Despite ongoing macroeconomic and geopolitical headwinds, commercial real estate (CRE) leaders are expressing cautious optimism for the second half of 2025, according to DLA Piper’s recently released 2025 Real Estate State of the Market Survey. While external factors such as rising interest rates and trade tensions have tempered enthusiasm, the survey highlights resilience in key asset classes and a strategic focus on long-term fundamentals.
The survey, conducted in two waves—first in early 2025 and again in May following U.S. tariff announcements—reveals a shift in sentiment. Initially, 52% of respondents were bullish about the CRE market. However, by the second wave, that number had dropped to 34%, with 66% expressing a bearish outlook. This change underscores the impact of external pressures on market confidence.
Interest rates remain a primary concern. In the first wave, 60% of respondents identified high interest rates as a top issue, increasing to 66% in the second wave. Notably, 41% expect interest rates to rise further in the next 12 months, a significant jump from 17% earlier in the year. These concerns are compounded by expectations that current and proposed tariffs will negatively impact the market, with 54% of respondents anticipating adverse effects.
Despite these challenges, certain sectors within the CRE market are showing resilience. Respondents identified multifamily housing (51%), data centers (44%), logistics and warehousing (38%), and Class A office spaces (27%) as asset classes with strong fundamentals. Additionally, affordable and senior housing continue to attract investor interest, with over 20% of respondents highlighting their appeal.
The availability of equity capital is another positive indicator. In the first survey wave, only 5% cited equity availability as a reason for optimism. By the second wave, this figure had risen to 15%, with 53% of respondents believing more equity will be accessible within the next year. This increase suggests a growing confidence in the market’s ability to attract investment despite prevailing uncertainties.
Bryan Connolly, Chair of DLA Piper’s U.S. Real Estate practice, commented on the findings: “While volatility and uncertainty may have increased, fundamentals ultimately still matter. We’re seeing investors focus less on the outside noise and more on identifying asset classes and locations that signal long-term value and resilience.”
The survey also notes a decline in expectations for foreign investment. In the first wave, 31% of respondents predicted strong foreign investment, but this dropped to just 12% in the second wave. This decline reflects growing concerns over global economic stability and the impact of U.S. trade policies.
Looking ahead, CRE leaders are focusing on strategic planning and innovation to navigate the complexities of the current market landscape. Emphasis is being placed on sectors that align with emerging secular trends, such as technological advancements and evolving consumer behaviors, which are reshaping demand for commercial spaces.
In conclusion, while the CRE market faces significant challenges in 2025, there is a measured optimism among industry leaders. By concentrating on asset classes with strong fundamentals and adapting to changing market dynamics, investors and developers aim to capitalize on opportunities and drive growth in the latter half of the year.