Ron Insana, contributor and senior analysti, CNBC; Suzanne Mulvee serves as Senior Vice President of Research and Strategy at GID; Indraneel “Indy” Karlekar, managing director and global head of research and strategy at Clarion Partners; Emi Adachi is a managing director and co-head of global research at Heitman, speaking at the 2025 ULI Spring Meeting in Denver.
ULI
The commercial real estate industry is preparing to ride out near-term volatility and slower growth in 2025 before seeing improvement in 2026 and 2027.
The 27th annual ULI Real Estate Economic Forecast points toward positive, but also toward sharply lower expectations for GDP and job growth this year. The consensus forecast calls for GDP growth to decline to 1.3 percent this year—a 150-basis-point drop compared to 2024. “This is a big adjustment, but I believe we’ll muddle through, and I think that’s what the consensus thinks, too,” says Suzanne Mulvee, chief strategy officer at GID, a real estate developer, investor, and operator.
Optimism at the start of 2025 has given way to uncertainty and volatility in the wake of new tariff policy. Despite a 90-day pause on reciprocal tariffs, the tariff overhang is weighing on decision-making across the board, from capital expenditures to hiring and new real estate investment. Globally, the average tariff for the United States now exceeds 16 percent, which is up from 3.3 percent and represents the highest level since 1937, according to Ron Insana—a contributor and senior analyst at CNBC—who moderated the panel discussion. “So, even though we dialed it back with China, we still have rather significant headwinds on the tariff front,” Insana says.
Forecasts for economic growth have been a moving target this year, amid a fast-moving new cycle. The speed at which the U.S. is able to negotiate trade deals—and the details of those deals—with key trading partners could shift the course of the economy. “What we’re trying to do is focus on what we do have visibility into, and that’s things like the state of the property markets [and] the strength of those markets, and we have to ride out this period of volatility,” says Emi Adachi, a managing director and co-head of Global Investment Research at Heitman.
Job growth slows
Although the United States is expected to remain at relatively full employment over the next three years, with an unemployment rate between 4.5 and 4.7 percent, job growth is slowing. According to the ULI Forecast, job growth—which hit 2 million in 2024—will fall by nearly half in 2025 and 2026, before climbing to 1.45 million in 2027.
Apart from tariffs, the U.S. is facing big demographic shifts related to its aging population and new immigration policy that will affect the workforce and create broader implications for the economy and for commercial real estate. The number of people who entered the country last year, through legal and illegal immigration—roughly 3 million—is expected to fall dramatically, with added effects from the rise in deportations.
“We’re so focused on tariffs, but . . . other things [are] going on in the immigration story,” Mulvee says. “You’re taking a lot of bodies out of the economy that might be growing it otherwise.” One data point that Mulvee is watching is the employment rate among people 25 to 54 years old, which is around 80 percent today. That percentage is very near the peak of the last four cycles. The number points to the possibility of the U.S. not having enough people to fill available jobs, she adds.
As of May, the country has already created 575,000 new jobs. So, it’s certainly conceivable that the U.S. could reach the current forecast numbers. “The longer-term question for us is, what is the demographic profile of the U.S. going to look like in five or ten years, and what’s a sustainable run rate for [job growth],” says Indraneel “Indy” Karlekar, a managing director and global head of research and strategy at Clarion Partners.
Transaction volumes
After hitting bottom in 2023, transaction volume has been logging a slow recovery. The ULI Forecast calls for slight improvement over the next two years, rising from $437 billion last year to $469 billion in 2025, and to $525 billion in 2026, with a bigger move to $600 billion ahead for 2027.
“One of the arguments for why cap rates are still relatively tight is that there’s just a scarcity of deals available on the marketplace. And it seems like the consensus is for that to continue, for at least another year,” Mulvee says.
Index data shows that global uncertainty is as high now as it was during the pandemic. In that context, it’s not surprising to see a very low forecast for transaction volume in the near term. The uncertainty complicates decision-making and understanding valuation. “Am I getting what is a fair value, or am I going to regret a transaction twelve months from now, or three months from now?” Mulvee says. “That’s creating a lot of consternation in the marketplace.”
In talking to investors, many of them certainly are pulling back and pausing, and others are diverting capital from the U.S. to Europe. At the same time, some are just pushing through, Adachi notes. “They . . . see this as some near-term volatility that they’re going to ride out,” she says. “They’re really seeing the long-term picture, and that’s what we’re trying to encourage our investors to do.”
Senior housing leads sector outlook
Senior housing is the clear leader in the three-year outlook on both rent growth and total return. Annual rent growth for the sector is expected to reach 4.5 percent and maintain a steady level of 4.3 percent in 2026 and 2027. Near-term total returns for the sector are comparable to retail and single-family rentals, at 5.0 percent in 2025 and 6.0 percent in 2026, before jumping to 8.0 percent in 2027.
“Seniors housing is a hugely exciting sector right now,” Adachi says. The sector has a great supply-demand picture, with baby boomers who are aging, limited new supply that has been built in the past several years, and a strong recovery following some of the challenges from the pandemic.
Despite uncertainty on how consumer spending will hold up under tariff pressures, low levels of new construction are benefiting retail, which also is forecast to have solid three-year returns and rent growth. Meanwhile, rental residential, including single-family rentals and apartments, are benefiting from challenges in the for-sale housing market.
Single-family residential never fully recovered from the pullback in construction after the Global Financial Crisis, and costs are continuing to create big hurdles to housing affordability and construction of new homes. “Cost is a huge part of it, and it’s only going to get harder, which is just going to exacerbate the housing shortage,” Adachi says.
Office, and particularly commodity office space, remains very challenged, and the forecast for office to jump from returns of -3.4 percent this year to 5.0 percent by 2027 could be optimistic, Karlekar notes. “The amount [of capex required to operate] an office asset nowadays is so extraordinarily high that, economically, it becomes really hard to justify making office investment unless its super-core, super–high end,” he says.
One of the challenges with the forecast is that it focuses on averages and doesn’t capture the nuances in the market, Mulvee notes. “If you have a new office product in the right submarket, you’re doing just fine.”
The same can be said of other property types, such as multifamily. “For my career, I’ve never seen the bifurcation so deep,” she says. For example, new leases in core markets are in mid-single digits, whereas apartments in the SunBelt that have more oversupply are single-digit negative in some cases. That averages out to numbers that are perhaps meeker, but depending on how a portfolio is weighted geographically, it could be performing just fine, she adds.
Navigating near-term uncertainty
Clearly, numerous significant issues are playing out that are clouding the near-term outlook, including tariffs, spending cuts, new immigration policy, and proposed tax cuts. When uncertainty is high, leasing slows down, and that’s especially true for the office sector and for big-box industrial. People don’t want to make a decision that they’re going to regret. “I do think we, as an industry, have to keep our eyes focused on durability of cash flows,” Mulvee says. “We can muddle through on the economics. But if we can just stick to our knitting, I think, as an industry, we can perform.”
The way Clarion Partners has approached the uncertainty is to focus its strategy on areas where it has conviction. Certain aspects of the economy are not going to be affected by short-term volatility, such as ones related to the housing shortage, demographic shifts, and innovation, Karlekar notes. “What helps us to navigate through uncertainty is having these thematic drivers that we think will work, regardless of what part of the economic cycle you’re in,” he says.
