Commercial real estate faces sector-specific challenges and opportunities in 2025. Understanding these dynamics helps investors allocate capital to highest-return opportunities.
Office: The Remote Work Reckoning
Class B and C office vacancy rates exceed 20% in major markets. Conversion to residential gaining momentum. Class A properties with modern amenities maintain 85-90% occupancy. Flight to quality accelerating.
Retail: Experiential Focus Wins
E-commerce-resistant retail thrives: restaurants, fitness, entertainment, services. Strip centers anchored by grocers see 95% occupancy. Regional malls face continued pressure except top-tier properties.
Industrial: Logistics Boom Continues
Last-mile distribution centers command premium rents. Supply chain diversification drives new development. Cap rates compressed to 4-5% for quality assets. Highest institutional demand across all commercial sectors.