Happy new year, everyone! Yesterday we spoke about what actually happened in 2024 (and evaluated my predictions from exactly a year ago). Today, let's prognosticate about what might happen in 2025 (keeping in mind that I'm based in Toronto and so there will naturally be a bias toward this market):
Very broadly speaking, our current commercial real estate downturn started, in my opinion, around the middle of 2022. That's when sentiment started to feel different and the market was starting to respond to increasing interest rates. Over the past few years, I've been overly optimistic in terms of how soon the market would reset. But eventually I'll be right. So I'm going to call 2025 as an important turning point where we see more capitulation, more bankruptcies, and a shedding of legacy assets/deals. For the other side of the market, this will mean more new deals.
This, however, does not mean that we will see a development environment that anywhere resembles what we saw prior to 2022. On the new construction residential side (condominium and multi-family rental specifically), I think it's going to take 2-3 years for us to work through and absorb our current supply pipeline. This will be an obvious headwind for land prices. The successful projects in this environment will be located in core/prime locations, underwritten at more modest scales, and focused largely on end users.
In 2024, we saw the continued rise of more people going back to the office. Here in Toronto, the average weekday figure is approximately 73% of what it was pre-COVID (data from November 2024). This year, I think we'll see this figure get close to 90% and then likely start to level off, some five years after the first lockdowns. I think it makes sense that we'll stabilize at some number below pre-COVID levels, but I also think it'll be a number that is much higher than most people expected just a few years ago.
I am reversing my position on autonomous vehicles (relative to last year). I believe we're much further along -- specifically Waymo is -- than most people think right now. Autonomous vehicles are happening and, in 2025, I think we'll see a significant expansion of coverage across the US led by Waymo + Uber. I don't think we'll see anything earth shattering from Tesla in regards to FSD, but who knows, Elon is good at making things happen. The big test will be cities with snow. This will likely take longer.
At the time of writing this post, the price of EU carbon permits is approximately €71.98 per tonne of carbon dioxide. It's all-time high was €105.73 in February of 2023, but some/many believe that it will need to be closer to €150 by 2030 if the world hopes to reach net zero by 2050. So for this reason, I'm going to say that its price rebounds to between €90-100 this year. This is largely a guess, but I'm including it in my predictions (at least partially) because it's quantifiable and easy to score later.
Crypto and technology more broadly are going to have an awesome year in 2025. As Fred Wilson wrote on his blog yesterday, one of the things we saw in 2024 was "Silicon Valley's hostile takeover of the federal government, via an infiltration of Donald Trump's MAGA movement." The "establishment government" was seen as being antagonistic toward tech and innovation, and so the industry jumped teams. One would expect that to pay dividends this year.
More specifically, I think we're going to see a web3 consumer application that finally breaks into the mainstream. Already, I've been impressed by NFT marketplaces like Rodeo. Many people won't appreciate that it's powered by some blockchain, but that's exactly what we want. We want the underlying technology to recede into the background and for the experience/utility to come into the foreground.
And with that, I will end and leave you all with this recent tweet from Chris Dixon. It's worth clicking through and reading the entire thing.
A big thank you to everyone who continues to read this blog. We're now into year 12 of this daily writing practice (my first post was in August 2013), and I'm still feeling more inspired than ever. It truly feels like we're at the dawn of so many new and exciting things: a new real estate cycle, an unprecedented innovation environment, and the list goes on. Next up, I'm going to write specifically about what we at Globizen are focused on for this upcoming year.
Cover photo by Tyler Rooney on Unsplash
Brandon Donnelly
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I’m a bit late to the punch with this post, but I think this year will truly be a new beginning for crypto. A lack of regulatory clarity, and even outright hostility from important government bodies (i.e the US) will be thrown out the window. This is probably one of the biggest hurdles towards “mainstream” adoption. But I don’t necessarily think crypto will go mainstream to the public this year. I think we will finally see in-production implementations of various crypto products that primarily benefit the existing financial industry. This will be them (various institutions - the biggest infra providers like Swift, DTCC, Euroclear; and banks; asset managers; etc) dipping their toes into this new technology, and if things go well, their investment in said technology will increase significantly, and rapidly. I’m not talking about billions, hundreds of billions, or even trillions of dollars. I am talking hundreds of trillions to quadrillions of dollars eventually flowing through a cryptographically secured system. I know that number sounds far fetched, but entities like the DTCC literally process quadrillions worth of transactions annually, and they are serious about moving that value on-chain (you can check their marketing materials yourself). It’s difficult to even conceptualize the level of cost savings associated with the commoditization of commercial trust via these systems, especially as they continuously develop and capture more use-cases in the longer term. It’s reminiscent of the internet. How many people could possibly imagine its capabilities back when all you could do was chat with other nerds on an archaic looking interface. After this, my belief is that we will start to see a number of corporations implementing a blockchain based tech stack into their existing systems. Many will reject this at first, but once a few companies prove it reduces operating costs to the extent their margins make them more competitive relative to whatever market they’re in, all of the other companies will swarm in to realize the same level of savings. It’s like software as a service all over again. None of these companies wanted to rollout an ERP when they can easily manage their processes using MRPs or even on paper. But once their competitors starting benefiting from ERP, their hand was forced - join them or die. The main reason it will take a while for crypto to go mainstream with the general public is because of the shitcoin/meme casino. It is truly a plague on the industry and it prevents the general public from actually investigating the underlying technology. It’s too distracting, too enticing to them. The majority will only realize the true benefits once those benefits have already been realized. It will be “mainstream” in the background, while the mainstream has little to no idea. But eventually they’ll slowly start to catch on.