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Construction and real estate activity in the U.S. and Georgia continue to be shaped by economic, political, and market forces. Below are several key trends that will influence development in 2025.

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In a previous article, we discussed how the COVID-19 pandemic has led to an increase in employees working away from the office. Even with more employers implementing return-to-office mandates for employees, many commercial office spaces remain underutilized.

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As a result, the U.S. is experiencing a steady uptick in the conversion or demolition of aging or vacant office properties into other uses such as multifamily, mixed-use, and hotel developments. According to CBRE, approximately 23.3 million square feet of office space is slated for conversion or demolition, nearly double the 12.7 million square feet of new office supply expected this year.<a href="#note-i">[i]</a> More than 70% of current or planned office conversions are targeted for multifamily projects, while hotels account for roughly 8% of all conversions.<a href="#note-ii">[ii]</a>

This movement is also visible in metro Atlanta, where about 667,254 square feet of office space is expected to transition to other uses, compared to only 250,000 square feet of new office development projected for completion this year.<a href="#note-iii">[iii]</a>

Construction Firms Continue to Navigate Tariffs

Ongoing supply chain disruptions and tariffs continue to challenge development budgets and timelines. Deloitte reports that the effective tariff rate for construction goods has risen to a 40-year high, reaching 25% to 30%.<a href="#note-iv">[iv]</a> As a result, material costs increased in 2025 and may continue trending upward.

Construction firms and organizations are deploying new strategies in response to these challenges. Some of these strategies include the following: (1) bulk purchase of materials to mitigate fluctuations in price, (2) substitution of high-cost materials on projects with other materials that cost less but provide similar quality, and (3) the diversification of supplier relationships to provide alternative sources for materials.<a href="#note-v">[v]</a>

Continued Growth in Data Center Construction

Although overall construction activity has slowed in 2025 due to higher costs and regulatory uncertainty, data center development continues to surge. Data center construction is largely driven by the increased demand for AI and other cloud-based services. Atlanta, for example, is one of the largest data center markets and, according to the CBRE, the state has had the best year-over-year growth in data center inventory through the first half of 2025<a href="#note-vi">[vi]</a>

Georgia’s Continued Recognition as a Top State for Business

Georgia continues to perform strongly in national business climate rankings. For the 12th consecutive year, Georgia has been recognized by Area Development as the top state for business in 2025. Area Development’s rankings evaluate states based on access to qualified talent, pro-business policy at the local and state level, and the state’s overall suitability for site development and expansion.<a href="#note-vii">[vii]</a>

Georgia, for example, led all states in its speed of permitting for development projects and was a top state for availability of development sites, logistics, and workforce development. These and other factors will remain important considerations for businesses and organizations when they begin to evaluate states for their next office, headquarters, or facility.<a href="#note-viii">[viii]</a>&nbsp; This article may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel. This document may be considered attorney advertising in some jurisdictions. © 2024 THOMPSON HINE LLP. ALL RIGHTS RESERVED.

<a href="#_ftnref1">[i]</a> <a href="https://www.cbre.com/insights/briefs/conversions-and-demolitions-reducing-us-office-supply" target="_blank" rel="noreferrer noopener">https://www.cbre.com/insights/briefs/conversions-and-demolitions-reducing-us-office-supply</a>

<a href="#_ftnref3">[iii]</a> <a href="https://www.cbre.com/press-releases/atlanta-office-conversions-to-exceed-new-construction-in-2025" target="_blank" rel="noreferrer noopener">https://www.cbre.com/press-releases/atlanta-office-conversions-to-exceed-new-construction-in-2025</a>

<a href="#_ftnref4">[iv]</a> <a href="https://www.deloitte.com/us/en/insights/industry/engineering-and-construction/engineering-and-construction-industry-outlook.html" target="_blank" rel="noreferrer noopener">https://www.deloitte.com/us/en/insights/industry/engineering-and-construction/engineering-and-construction-industry-outlook.html</a>

<a href="#_ftnref6">[vi</a>] <a href="https://www.deloitte.com/us/en/insights/industry/engineering-and-construction/engineering-and-construction-industry-outlook.html" target="_blank" rel="noreferrer noopener">https://www.deloitte.com/us/en/insights/industry/engineering-and-construction/engineering-and-construction-industry-outlook.html</a>

<a href="#_ftnref7">[vii]</a> <a href="https://www.areadevelopment.com/Top-States-for-Doing-Business/q3-2025/2025s-top-states-for-business.shtml" target="_blank" rel="noreferrer noopener">https://www.areadevelopment.com/Top-States-for-Doing-Business/q3-2025/2025s-top-states-for-business.shtm</a>l

<a href="#_ftnref8">[viii]</a> <a href="https://www.areadevelopment.com/Top-States-for-Doing-Business/q3-2025/2025s-top-states-for-business.shtml" target="_blank" rel="noreferrer noopener">https://www.areadevelopment.com/Top-States-for-Doing-Business/q3-2025/2025s-top-states-for-business.shtml</a>

2025 Development Trends: Conversions, Tariffs, and Data Centers

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