The US real estate construction industry is undergoing a structural shift that will have long-term implications for the CRE sector. The number of new apartment units coming online over the next few years is declining. Industrial construction is also slowing, and office and retail construction have been minimal for several years, said John Chang, national director of research and advisory services at Marcus & Millichap.

“We had record apartment completions in 2024 and industrial construction hit a record in 2023, so maybe the downturning construction is just the real estate cycle at play,” said Chang. “But I think the issue runs deeper, and I believe that construction of all types of commercial real estate will slump for several years, maybe five years or more.”

Chang outlined five factors that are weighing on the construction industry. The first is the wave of retiring Baby Boomers. Labor force participation of people over age 65 is trending lower, down to 20.2%, or a loss of nearly 400,000 workers.