As we move through the second quarter of 2025, the commercial real estate market, especially within land development, continues to show signs of localized shifts and recalibration. Today’s environment is anything but uniform, and we’re seeing a market deeply influenced by regional dynamics, entitlement processes, infrastructure readiness, and access to both capital and builder demand. 

These variables differ significantly from one submarket to the next, making it more critical than ever to understand the local context. That being said, here are a few of the major trends we’re seeing in commercial real estate markets across the country.

Slowing Demand and Cautious Capital

In many secondary and tertiary markets, buyer demand has softened. Homebuilders are becoming increasingly cautious with new acquisitions, especially as they grapple with elevated holding costs and a slowdown in new home sales. While the appetite for development land is still present, it is measured and selective.

Access to capital remains tight. Elevated interest rates have made both debt and equity financing more conservative. Investors are gravitating toward low-risk, shovel-ready opportunities, leaving speculative plays on the sidelines. Suburban and exurban communities, in particular, are experiencing slow home absorption rates, often just one to three units per month. This has significantly extended development timelines and dampened builder interest in starting new projects.

Pricing Reflects a Flight to Certainty

Pricing trends are following the commercial market’s shift toward certainty and entitlement. Unentitled land, especially paper lots, has seen price reductions of 15 to 30 percent from the peak in 2021 and 2022. In contrast, entitled and infrastructure-ready properties in high-growth metro areas are still commanding strong premiums.

Sellers of raw land are increasingly facing pushback, particularly when listing prices remain misaligned with current market realities. This disconnect has led to a widening gap between seller expectations and buyer willingness, which is further slowing transaction velocity.

Builders Are Focused and Selective

Across the board, both national and private builders have adopted a more conservative stance. Rather than acquiring large land tracts, national builders are prioritizing takedown schedules and focusing on sites that deliver a near-term return. Private builders are even more cautious, engaging only in projects that offer significant discounts or creative structuring, often through joint ventures with landowners.

In today’s environment, the most desirable projects are those that are fully entitled, connected to municipal utilities, and structured for phased development. Builders are looking for certainty, speed, and lower upfront capital exposure.

Development Margins Remain Tight

Even when builder interest is present, feasibility remains a challenge. Infrastructure costs continue to climb due to inflation in labor and materials. Expensive components like sewer pump stations, road systems, and stormwater infrastructure remain key cost drivers. 

Combined with high borrowing rates and protracted entitlement timelines, many projects simply do not pencil out unless land costs are low or deals are structured creatively.

Opportunities in a Challenging Environment

Despite the headwinds, strategic opportunities are emerging. Public-private partnerships are becoming more attractive, particularly for large-scale, mixed-use, or workforce housing developments. These arrangements can help bridge funding gaps and improve project feasibility.

There is also continued interest in built-for-rent communities, especially horizontal multifamily concepts in markets where infrastructure is already in place. These models offer an appealing balance of yield and flexibility in a risk-averse environment.

Deal structuring has also taken center stage. Seller financing, option contracts, and performance-based takedown agreements are becoming more common as developers seek to reduce risk and align capital deployment with entitlement progress.

Final Thoughts

As we look ahead in 2025, a few clear themes are emerging. Speed and certainty in the commercial real estate market are more valuable than ever. Builders are focused on fewer but higher-quality sites. Projects near employment centers, good schools, and infrastructure will continue to gain traction, but only if the pricing is right.

Most importantly, creativity and flexibility are now essential tools for getting deals done. Whether through strategic partnerships, innovative financing, or phased execution plans, the ability to adapt to changing conditions will define success in this cycle.

If you’ve got questions about the commercial real estate market or want to find commercial land for sale near you, get in touch with me at Cbowes@NationalLand.com or find your local Land Professional here!