2025 Commercial Real Estate Mid-Year Update: Staying the Course

Key Insights

• Investment activity is recovering: Total commercial real-estate deal volume is expected to grow by about 10 % in 2025, though still remains well below the pre-pandemic average.

• Sector‐specific fundamentals vary:

  • Industrial/logistics: Demand remains strong for high-quality space; older or secondary assets are being left behind.

  • Retail: New supply remains very limited, especially in growth markets like the Sun Belt and Southeast, which supports rent growth and bidding competition.

  • Office: Still challenged, but signs of stabilization are emerging in prime assets as occupiers seek flexible, high-quality space.

• Capital markets: With higher rates and a sticky debt environment, cap rates may begin easing from their cyclical peaks, but investors remain selective.

  
  

Strategic Implications for Investors and Brokers

• Focus on quality, location and asset health: Assets with strong fundamentals, good location and tenants/occupiers that can weather slower growth will outperform.

• Be wary of excess supply: Markets or sub-sectors with heavy new construction or secondary assets face more risk.

• Leverage scarcity: In sectors like retail and industrial where new supply is constrained, there’s more upside for well-positioned owners and tenants.

• Watch macro risk: While fundamentals are holding up, slower GDP growth, geopolitical risk and rate volatility mean diligence is crucial.

  
  

Summary

Despite economic headwinds, the commercial real estate market is far from stagnant. The report underscores that fundamentals remain resilient, especially for prime assets in strong sectors and markets. For 2025, the winners will be those positioned with discipline, selective risk and strong operational execution.