Best Bets for 2025 Based on What the Experts Know Now

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NAI Farbman executive vice president Ronald Goldstone is bullish about the 2025 prospects of best-located retail, office and mixed-use properties in Michigan. The story no doubt is the same across the country. “If anything, they are healthier than they have ever been,” he said. But the Farmington Hills-based broker said retail and office properties below the top-tier class face challenges in terms of leasing and investment sales. “The gap has grown deeper than I’ve ever seen it between A, B, C and D properties.”

The culprits on the retail side include daunting construction costs, a smaller number of expanding chains and, to a lesser extent, today’s still-high capital costs. In some Michigan markets, Goldstone noted, construction costs for store builds that once would have run $80 or less per square foot have been reaching $200 or even $300 per foot. Meanwhile, “the retailers that are out seeking locations have become exceptionally selective,” the broker said.

To cope with these challenges in 2025, the Marketplaces Industry will need to “roll up their sleeves and be super creative,” Goldstone said. His advice: Build a multidisciplinary project or company team to connect with potential users and to seek partnerships with forward-thinking municipalities.

Sitting down with public officials and talking to them about the realistic prospects of lower-tier assets, in particular, could be a smart move, he added. “They need to accept uses that may not have been their first choice five, seven or 10 years ago,” Goldstone said. “I still scratch my head when it comes to some of these assets. They are sitting empty and have failing roofs, there’s an interested party, and yet the city still says: ‘No, we don’t want the use.’”

In the cyclical real estate economy, even a hard-hit property is likely to rebound eventually, and so, Goldstone said, landlords with enough financial wherewithal should consider being flexible with tenants, too. “The concept of blend-and-extend can be a mutually beneficial pathway,” he explained. “Let’s say the tenant occupies 30,000 square feet with a year of remaining term but in reality only needs about 20,000 square feet. As a landlord, you can take the burden off that existing tenant by signing a new lease for 20,000 square feet for five or six years and then finding a new tenant for that remaining 10,000 feet.”