2025 Forecast: Trends Shaping Site Selection and Corporate Real Estate

The year 2025 is poised to be pivotal for site selection and corporate real estate, driven by a myriad of factors from economic shifts to technological advancements. Understanding these trends will be crucial for businesses looking to optimize their operational and real estate strategies in a changing landscape.

Key trends influencing 2025

1. Manufacturing Reshoring Accelerates

With an expected rise in manufacturing reshoring, companies are responding to supply chain disruptions and geopolitical concerns by bringing production closer to home. This trend, enhanced by artificial intelligence (AI) and automation, makes domestic production more viable and competitive.

2. Stabilization of the Office Market

The office sector is anticipated to find footing after gaining over 20% vacancy and 1 billion square feet of available space. Initiatives by major companies like Amazon, AT&T, and Citigroup to enforce return-to-office policies will play a significant role in stabilizing the market.

3. Warehouse Capacity Levels Out

After a spike in vacancy rates to around 6.4% in 2024, warehouse space is expected to stabilize in 2025. This comes as pandemic-induced demand cools and the pace of new industrial construction slows.

4. Data Center Expansion

The demand for data centers is forecasted to grow substantially, with over 20+ gigawatts of new capacity needed to support AI and cloud computing advances. This underscores the need for strategic site selection to access critical infrastructure like power and fiber.

5. Resilience of the Retail Sector

Retail real estate is set to enter 2025 with a robust outlook, particularly in suburban locations and Sun Belt cities, driven by a low vacancy rate and continued demand.

6. Gradual Housing Market Recovery

The housing market is expected to slowly improve although mortgage rates are expected to stay above 6%. Home prices are likely to stabilize, reflecting a cautious but steady recovery.

7. Economic Impacts of Tariffs

Proposed tariffs by the new administration could influence inflation and the broader economy, potentially accelerating reshoring initiatives for manufacturing.

8. The Power of AI

AI is expected to significantly impact the economy by boosting productivity across various industries, leading to potential economic growth through increased efficiency, automation of tasks, and improved decision-making, all while also creating new jobs in AI development and related fields. Although job displacement in certain sectors remains a concern, the impact will likely be a mix of positive economic gains with challenges regarding workforce adaptation and potential regulatory hurdles.

9. Labor and Construction Costs

Tighter immigration policies may exacerbate labor shortages, particularly in construction, impacting overall project costs and timelines.

10. Surge in M&A Activity

Merger and acquisition activity is anticipated to increase, influenced by an accommodating monetary policy if the Federal Reserve adjusts interest rates downward toward 4%.

11. Rising Energy Demand

Global electricity demand is expected to rise by 4% in 2025, driven by economic recovery and the expanding use of technology, which could lead to stable but slightly increasing energy prices.

Conclusion

As 2025 approaches, companies must navigate a complex array of factors that will shape site selection and corporate real estate decisions.  From increasing reshoring to stabilizing office and warehouse markets, and the explosive growth in data center demand, each trend offers unique challenges and opportunities. 

Strategic site selection, informed by deep industry insights and comprehensive market analysis, will be key to leveraging these trends effectively. Understanding these dynamics will enable companies to make informed decisions, capitalize on emerging opportunities, and optimize their real estate and operational strategies for success in a dynamic global market.