Keep an eye on these two as the year unfolds, says commercial president
The woes of the office market have dominated headlines about the US commercial real estate space’s problems in recent years, with that struggling asset class weighing against prospects for the sector as a whole.
But other forms of investment are helping brighten the outlook for the commercial space in 2025 as lenders keep a close eye on emerging asset classes and their potential to smooth the CRE landscape.
Chief among those, according to Eastern Union co-founder and president Abraham Bergman (pictured top) is self-storage – a phenomenon that’s gone from strength to strength because of urbanization.
The shrinkage of apartment sizes over the last 20 years, coupled with the continuing clamor of workers – especially younger generations – to live in cities, are trends that have seen demand for self-storage grow.
“You go back 20, 25 years, that phenomenon started in major cities like New York and Chicago where every square foot was worth a lot of money and you saw apartments shrinking,” he told Mortgage Professional America. “However, that has expanded out in the market to other areas as well.
“People are willing to take a smaller apartment in order to keep the rent slightly more affordable, so we’ve definitely seen more people living in smaller apartments. People taking [those] apartments are going to use self-storage – store their summer clothes in the winter and winter clothes during the summer, because they simply don’t have a lot of room in their apartment.”
US emerging as a prominent market for self-storage
North America emerged as the largest region in the global self-storage market in 2023, according to ResearchAndMarkets.com, while the space saw a worldwide compound annual growth rate (CAGR) of 7.7% between that year and 2024.
It’s also expected to continue expanding in the years ahead and grow 7.9% per year between now and 2028 to hit a market size of $86.05 billion. That’s due, in part, to high demand for non-conventional storage options, the research firm said, as well as small-scale business expansion and higher demand for climate control.
The continuing growth of the e-commerce sector will also play a role as companies begin to hold larger quantities of goods to store before selling to a national and global audience of customers.
Manufactured housing on the rise in 2025
Another emerging asset class in the commercial real estate space: manufactured housing, also sometimes referred to as mobile homes. That may have had pejorative connotations in the past, but Bergman said it’s become a much more professional and well-managed offering in recent years, its appeal widening for buyers who want to own a home but who are struggling with affordability.
“We see a lot of retirees and young families. It’s a cheaper form of homeownership but it’s homeownership, and it’s become a very attractive product,” he told MPA.
Pending home sales in the US dropped 5.5% in December, the first decline since July, according to the National Association of Realtors (NAR). https://t.co/LjYYVywrTa
— Mortgage Professional America Magazine (@MPAMagazineUS) January 30, 2025
Those property types are constructed entirely in a factory before being transported to site, helping buyers offset some of the costs associated with building the home (although they must also ensure their property is compliant with local area rules).
The asset class is expected to account for $27.28 billion in market share this year, according to Mordor Intelligence, rising to $36.2 billion by 2030. Developers, including Clayton Homes, are expanding production facilities for that type of product, and the US Department of Housing and Urban Development (HUD) also moved to simplify zoning requirements for manufactured homes last year.
House price indexes for manufactured homes, meanwhile, are also on the up. Federal Housing Finance Agency (FHFA) research showed those indexes jumped by 3.2% in 2024’s second quarter compared with Q1, and were up by a full 7.9% year over year between Q2 2023 and Q2 2024.
“They’re beautiful, well-maintained, and have become on a par with owning a home,” Bergman said. “That market and area of the business continues to develop.
“There are some large owners who manage very professionally, and it’s a different product than what we remember from 25 years ago. It’s part of the multifamily group, and I think it’s going to continue to [grow].”
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