Below is a summary of the performance of each major commercial real estate sector in June of 2025:
After nearly turning positive in Q1 2025, office absorption declined again in the second quarter
as tenants remained hesitant to commit to leases amid broader economic uncertainty, lifting
the vacancy rate to 14.1%. Landlords grew more competitive on pricing, slowing annual rent
growth to 0.6%. Class A offices posted positive 12-month absorption for the second straight
quarter but saw vacancy climb to 20.5%. Class B space continued to shed tenants, though at
half last year’s pace, with vacancy at 12.0% and stronger rent growth of 1.2%. Class C properties
faced further losses, pushing vacancy to 5.4%.
As of June 2025, the multifamily market shows early signs of stabilization, with net absorption
up 20% year-over-year to 531,000 units and new completions down 9%. Vacancy held at 8.1% as
the supply-demand gap narrowed, and rent growth stayed modest at 0.9%. Class B properties
led demand with stronger rent gains, while Class A maintained the highest vacancies.
Oversupply continued to pressure rents in parts of the Sun Belt, while markets like South Bend
and San Francisco outperformed with above-average growth.
Retail demand has weakened over the past year, with 12-month net absorption falling from
37.4 million to –3.9 million square feet and annual rent growth slowing to 2.0% in June 2025.
Nonetheless, retail currently holds the fastest rent growth and the lowest vacancy rate among
all CRE sectors. General retail was the only segment with positive absorption in Q2 2025, while
neighborhood centers and malls posted the biggest losses, the latter offsetting most of its
vacancy impact through inventory cuts. General retail also maintained the lowest vacancy at
2.6%, while neighborhood centers and power centers led rent growth at 2.7% and 2.6%,
respectively.
The industrial sector’s post-pandemic surge has cooled, with oversupply and softer demand
driving a 39% year-over-year drop in net absorption to a decade-low 79.7M SF. New
completions outpaced demand by 4 to 1, pushing vacancy up to 7.4%. Rent growth slowed to
1.7%, falling behind retail as the fastest-growing CRE sector. Logistics remained the primary
demand driver, followed by a sharp rise in specialized facility absorption, while Flex space saw
net losses.
As 2025 moves forward, the hospitality sector remains stable, though occupancy at 63.0% is
still 2.9% below pre-pandemic norms, weighed down by remote work and reduced corporate
travel in urban markets. Nonetheless, ADR and RevPAR have surpassed 2019 levels, up 22% and
17%, respectively, driving a rebound in profitability. Hotel transaction activity has eased as
investors await clearer signs of sustained demand. Performance remains uneven, with leisure focused markets like Hawaii leading the way, while some urban destinations continue to lag.
