Commercial Real Estate Markets in the USA

Commercial real estate markets in the USA react to economic forces, business decisions, and population trends. In 2025, each property type follows its own pattern; some are expanding quickly, while others are adjusting to reduced demand or new usage models.

Office vacancies remain high in large cities, while industrial properties are seeing steady interest from logistics and eCommerce players.

Retail locations are redesigned to stay relevant, especially in metro areas with strong foot traffic. At the same time, multifamily developments are increasing to keep up with rising rental demand in key states.

This blog outlines what’s happening across sectors, where growth is steady, and which metro areas are attracting investor attention.

If you manage, own, or invest in commercial property, these updates can help you plan more effectively, stay ahead of challenges, and better understand how different locations and property types are currently performing.

Current State of the Commercial Real Estate Sector in the U.S.

In 2025, the commercial real estate sector in the U.S. is showing signs of gradual recovery. While some parts remain uncertain, overall activity is increasing.

According to CBRE’s 2025 U.S. Real Estate Market Outlook, transaction volume is expected to grow slightly compared to the past two years, following slower periods caused by high inflation and changing interest rates.

The sector has a total market value above $20 trillion. Office properties in major cities still have high vacancy rates, but smaller markets and suburban areas have seen improved leasing activity.

Industrial real estate leads in performance, boosted by eCommerce growth, demand for logistics hubs, and the expanding need for data centers.

Retail has regained interest, especially in smaller-format stores tied to local communities. Multifamily properties remain strong, especially across the Sun Belt, where job and population growth continue. These segments are adjusting to changing expectations around energy use, technology, and long-term investment strategies.

Sector-by-Sector Breakdown

Office Market Trends Post-Pandemic

In 2025, the office segment of the U.S. commercial real estate market continues to adjust to long-term changes in tenant behavior and space use. While recovery is underway, progress varies across regions and building types. Hybrid work has shifted demand patterns, and many businesses are downsizing or reconfiguring their spaces rather than expanding.

Here are some data and trends:

National office vacancy rate: 17.6% as of Q1 2025 (Moody’s Analytics)
Downtown Class A vacancy: Exceeds 20% in cities like San Francisco and Chicago
Suburban office leasing volume: Up 6% year-over-year in Sun Belt metros
Average office lease size: Down 19% from pre-pandemic benchmarks
Tenant preference: Increased demand for flexible terms and shared spaces
Adaptive reuse trend: More than 15 million sq ft of office space converted to residential or mixed-use since 2023 (NAIOP)

Urban centers continue to see slower lease activity, with some firms exiting long-term contracts or renegotiating terms. In contrast, suburban locations have gained traction, particularly in areas with population growth and lower operating costs.

Office landlords focus on modern upgrades, shared amenities, and sustainability measures to retain tenants.

Industrial Property Demand Remains Strong

Industrial real estate continues to outperform other commercial property types in 2025. Demand is high across coastal and inland regions, driven largely by the ongoing growth of eCommerce and the need for improved supply chain efficiency.

Investors are paying close attention to this segment due to its resilience and long-term leasing stability.

Here are some data and trends:

National industrial vacancy rate: 4.2% in Q1 2025
Warehouse rent growth: Up 9% year-over-year in key logistics corridors
eCommerce share of retail sales: 22.1% in early 2025
Inland markets like Dallas and Indianapolis: Leading warehouse construction activity
Build-to-suit development: Accounts for over 60% of large industrial transactions
Average lease length: Exceeds 7 years for new industrial deals

Companies are expanding in suburban locations and smaller cities where land availability and transportation access improve operational costs. Logistics firms also focus on mid-mile and last-mile delivery centers to meet faster shipping expectations.

This sector also benefits from AI-driven inventory systems, automated facilities, and growing interest in data centers.

Retail Space Recovery & Redesign

Retail properties are steadily improving in 2025, particularly in areas with strong local economies or evolving downtown districts. The retail sector has responded to long-term consumer behavior changes by rethinking the storefronts' role and reworking older layouts into spaces that support community activity.

Here are the data and trends:

Retail vacancy rate (Q1 2025): 5.3% nationally
Leasing activity: Up 7% year-over-year across open-air retail centers
Urban mixed-use growth: Retail integrated with residential and office continues to expand in high-density areas
Suburban strip mall conversions: Nearly 15% of U.S. strip malls are undergoing partial or full repurposing
Foot traffic recovery: High-traffic metros exceed 2019 levels, while smaller towns show slower gains
Experiential retail formats: More than 35% of new leases include entertainment or dining elements

Metro areas like Miami, Austin, and Denver lead retail redesign efforts, often combining local services, food, and flexible use areas within a single building. In contrast, smaller towns are seeing more modest changes, with some relying on essential businesses to anchor demand.

Retail property owners are investing in visibility, walkability, and multi-use potential to meet shifting expectations.

Multifamily Growth in Urban & Secondary Markets

The U.S. multifamily sector continues to attract strong investor interest in 2025, but growing concerns around affordability and construction risks are changing the conversation. Rent growth has slowed from the peaks seen in 2022–2023, yet remains well above pre-pandemic levels in many urban markets.

Here are the data and trends:

National average rent increase (12-month): 4.7% as of March 2025
Sun Belt metro growth: Phoenix, Tampa, and Charlotte saw annual rent gains over 6%
New multifamily starts: Over 500,000 units underway in early 2025
Construction delays: 1 in 5 projects face setbacks tied to financing or permitting
Investor focus: Mid-tier cities with job growth and favorable tax structures
Affordability pressure: Over 50% of renters in major metros spend more than 30% of their income on rent

High inflation and interest rates have raised development costs, forcing some builders to pause or scale back. At the same time, many investors are moving capital into the residential rental segment due to its relative stability and long-term upside.

Property managers and owners are re-evaluating project locations, materials, and financing strategies to manage risk. While the demand outlook remains strong, affordability concerns are placing new expectations on how housing is built and priced across the country.

Commercial Real Estate Markets With The Highest Economic Growth

Some metro areas in the U.S. outperform others in 2025, driven by population growth, business migration, and job creation. These cities see increased leasing activity, new construction, and strong demand across multiple property types, especially industrial, multifamily, and office conversions.

Key growth markets include:

Austin, TX: Tech investment, business relocation, and a growing talent pool have boosted demand for commercial space. Leasing volume in Q1 2025 was up nearly 12% compared to last year.
Raleigh, NC: Affordable land, research institutions, and a steady pipeline of skilled workers have made Raleigh a favorite for real estate investors. Vacancy rates remain below national averages across all major sectors.
Phoenix, AZ: Industrial properties and multifamily housing are booming thanks to steady in-migration and expanding infrastructure. Developers are targeting areas around logistics corridors and new suburban developments.
Nashville, TN: Office-to-residential conversions and mixed-use projects are gaining traction, supported by regional job growth and downtown redevelopment efforts.

Regional Differences:

Sun Belt: Markets like Atlanta, Dallas, and Tampa continue to attract capital due to lower costs, business-friendly policies, and warmer climates.
Midwest: Cities such as Columbus and Indianapolis are growing steadily, though at a slower pace, driven by logistics and education-related development.
Northeast: Growth is more limited. While Boston remains strong in life sciences, other cities are seeing delayed recovery due to high operating expenses and limited space.

Conclusion

Commercial real estate in the U.S. today presents a mixed picture.

Some asset classes are gaining value quickly, while others are seeing slower progress. The strongest markets right now often combine affordable space, business growth, and strong regional hiring. Metro areas like Austin and Raleigh continue to attract construction and investment across industrial and multifamily developments.

In contrast, large office buildings in high-cost cities still face low occupancy and long lease cycles. Smaller cities with active populations and stable job markets are drawing more interest from property owners and real estate companies.

To make smarter decisions in 2025, stay informed on current trends, local performance data, and the practical needs of tenants.

The market has no single direction, but with the right insights, you can find opportunities that match your goals and help you stay competitive.

Frequently Asked Questions

Which U.S. cities are leading in commercial property growth?

Cities like Austin, Raleigh, Phoenix, and Nashville are growing strongly. These areas combine business expansion, population increases, and property development across multiple property types.

Is office space still a good investment?

Office space is still valuable, but returns depend on location, building quality, and tenant flexibility. Suburban offices and mixed-use conversions are performing better than large downtown towers.

What sector is outperforming in 2024?

Industrial real estate continues to lead. Due to eCommerce and supply chain planning, demand for warehouses, logistics centers, and data facilities remains high.

What are the risks of investing in commercial property now?

Risks include rising interest rates, construction costs, and regional demand changes. Investors face challenges from longer lease-up times and tighter financing conditions in some areas.