PNC Real Estate Outlook: Navigating a Foggy Forecast

A foggy economic backdrop is making it difficult for businesses to have a clear sense of what might be in store down the road in 2025. However, just because there is uncertainty does not necessarily mean there is a lack of opportunity, according to Dan Mullinger, head of PNC Real Estate.

“If the fog starts to clear around the potential impacts of international trade policy, real estate markets could be poised to do well in the second half of the year,” Mullinger said. “This could lead to accelerated activity in the commercial real estate sector, particularly if the Federal Reserve eventually proceeds with interest rate cuts, which PNC’s economic team is forecasting.”

Consistent with PNC Real Estate’s expectations, two areas within commercial real estate that have performed well so far in 2025 are multifamily housing and Commercial Mortgage-Backed Securities (CMBS). Demand for multifamily housing has continued to increase, and there have been some signs of rent growth in the market. This momentum should carry strongly into 2026, which is likely to be another healthy year for multifamily housing. For CMBS, origination activity has continued to tick up thus far in 2025.

For other areas within real estate, economic uncertainty dominates the near-term outlook:

Industrial: In the industrial warehousing space, many companies are waiting to see what impacts may result from tariff policy before taking decisive action.
Office: As a general trend to return to the office gains momentum, there has been more activity in terms of leasing activity for commercial office space. But it remains unclear how this sector will fare in the long term.
Retail: There is some optimism for retail properties, as there is strong demand for retail space, owing to an overall lack of new construction.
Hospitality: Some potential growth is possible in the hospitality industry in the second half of the year, depending on capital needs in the sector. There may be opportunities for investment in terms of repositioning assets and new construction.

“The mentality for many companies right now is to remain in wait-and-see mode until there’s more clarity about what they will be facing in terms of the rate environment, trade policy, and other macroeconomic factors,” Mullinger said. “Our team of specialists in PNC Real Estate is committed to staying closely informed as things develop, so that we can continue to be trusted advisors to businesses facing uncertainty about the path forward.”

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