15 Real Estate Industry Challenges in 2025

The real estate industry has had its fair share of disruptions since 2020, stemming from pandemic-driven market shifts, record-high inflation, and the steepest interest rate hikes in decades. But as the new year begins, many analysts are expressing cautious optimism, as mortgage rates start to decrease, home price growth moderates, and overall confidence begins to improve in both the commercial and residential markets.

The reality is that many industry challenges continue to stymie growth for real estate businesses. Read on to learn how real estate organizations can eradicate or minimize many of these challenges—and set themselves up to profit—by proactively confronting the 15 obstacles described below.

What Are Real Estate Industry Challenges?

Real estate companies face a wide range of challenges, some external to the business, in the form of economic fluctuations—such as inflation and steep mortgage rates—regulatory changes, demographic shifts, and technological advancements. Internal challenges, such as inefficient workflows, inaccurate financial reporting, and cash flow issues, can also hinder business growth. With nearly $1.8 trillion in commercial real estate loans maturing through 2026, according to the Counselors of Real Estate, real estate firms must adapt their strategies to navigate and thrive amid this complex landscape.

Key Takeaways

• Real estate organizations are grappling with numerous financial/economic, operational, technology/data, and market challenges in 2025.
• Operational inefficiencies can hinder growth and profitability just as easily as rising interest rates.
• Commercial property owners could face financial strain as loans come due and need refinancing.
• Embracing technology, particularly artificial intelligence (AI) and automation tools, can fuel long-term success.

Real Estate Industry Challenges Explained

Some real estate industry challenges are common to all industries. Operational challenges, for example, including financial reporting accuracy and tax management, become harder to handle as any company grows and expands. Technology-related issues, such as fragmented data systems and lackluster customer relationship management (CRM) capabilities, are often the result of rapid digital transformation needs colliding with established industry practices.

For real estate businesses, market conditions add a layer of intricacy to the challenges. While new and existing home sales are projected to rise an average of 10% or more in 2025 and 2026, according to the National Association of Realtors, the commercial sector faces significant refinancing pressures as loans become due. Regulatory and policy changes, environmental standards, and zoning laws create compliance burdens that vary by region, impacting development costs and growth opportunities. And tax policies, such as the State and Local Tax Deduction cap, continue to influence market dynamics in high-value areas.

Meanwhile, property management firms must contend with fulfilling tenants’ expectations amid their own rising operational costs. Furthermore, supply chain disruptions continue to delay development timelines and raise costs, while inflation and interest rates confound real estate investment strategies.

These challenges are more acute for organizations attempting to scale their operations. Indeed, as real estate companies grow, they often find that their manual processes, legacy systems, and traditional workflows become bottlenecks. Success in 2025 requires addressing both immediate operational inefficiencies and longer-term strategic needs.

15 Real Estate Industry Challenges

From complexities in financial and regulatory issues to constantly evolving market conditions, real estate professionals face numerous obstacles in both daily operations and long-term planning.

1. Inaccurate Financial Reporting

Inaccuracies in financial reporting can cause a real estate company to misrepresent its financial health and lead to poor decision-making by internal and external stakeholders, such as investors and lenders. Common reporting errors include misclassified expenses, incomplete documentation of capital improvements, improper revenue recognition, and inconsistent property valuations. In addition, real estate companies must accurately track and report multiple financial streams, such as construction costs, maintenance expenses, property tax assessments, and debt obligations. For commercial properties, precise reporting of net operating income and debt service coverage ratios becomes crucial for securing favorable refinancing terms. Similarly, residential property managers must maintain accurate records of rental income, vacancy rates, and operating expenses to demonstrate property performance and justify valuations.

For example, if a property manager underreports rental income or doesn’t properly account for building improvements, it can result in understated revenue and overstated expenses. Similarly, if a real estate investment trust misclassifies its leases or fails to disclose key lease terms, it can mislead investors about the company’s cash flow and risk exposure. Inaccurate financial reporting can also affect a real estate company’s ability to secure a loan.

2. Complex Tax Calculations and Deductions

Real estate organizations face complicated tax calculations that can affect their profitability and investment strategies. Capital gains taxes and depreciation, for example, require that companies carefully structure their deals, using strategies such as tax-deferred exchanges and timing sales to minimize tax liabilities. That said, they must also consider the tax consequences for buyers, lenders, and investors that are involved in their sales.

Tax regulations vary across local, state, and federal jurisdictions, which can make life tricky for companies that operate in multiple markets. Organizations also must track numerous deductible expenses, such as mortgage interest, property management fees, repairs, and maintenance, to take full advantage of available tax deductions. Missing deadlines or incorrectly calculating deductions can result in unexpected tax liabilities that affect cash flow and future investment opportunities.

3. Fragmented Data and System Integration

In many real estate organizations, data is siloed across multiple departments and disparate systems, such as property management software, accounting platforms, and CRM databases. This fragmentation prevents companywide visibility into operations and performance without first having to manually aggregate and reconcile data from various sources to create a full picture.

For example, a property management system may contain detailed information about tenant leases and maintenance requests, while a separate accounting system tracks transactions, budgets, and reporting. Without seamless integration between these systems, often through an enterprise resource planning (ERP) solution, real estate professionals will struggle to blend the intelligence needed to make informed decisions and provide a good experience for their customers. Lack of integration also increases operational costs through duplicate data entry and manual reconciliation and often delays reporting, which can slow down everything from refinancing applications to investment decisions.

4. Inefficient Lease Management

Managing multiple leases across various properties demands meticulous tracking of key dates, terms, and obligations. For example, real estate organizations must monitor lease expirations, renewal options, rent escalations, and maintenance responsibilities while ensuring compliance with lease terms and regulatory requirements. Proper lease accounting is also crucial as companies track both current obligations and future commitments—including revenue recognition, escalating rent, and tenant improvements—across their portfolios.

Manual lease management processes are particularly vulnerable to error. Common mistakes include misclassifying lease types, failing to apply a scheduled rent increase, and overlooking utility reimbursement terms, all of which have revenue consequences. Poor lease management can also damage tenant relationships if important maintenance obligations are unclear or lease-related disputes arise due to inadequate documentation.

5. Managing Back-Office Tasks

Back-office operations in real estate are time-consuming, tedious, and resource-intensive, but they’re also critical to operations. Manually processing rent payments and security deposits, reconciling bank statements, and handling maintenance invoices, to name a few activities, can easily cause bottlenecks that delay more strategic work, such as closing a sale.

Inefficient back-office management also increases the risk of errors in accounts payable and receivable. When staff has to juggle multiple spreadsheets and paper documents, details such as common area maintenance expenses, property tax assessments, and insurance compliance, may get overlooked, payments could be delayed, and cash flow projections become less reliable. These issues can hinder daily operations and compromise business relationships with those who depend on consistent, accurate processes.

6. Handling Paperwork in Transactions

Real estate may be about location, location, location, but the paperwork involved in a real estate transaction is about volume, volume, volume. From purchase agreements and title documents to mortgage paperwork and disclosure forms, paper documents can be easily misplaced or misfiled, signatures required by various parties skipped, and regulatory compliance requirements overlooked. Even the smallest of hiccups that occur while shuttling papers among buyers, sellers, lenders, title guarantors, and inspectors can lead to costly delays, legal disputes, or deal cancellations. This challenge multiplies for commercial properties, which must factor in environmental assessments, zoning compliance, and lease-related tenant estoppel certificates. These certificates establish, for third parties, the current status of the lease terms, such as whether tenants are up to date on rent payments.

7. Customer Relationship Management (CRM) Issues

Consider a midsize real estate brokerage that hasn’t modernized its business systems and so relies on a combination of spreadsheets, email, and physical files to manage client data. Without a centralized database, critical information about property inquiries, showing schedules, maintenance requests, and follow-up tasks can slip through the cracks. This challenge is compounded when managing multiple properties or dealing with long-term relationships in commercial real estate and property management.

This is where a CRM system shines, providing solid CRM practices are in place. These entail consistent data entry, regular updates, and standardized processes for tracking interactions and follow-ups. Without such practices, even the most sophisticated CRM system can’t prevent lost leads, delayed responses to client requests, or frustrated customers who take their business elsewhere.

8. Property Management Inefficiencies

Property management inefficiencies can stem from various sources, such as technological limitations, geographical challenges when managing multiple properties, and personnel constraints. Common issues include inadequate systems for tracking maintenance requests and difficulty enforcing lease agreements on a consistent basis, both of which can eat into profitability. For example, delayed response to maintenance issues can result in more expensive repairs, while failure to enforce lease terms, such as not collecting late fees for overdue rent, can manifest in lost revenue.

The impact of these inefficiencies extends beyond day-to-day operations. Poor maintenance tracking can also result in disputes with tenants and higher vacancy rates. Without proper systems and processes in place, property managers find themselves constantly reacting to problems rather than preventing them.

9. Inconsistent Project Management and Tracking

The goal for all real estate projects, whether a small-scale renovation or a large office complex development, is to complete them on time, on budget, and at the correct quality standards. But without consistent project management practices, deadlines can easily slip, costs can escalate, and quality can suffer. For example, poor coordination among contractors can lead to scheduling conflicts, while inadequate budget tracking might result in cost overruns that affect a project’s viability.

Inconsistent tracking methods also make it difficult to compare project performance to reveal trends in what’s working and identify areas for improvement. This lack of standardization can result in repeated mistakes, inefficient resource allocation, and missed opportunities to leverage successful practices across projects.

10. Supply Chain Disruptions

Delays or shortages in the availability of critical building materials, such as lumber and steel, can lead to project delays, cost overruns, and reduced profitability. For example, if a developer is unable to secure the necessary materials to complete a new apartment complex on schedule, it may have to pay extended loan interest payments and lose revenue from delayed tenant occupancy. Similarly, if a property manager can’t obtain the supplies or equipment it needs through its supply chain for an important repair—say, a leaky roof—building tenants are likely to complain and may choose not to renew their leases.

In addition to these direct impacts, supply chain disruptions can also create ripple effects throughout the real estate ecosystem, affecting everything from property valuations to financing availability.

11. Inflation and Interest Rates

The real estate market has experienced a dramatic rise in financing costs. For example, 30-year fixed mortgage rates have remained above 6% since September 2022, according to the Federal Reserve, following nearly 12 years of rates below 5%. Higher rates have played a major role in pushing down existing home sales to a 14-year low, according to Freddie Mac’s November 2024 outlook report. Looking ahead, market analysts expect some moderation in rates, though the higher cost of financing will continue to hinder industry growth.

Higher interest and inflation rates affect every aspect of real estate operations. Development projects face higher construction financing costs, while property acquisitions require careful evaluation of capitalization rates and potential returns. Commercial property owners must balance increased borrowing costs against market-sustainable rent levels. Inflation continues to push up operating costs, challenging profitability and growth in both commercial and residential sectors—and potentially pushing costs onto tenants and buyers.

12. Housing Shortage and Affordability Crisis

As demand for housing continues to outpace supply, many potential buyers and renters have been priced out of the market right from the start, let alone during a bidding war. And as mortgage rates continue to remain high, that too makes it harder for some real estate companies to find qualified clients and close deals.

Property managers also face pressure to maintain competitive rental rates while covering their increased operating costs. And developers must balance their construction expenses against potential returns, often leading to fewer new housing projects. Meanwhile, local zoning restrictions and lengthy approval processes can delay or prevent new housing growth, further constraining supply.

13. Navigating Market Trends

Real estate organizations must constantly monitor and respond to shifting market dynamics. This requires analyzing demographic trends, economic indicators, and regional market conditions to make the best possible decisions about property investments, development projects, and even marketing strategies. For example, companies should understand how evolving workplace policies are reshaping demand for office space and how sustainability requirements might affect building values and operating costs.

Companies must also be alert to economic indicators that signal a recession and potential changes in government policies, such as zoning laws or tax regulations, and plan accordingly. The hard part is distinguishing temporary shifts from long-term changes that require strategic adaptation. Misjudging a situation can result in missed opportunities or costly investments in the wrong market segments.

14. Keeping Up With Technological Advancements

Real estate companies are embracing advanced technologies to streamline operations, reduce administrative overhead, and improve decision-making. For example, 75% of leading real estate brokerages have already integrated artificial intelligence (AI) into their workflows, according to the 2024 Delta Media Real Estate Leadership Survey.

AI’s power in real estate lies in its ability to quickly analyze complex datasets. By processing information about comparable properties, market conditions, and neighborhood trends, AI can accurately assess property valuations. In addition, AI-powered predictive analytics tools can identify emerging community trends and anticipate property value fluctuations by analyzing historical data patterns and current market indicators. Meanwhile, generative AI can be used to craft compelling property descriptions and targeted marketing materials.

But technology’s capabilities in real estate extend beyond AI to include a broad range of “proptech” solutions that can automate real estate operations. Blockchain technology, for instance, is being used to provide secure and transparent records of property transactions, title transfers, and other documents, while smart contracts built on blockchain can automate and secure property-related agreements and transactions between parties, reducing processing time and costs. Virtual and augmented reality technologies have also gained traction, helping companies reach a wider audience by fueling remote property tours and new construction visualizations.

So what’s the challenge? Implementing any of these technologies on-premises requires significant, upfront financial investment and expertise in infrastructure, integration, training, and cybersecurity. Cloud-based solutions remove much of those burdens while offering easier deployment. Still, real estate companies must evaluate their needs to decide which technologies can truly add value.

15. Limited Scalability

As real estate organizations grow, traditional manual processes throughout all corners of the business become increasingly complex, cumbersome, and prone to human error. Geographic expansion compounds these challenges, as companies must manage different market conditions, regulatory requirements, and local business practices.

Legacy systems typically lack the flexibility to accommodate growth. Modern ERP solutions, on the other hand, can scale up or down based on business needs. These cloud-based systems integrate essential functions, such as lease administration, financial forecasting, maintenance scheduling, and document management, onto a single platform, eliminating data silos and reducing administrative overhead.

How Technology Helps Solve Real Estate Challenges

With the right technological solutions in place, real estate companies can address their internal challenges and help contain, at least, the external ones that are beyond their control. Here are six ways technology can help solve real estate challenges:

1. Automate repetitive tasks: Automation tools streamline mundane, time-draining tasks, such as data entry and document management. This frees employees to focus on higher-value work, such as generating leads and building client relationships.
2. Improve data management and analysis: With a centralized data storage system and AI-backed advanced analytics, companies can have valuable data insights at the ready. This real-time intelligence helps them identify market trends and make more informed portfolio decisions, among other advantages.
3. Enhance communication and collaboration: Digital platforms ease interaction among all parties in a real estate transaction. Videoconferencing and secure messaging systems facilitate efficient communication, regardless of stakeholders’ locations. Client portals and electronic signature capabilities further streamline transaction administration by providing secure document sharing and faster contract execution.
4. Provide virtual property tours and visualizations: Immersive tours, courtesy of virtual reality, allow real estate firms and agents to showcase multiple properties while giving potential buyers detailed views of spaces before in-person visits. This technology expands market reach while saving time and resources for all parties.
5. Employ smart building technology: Internet of Things devices and smart building systems improve energy efficiency and maintenance processes. Sensors can monitor equipment performance, predict maintenance needs, and automatically adjust building systems, while collected data helps property owners optimize utility costs and prevent expensive repairs.
6. Speed accounting processes: Automated accounting systems can handle everything from rent collection and invoice processing to financial reporting and tax calculations. This automation significantly reduces month-, quarter-, and year-end closing times while ensuring accurate, compliant financial statements.

Tackle Real Estate Industry Challenges Head-On With NetSuite ERP

From property management and lease administration to client relationships, financial reporting, marketing, and much more, real estate organizations must manage many diverse aspects of their business—each one potentially requiring its own specialized system. NetSuite ERP minimizes this complexity through one consolidated cloud-based system that can encompass most, if not all, business functions for real estate companies. The solution provides businesses with real-time visibility into their financial and operational performance; automates key processes, including accounts payables and receivables; and ensures compliance with real estate accounting standards. Centralized customer data also enables more strategic tracking of relationships with buyers, sellers, tenants, vendors, and other important partners. NetSuite ERP helps real estate organizations reduce their costs through improved efficiencies and make data-driven decisions based on accurate, up-to-date information.

The real estate industry faces a slew of internal and external challenges as it heads into 2025. They include operational hurdles, such as inaccurate financial reporting and fragmented data systems, and broader market pressures, such as rising interest rates and housing affordability concerns. Organizations that take a proactive approach to addressing these challenges—through strategic planning, process improvement, and technological solutions—can build resilience against market uncertainties while creating opportunities for future expansion.

Real Estate Industry Challenges FAQs

What is the biggest challenge facing the real estate industry?

The real estate industry faces many big challenges in 2025. Among them, according to the 13th annual compilation by the Counselors of Real Estate, are high financing costs, commercial loan maturities, and geopolitical issues that affect supply chains, inflation, and housing affordability.

What is the biggest challenge facing realtors?

As new online real estate platforms appear and the number of licensed agents grows, realtors must find new ways to attract clients. This may include developing a strong personal brand and reputation, building a robust online presence, and delivering exceptional service consistently.

Is the real estate industry growing or declining?

In many markets, demand for housing continues to outpace the supply, leading to rising home prices and increased competition among buyers. Nevertheless, new and existing home sales are expected to rise by about 10% in 2025, according to the National Association of Realtors. On the other hand, the commercial real estate sector could face significant challenges as billions of dollars’ worth of property loans come due in 2025. This suggests uneven growth across different market segments, with the residential sector showing promise while the commercial sector grapples with refinancing concerns in a high interest rate environment.

What problems do realtors solve?

For nonprofessionals, real estate transactions can be tough to navigate. Realtors guide clients through the complex process of buying, selling, or leasing properties while managing documentation, negotiations, and regulatory compliance requirements. They also provide market insights and access to their networks of lenders, inspectors, and other service providers.