A funny thing about commercial real
estate: while the buildings themselves are fixed in place, the forces that
create demand for those buildings are anything but. They shift with time,
trend, and turmoil—and if you’re not paying attention, you might miss the cues
that tell you when and where activity will ignite.
Take lease expirations, for example.
It’s one of the most fundamental drivers of deal flow in our business. When a
lease winds down, a decision must be made—renew, relocate, or remain on a
month-to-month basis. That single moment often becomes the catalyst for months
of planning, broker engagement, site tours, financial modeling, and ultimately,
action. No expiration? No pressure. And no pressure means no urgency—one of the
key ingredients in getting deals done.
But leases alone don’t tell the whole
story.
As we turned the corner into 2025, the
tail end of 2024 gave us a master class in commercial real estate hesitation.
Activity slowed not because companies lacked need, but because they lacked
certainty. Three macro forces kept tenants and investors glued to the
sidelines:
1. Presidential politics.
Decision-makers wanted to know what kind of business climate they’d be
operating in before signing on to long-term commitments. Red or blue,
regulation or deregulation, tax incentives or new compliance rules—these all
influence corporate planning and therefore real estate strategy.
2. Interest rate direction. The Fed
kept everyone guessing. Would rates go up again? Plateau? Begin to fall?
Capital markets hate ambiguity, and so do CFOs staring at lease vs. own models.
3. Consumer confidence. As goes the
consumer, so goes much of our economy. Businesses took a hard look at spending
patterns, savings rates, and employment numbers before deciding whether now was
the right time to expand.
Add to that a steady churn of mergers,
acquisitions, and dispositions, and you’ve got another strong source of
demand—though not always in the ways you might expect. M&A can consolidate
two footprints into one, freeing up space in one market while triggering new
need in another. Dispositions, meanwhile, open up inventory for others or
signal a company’s shift into a new vertical altogether.
But let’s zoom out even further.
Sometimes, real estate demand is born
from entirely new industries—and those moments often follow technology
breakthroughs or policy shifts. Consider:
• Electric vehicles and their
supporting infrastructure: battery plants, charging stations, and parts
distribution centers.
• Lithium-ion batteries, which require
massive and specialized manufacturing space.
• Data centers, the digital backbones
of our modern lives, quietly taking down millions of square feet with very
specific utility and security requirements.
We’ve seen this before. The 1980s
research and development boom created entire submarkets for tech, biotech, and
medical device firms. Those buildings weren’t just shells—they were incubators
for innovation.
Sometimes the spark comes from
government regulation. Remember when the EPA mandated the elimination of Freon
from air conditioning units? That one change sent shockwaves through the HVAC
industry, creating demand for new service hubs, training facilities, and parts
distribution warehouses. A political decision translated directly into square
footage demand.
In short, demand drivers in commercial
real estate are everywhere—you just have to know where to look.
The next wave of activity might not
come from a lease expiration or a low interest rate. It might come from an
emerging technology, a new federal incentive, or even a global conflict that
reshapes the supply chain. Our job, as advisors, is to interpret the signals,
anticipate the shifts, and help our clients position themselves ahead of the
curve.
Because buildings may be
stationary—but the forces behind them are always in motion.
