Dealmakers in commercial real estate are navigating a landscape transformed by sweeping changes in trade, federal spending and foreign relations policies—shifts that have left many on edge, resulting in the slowing pace of mergers and acquisitions, according to PwC’s U.S. Deals 2025 Midyear Outlook. Yet, amid the uncertainty, cautious optimism signs remain, with “emerging green shoots” suggesting new opportunities could be on the horizon, as noted in the report.
Tim Bodner, a partner at PwC who leads the firm’s U.S. and global real estate deals business, identified three key areas of interest in a conversation with GlobeSt.com: office conversions, the global digital economy and updates to U.S. tax policy.
Traditional asset classes such as office, retail, and logistics have experienced slower activity than anticipated, Bodner noted. However, alternative sectors, including data centers, healthcare, and cold storage development—have seen a surge in interest. Office conversions, in particular, are drawing attention. In 2024, 73 office-to-residential conversion projects were completed in the U.S., up from 63 the previous year. Looking ahead, 279 projects are slated for completion in 2025 and beyond.
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The dynamics of these transformations are highly city-specific. “I live in Washington, DC. There’s not a lot happening here, but in a place like New York, there’s a lot happening,” Bodner explained, referring to The Big Apple as the “poster child” for conversions. He attributed this to sellers becoming more realistic about property valuations.
Still, not every building is a candidate for conversion; both size and quality are limiting factors. While Class A offices remain resilient, the fate of lower-quality assets—Class C and D—remains uncertain. There's also the potential for conversions into data centers, senior living facilities, hotels, or other alternative uses.
The digital economy is also reshaping the CRE landscape. Data centers have emerged as a dominant alternative asset class, driven by the relentless growth of data generated by smartphones, connected devices, and the rise of generative artificial intelligence.
“We’re still generating an incredible amount of data… and you still need data center capacity to meet those data needs,” Bodner said. While capital is pouring into this sector, he cautioned that overbuilding could become a concern, potentially leading to downward pressure on rents and valuations. The high cost of land is pushing some investors into tertiary markets, but Bodner warned that these markets require careful consideration, while core gateway markets remain strong.
Tax policy is the third area shaping the outlook for real estate deals. Although the House has passed its version of a tax bill, the Senate is still negotiating, leaving the final outcome uncertain. Issues such as carried interest, like-kind exchanges, and property tax deductions appear settled, but Bodner highlighted concerns over the treatment of foreign capital. “If that goes away and we don’t have any changes in the other areas I mentioned, we would feel pretty good about the bill from a real estate industry perspective at this point,” he said.
Despite the headwinds, Bodner’s assessment points to a market in flux, where adaptability and a keen eye for emerging trends could make all the difference for dealmakers in the months ahead.
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