There is no denying the fact that 2024 has been a remarkable year for the real estate industry as it showed great resilience and positive momentum across the top markets in Asia Pacific. However, as 2025 is approaching, the realty sector is facing a pivotal moment, with pressing questions challenging traditional norms and driving the need for innovation.
How will the rise of AI and automation reshape property management, valuation, and tenant experiences? Can the sector adapt to the enduring impact of hybrid work models, which continue to redefine the demand for office spaces across the globe?
Meanwhile, climate change looms large, with investors and developers prioritizing sustainable, energy-efficient buildings to meet strict environmental norms. Moreover, the possibility of a comprehensive surge in mergers and acquisitions is also on the table in the upcoming year.
So what’s really on the minds of investors and occupiers as we look ahead to 2025? Let’s dive into some of the key issues that could become a point of concern in the upcoming year.
5 Key Issues Defining Real Estate in 2025
- Will Rising Office Attendance Redefine the Commercial Real Estate?
As most of the employees return to the office after a prolonged period of remote work, the dynamics of the workplace are undergoing a significant transformation. Now, people are spending more time at their workplace which leads to an average four days per week working module. This rise in office attendance means increased demand for dynamic work environments. That’s why several business owners and corporate real estate leaders are focusing on reimagining their workspaces that not only improve efficiency but also foster long-term growth.
However, this rising demand for functional and fully-equipped office spaces is poised to be a major concern in 2025 as the competition for best office spaces will heat up.
- How is climatic change going to affect the global real estate industry?
Extreme weather conditions like heatwaves, storms, flooding and droughts are on the rise all around the world, causing problems for both investors and occupiers. Mitigating climate risk has become an urgent priority for several businesses. As climate change continues to affect the built environment, more attention and adaptation will be required from the real estate industry.
Notably, properties in disaster-prone locations are becoming less attractive to investors, and insurers are raising premiums or even withdrawing coverage altogether. This shift is forcing buyers, investors, and developers to prioritize climate resilience when evaluating locations. For facilities managers, this means a dual challenge.
On one hand, they must ensure that robust emergency plans are in place to protect assets and occupants during climate-induced events. On the other side, they need to focus on long-term strategies to enhance resilience. This involves upgrading infrastructure, retrofitting systems, and implementing green building technologies to mitigate the climatic challenges in the coming years.
- Will Spending on Building Upgrades See a Surge?
Investors are becoming more open to putting money into upgrading a wider range of properties. This shift means older or less ideal buildings might soon get a makeover, with larger-scale renovations and retrofits becoming part of value-adding strategies.
Investors are focusing on retrofitting those properties that might not necessarily check all the boxes in terms of quality, location or even amenities. With a limited supply of properties that meet the needs of both investors and tenants, we could see more funds being spent on improving buildings outside of prime locations.
- Can Real Estate Keep Up With the AI Boom?
Artificial Intelligence is changing the way we communicate, research, function, or even live, impacting the life of almost every individual on the earth. Therefore, in 2025, the demand for workspaces where the user experience can be enhanced by AI, and virtual or augmented reality, will grow immensely.
Meanwhile, AI will further continue to empower the development of smart buildings, making assets more efficient and more inviting for employees.
- Will private equity drive real estate M&A?
Rising debt costs have pushed investors to seek new funding sources, and that’s where private equity is playing a major role in driving mergers and acquisitions (M&A) in real estate. Large pools of capital, typically from North American private equity funds, are leading M&A growth, especially in sectors like logistics and data centers across the Asia Pacific region.
Instead of slowly building portfolios by acquiring individual assets, these funds prefer M&A to scale up quickly and grow their assets under management (AUM). This trend of increased M&A activity is expected to continue.
