Bank of America’s 2025 Specialty Asset Outlook: A Bull Market in Real Assets?

The Bank of America’s 2025 Specialty Asset Management (SAM) Outlook is out, and the message is clear: real assets—like commercial real estate, farmland, timberland, and energy—are poised to play a central role in investment strategies as the global economy navigates elevated inflation and shifting demand patterns. The report, authored by the bank’s private wealth team, positions these sectors as critical diversifiers in an era where traditional financial instruments face headwinds.

1. Commercial Real Estate: A Sector on the Rebound

The report highlights that commercial real estate (CRE) is entering a phase of stabilization after years of volatility. Rising interest rates and overbuilding in some markets had dented investor confidence, but bank of america sees a rebalancing act underway. Property valuations are stabilizing, and liquidity is improving, particularly in sectors like industrial and multifamily housing.

The outlook advises investors to adopt a selective approach, favoring subsectors tied to long-term structural trends. For instance, warehouses near major urban centers—critical for e-commerce logistics—are singled out as a high-potential niche. Meanwhile, office spaces remain a mixed bag, though the report notes that Class A office properties in major tech hubs (e.g., Austin, Seattle) are holding their value better than their suburban counterparts.

2. Farmland: A Quiet Resilience

Farmland, often overlooked in mainstream portfolios, is framed as a “stability play.” The report points to easing competitive pressures and stable (if slightly lower) valuations as buying opportunities emerge. Unlike other asset classes, farmland’s value is tied to tangible productivity—crop yields, water rights, and soil quality—making it less susceptible to market swings.

One key advantage: farmland offers a natural hedge against inflation. As food demand grows alongside global population expansion, the asset class is expected to deliver steady income through rental agreements and commodity price appreciation. Bank of America notes that farmland has historically outperformed bonds and cash during inflationary periods, though it cautions that due diligence is critical.

3. Timberland: The Biological Hedge

Timberland stands out in the report for its unique characteristic: growth driven by biology, not economics. Trees take decades to mature, but their steady expansion creates a predictable yield stream. The report emphasizes that timberland returns are “decoupled from macroeconomic cycles,” making them ideal for risk-averse investors.

Moreover, timber’s role in sustainable construction and packaging materials is gaining traction. Bank of America cites the rise of “green building” standards, which favor wood over steel and concrete, as a tailwind. The report estimates that timberland investments could provide annual returns of 6-8% over the next decade, with minimal correlation to stock or bond markets.

4. Energy: A Shift Toward Renewables and Natural Gas

The energy sector’s outlook is shaped by two trends: rising global demand and the push toward carbon-friendly solutions. Bank of America projects that energy usage will grow by 1.7% annually through 2040, driven by emerging economies and industrial activity. Domestically, the focus is on natural gas—a bridge fuel—and renewables like solar and wind.

The report warns against overexposure to fossil fuels but highlights opportunities in energy infrastructure, such as pipeline networks and utility-scale solar farms. For example, U.S. natural gas production is expected to rise 12% by 2030, supported by export demand from Asia and Europe.

The Risks and the Bottom Line

Bank of America’s SAM team is quick to note the risks: real assets are illiquid, tax regimes are complex, and natural disasters or regulatory changes can cause abrupt losses. For instance, a wildfire in a timber region or a sudden drop in crop prices could wipe out gains. The report stresses that these investments should represent a “strategic slice” of a portfolio, not a dominant position.

Despite the risks, the data is compelling. Over the past decade, a portfolio with 15% allocated to real assets (CRE, farmland, timber, and energy) outperformed an all-stock portfolio in 7 of 10 years, with 30% less volatility. As the SAM Outlook concludes: “In 2025, the most resilient portfolios will be those that embrace real assets—but with eyes wide open.”

In a world where traditional assets are increasingly correlated and volatile, the message is clear: diversification isn’t just about stocks and bonds anymore. The future of wealth management may very well be written in concrete, crops, trees, and turbines.

Final Note: The Bank of America SAM team manages $50 billion in specialty assets for ultra-high-net-worth clients, with a 10-year average return of 9.2% annually across its real-asset portfolios. The report underscores that 2025 is a pivotal year to position for the next decade—but investors must act strategically, not impulsively.