The start of 2025 brings a fresh perspective on the economic landscape. With the recent Economic Update, we can better understand trends shaping industries, from logistics and retail to real estate and labor. Let’s unpack the key highlights of this 2025 real estate forecast.
As December closed out the year, the Logistics Managers’ Index (LMI) dropped to a four-month low of 57.3, reflecting the expected seasonal inventory decline. However, upstream manufacturers ramped up imports to hedge against potential tariffs, leading to an unexpected inventory buildup. This strategic move was supported by a 15.6% year-over-year increase in U.S. imports from China. Meanwhile, transportation costs surged amid heightened holiday demand.
Takeaway: Despite short-term logistics slowdowns, strategic planning is keeping supply chains resilient.
While traditional indoor malls grapple with rising vacancies, open-air shopping centers are thriving, hitting a historic low vacancy rate of 6.2%. Despite the growth of e-commerce, physical stores accounted for 77% of 2024 holiday sales, highlighting their ongoing importance. Discount retailers are fueling this trend, with many planning expansions in 2025.
Takeaway: Open-air retail spaces are proving their staying power, creating investment opportunities in retail real estate.
3. Commercial Real Estate: Refinancing Takes Center Stage
Trepp’s 2024 analysis revealed a robust recovery in market liquidity, driven primarily by refinancing activity. With $96.83 billion in loans maturing by 2026, refinancing remains a safer bet for many property owners compared to sales. The private-label CMBS market saw an impressive 165% year-over-year growth, marking a strong rebound.
Takeaway: Refinancing trends underscore cautious optimism in commercial real estate markets.
Migration patterns reveal continued interest in the Carolinas, Texas, and Arizona, with Dallas and Charlotte leading as top destinations. U-Haul data shows a shift in inbound migration trends, indicating emerging hotspots beyond traditional movers’ hubs.
Takeaway: Population shifts are reshaping housing demand, retail activity, and local economies in these areas.
December’s Consumer Price Index (CPI) report showed signs of disinflation, with a 0.4% monthly and 2.9% annual increase. Core CPI slowed as well, offering a glimmer of relief. Stock markets responded positively, anticipating fewer rate hikes, but the Federal Reserve remains cautious about potential policy impacts.
Takeaway: Stabilizing inflation offers hope, but global economic uncertainties keep markets on edge.
The latest FOMC minutes reflect optimism about inflation trends moving toward the 2% target. Yet, concerns over labor market tightness and policy uncertainties persist, as the incoming administration’s tariff and immigration changes could shift economic dynamics.
Takeaway: Policymakers remain cautiously optimistic, emphasizing adaptability in the face of evolving conditions.
Capital Economics predicts modest GDP growth for major economies in 2025. China is expected to rebound, thanks to government interventions, while the U.S. may see minor inflationary pressures from proposed tariffs. A soft landing remains the central theme for the year.
Takeaway: While slower growth is anticipated, global markets appear resilient.
The U.S. added 256,000 jobs in December, exceeding expectations and nudging unemployment down to 4.1%. Wage growth remains steady at 3.9%, indicating a strong labor market. However, markets are recalibrating expectations for rate cuts in light of this resilience.
Takeaway: A robust labor market could anchor broader economic stability in 2025.
Although optimism dipped slightly in January, Americans remain generally positive about the economy, with the RealClearMarkets/TIPP index holding above 50. Concerns about trade policies and tariffs, however, are beginning to weigh on sentiment.
Takeaway: Confidence persists, but it’s fragile in the face of potential policy shifts.
Trepp reports a rise in special servicing rates for mixed-use and multifamily properties, with mixed-use loans hitting their highest rate since 2013. On the flip side, industrial real estate continues to perform well, with minimal special servicing rates.
Takeaway: The divergence between property types underscores the importance of strategic sector focus in real estate investments.
Final Thoughts The January 2025 Economic Update highlights a dynamic economic environment marked by resilience and strategic adaptation. While inflation cools and logistics recalibrate, strong job growth and retail demand signal robust underpinnings. For investors, business owners, and policymakers, the year ahead presents opportunities to navigate change with confidence.
What’s your take on these economic shifts? Share your thoughts below or reach out to discuss how these trends might impact your industry!
