The 2025 Horizon: Key Insights for Facility Managers and Building Owners

By Caroline Shelly

As 2024 comes to a close, it’s a time to reflect on the milestones we’ve achieved and the challenges we’ve overcome. But it’s also an opportunity to look ahead. The new year brings change, and 2025 is set to reshape the landscape for building owners, facility managers, and corporate office spaces. With the U.S. government transitioning in January, new tax incentives and potential challenges are on the horizon—offering opportunities for growth, innovation, and strategic planning. Some of these new tax incentives might include:

Potential Tax Incentives:

1. Energy Efficiency and Sustainability:

   • Start by exploring the potential continuation or expansion of incentives for green building improvements. These include tax credits for energy-efficient HVAC systems, solar installations, and sustainable retrofits under the Inflation Reduction Act—each designed to reduce carbon footprints and support environmental goals. Begin by conducting an energy audit of your facility to identify areas for improvement. Then, connect with your local public utility companies, as they offer comprehensive programs and expert guidance to help you determine which incentives are best suited for your company. Taking these proactive steps can help you align with environmental objectives while achieving cost savings and long-term sustainability. U.S. Chamber of Commerce

2. Commercial-to-Residential Conversions:

   • In cities facing high office vacancy rates, there are increasing incentives for converting underutilized commercial properties into residential spaces. These include tax credits, grants, and zoning adjustments to encourage adaptive reuse of buildings, with California, New York, and Chicago leading the way. Thompson Coburn

3. Capital Investment Incentives:

   • The government may introduce or bring back policies that allow businesses to deduct the full cost of certain facility and equipment upgrades immediately, rather than spreading the deductions out over several years. This is known as “100% bonus depreciation” or “full expensing.” If these proposals are enacted, they could make it more affordable to invest in modernizing your facilities, upgrading equipment, or improving infrastructure. By deducting these expenses all at once, businesses can reduce their taxable income for the year, freeing up cash flow to reinvest in other areas. Ballard Spahr | National Law Firm

​Challenges for Corporate Office Space:

The corporate office landscape is undergoing a profound transformation as hybrid work models, evolving tax policies, and market shifts redefine how businesses use and invest in their spaces. From record-high vacancy rates in urban centers to increasing operational costs driven by rising taxes, companies and building owners alike face significant challenges. Additionally, while adaptive reuse projects like converting offices into residential spaces offer opportunities, they come with complex regulatory and logistical obstacles. To navigate these changes effectively, businesses must stay ahead of legislative developments, leverage local programs for financial support, and rethink their strategies for space utilization and investment.

1. Office Space Utilization Declines:

   • Hybrid work models have led to historic vacancy rates in urban centers. Many companies are downsizing, leading to difficulties in leasing or maintaining large office spaces.

2. Rising Tax Burdens:

   • Scheduled increases in corporate tax rates, limitations on interest expense deductions, and amortization of R&D expenses could increase operational costs for businesses. This may deter investment in office space improvements​

3. Complex Conversions:

   • While incentives exist, converting offices to residential properties faces logistical and regulatory hurdles, such as zoning laws and architectural constraints, which may impact the financial feasibility of such projects​

Building owners and facility managers should stay informed about potential legislative developments and local programs offering financial support for adaptive reuse, sustainability projects, and modernization efforts. At the same time, corporations should assess their space utilization strategies and plan for potential tax policy changes that could affect their bottom lines.

The evolving landscape of tax incentives and challenges in 2025 may inspire several positive initiatives that benefit building owners, facility managers, and broader society:

1. Green Building Innovations

   • Enhanced tax credits for sustainable retrofits and energy-efficient improvements could accelerate the adoption of green technologies. This aligns with corporate ESG (Environmental, Social, Governance) goals and contributes to combating climate change​. A facility manager might take advantage of enhanced tax credits to upgrade an office building with solar panels and energy-efficient HVAC systems, reducing operating costs and supporting ESG goals.

2. Revitalization of Urban Areas

   • Conversion incentives for transforming vacant office spaces into residential units or mixed-use developments may rejuvenate downtown districts suffering from high vacancy rates. This could create more vibrant, livable urban areas and address housing shortages​. A building owner could use conversion incentives to transform an underutilized office tower into a mixed-use development with residential units and retail space, helping to revitalize a struggling downtown area.

3. Economic Growth and Job Creation

   • Investments spurred by tax incentives—such as reinstating full expensing for capital investments—could boost economic activity, create construction jobs, and stimulate demand for related industries​. A developer could leverage full expensing for capital investments to modernize an old warehouse into a coworking space, creating construction jobs and supporting local businesses.

4. Modernized Workspaces

   • Challenges with retaining tenants may push building owners to invest in modern amenities and flexible spaces. These upgrades can attract hybrid and remote-first companies, creating a more adaptable and appealing workspace market. A landlord might invest in shared lounges, fitness centers, and advanced air filtration systems to attract hybrid-work tenants, creating a workspace that meets the demands of a changing workforce.

6. Innovation in Facility Management

   • New challenges could inspire innovative approaches to managing space utilization, energy efficiency, and tenant experiences. Facility managers may adopt advanced technologies, like IoT (Internet of Things) and AI-driven analytics, to optimize operations. For example, a facility manager might implement IoT sensors throughout a corporate office to monitor real-time space utilization, such as which desks, meeting rooms, or collaborative areas are most frequently used. This data could then be analyzed using AI-driven analytics to identify underutilized areas and reconfigure the office layout to better meet employee needs.

Next Steps You Can Take Now

1. Conduct an Energy Audit

   • Discover hidden savings by identifying energy inefficiencies. Upgrade to eco-friendly systems like solar panels and LED lighting. Tap into utility incentives and grants to turn sustainability into profitability.

2. Rethink Space Utilization

   • Is your space working as hard as you are? Optimize underused areas for hybrid work with coworking zones and flexible layouts that attract and retain tenants.

4. Prepare for Tax Policy Shifts

   • Stay ahead of the curve. Monitor new policies like full expensing for upgrades to maximize savings. Strategize with financial advisors to seize 2025’s tax incentives.

5. Embrace Smart Tech

   • Revolutionize operations with AI tools. Track space and energy usage in real-time, then act on insights to boost efficiency and tenant satisfaction.

HF Planners, LLC Can Help

These initiatives highlight how shifts in policy and market conditions can catalyze forward-thinking solutions, turning challenges into opportunities for sustainable development and economic revitalization. HF Planners can play a critical role in supporting these efforts by offering expertise in strategic facility planning, workspace design, and project management. Whether it’s assisting with green building improvements, reimagining office layouts for hybrid work models, or managing complex conversion projects, HF Planners can help businesses align their facility strategies with evolving goals and regulations. By partnering with stakeholders, HF Planners ensures that every project not only meets immediate needs but also supports long-term success in a rapidly changing environment.

Have questions or innovative ideas? Let’s make them a reality! Connect with Caroline Shelly today and take the first step toward transforming your facilities for 2025 and beyond.

Caroline Shelly: cshelly@hfplanners.com

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