The National Association of REALTORS® Research Group’s August 2025 Commercial Real Estate Market Insights Report was recently published an in-depth analysis of the U.S. commercial real estate (CRE) landscape.
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 Federal Reserve held benchmark rates at 4.5% for the fifth meeting, with inflation steady at 2.7%—above the 2% target. Job growth slowed to 73,000 in July, and unemployment rose to 4.2%.
However, Q2 GDP rebounded by 3%, driven by consumer spending. Anticipated rate cuts from September could ease CRE borrowing. Total CRE debt held at $3 trillion, with delinquency stable at 1.57% in Q2, though large banks reduced holdings while small banks grew theirs.
Office Properties
Absorption turned negative at -16.5 million sq. ft. over 12 months, which was milder than in prior years. Vacancy remained at 14.1%, and rent growth was subdued at 0.7%, with landlords offering concessions.
Class A properties saw positive absorption and a vacancy drop to 20.0%, while Class B and C weakened. The worst performers included Washington, DC; Chicago; and Boston, each vacating more than 3 million sq. ft.
Multifamily Properties
The sector showed stabilization, with 512,000 units absorbed over 12 months and completions down 16%. Supply exceeded demand by 14%, pushing vacancy to 8.1%, but rent growth held at 1.0%.
Class A vacancy was highest at 10.2%, Class B was strongest in absorption, and Class C rents rose 1.6%. Sun Belt markets like Austin and Florida cities saw rent declines of more than 4%, while San Francisco led growth at 6.1%.
Major metros such as NYC and Dallas added more than 20,000 units.
Retail Properties
Demand softened, with absorption dropping to -10.9 million sq. ft. over 12 months; rent growth slowed to 1.8% but still led all sectors. Vacancy rose to 4.3%, the lowest overall.
General retail posted positive absorption and 2.7% vacancy, while neighborhood centers and malls were the weakest.
Strongest rent growth occurred in Raleigh (7.1%) and Omaha (5.5%), while Pittsburgh declined by more than 4.5%. Top absorbers included Houston and Dallas (each more than 1 million sq. ft.), but Los Angeles lost 2.1 million.
Industrial Properties
Momentum cooled, with absorption down 54% to 60.5 million sq. ft.—a decade low. Deliveries outpaced demand 4:1, pushing vacancy up to 7.5%, and rent growth eased to 1.7%. Logistics drove demand (60.9 million sq. ft.), while flex space vacated 6.4 million.
The strongest performers were Dallas (20.4 million sq. ft.) and Savannah (19.5 million, with a specialized surge). Rent leaders included Dayton (9.1%) and Charlotte (6.1%), while Los Angeles declined 5.0%.
Hotel Properties
The sector remained stable with 62.9% occupancy (3.1% below pre-pandemic levels), but ADR ($161) and RevPAR ($101) were up 22% and 17% from 2019. Sales volume fell to $19.6 billion over 12 months due to high costs.
Leisure spots like Hawaii excelled (Kauai: ADR/RevPAR up 57%/59%), while urban areas (San Francisco, Texas West) lagged 27-29% below benchmarks. NYC led occupancy at 86%.
Our Thoughts
Moving forward, the CRE market may see a gradual recovery as lower interest rates stimulate demand, particularly in office and industrial sectors adapting to hybrid work and logistics needs.
However, oversupply in multifamily and retail, alongside regional disparities (e.g., Sun Belt rent declines vs. San Francisco growth), suggests cautious optimism. Investors should monitor urban market recoveries and leverage data-driven strategies, as hospitality’s profitability and industrial logistics growth could drive future trends.
By mid 2026, balanced supply-demand dynamics and economic stability may position CRE for modest growth, though persistent challenges like vacancies and financing costs warrant strategic planning.
Click here to read the entire report.
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