'The Days Of Free Money Are Over': 2025 Real Estate Predictions From CRE's Top Ten Issues Report

Perhaps obviously, the real estate industry is facing an uphill challenge heading into 2025, with global elections, financing costs and mounting debt maturities being the most pressing concerns, according to the Counselors of Real Estate’s (CRE) annual Top Ten Issues report.

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The report points to an industry grappling with unprecedented uncertainty. At the front is an estimated $2.5 trillion in commercial loan debt set to mature by 2026, forcing a reckoning in property valuations and financing structures.

“Whether the Fed reduces rates four times or two or three or five, rates are not going down to zero,” Anthony DellaPelle, CRE’s 2024 global chair, said at a conference last week. “I don’t think you’ll see people get mortgages under 3% for a long, long time unless something weird happens and I don’t wish that upon us.”

The rising cost of property insurance adds another layer of uncertainty to the market. Insurance companies, facing increased risk from extreme weather events and property damage, have continued to raise premiums. The trend directly impacts property values and transaction feasibility across all sectors.

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The CRE said office vacancies are a thorny issue, with ripple effects extending beyond commercial real estate. According to HousingWire, DellaPelle cited a recent transaction in which a $32 million assessed office building sold for just $8.5 million, marking the value reset occurring in many markets.

Those devaluations threaten local tax bases and could force municipalities to shift tax burdens onto residential property owners. The housing market faces its own set of challenges, particularly around affordability and inventory constraints.

Demographics play a role, according to the report, with many older homeowners choosing to stay put rather than trade up at higher interest rates. “Why would I sell my house and buy a new one, taking on a 7% mortgage to get a smaller house that is going to end up costing me more than my big house?” DellaPelle said.

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Sustainability concerns continue to gain prominence, driven by regulatory changes and shifting consumer preferences. Property owners face mounting pressure to understand and reduce their carbon footprints, while younger buyers increasingly prioritize climate resilience in their purchasing decisions.

The geopolitical landscape adds another layer. Global conflicts and political shifts can quickly impact supply chains, construction costs and investment patterns. The report highlights how international tensions often drive foreign capital into U.S. real estate markets as investors seek safe havens.

The report suggests that success in this challenging environment requires careful attention to demographic trends and population movements. “You have to anticipate where they [people] are going,” DellaPelle said.

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