The traditional holiday known as Ground Hog Day (celebrated Feb 2 annually) is more of a folk lore event rather than an actual weather prediction. As a side note, in case you missed Punxsutawney Phil this year the groundhog (actually a woodchuck) saw his shadow and predicted 6 more weeks of winter. 

February 7, 2025

By Al DiNicola, AIF®
DST 1031 Specialist
NAMCOA® – Naples Asset Management Company®, LLC
Securities offered through MSC-BD, LLC, Member of FINRA/SIPC

Phil, over the years, is right 40% of the time. Commercial Real Estate forecasting may have a better percentage in predictions.

During the month of January and spilling into February commercial real estate practitioners, financial advisors and real estate investors attend multiple Webinars reviewing 2024 and looking toward predictions for 2025. Is there a real estate ground hog day?

You may remember the 1993 movie called Groundhog Day. In this comical movie a man (played by actor Bill Murray) relives the same day over and over again. Because of the movie, the phrase “Groundhog Day” is now often used to describe repetitive, monotonous situations.

“Real Estate Groundhog Day” is not a widely recognized term, but it could refer to the repetitive cycle often experienced in the real estate industry. This could include:

  • Market Cycles – The recurring patterns of boom and bust in real estate markets, where property values rise and fall in predictable cycles.
  • Buyer’s and Seller’s Behavior – The repetitive nature of buyer hesitations, seller expectations, and negotiation tactics that agents deal with regularly.
  • Agent Routine – Real estate professionals often feel like they are reliving the same tasks daily, such as prospecting, showing homes, negotiating deals, and handling paperwork.
  • Seasonal Trends – The real estate market tends to follow seasonal patterns, with increased activity in spring and summer and slowdowns in fall and winter.

2025 Commercial Real Estate and Alternative Real Estate Outlook

For investment advisors and representatives we do experience cycles and compare and contracts past trends to establish some type of predicative future.  Many look to cause and effect in the markets.

Many of the same takeaways in the commercial real estate analysis can transfer to the Delaware Statutory Trust (DST) investment opportunities, Opportunity Zones as well as the direction of private equity into real estate development. Private equity as well as individual investors are moving into the alternative real estate space for a variety of reason.

Many of the sessions we have attended provide the same key takeaways:

  • With the second largest drawdown of CRE valuations on record, a compelling entry point is on full display.
  • Looming debt maturities and stressed capital structures will support significant opportunity for well-capitalized buyers.
  • Slower economic growth will drive more focus on the intersection between real estate and demographic trends.
  • Housing affordability, migration patterns, and immigration policy will be critical trends to consider when making investment decisions.
  • Construction starts are down significantly across commercial real estate, setting up for strong fundamentals.

Wall of Debt Maturities 

The massive transaction volume from 2021 to 2023 created a great deal of debt to go with it. Much of the debt originated between 2019 and 2022 will be coming due in the next 12 to 24 months.

Affordability

Housing affordability will drive residential rental demand. Despite an increase in mortgage rates, the Case-Shiller Home Price Index is at an all-time high. This is driven by the continued demographic demand for housing, coupled with an extremely low supply of existing homes for sale.

Migration Patterns

Both domestic population migration between states and immigration from abroad will have an outsized impact on commercial real estate demand going forward, especially as organic growth from births continues to wane. It is estimated that 75 percent of population growth in the next decade will come from immigration. The profile of potential renters will also vary significantly depending on the migration timing a market experiences. International migration is concentrated on a few key states, with Florida, California, and Texas receiving the largest share.

Supply and Demand Dynamics Across High-Conviction Sectors.

The demographic backdrop will drive supply/demand dynamics for commercial real estate throughout the next decade. Given the slow-growth macroeconomic environment, the strongest real estate sectors will be those whose demand is tethered to life events rather than economic growth. Those same real estate sectors also benefited from the low interest rates of 2020 to 2022, seeing a boom in construction starts during that time period.

Interest rates seem to be a topic of discussion by many and look towards a trend lower.  However the market with make a move with or without significant changes. Seller of actively managed real estate will seek to move into passive management.  Investors with capital gains will continue to seek tax deferral through 1031 tax deferred exchanges (some utilizing DST for passive income and tax deferral). Other investors with capital gains may seek to invest into Opportunity Zones for long term compounding potential returns.

Over the next few weeks, we will provide a review into specific asset classes and the projection.  Will we repeat the same results as 2024, or will this year see appreciable improvements in the markets?

We want to thank many of the sponsors who have provided 2024 and 2025 analysis including Inland-Investments, Capital Square, Cantor Fitzgerald, Brookfield, Starwood and others.

NAMCOA® is a SEC registered investment advisory firm that provides comprehensive portfolio management, financial planning, and fiduciary decision-making services on behalf of retirement plan sponsors. Our Difference is summarized by our fiduciary approach which enables us to better meet portfolio and retirement plan objectives, resulting in stronger risk adjusted returns for investors and peace of mind for Clients. We also focus on alternative real estate investment. Many real estate investors are seeking tax deferred solutions utilizing §1031 exchanges or Opportunity Zones.

DSTs are not for all investors.  The acquisition of a DST is for accredited investors only.  Contact your investment adviser for additional details on how a DST may be a solution to your 1031 Exchange and suited for your investment future. For more information on how to properly set up an IRC 1031Tax Deferred Exchange or if you are an accredited investor and would like additional information on a DST contact Al DiNicola at 239-691-8098 or email adinicola@namcoa.com.

This is not an offer to purchase or solicitation to purchase any security, as such be made only through an offering memorandum or prospectus.  Investing in securities, real estate, or any investment, whether public or private, involves risk, including but not limited to the potential of losing some or all of your investment dollars when you invest in securities. You should review any planned financial transactions that may have tax or legal implications with your personal tax or legal advisor.   NAMCOA, LLC is a Registered Investment Advisor, regulated by SEC (Securities and Exchange Commission). Our corporate office is located at 999 Vanderbilt Beach Road, Suite 200, Naples Florida 34108. Securities Offered through MSC-BD, LLC, Member of FINRA/SIPC. 8215 SW Tualatin- Sherwood Rd, Suite 200, Tualatin, OR 97062.  MSC-BD, LLC and NAMCOA are independently owned and are not affiliated.

Thank you.