Real Estate Development in 2025: Five Key Trends Shaping the Industry

Overview

Changing political fortunes and the fluctuations of the business cycle often generate streams of reactive commentary, obscuring the long-term, structural trends that truly drive real estate and capital markets. For real estate development, where projects span years from inception to completion, decisions must be anchored in enduring fundamentals rather than short-term volatility, to avoid the misallocation of attention and resources.

This outlook explores five key themes shaping real estate development in 2025 and beyond: the realignment of global supply chains, shifting generational housing preferences, the rise of data centers as critical infrastructure, the continued importance of life science clusters, and the need for localized strategies in fragmented markets.

Each of these trends underscores how precision and alignment are more critical than ever. The thematic insights shaping our development strategies demand a nuanced, data-driven approach that identifies opportunities at a granular level and aligns them with structural growth drivers.

1. Navigating supply chain reconfigurations

Shifting trade alliances, reshoring initiatives and geopolitical shifts are reshaping real estate development opportunities in ways that signal a possible long-term realignment. While these trends predate the COVID-19 pandemic, they have accelerated in recent years, influencing how aggressively nearshoring and localization strategies should be pursued. Rather than framing this as strict “deglobalization,” we focus on a more nuanced trade reconfiguration. Even in a partial realignment scenario, the structural nature of these changes—driven by geopolitical uncertainty and supply chain resilience—makes them impossible to ignore.

The most immediate real estate implication is increased demand for U.S. logistics, as businesses reassess global production footprints and explore inventory stockpiling to buffer against disruptions. Yet, the more transformative driver lies in U.S. advanced manufacturing and federal industrial policies that prioritize domestic production of semiconductors, clean energy components, and electric vehicles. These initiatives are catalyzing demand for logistics infrastructure near manufacturing hubs, ports, and rail yards, creating opportunities for strategically located distribution facilities along critical transportation corridors.

2. Generational convergence in housing preferences

Demographics have always been central to development decisions, but the current period is uniquely defined by the convergence of major generational milestones alongside unprecedented economic shifts. Millennials are entering their prime family-forming years, Gen Z is beginning their careers and expanding the renter pool, and Baby Boomers are transitioning into retirement. These changes are unfolding amidst rising housing costs, inflationary pressures, and a redefinition of work-life balance, creating overlapping (though sometimes competing) housing needs across generations.

These demographic shifts present a unique opportunity for lower-density multifamily housing in inner and second-ring suburbs, where space, affordability and community align with the preferences of renters across generations. At the same time, 2025 marks a critical moment, with Gen Z expected to contribute at least 1.5 million net household growth¹  while Baby Boomers add demand for downsized housing. While suburban opportunities predominate, truly luxury, top-of-the-line product in selective urban locations that offer convenience and vibrancy remain compelling.

3. Targeting data centers amid a gradual AI transformation

Artificial Intelligence (AI) holds immense transformative potential for the economy and property markets, though the speed and scale of its impact is likely to vary across economic sectors, industries and property types. A gradual, longer-term adoption scenario encourages prioritizing adaptable spaces that can evolve alongside technological advancements, as well as investing in resilient markets and product types—while avoiding premature commitments to speculative, AI-specific features, product types, and markets that may take longer to materialize.

This measured approach contrasts with the extraordinary investments already underway in data centers, driven by the largest technology firms’ focus on AI. Regardless of AI’s broader adoption rates, the sheer scale of capital flowing into AI-related infrastructure ensures robust demand for data centers in the years ahead. Our conviction in data centers goes beyond their immediate utility; we also view them as strategic infrastructure, vital to powering the entire digital transformation (including AI). We are focused on developing data centers in markets that balance 1) access to large population centers; 2) proximity to financial hubs, e-commerce centers, and national security and defense operations; 3) supportive infrastructure and power availability; and 4) land affordability.

4. The science of place: developing innovation clusters

The COVID-19 pandemic sparked a surge in demand for life science space, driving significant new development. As the immediate momentum fades, 2025 emerges as a pivotal year for the sector. Balancing cyclical supply challenges with structural drivers—such as advances in biotech, aging demographics, and ongoing healthcare innovation—will shape the next phase of growth. These drivers remain robust, ensuring long-term demand and underscoring the need for strategic, targeted development.

At the heart of our strategy is the concept of “clusters”—bio-innovation hubs where research labs, universities, hospitals, and manufacturing facilities converge to create ecosystems of innovation and productivity. These clusters generate consistent demand for space, premium rents, and, in some cases, public policy incentives that drive further development. Whether in established life science hubs like Boston and San Francisco or emerging markets like Raleigh and Los Angeles, the challenge for 2025 and beyond lies not in determining demand but in delivering the right space in the right places to meet the sector’s evolving needs.

5. Fragmented demand requires precision development

As the economic and demographic landscape becomes increasingly complex, the need for a hyper-local, data-driven approach to real estate development has never been greater. Broad market trends often obscure important micro-market nuances, where actionable opportunities are most likely to emerge—down to the zip code or even sub-zip-code level. Our research highlights the fragmentation of demand, showing how migration patterns, affordability challenges, and tenant preferences can vary significantly within the same submarket. This insight drives our focus on identifying resilient micro-markets even within lagging markets or submarkets.

To navigate this complexity, we combine granular datasets with qualitative insights from our local teams to create a more complete understanding of micro-market dynamics. While data is a powerful tool for uncovering obscured opportunities, its effectiveness depends on the ability to interpret and act on it. Our more nuanced approach allows us to differentiate between resilient nodes and areas facing structural challenges, ensuring that our development strategies align with both near-term demand and long-term growth potential.

Conclusion

At first glance, the world may seem more complex and uncertain than ever. As developers, however, we are committed to maintaining the long view—framing what appear to be unprecedented short-term disruptions within the broader context of long-term technological advancements, demographic shifts, and global economic growth. While we recognize the influence of public policy changes and business cycles on individual projects or strategies, our core approach focuses on adaptability in the face of uncertainty and precision in execution. Central to this is our emphasis on granularity—leveraging data and local insights to uncover opportunities that align with enduring structural trends. Together, the themes outlined here form the foundation of our strategies designed to navigate complexity and deliver sustained value over time.

¹ John Burns Consulting