The National Association of REALTORS® Research Group’s March 2025 Commercial Real Estate Market Insights Report was recently published an in-depth analysis of the U.S. commercial real estate (CRE) landscape.
Amid economic uncertainties and a stable Federal Reserve interest rate of 4.5%, the CRE market exhibits resilience, with pockets of stabilization and growth across key sectors.
Below is a streamlined summary of critical insights for the office, multifamily, retail, industrial, and hotel sectors, alongside economic and lending trends.
Economic Backdrop
The U.S. economy grew at a 2.4% annualized rate in Q4 2024, with job growth adding 151,000 jobs in February 2025, maintaining a 4.1% unemployment rate.
Inflation eased to 2.8%, prompting expectations of two rate cuts by year-end, which could stimulate CRE investment. CRE loans reached $3.01 trillion, with delinquency rates rising slightly to 1.57% in Q4 2024, particularly in the office sector at 7.8%.
Office Properties
The office market continues to face challenges, with negative net absorption of -20.5 million square feet over the past 12 months, driven by remote work trends. However, move-outs dropped significantly, and rent growth ticked up to 1.1%.
Vacancy rates hit 14.1%, with Class A properties at 20.5%. New York and Sacramento saw positive absorption, while San Francisco and Washington, DC, recorded losses. High vacancy rates persist in major metros like San Francisco (23.79%) and Houston (19.66%).
Multifamily Properties
The multifamily sector is stabilizing, with net absorption surging 46% to 551,000 units. Despite new supply outpacing demand, vacancy rates held steady at 8%, and rent growth remained modest at 1.1%.
Dallas-Fort Worth, New York, and Atlanta led absorption, while Sun Belt markets like Austin saw rent declines due to oversupply. Providence and Rochester posted strong rent increases above 3.5%.
Retail Properties
Retail remains resilient with the lowest vacancy rate among CRE sectors, despite a 77% drop in net absorption to 10.5 million square feet. Rent growth slowed to 1.9%, but general retail and strip centers drove positive absorption.
Dallas-Fort Worth led in absorption, while Los Angeles saw significant space losses. Salt Lake City and Norfolk recorded rent increases above 6%.
Industrial Properties
The industrial sector cooled after years of robust growth, with net absorption falling 42% to 114 million square feet and vacancies rising to 7%. Rent growth softened to 2%, but logistics properties led absorption.
Dallas-Fort Worth and Savannah topped absorption, while Los Angeles saw declines. Cincinnati and Dayton reported strong rent increases, while Port St. Lucie faced high vacancies.
Hotel Properties
The hotel sector maintained a 63% occupancy rate, with average daily rates (ADR) at $159 and revenue per available room (RevPAR) at $100, both surpassing pre-pandemic levels.
Maui led with an ADR of $542, and New York City topped occupancy at 84%. However, San Francisco and Oakland lagged in recovery. Hotel acquisitions dipped slightly to $22.1 billion.
Our Thoughts
Despite persistent challenges in the office sector, with high vacancies and negative absorption, other segments like multifamily and retail demonstrate resilience, driven by strong demand and tight supply. The industrial sector, though cooling, remains fundamentally sound, while hotels show steady recovery in profitability.
With inflation easing to 2.8% and anticipated Federal Reserve rate cuts, the CRE market is poised for gradual improvement in 2025, though regional disparities and oversupply in certain markets warrant careful monitoring.
Click here to read the entire report.
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