Nice knowing you, 2024
Optimism abounds heading into 2025. Avison Young surveyed U.S. Market Intelligence leaders across key sectors to gather their perspectives on the year ahead for both the overall market and their respective disciplines. The primary takeaway—100% believe the market will improve in 2025.
With election uncertainty now behind us, focus has shifted to the new administration’s policy details and the resultant impacts on financial markets, interest rates, and the economy at large. Policies related to trade, regulation, immigration, and tax reform are most acutely expected to impact the commercial real estate industry.
Despite these open policy questions, the long-term fundamentals of commercial real estate are positive, and there is a rising awareness that our enduring pursuit of office busyness, vibrant cities, and innovative work are moving us into an era of new opportunity and strategic optimism.
Join us as we explore the trends shaping 2025 and the major sectors driving our economy.
As the U.S. economy continues a path toward recovery, we are observing some cities rebounding more quickly than others, driven by unique factors specific to each market. Our experts have identified several markets to watch, where dynamic shifts are fostering positive momentum, positioning these areas for significant progress in the coming year.
Larger circles represent more consensus among team.
Industrial
Peter Kroner
Director, Market Intelligence
Industrial / Supply Chain and Logistics
Driving activity
Next year, the industrial sector will be heavily influenced by trade policy and inflation. If new policies can successfully curb inflation and boost consumer disposable income, then demand for industrial space could rise significantly. Additionally, firm reshoring and near-shoring initiatives may increase demand from non-distribution users, such as manufacturing and production, particularly in port markets where material imports are concentrated.
Inhibiting growth
Tough trade policies could lead to higher consumer prices and supply chain shortages, especially for any industries that are transitioning to reshoring or near-shoring but are not yet self-sufficient. This scenario may reduce industrial requirements, particularly as consumers rely more on credit amid diminishing savings.
Automotive is an industry to watch, as the Federal Reserve's rate hikes have increased monthly car payments, making it harder for buyers to afford new vehicles. As a result of this, fewer people can qualify for car loans, leading to a decline in overall sales. These high financing costs could further suppress industrial space demand for the automobile sector, which has been a growing source of industrial space needs in the U.S. and Mexico.
Other impacts
Asset managers, investment funds, and developers have raised record levels of capital for industrial-focused investments. After nearly two years of paused developments, 2025 is poised for a surge in industrial pricing and an uptick in the development pipeline, with activity ramping up in the latter half of the year.
Looking forward to 2025
We are welcoming a new boy and girl (twins!) to our growing family and settling into our new home in my suburban hometown.
Data centers
Howard Huang
Analyst, Market Intelligence
Data Centers
Driving activity
Artificial intelligence (AI) and machine learning (ML) continue to grow at a rapid pace, driving the demand for increasingly advanced and energy-efficient data centers. Autonomous and self-navigating vehicles, now offered by more automakers, also depend heavily on data centers to operate. Many older data centers are becoming obsolete due to their inability to support AI/ML applications, and retrofitting these facilities is often unfeasible, spurring the development of new, cutting-edge data centers.
Additionally, the rise of alternative energy sources, particularly the push to revive nuclear power by tech giants such as AWS, Microsoft, Meta, and Google, may spark a new era of energy independence. This could enable data center expansion without the constraints of traditional power grid dependencies.
Inhibiting growth
Power availability and equipment availability remain significant challenges to data center development. In many established markets, power generation is already maxed out. Even in areas with available generation capacity, the timelines for achieving power transmission through local utilities are prolonged due to unprecedented demand.
Supply chain delays in procuring equipment for transformers and constructing new substations further exacerbate this issue.
The high demand for data center IT equipment, such as graphics processing units (GPUs), continues to outpace supply, potentially delaying the operational readiness of new facilities.
Another important factor to consider is community pushback against data center developments, which poses an ongoing hurdle. Community members are wary of increased pollution or higher electricity prices, and overcoming these challenges will require strategic investments, community partnerships and educational outreach by developers.
Other impacts
The incoming administration has expressed support for nuclear energy development. If realized, this policy could significantly enhance energy availability in the U.S., benefiting not only the growth of data centers but also other industries reliant on stable power infrastructure.
Looking forward to 2025
I’m excited for the long-anticipated release of the latest Grand Theft Auto 6 video game!
Life sciences
Tucker White
Manager, Market Intelligence
Life Sciences
Driving activity
The U.S. life sciences sector is poised for moderate growth driven by several key trends.
- Biotech is showing advances in gene editing (e.g., CRISPR) and mRNA technologies that will continue to drive innovation, with applications expanding into treatments for genetic disorders, cancers, and infectious diseases.
- Personalized medicine will drive individualized healthcare, leveraging genomics and AI-driven data analysis, to enhance drug development, diagnostics, and treatment efficacy while bringing life to new companies in need of lab space.
- Digital health integration is showing increasing adoption of AI, machine learning, and wearable technologies which will bolster remote patient monitoring, diagnostics, and real-world evidence collection—streamlining clinical trials and regulatory approvals.
- Finally, regenerative medicine, supported by a growing pipeline of cell and gene therapies, will transform treatments for previously untreatable diseases.
Venture capital investment and strategic mergers and acquisitions should also remain strong, driving consolidation and innovation, particularly in niche therapeutic areas. These trends are underscored by rising healthcare demand, and most importantly, strong funding from private, public, and government vehicles, will lead to stronger demand for lab and manufacturing space in 2025 compared to 2024.
Inhibiting growth
Regulatory hurdles remain a significant challenge, as lengthy approval processes for new therapies can delay market entry and inflate development costs. Additionally, pricing pressures from federal and state governments, insurers, and patient advocacy groups may limit profitability which in turn could affect occupier spending on R&D which requires lab space. Economic uncertainties, including inflation and fluctuating interest rates, could dampen venture capital and private equity investments, restricting funding for occupiers moving from incubation space to traditional lab space.
Talent shortages in specialized fields such as bioinformatics, genomics, and biomanufacturing may also hinder growth, exacerbated by competition for skilled professionals across industries. Supply chain disruptions—a lingering effect of the pandemic—could delay the production and distribution of critical components for research and development. And increased competition from global markets, particularly emerging life science hubs in Asia and Europe, could challenge U.S. dominance. These headwinds, if not addressed, may slow the sector's expansion and innovation in 2025 and beyond.
Other impacts
The jury is still out on the effect the new presidential administration will have on demand for life science real estate, but 2025 will be an early indicator of how the industry will fare the next several years with major economic and healthcare policies expected to be implemented early in the political cycle.
Looking forward to 2025
I’m looking forward to getting married then eating my bodyweight in pasta during our honeymoon.
Retail
Meghann Martindale
Principal and Director, Market Intelligence
Retail
Driving activity
The retail market will enter a new era in 2025. A dynamic resurgence in investment activity will happen as interest rates continue dropping and pricing transparency improves. There will be more store closures and retailer bankruptcies, but this isn’t necessarily a bad thing as that creative disruption is what keeps the retail industry evolving and provides more supply to meet record demand for space. Factors such as fiscal, trade, and immigration policy changes under the new administration, the unpredictable resilience of U.S. consumers, and a cooling labor market add layers of complexity to this outlook; however, overall opportunities for innovation, remerchandising, and maximizing property performance will be significant drivers for the fundamentals of retail real estate in 2025.
Retail holds distinct advantages, with multiple levers (such as specialty leasing, brand partnerships, events, and activations) to generate incremental revenue and enhance net operating income (NOI) to sustain asset value. Off-market deals in 2024 have set the stage for increased transaction activity in 2025, laying the groundwork for potentially record-breaking trading years in 2026 and 2027.
Inhibiting growth
Rising insurance costs, construction pricing, debt and equity, and the financing and refinancing landscapes are all affecting the retail trading volume. Renewed port negotiations or strikes could also impact movement of goods, prices, and retailer operations. And it is yet to be seen whether consumer spending can remain resilient—although tariffs may trigger renewed inflation pressure, U.S. consumers have not stopped spending through recent inflation and rising interest rates, so tariffs may not deter spending to the levels some are fearing.
Other impacts
Retail has successfully adapted and responded to change through the digital disruption over the past 25 years. This resilience will continue to shape the sector as it navigates 2025 and beyond. However, retail is uniquely complex—market conditions vary significantly by geography, even down to the street or center. These nuanced dynamics underscore the importance of further analysis at deeper, granular levels.
Looking forward to 2025
I am looking forward to a fast and furious 2025 as market activity rebounds and we continue to see new and exciting innovations that enhance how we live, work, shop, and play.
Multifamily
Grant Hayes
Manager, Market Intelligence
Multifamily
Driving activity
The development of housing will continue to play a pivotal role in determining whether elevated demand for multifamily properties will remain at its current peak. For the first time since 2014, younger workers nationwide are experiencing larger wage increases than ever before helping to keep pace with the rising cost of living in most cities. If this trend continues it could help shape leasing and purchasing behavior in multifamily markets.
Multifamily properties have consistently proven to be a favored investment product, comprising of more than a third of total investment activity since mid-2023. The sector's sustained appeal is driven by resilient demand, supported by a combination of population growth in key markets, persistent housing shortages, and the unaffordability of single-family homes for many potential buyers. Investors are particularly drawn to multifamily for its reliable income streams and long-term growth potential.
Inhibiting growth
High interest rates are suppressing multifamily transaction activity, with sales volumes significantly down as the cost of borrowing remains high. This has directly impacted valuations on buildings and rents, as rising capital costs diminish profitability and buyer interest. In many cities, shortages of housing inventory continue to exacerbate affordability driving individuals towards rental properties.
Meanwhile, the pace of single-family rental (SFR) construction is constrained by elevated development costs. Rising costs of labor, materials, and land make it challenging to produce affordable housing units at scale, limiting supply. These economic barriers also keep new single-family homes out of reach for many first-time buyers, further perpetuating the demand for multifamily rentals as a viable housing alternative. This dynamic underscores the multifamily sector's critical role in addressing the housing affordability crisis.
Other factors
The lack of sufficient single-family housing across many markets continues to drive strong demand for rental properties. However, rent control policies remain a contentious topic in today’s climate of housing shortages. As of 2022, only seven states maintain some form of rent control, but the policy’s resurgence mid-2024, has raised concerns within the multifamily industry. Cities like New York and San Francisco, which have the longest-standing rent control policies, still grapple with significant housing shortages and some of the highest rental prices in the nation.
Looking forward to 2025
Spending quality time with family, exploring new destinations through travel, indulging in music, and enjoying time at the beach.
Office
Danny Mangru
Senior Manager, Market Intelligence
Office
Driving activity
Key sectors such as financial services, technology, and law firms are expected to drive office leasing and investment activity in 2025. As workforce expansion directly impacts the demand for office space, monitoring employment trends will be crucial in identifying markets poised for growth. This correlation underscores the importance of job creation and talent migration in shaping office market dynamics.
Inhibiting growth
- Elevated interest rates are impacting access to debt, particularly in some markets, as the cost of borrowing remains high.
- Caution among investors, influenced by tighter lending conditions, is creating headwinds not only for office assets but across the entire commercial real estate spectrum.
- Recovery is expected to vary significantly by market. For example, cities like San Francisco and Chicago may lag behind New York due to differing employment trends, investor confidence, and local dynamics.
Other factors
The return-to-office (RTO) debate has largely stabilized, with most companies having solidified their RTO policies. As a result, the office market is starting to return to more predictable turnover patterns, driven by lease expirations rather than pandemic-driven disruptions. However, continued recovery will remain highly market-specific, influenced by factors like wages, population shifts, and employment growth. Markets with favourable demographic and economic conditions will likely lead the recovery.
Looking forward to 2025
WWE Summerslam is coming to the New Jersey area, and I will be ringside.
Office Busyness Index
Busy places can create vibrant, lively and enriched experiences. Build connectivity and spark energy. And, fuel financial performance.
Healthcare
Derek Jacobs
Market Intelligence Analyst
Research
Driving activity
The healthcare industry is demonstrating consistent year-over-year growth, which is expected to fuel sustained occupier demand for healthcare real estate in 2025. Certificate of Need (CON) requirements, can prevent healthcare providers from expanding or providing a specific healthcare service in a given area—unless first demonstrating the need for that service in select markets, CONs are being reconsidered and rolled back, creating new occupier opportunities for presence and expansion. Continued supply constraints, particularly in high-growth regions like the Sun Belt, also present opportunities for developers to address unmet demand.
Inhibiting growth
On the other hand, red tape and regulations at the local level such as the potential for more restrictive CON requirements will inhibit growth in certain markets. Occupier preference for smaller medical retail space as an alternative to larger medical outpatient space for certain uses will result in a more nuanced story concerning Medical Office Building (MOB) space use and leasing.
Other impacts
Federal policy changes in 2025 could significantly influence the healthcare sector, either by fostering growth or introducing additional barriers. The details of these policy shifts remain uncertain, but the trajectory of demand is clear: an aging population will drive increased need for healthcare services across the board. This demographic trend underscores the sector's resilience and its critical role in the broader real estate market.
Looking forward to 2025
I’m personally looking forward to some exciting trips my girlfriend and I have planned, including a visit to see my brother in upstate New York. Here’s to a year of growth, learning, and adventure!
AI and technology
Louis Thibault
Senior Analyst
Research
Driving activity
Although the tech sector remains volatile, the likelihood of increased funding, innovation, and investment by “Big Tech”, as well as the administration’s focus on fostering innovation, could spur significant growth. While tech stands to gain the most in the AI race, smaller companies are finding ample success with niche product types. Additionally, venture capital funding has primarily focused on tech growth, with over half of the nation’s funding carved out for San Francisco Bay Area companies in 2024. By the end of 2025, we expect the sector gain momentum, particularly in areas such as AI, chip manufacturing, and automation.
Inhibiting growth
A recession, while detrimental to overall economic growth, could open opportunities for technology occupiers to own more of their real estate rather than lease in some markets. This could help loosen cost commitments to landlords. In tech-heavy markets like San Francisco, there has been an over commitment of space leading to rapidly spiking vacancy. Some markets have become the catchers mitt due to the cost of doing business and access to talent which remains the number one driver for this sector.
Other impacts
Trade policies, which impact tech manufacturing, remain critical factors to watch. Despite the uncertainties, the U.S. is expected to maintain strong investment in AI, aligning with global technological trends. Advancements in AI, automation, and cloud computing could also spill over into other industries, further enhancing demand for office and industrial space.
Looking forward to 2025
I’m optimistic about the market picking up, hoping it sparks positive momentum in both professional and personal realms.
Questions? We'd love to hear from you.
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Market Intelligence
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Market Intelligence