The Best Ever Conference returned for its ninth installment in March 2025, with BEC IX featuring an impressive cast of commercial real estate experts and nearly 1,000 active and passive investors.
As one of its marquee speakers, BEC once again welcomed John Chang, Senior Vice President of Research and Insights at Marcus & Millichap, to share his economic outlook for commercial real estate investors.
Known for his data-driven approach and engaging storytelling, Chang delivered some sobering news about the economic landscape while identifying potential opportunities for multifamily investors. In a presentation that he admittedly revised just the day before due to rapidly shifting market conditions, Chang offered five bold predictions for 2025.
1. Tariffs Present a Significant Inflation Risk
Chang identified tariffs as a major economic wild card. With 25% tariffs now implemented on imports from Canada and Mexico, and 20% on China, approximately 41.5% of U.S. imports are affected. These three countries represent America's largest trading partners, supplying everything from food and consumer goods to critical construction materials.
"If they stay in place, they are going to be inflationary," Chang warned, noting that while some argue tariffs only cause one-time price increases, the constant shuffling and potential expansion to other regions creates ongoing inflationary pressure. Combined with other factors, Chang believes tariffs could push inflation back up to 3.5% by year-end, reversing the downward trend the Fed has worked to achieve.
2. Immigration Policies Could Weaken Economic Growth
Despite high labor force participation among prime working-age adults (25-54), Chang expressed concern about potential labor shortages resulting from deportation policies and reduced immigration. The U.S. currently has more job openings than unemployed workers, with only a 750,000 worker shortage compared to 6.2 million in 2022 — a gap that was largely closed through immigration.
"I'm not taking a stance on that. I'm not saying hey right wrong or indifferent, but I'm saying we will see fewer people to fill the jobs that we create through economic growth," Chang explained. This labor shortage would particularly impact construction, agriculture, healthcare, and hospitality services, potentially driving up wages and creating additional inflationary pressure.
3. Interest Rates Will Remain Volatile
Chang's third prediction centered on interest rate volatility. With the current Fed Funds rate at 4.25%, rates have returned to the 35-year historical average. However, economic uncertainty — currently at its second-highest point in history behind only the pandemic — is driving significant market volatility.
"They're bouncy. They're moving around," Chang noted. "Get it locked fast because they can move again very quickly." He projects the 10-year Treasury will hover around 4.5% (plus or minus 50 basis points) but with significant fluctuations throughout the year. Chang also highlighted the Fed's cautious stance, quoting Chairman Powell's statement that they "do not need to be in a hurry to adjust our policy stance" amid uncertain economic conditions.
4. The Housing Shortage Will Continue
On a more positive note for multifamily investors, Chang predicted the ongoing housing shortage would persist, driving rental demand. With the median age of first-time homebuyers now reaching 38 (up from 30 in 2010), millennials are staying in rental housing longer due to affordability challenges and shifting preferences.
The affordability gap between homeownership and renting has reached a record $1,300 monthly differential, and only 27% of households can qualify for a mortgage under current lending criteria. This creates "greater lease renewal rates" and "upward pressure" on rents, as fewer renters transition to homeownership.
5. Inflation-Resistant Hard Assets Will Be Favored
Chang's final prediction suggests market volatility will drive investors toward inflation-resistant hard assets like gold and real estate. With multifamily construction slowing significantly (starts down 76% from peak levels), future supply constraints could strengthen the rental market despite current high vacancy rates.
"The cost of construction goes up," Chang explained, noting that tariffs on lumber and other materials, combined with potential labor shortages, will further reduce new development. He pointed to recalibrated cap rates, which have increased 130 basis points for multifamily properties since 2021, creating more attractive yields for investors in today's market.
Looking Ahead
For multifamily investors, Chang's outlook presents a mixed but ultimately promising picture. While economic uncertainty, inflation risks, and interest rate volatility create near-term challenges, the persistent housing shortage and constrained development pipeline could create favorable supply-demand dynamics. With $200 billion in "dry powder" still targeting real estate investments, Chang anticipates increased capital flows into commercial real estate as investors seek shelter from stock market volatility and inflation protection.
As Chang succinctly concluded, "Inflation-resistant hard assets are going to be favored. That's gold. That's real estate." For multifamily investors who can navigate the current volatility and secure appropriate financing, the market fundamentals suggest resilient long-term demand despite the economic headwinds ahead.
Further insights from BEC IX:
Day One Recap
Day Two Recap
Joe Fairless's Keynote: How to Thrive in '25
Listen to John Chang's podcast, The Horizon, on the Best Ever CRE Show.
