2025 CRE Market Takeaways: How Different Regions and Asset Types Performed
The commercial real estate market in 2025 did not move in one direction, or for one reason. Instead, performance varied widely by region, asset type, and local fundamentals, reinforcing a key lesson for property owners, investors, and lenders: national headlines only tell part of the story.
Using CoStar-reported trends and market observations from across the country, here’s a look at how different regions and asset classes performed in 2025, and what those differences mean heading into 2026.
Sun Belt Markets: Growth Still Matters—But Selectivity Is Key
Markets such as Tampa, Dallas–Fort Worth, Austin, Phoenix, and Nashville continued to outperform many national averages, supported by population inflows, employment growth, and business expansion.
What we saw in 2025:
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Retail and industrial assets remained resilient
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Rent growth moderated but stayed positive relative to the U.S. average
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Office performance varied widely by submarket and building quality
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New construction slowed, helping stabilize fundamentals
Key takeaway:
Growth markets still rewarded investors and owners—but only when assets were well located and aligned with current tenant demand. The days of broad-based appreciation gave way to property-level performance differentiation.
Midwest & Secondary Markets: Stability Over Speed
Markets like Indianapolis, Columbus, Kansas City, Minneapolis, and Des Moines demonstrated a different kind of strength in 2025—consistency.
What we saw in 2025:
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Less pricing volatility than coastal or high-growth markets
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Continued demand for industrial and necessity-based retail
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Steady occupancy supported by diversified local economies
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Investor interest driven by lower basis and predictable cash flow
Key takeaway:
In a cautious capital environment, stability became an advantage. Secondary markets proved that slower growth does not necessarily mean weaker fundamentals—particularly when operating costs and entry pricing remain favorable.
Coastal Gateway Markets: Correction and Repricing Continue
Major coastal metros—including New York, San Francisco, Los Angeles, Seattle, and Boston—continued to adjust in 2025, particularly in the office sector.
What we saw in 2025:
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Office pricing resets driven by utilization and leasing uncertainty
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Increased bid-ask spreads across several asset types
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Strong demand for best-in-class assets, even as overall volume remained muted
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Greater scrutiny of income assumptions and exit cap rates
Key takeaway:
2025 reinforced the importance of current, market-supported valuations in gateway cities. While challenges persisted, well-located and well-leased properties continued to trade—just under more disciplined assumptions.
Asset Class Performance: Not All CRE Moved Together
Retail
Retail was one of the more stable asset classes in 2025, particularly for:
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Grocery-anchored centers
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Neighborhood retail
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Smaller-format spaces favored by national brands
Construction remained limited, supporting rent levels in many markets.
Industrial
Industrial demand normalized after record highs in prior years, but fundamentals remained healthy:
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Vacancy increased modestly in some markets
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Rent growth slowed but stayed positive
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Location and logistics efficiency became even more important
Office
Office performance was highly market and asset-specific:
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Class A, well-amenitized buildings outperformed
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Commodity office faced continued leasing challenges
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Valuations depended heavily on tenant quality and lease duration
Multifamily
Multifamily experienced:
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Slower rent growth due to new supply deliveries
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Generally stable occupancy in growth markets
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Greater emphasis on operating efficiency and expense management
Key takeaway:
In 2025, asset class performance depended less on category and more on execution, location, and market fundamentals.
What 2025 Taught the CRE Market
Several clear lessons emerged:
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There is no “average” CRE market anymore
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Regional and submarket data matters more than national trends
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Asset quality and tenant profile drive value
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Accurate valuations require real-time, localized insight
These themes shaped decision-making throughout 2025 and will continue to influence transactions, financing, and development strategies in 2026.
Looking Ahead to 2026
As markets move further into normalization, success will depend on understanding where demand is durable, where pricing has adjusted, and where assumptions need to be reset.
At Lowery Property Advisors, we evaluate commercial real estate through a market-specific, data-driven lens, recognizing that credible valuations depend on understanding not just what happened—but why it happened in each market. As regional differences continue to shape performance, clarity and context remain essential for informed real estate decisions.
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