Real estate consulting

In 2027, the real estate industry will face pressure to get leaner to navigate higher interest rates. But businesses willing to adapt will come out stronger on the other side. Read this 2027 real estate industry trends guide to learn more, including top industry challenges, practical action steps for business leaders to succeed over the next 12 months and why, in real estate, good relationships remain the key to everything. What are the top real estate industry challenges in 2027? Interest rates will likely remain the biggest challenge for real estate in 2027. Businesses will also need to continue reckoning with the repercussions of the AI revolution on both business operations and deal opportunities. Key details leaders should know include: Rising interest rates: Interest rates are creating pressure on multiple fronts, including cost of capital and cost of debt. This is impacting valuations and also affecting if and when deals get done. Refinancing and capital allocation: Higher borrowing costs and more conservative lending standards may create financing gaps as loans mature. Owners should evaluate upcoming maturities early and consider refinancing, recapitalization, asset sales and potential equity requirements before liquidity becomes constrained. AI business impact: AI is changing how real estate businesses operate, pushing firms to rethink staffing, footprint, leverage, technology and workflows. If you can’t figure out how to operate more efficiently, you’ll get lapped by competitors who do. Resource competition: AI is also directly impacting deals, in part because AI infrastructure like data centers has such intensive resource requirements that it’s pulling energy, water and other resources away from other development projects. Resources are limited; competition will be fierce. If there’s a common theme here, it’s that your business will need to get nimbler and more flexible to thrive in 2027. What are the big opportunities for real estate businesses in 2027? In 2027, real estate businesses that focus on building relationships will find those relationships deliver wins. Businesses should also thoughtfully address succession, take advantage of the industry’s inherent tax efficiencies and explore projects like Opportunity Zones. Look at: Relationship building Real estate is built on relationships. The more you can leverage relationships with tenants, contractors, governments, municipalities and builders, the more successful your business will be, as you’ll create deal opportunities that might simply not exist otherwise. Make developing and maintaining crucial relationships one of your core business goals for 2027 and beyond. Generational succession The largest wealth transfer in history rolls on unabated, with up to $124 trillion expected to pass from baby boomers to their descendants and beneficiaries through 2048. Real estate owners should approach this transfer thoughtfully, considering options like asset diversification, leadership succession to younger family members or divesting entirely. Careful succession planning is important here , as business partners or family members may have conflicting opinions that need time to be worked through. Tax advantages Real estate offers nearly unparalleled tax advantages. Use them. Leverage depreciation , 721 transactions and UPREITs to create tax deferments on real estate consolidations (which can be especially useful during succession planning), Delaware statutory trusts or tenancy in common (TIC) structures to facilitate 1031 exchanges and more. You’ll need a tax advisor who understands real estate to help you maximize your opportunities here. Open-ended funds Traditionally, many real estate funds have been closed-ended, with a scheduled end date. But investors are increasingly gravitating toward open-ended funds, which provide more liquidity and allow for decision-making based on business and financial considerations rather than time limits. Consider open-ended funds as a long-term play, especially when combined with an effective tax strategy to maximize your potential return. Opportunity Zones 2.0 A new iteration of the Opportunity Zone program takes effect on January 1, 2027 . While any older Opportunity Zone investments will typically face a hard tax deadline, new investments will operate under a more flexible set of tax rules, allowing for greater optionality as well as additional tax benefits for investments lasting at least five years. Senior living projects In addition to powering a generational wealth transfer, baby boomer retirements are also creating a wave of new demand for senior living facilities . The number of Americans aged 80+ is growing at 4-6% a year, but the supply of senior living housing is expanding at an annual rate of only 2-3%, creating a significant delta between supply and demand. 20-minute communities Finally, it’s worth noting that many Americans are eager to move away from the traditional model of commuting from a suburb to a downtown office. There’s a growing demand for 20-minute communities: a place where you can live, work, have fun with friends and access essential services within a 20-minute walk or bike ride. These moderate-density, hybrid commercial-residential communities appeal to both younger people and retirees, with home prices, for example, commanding a 15.5% premium . Real estate businesses should think creatively about how to do more to cater to this demand. Action steps: How real estate leaders can help their businesses thrive Real estate business leaders who approach 2027 with an adaptable mindset and clear strategic focus will set their businesses up to thrive. Here are key action steps for leaders to consider: 1. Focus on win-win relationships Don’t just build relationships to help your own business. Focus on developing genuinely mutually beneficial partnerships with other investors, developers and tenants so that the people you do business with will want to keep doing deals with you, again and again. 2. Tell the story of your business What makes your business successful? How are you different from your competitors? Get really good at answering these questions. Make your answer into a story — one that shows investors why they should give you their money. 3. Evaluate everything Continue to evaluate your portfolio, team, financials, systems and business processes on an ongoing basis. Every facet of the real estate business is changing right now, so keep your eye on everything and be prepared to change direction quickly when needed. Performance will vary significantly by asset class, market, property quality and capital structure. Assess each asset individually and identify where operational improvements, repositioning, recapitalization or disposition could create a stronger outcome. 4. Build an AI foundation Carefully integrating AI into your business is essential to running a leaner, more adaptable operation. Make sure you’ve got an AI foundation in place: a data foundation, AI governance and a strategy to align AI use with your core business goals. 5. Lean into tax opportunities Tax efficiencies are critical to unlocking real estate wins. Make your tax advisor a part of your strategic planning to gain insight into how to take advantage of critical tax opportunities like Opportunity Zones, including where timing and deal horizons come into play. 6. Prioritize operational improvements Look to bolster operational effectiveness beyond simply integrating AI. Think net operating income (NOI) improvement, cash and liquidity forecasting, capital expenditure planning, timely financial reporting and scenario modeling around occupancy, rates and refinancing — all areas where a step forward can make your business meaningfully stronger. Read more Your guide to using AI in real estate for smarter growth Opportunity Zone updates: New IRS guidance for investors Tax planning for sole proprietors and real estate investors