From AI to Adaptive Reuse: Predictions for Real Estate and Construction in 2025

The past year has tested US companies across industries, with challenges stemming from election uncertainties, soaring inflation, and high interest rates creating a turbulent business environment.

However, as 2025 approaches, signs of change are emerging, according to BDO USA. Expected interest rate cuts and the conclusion of the election cycle hint at greater market stability in the months ahead.

AI Adoption Will Reshape Real Estate and Construction

While real estate has embraced AI to some degree, construction lags behind when it comes to adoption. But in 2025, both sectors are expected to expand their use of AI significantly.

• Construction applications: AI will optimize project management by automating scheduling, resource allocation, and risk detection.
• Real estate applications: Chatbots and other AI tools will streamline tenant communication and reduce operational costs.

With inflationary pressures and labor shortages, AI presents a solution to enhance efficiency and reduce expenses across industries.

Biometric Data Legislation to Expand

AI-driven biometric data applications, such as enhanced security and workforce tracking, are expected to gain traction. However, these advancements come with privacy risks, prompting more states to adopt regulatory measures.

• Challenges: Data breaches could expose sensitive employee data, heightening the need for stringent security protocols.
• Current Legislation: Illinois leads the charge, but more states will likely follow in 2025.

Construction firms must proactively safeguard biometric data to mitigate risks and comply with emerging regulations.

Data Center Construction to Soar

The rise of AI tools necessitates powerful data centers with cutting-edge cooling systems and energy solutions.

• Key Locations: Northern Virginia, Austin, Atlanta, and Columbus are prime candidates for new centers.
• Challenges: Power supply issues may push tech firms to explore nuclear energy solutions despite legal and logistical hurdles.

Data center growth underscores the increasing intersection of construction, technology, and energy infrastructure.

Adaptive Reuse to Ease Housing Crisis

The housing crisis and ongoing struggles in commercial real estate are driving adaptive reuse projects.

• Current Housing Gap: The US faces a shortage of 7.3M affordable rental homes.
• Economic Benefits: Transforming vacant offices and malls into residential spaces could rejuvenate struggling local businesses.

This trend offers dual benefits: addressing housing needs while revitalizing urban communities.

Infrastructure Projects to Grow Amid Policy and Climate Pressures

Natural disasters and a renewed focus on domestic manufacturing will accelerate infrastructure and industrial construction.

• “America First” Policies: Expanded R&D tax credits and other incentives may bolster industrial projects.
• Challenges for Smaller Firms: Financial pressures will limit smaller retailers’ ability to invest in new construction.

The emphasis on large-scale projects aligns with broader economic and environmental needs, further shaping the construction industry’s trajectory in 2025.

Looking Ahead

From leveraging AI to adapting to regulatory shifts, 2025 will bring transformative opportunities and challenges for the real estate and construction industries. Firms prioritizing innovation and resilience will be best positioned to thrive in this evolving landscape.