Steinbauer Associates, Inc. in Miami, predicts that office sales will be slow because the prices will remain far below their real value.

Amid the distress is a noteworthy bright spot: Class A buildings, which are faring well. Cheema and Konigsberg predict that in 2025, these assets will continue to attract tenants with high-end amenities. Kristi Simmons, SIOR, senior vice president of CBRE Occupier Services in Austin, Texas, takes a similar view. She says her clients love offices that offer more common areas, lounges, and delis or bars in the lobby, etc., and expects that landlords’ focus on amenities will continue into next year.

Simmons also points out that tenants have often benefited from the distress in the market. She reports that “concessions are at an all-time high in terms of free rent and finish-out packages.” But she anticipates fewer concessions starting in mid-2025, especially as companies continue to roll out return-to-work policies.

INDUSTRIAL

During the past few years, while the office market has been struggling, the industrial market has been riding high. Many experts expect that industrial will continue to perform well, although not quite as well as it has in recent years. “The froth is coming off,” says Konigsberg. Melissa Alexander, SIOR, partner at Foundry Commercial in Nashville, Tenn., agrees. “We’re still seeing growth,” she says. “It’s just not the crazy absorption numbers that we saw two years ago.”

She cautions, however, that trends differ by region. For example, when many people relocated to the South during the pandemic, distribution centers followed. Demand for distribution centers is also high in the Vegas area, reports Amy Ogden, SIOR, partner at Logic Commercial Real Estate. Although oversupply has affected the region, interest from e-commerce and third-party logistics companies is helping to keep the market fluid.

Culberson expects continued stabilization of industrial in Upstate New York. He reports that vacancy rates have normalized to pre-COVID levels, and that speculative construction has stalled. The Phoenix market is also seeing low levels of spec construction, says Joshua Wyss, SIOR, executive director of Cushman &Wakefield in Phoenix. He believes absorption will increase in 2025 through a combination of increased tenant demand and large build-to-suit completions.

Power supply may impact the industrial market in the future. Wyss points out that new data centers will put more strain on the supply, and that challenges will only increase “when utilities look to balance reliability with green energy sources.”

Bryce Custer, SIOR, broker at NAI Spring in Canton, Ohio, shares Wyss’s unease. Custer works with many data center clients and other industrial clients who want to build or expand facilities, and they are having a difficult time getting the electricity they need. Scarcity, he says, is leading to high costs. He points to places like the Ohio River Corridor, where coal facilities that generate power are being shut down, while energy consumption throughout the United States is rising. Prices are increasing accordingly, leading Custer to forecast “a mad rush for power” in 2025.

PREPARING FOR 2025

Simmons is preparing for 2025 just as she would any other year. “In our world, we live on a roller coaster and every year is a mystery.” Her focus, as always, is to keep her head down “and continue to develop relationships that lead to new clients.”

Steinbauer advises his clients to retain reserves for company operations, should things slow down, and he follows his own advice. Ogden warns other brokers to avoid frivolous spending, which can increase the impact of market fluctuations.

Counterbalancing fears of a downturn are expectations of interest-rate cuts. Even amid destabilization from ongoing geopolitical threats and the advent of a new presidential administration, the cuts could “generate enough momentum for our industry,” Davenport suggests. Simmons concurs: “One small adjustment on the rate side, and we anticipate the confidence to come back and the floodgates to open with activity.”

Alexander expects a clearer path after the election. “Once we get through it, no matter what happens, life moves on,” she says. “People know what to expect for the next four years in their president.” She adds that post-election clarity may prompt deployment of capital that’s been sitting on the sidelines.

Culberson, overall, is optimistic about 2025, despite the challenges it presents. He concludes: “The year could be marked by increased transactional activity and a gradual return of confidence in the real estate sector.”

This article was sponsored by the SIOR Foundation - Promoting and sponsoring initiatives that educate, enhance, and expand the commercial real estate community. The SIOR Foundation is a 501(c)(3) not-forprofit organization. All contributions are tax deductible to the extent of the law.

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CONTRIBUTING MEMBERS

• Melissa Alexander, SIOR 
• Faraz Cheema, SIOR
• Tyler Culberson, SIOR
• Bryce Custer, SIOR
• Tom Davenport, SIOR 
• Ted Konigsberg, SIOR 
• Amy Ogden, SIOR
• Kristi Simmons, SIOR
• John Steinbauer, SIOR 
• Joshua Wyss, SIOR