The US real estate market is poised for significant change in 2025, shaped by the regulatory rollbacks, potential tax cuts, immigration reform measures, and inflation concerns prompted by a second Trump administration. As part of our ‘Real Estate from a New Perspective’ series, Michael Von Bevern, Co-Managing Director – Americas at Suntera Global, examines how such shifts will create both opportunities and challenges in the years to come…
Over the next four years, a number of factors stand to create opportunities for growth but also notable hurdles for the sector to contend with. While it takes time for policy changes to manifest, many of those proposed by the Trump administration have the potential to influence growth and inflation on a macroeconomic scale, adding complexity to forecasting their impact on real estate. Consequently, how these dynamics might unfold and their implications for the real estate industry is up for debate.
Deregulation and tax cuts
Proposed tax cuts and a focus on deregulation under the Trump administration have the potential to reshape the real estate development landscape. For example, by reducing bureaucratic hurdles like lengthy permitting processes and strict environmental and zoning requirements, these policies can accelerate project timelines and lower development costs, boosting the retail and multi-family real estate sectors.
In particular, such multi-family developments stand to gain from a reduction in regulatory red tape and with increased demand for housing in urban and suburban markets, developers will be able to deliver housing more efficiently. This streamlined approach may in turn spur innovative multi-family designs that integrate modern amenities, sustainability features, and community-centric layouts. And, with a rise in suburban relocation, developers are increasingly focusing on creating retail hubs that combine shopping, dining, and entertainment in one community.
Meanwhile, the growing demand for luxury rentals highlights a significant demographic trend. Generation X, many of whom are now entering middle age, is increasingly drawn to the convenience and flexibility of rental living. As homeowners transition into renters – often seeking high-end amenities and prime locations – developers are responding with upscale multi-family projects.
This shift is particularly evident in markets where ‘rentals by me’ are booming. These localized trends reflect a broader national trend: a preference for quality rental housing over traditional homeownership, aligning with renters prioritizing mobility, amenities, and reduced maintenance burdens.
Inflation and rising interest rates
The new administration is expected to reverse several Biden-era regulations affecting the financial services and housing sectors while also introducing corporate tax cuts.
These policy shifts aim to stimulate economic activity and support the commercial real estate industry and potential changes include reducing capital gains tax and supporting existing 1031 exchange benefits, to name a few.
However, these advantages may be tempered by inflationary pressures, expected under the Trump administration, which are likely to drive long-term interest rates higher. For real estate developers, this means higher borrowing costs, particularly for new construction. As a result, projects in the early planning stages may face viability concerns as financing becomes more expensive, potentially curbing supply in the medium term.
Rising inflation will also impact cap rates across all commercial real estate subsectors. As cap rates rise, property valuations are expected to decline, potentially dampening investor appetite for acquisitions and investors will need to balance inflationary risks with opportunities to acquire assets at more attractive prices.
Restrictive immigration policies
Restrictive immigration measures could in turn slow labor force growth, posing challenges for the construction industry and the broader real estate sector.
The construction industry relies heavily on immigrant labor particularly for large-scale developments like multi-family housing and commercial projects with a reduction in such resource potentially impacting project costs, completion times and the ability to move forward with a development.
But the impact of higher labor costs also extends beyond construction.
For instance, rising costs could discourage investment in affordable housing developments further exacerbating housing shortages in areas where affordable options are already scarce. Similarly, commercial projects aimed at revitalizing underserved areas might struggle to justify returns in the face of higher labor costs.
As a result, these challenges could shift market dynamics over time, especially when automation and prefabrication methods that can help offset workforce constraints are factored in. Modular construction, for example, reduces the reliance on manual labor making it easier for developers to complete projects on time and on budget.
Ultimately, restrictive immigration measures will require the industry to adapt – but not without introducing substantial challenges for developers and investors to overcome first.
The next three – four years: a mixed outlook
In the near term, the US real estate market faces a mixed bag of potential highs and lows.
Deregulation and tax cuts may drive growth, while inflation and restrictive immigration policies could pose headwinds. The longer-term effects of these policy shifts should, however, become clearer as the economy digests the change in political control in the New Year.
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Michael Von Bevern
CO-MANAGING DIRECTOR, AMERICAS
