Confidence Surges in Commercial Real Estate Market: Report

Colliers has released its 2025 Global Investor Outlook, which revealed renewed investor optimism and confidence that the commercial property market has moved past an inflection point after two years of muted transactions.

Along with subsiding inflation, lower interest rates, an improved economic outlook and expansive fundraising, Colliers predicts a new and more diverse market environment to emerge, by asset class and investor base, than the one it replaced.

The report noted that some uncertainties remain, including a potential resurgence in inflation that changes the direction or tempo of rate cuts, a lack of inventory and low levels of new supply, and regulations that can complicate market liquidity on a more nuanced basis.

While recent elections in major economies such as the UK and U.S. have provided more clarity around policies, Colliers says that lingering geopolitical tensions require a cautious approach to 2025 investments.

“We are seeing signs of positive momentum, with stronger sentiment growing as asset values stabilize. Stronger fundraising, including a return of core capital, will take time to flow through into deal volumes, though it is a strong indicator that more activity will hit the market soon,” said Luke Dawson, head of global capital markets for Colliers. “In conversations with investors around the world, now is the time to be laying the groundwork for the next few years of growth as the transactional market moves off the bottom of the cycle.”

The report noted that underlying fundamentals are improving across all sectors. As high-profile, global firms lead the return-to-office charge, prime urban office assets are attracting renewed interest, while secondary assets and locations are seeing value-add strategies play out for redevelopment and renovation.

Several offices purchased in the last 12 months have been acquired for redevelopment into higher quality, more sustainable offices to match elevated standards required by occupiers.

Similar to the bifurcation in office assets, industrial and logistics (I&L) assets continue to be a major investment theme. Several investors now seek assets that have solid sustainability credentials and modern features that tenants demand.

More investors are also exploring hotels and shopping centres in strategic locations. Alternatives such as cold storage and senior housing continue to be subject to competition. Investors are chasing data centres, in particular, due to the boom in artificial intelligence (AI). However, the sizeable energy requirements of these facilities are running into supply and planning constraints in some markets.

“Where there is tight inventory, limited new development opportunity or high costs for ground-up construction, investors should consider value-add or opportunistic properties in well-located areas and take a redevelopment approach to support demand,” said Dawson.

Colliers expects private investors, especially family offices and private equity funds, to be among the more active buyers in 2025. Even as the market recovers, more private generational wealth is likely to expand into real estate. Colliers also predicts a return to equity-focused strategies as debt becomes more accessible and investors reallocate capital to traditional equity structures such as joint ventures, recapitalizations, and M&A.

“Family offices and private wealth are expanding and bolstering the commercial real estate investor base because they often have access to more nimble and versatile capital,” said Damian Harrington, head of research for Colliers’ Global Capital Markets platform and EMEA. “As they continue to grow and diversify their portfolios, they – like all investors – must stay informed of market conditions and regulatory changes impacting real estate: ranging from residential rent caps and utility provision, to planning policies that would impact construction. Successfully entering new markets or niches often requires expert advisers who can help you navigate the market and explore innovative structures.”