In the second quarter of the year, the economy showed signs of renewed momentum, even as monetary policy remained the same. This resilience was driven mostly by solid consumer spending and a decline in imports. Inflation edged higher to 2.7%, while the labor market continued to add jobs. In this economic environment, commercial real estate trends saw little major change. The office sector continued to weaken, and retail and industrial activity cooled further. Multifamily remained the bright spot, though signs indicate the sector may have peaked as net absorption has begun to slow. The hospitality industry remained stable. Looking ahead, while the Federal Reserve is expected to lower rates, any reduction in borrowing costs could provide a lift to commercial real estate activity. Here is a short summary of the major asset classes.
Office
Office absorption slipped in Q2 2025 as economic uncertainty kept tenants cautious, driving overall vacancy to 14.1%, slowing rent growth to 0.6%, and revealing a split market where Class A held modest demand but higher vacancy, Class B lost fewer tenants with slight rent gains, and Class C faced further losses.
Multifamily
As of June 2025, the multifamily market is showing early stabilization, with absorption up 20% and new supply easing, keeping vacancy steady at 8.1%, rent growth modest at 0.9%, and performance varying by class and region as Class B demand strengthens, Class A vacancies remain elevated, and select markets like South Bend and San Francisco outpace the national trend.
Retail
Retail demand softened over the past year, with absorption turning negative and rent growth slowing to 2.0% in June 2025, yet the sector still leads CRE with the lowest vacancy and fastest rent growth, driven by general retail’s resilience and stronger pricing at neighborhood and power centers.
Industrial
The industrial sector has cooled from its post-pandemic highs, with oversupply and weaker demand cutting absorption to a decade low, driving vacancy up to 7.4%, slowing rent growth to 1.7%, and leaving logistics and specialized facilities as demand bright spots while Flex space contracted.