The next CRE disrupter: What’s coming for the balance of 2025?

Commercial real estate is no stranger to disruption. Over the years, we’ve seen tech booms, financial crashes, pandemic-induced pivots, and policy shifts — each shaping how, where, and why properties are bought, sold and leased.

Now, as we  have eclipsed two months of 2025, the question is: What’s next? What trends, policies, or economic shifts will send ripples — or shockwaves — through the commercial real estate industry this year?

While no one has a crystal ball, here are the key forces that could redefine commercial real estate as we know it.

The interest rate wildcard

After a rollercoaster ride of rate hikes in 2023 and 2024, all eyes are on the Federal Reserve. If interest rates come down, expect renewed investment activity as buyers jump back into the market, particularly in asset classes like multifamily, retail, and industrial.

On the flip side, if rates remain elevated, property values could continue their adjustment downward, forcing sellers to get realistic about pricing. Distressed assets may hit the market at more aggressive discounts, creating opportunities for well-capitalized investors to scoop up deals.

Either way, financing costs will remain a major player in 2025, shaping everything from new development to refinancing strategies.

The great office reset

Office space is still in a state of flux. While some markets have rebounded, others are saddled with record-high vacancy rates. The remote work debate is far from settled, and companies are still rightsizing their footprints.

The trend to watch in 2025? Adaptive reuse. Cities like New York, San Francisco, and Chicago are actively pushing for office-to-residential conversions, and the success of these projects could pave the way for similar initiatives nationwide. If office landlords can’t lease their space, many will be forced to sell, redevelop, or repurpose. That shift could redefine entire downtowns.

AI-driven CRE

Artificial intelligence is quickly moving from novelty to necessity in commercial real estate. By 2025, expect AI to play a bigger role in:

— Market forecasting – Predicting tenant demand, property values, and investment trends.

— Automated transactions – AI-driven platforms could streamline leasing and deal negotiations.

— Property management – Smart buildings will rely on AI to reduce energy costsand optimize occupancy.

The biggest disrupter? AI-powered brokerage tools. If a machine can analyze a property’s value, predict tenant turnover, and match buyers with sellers in seconds. Where does that leave traditional brokers? The smart ones will adapt by using AI as a tool rather than seeing it as competition.

Industrial growth slows

For years, industrial real estate was the darling of commercial property investment, fueled by e-commerce expansion, supply chain shifts, and reshoring efforts. But as we move into 2025, cracks are beginning to show—especially in the Class A logistics sector.

After years of feverish development, many major markets are now oversupplied with large, high-end distribution centers, leading to rising vacancy rates and flattening rents. Markets like Dallas, Phoenix, and Inland Empire have seen an influx of new construction deliveries at a time when demand from major tenants — especially e-commerce giants — has cooled.

This isn’t a collapse, but it is a correction. Leasing activity is still happening, but at a slower pace, and landlords are being forced to offer concessions or lower rents to attract tenants. Investors who banked on continued breakneck absorption rates are now reassessing their strategies, particularly in overbuilt logistics corridors.

That said, not all industrial real estate is slowing. Smaller, last-mile distribution centers in dense urban areas remain in demand as retailers optimize delivery networks. Similarly, sectors like cold storage and specialty manufacturing continue to see steady interest.

For industrial owners, 2025 will be about differentiation. Class A landlords may need to get creative with tenant incentives, while niche industrial assets will likely hold their value better in a cooling market.

Retail’s reinvention continues

The so-called retail apocalypse never fully materialized, but the sector is definitely evolving. In 2025, successful retail centers will be those that blend experience, entertainment, and essential services.

Expect to see:

—More medical and wellness tenants filling retail spaces.

—A continued boom in grocery-anchored centers, which have proven resilient.

—The rise of “click-to-brick” showrooms, where online brands open physical stores to engage customers.

Retail landlords who embrace tenant diversity and mixed-use elements will stay ahead of the curve, while those clinging to outdated formats may struggle.

If history has taught us anything, it’s that commercial real estate never stands still. Every market cycle, every technological advance, and every policy shift brings new challenges and new opportunities.

As we’re into 2025, the industry’s next big disrupter could come from any direction—interest rates, AI, adaptive reuse, or even a policy shift we haven’t seen coming yet. The winners will be those who stay ahead of the trends, adapt quickly, and embrace change as the only constant.

So, buckle up. The next CRE transformation is already underway.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104.