Featured

Real Estate Investment Management Trends for 2025

By Brittany Benz January 27 2025 min read
AppFolio Blog 2024 Q4 IM Trends 1140x641 1

The real estate investment landscape is once again bracing for a new year with new market conditions. Preparing for these changes will be critical for firms aiming to stay competitive and get ahead, especially as emerging technologies begin to reshape everything from portfolio management to client engagement strategies.

In this article, we’ll explore key trends on the horizon with insights from industry leaders on how to navigate challenges and proactively strategize for 2025.

 

1.) Prepare to Navigate New Policies, Rising Mortgage Rates, and Inflation

Right now, asset managers are focused on finding stability, especially as potential tax policy changes could introduce new challenges for investors in 2025. According to BDO Global Corporate Intelligence, this might include updates to corporate tax rates, trade and tariff policies, and the future of certain expiring provisions within the Tax Cuts and Jobs Act (TCJA).

The 2024 BDO Tax Strategist Survey warns that, “less than half of asset management leaders have a tax risk mitigation and response strategy in place and proactively prepare for changes that affect their tax risk profile.”

Although mortgage rates are currently falling, the Wall Street Journal notes that rate expectations are rising — mainly due to inflation. Investors expect future short-term rate hikes, foresee ongoing high inflation, and are cautious about the government’s growing debt and potential new policies. This can make long-term bonds less appealing and push mortgage rates higher.

BDO offers advice on how firms can prepare for a potential new state of the economy:

  • Keep up with emerging, innovative technologies.
  • Adhere to an evolving regulatory environment.
  • Adopt flexible staffing models to address labor trends and the changing workforce.
  • Create scenarios for potential tax outcomes and risks to help forecast impacts.

2.) Discover New Opportunities for Raising and Deploying Capital

Both BDO and Deloitte predict that investors will continue to seek alternative financing options and that organizations should consider broadening product lineups into alternative investment offerings such as private credit and evergreen or hybrid fund structures.

The 2024 BDO Private Equity Portfolio CFO Outlook Survey explains why such business expansion is critical: “Private credit has become one of the most common sources of financing for deals in recent years. In fact, nearly half (46%) of private equity fund managers say private credit is their preferred source for financing acquisitions.” 

According to the Emerging Trends in Real Estate® 2025 report issued by PwC and the Urban Land Institute, surveyed real estate professionals also rated industrial/distribution centers, single-family housing, and multifamily as having the best investment prospects for where to allocate capital in 2025:

  • Multifamily Residential: Strong demand for quality apartments for affordable rents persists due to housing shortages, fewer young homebuyers, and immigration trends driving the need for reasonable rentals.
  • Digital Infrastructure: There’s a short supply of facilities for the rapidly growing digital economy, necessitating investment in data centers, call centers, cell towers, and microchip manufacturing.
  • Industrial Properties: Consumers have come to expect instant delivery of consumer goods, resulting in demand for trucking terminals, warehouses, and local manufacturing hubs.

3.) Develop Strategies for Targeting a Younger Generation of Investors

One of the biggest forces driving change is the ongoing transfer of resources from Baby Boomers to Millennials and Gen Z, and wealth management firms need to adapt to meet new demands for technology-driven services. A recent benchmarking survey from JLL describes, “By 2045, more than $84 trillion dollars is expected to change hands in the U.S. alone, presenting a massive opportunity for wealth managers.”

JLL cites these younger investors will be looking for:

  • Tech-driven services that provide convenient, personalized, and seamless experiences both in-person and digitally.
  • Holistic wealth management solutions that integrate investments, taxes, insurance, and banking.
  • Investments in emerging areas such as environmental, social, and governance (ESG), digital assets like cryptocurrency, and private market investments.

To meet these preferences, firms have been transforming strategies, offerings, and even physical locations. Rather than branding their branches as exclusive spaces, designs now reflect a “welcoming social wealth club.” Wealth management centers have even taken a hybrid approach, incorporating artificial intelligence (AI) to combine in-person and digital experiences.

4.) Fully Harness AI as an Enhancement Tool

While there’s uncertainty about what exactly 2025 holds for investors and investment management businesses, one thing is clear: Technology is building on the momentum it’s had in the real estate investment landscape, especially when it comes to artificial intelligence.

This year, investment managers should put their energy into fully harnessing AI’s potential. On the operations side, AI is automating time-consuming tasks, reducing costs, and improving decision-making speed, so businesses can compete more effectively. Many teams are using it to specifically assist with things like trade reconciliations, security research, and portfolio compliance monitoring.

Deloitte reiterated, “Those that lag in realizing efficiency or identifying ways to drive innovation may find it challenging to remain competitive in 2025 because efficiency in investment management operations is not just a margin enhancer but could also have potential to drive alpha.”

On the sales and distribution side, AI-powered investment management platforms are offering tailored portfolio recommendations and marketing strategies to help firms drive revenue growth and enhance customer experiences.

Deloitte believes that investing in technologies that use AI in the sales and distribution processes is a significant revenue-generating opportunity. The company predicts that “usage of AI in distribution initiatives is expected to expand at both ‘modest’ and ‘heavy’ degrees, as the potential benefits to revenue growth become clearer for the investment management industry.”

5.) Leverage Technology for Operational Efficiency

Economic shifts could potentially limit resources in terms of time, money, and staff — yet business requirements between investment managers and clients are unlikely to downsize. 

Adopting a complete real estate management software, like AppFolio Investment Manager, can help firms maximize asset performance and simplify operations. This easy-to-use real estate investment management software incorporates smart automation and advanced AI to help investment managers get work done faster and focus on high-level, hyper-personalized client experiences.

AppFolio Investment Manager can specifically help with:

  • Building new partnerships by providing real-time communications for tasks like documenting business interest, digitally signing contracts, sending wiring instructions, and recording and confirming capital contributions.
  • Automating waterfall distributions to increase the speed of delivery to investors, ensuring the accuracy of funds, reducing financial errors, and tracking transactions for auditing purposes.

Ultimately, as we move into this year, investment managers will find success in three key ways:

  • Understanding and adapting to evolving market conditions and investor priorities
  • Leveraging tech-driven experiences for both managers and clients
  • Maximizing operational efficiency with AI, automation, and a complete investment management platform

Staying proactive and informed on trends will also empower firms to seize opportunities amidst uncertainty. To explore how your business could strengthen investor performance this year, sign up for a free demo of AppFolio Investment Manager.