As we step into Spring 2025, the commercial real estate (CRE) market is showing signs of subtle transformation, shaped by both economic forces and long-term behavioral shifts. While some sectors are recalibrating, others are experiencing renewed momentum—and smart investors and businesses are responding accordingly. Here’s a look at key trends driving the market this season.
Office: From Downsizing to Right-Sizing
The office sector continues to evolve in response to hybrid work models. While large-scale downsizing dominated headlines in previous years, we’re now seeing a more strategic trend: right-sizing.
Businesses are no longer giving up space entirely, but they’re becoming more thoughtful, seeking flexible layouts, collaborative environments, and efficient footprints that support productivity without unnecessary overhead.
Key Takeaway: Office users want less space, but better space—with amenities, adaptability, and locations that support talent attraction and team culture.
Warehouse: Cooling After the Tariff-Driven Surge
The industrial and warehouse market saw a significant boom in recent years as businesses raced to secure space and shore up supply chains in response to global tariffs and trade uncertainty.
That surge, however, has begun to soften slightly.
While demand remains healthy, companies are no longer stockpiling space at the same rate. The market is shifting back toward balanced absorption and strategic long-term planning, with logistics and last-mile delivery still playing key roles.
Key Takeaway: Warehouses are still valuable, but we’re entering a more measured phase of growth compared to the urgency-driven deals of recent years.
Data Centers: Red-Hot Demand
If there’s one standout in Spring 2025, it’s the explosion in demand for data centers.
Driven by AI integration, cloud computing growth, and the digital backbone of nearly every industry, data centers are one of the most in-demand asset classes in the CRE space right now.
Locations with reliable power, fiber infrastructure, and access to talent—like Princeton, New Jersey—are seeing a surge in development and interest.
Key Takeaway: Investors and developers are aggressively targeting tech-ready sites for data centers. Expect this trend to continue well into 2026.
Residential Development: Townhomes Drive Land Sales
On the residential development side, townhome demand is soaring, especially in suburban and semi-urban areas. This trend is being driven by buyers seeking affordability, low maintenance, and community living close to work and schools.
As a result, land sales—particularly parcels zoned for residential use—are becoming increasingly attractive to developers.
Locations with access to transportation, schools, and retail are in highest demand, making well-located land a hot commodity this spring.
Key Takeaway: Land for residential development is gaining momentum, particularly in markets where townhome living matches buyer lifestyles and affordability goals.
Spring 2025 Summary: A Season of Strategic Movement
This spring, the CRE market is less about big moves and more about smart moves. From companies right-sizing office footprints, to rebalancing warehouse strategy, to capitalizing on data center and residential development opportunities, success lies in understanding where growth is happening—and why.
At Fennelly Associates, we help our clients identify these trends early and act strategically, whether you’re leasing, investing, or developing. Let’s make Spring 2025 a season of thoughtful growth and forward momentum.
