Big questions real estate is asking in 2025

Global real estate markets may be about to turn a corner, but pressing issues remain.

Companies are calling people back to offices at an increasing rate. Climate risks to real estate are rising and, in many cities, buildings are at risk of obsolescence. Artificial intelligence is continuing to show its utility to the industry, and its impact on the data center sector continues to grow. The possibility of an uptick in mergers and acquisitions is also on the table.

So what’s really on the minds of investors and occupiers as we look ahead to the next year? Read on as we dive into some key issues for 2025.

How will rising office attendance shake up the workplace?

People are spending more time in the office, heading towards an average four days per week.

Trying to right-size office space with both efficiency and long-term growth in mind is a core priority for corporate real estate leaders and is set to become an even bigger issue in 2025 as competition for the best space heats up.

“Many organizations believe the number of office days will keep rising,” says Flore Pradere, Research Director for Global Work Dynamics at JLL “Employers preparing for a return to growth are being smart about the amount and quality of space they’ll need in future, investing in responsible way to ensure their real estate is fit for purpose and well occupied.”

It’s why more businesses are employing dedicated workplace experience managers. Already, a third of all companies surveyed by JLL now have one in place. A further 9% are considering hiring one to help build thriving teams and a better workplace culture.

What will more severe weather events mean for real estate?

Heatwaves, flooding, storms and droughts: extreme weather events are on the rise, with implications for both investors and occupiers. Climate risk is already increasing insurance costs and in the coming years will have a growing impact on other areas such as location decision, valuations and financing.

As climate change impacts the built environment, more attention, adaptation and action will be required by the real estate industry, according to JLL’s Future Vision Climate Inflection Point report.

In particular, facilities managers are faced with the dual challenge of making sure the right emergency plans are in place and improving resilience. Systems maintenance will become increasingly critical.

More companies are looking to increase resilience to climate events and minimize the costs of disruption, says John Thigpen, vice president for sustainability in Project Development Services at JLL in the U.S.
“Mitigating climate risk is an urgent priority.”

Will spending on building upgrades take off?

Investors are set to become increasingly confident in taking capex decisions for a broader group of assets – properties that might not necessarily tick every box in terms of quality, location or amenities. Larger scale repositioning and retrofitting could benefit value-add focused strategies.

“For many, the decision remains between upgrading or selling at a discount," says Cameron Ramsey, JLL Capital Markets Research & Strategy director, EMEA. "Against a lack of assets to satisfy both value-add investors and occupational requirements, we could soon see capital expenditure extend beyond prime locations and opportunities."

Can real estate keep up with the AI boom?

The global AI boom is set to play a bigger role in the real estate industry. As demand, design, function, and business models are impacted, companies must stay vigilant, as JLL’s Future Vision reports points out.

Demand for spaces where experiences can be enhanced by AI, and virtual or augmented reality, will grow. Meanwhile, AI will empower the development of intelligent buildings, making assets more efficient and more inviting for employees.

Mixed reality spaces, where the digital and physical combine, will emerge, as augmented reality and virtual reality evolve. Space will need to be flexible and adaptable.

Demand for computing infrastructure itself, such as data centers and chip manufacturing facilities, will continue to grow. 

Will investors remain switched on to data centers?

Investors will widen their search for opportunities in the coming year. As an alternative to more established real estate sectors, data centers continue to stand out.

By 2027, data center storage capacity is expected to more than double to 21 zettabytes. But more storage is still needed.

Globally, data centers will become a $317 billion market by 2026, more than doubling from the $153 billion recorded in 2020, according to JLL.

While the U.S. currently holds the highest concentration of data center investment, with 58% market share over the past five years, momentum is gaining in Asia Pacific, where investment share has risen to 24% in the same period.

As investors continue to seek inroads, more data center M&A is expected in 2025 and beyond, says Celina Chua, Data Center Client Solutions Director, Capital Markets, Asia Pacific, JLL.

“We expect larger data center platforms to be prime targets for consolidation or acquisition, especially those with strong management teams but limited resources,” she says.

Will private equity drive real estate M&A?

With rising debt costs in recent years, the pressure on investors to find new capital sources has grown. In turn, global private equity is seeking to build scale through M&A.

It’s why the marrying of fresh capital with existing, established entities is particularly prevalent in APAC, explains Tim Graham, Global Lead for International and Strategic Capital at JLL.

“Large pools of capital, typically from North American private equity funds, have been behind the growth of M&A strategies across the Asia Pacific region,” he says, noting that private equity funds will continue to build scale in sectors such as logistics and data centers.

“Acquiring single assets to gradually build a portfolio of scale takes considerable time,” Graham says. “As capital increasingly seeks to efficiently deploy at scale and achieve AUM growth, we expect to see continued M&A activity in the region.”