CBRE’s U.S. Real Estate Market Outlook 2025, released on June 20, outlines a cautiously optimistic trajectory for the commercial real estate sector. Despite persistent challenges—chief among them high interest rates and tight credit conditions—the report projects a moderate recovery across all major property types: office, retail, industrial, and multifamily. This rebound is expected to be underpinned by resilient consumer spending, steady economic growth, and increasing investor interest in select asset classes.
The report notes that the 10-year U.S. Treasury yield remains elevated, hovering above 4%, which continues to influence borrowing costs and suppress investment activity. However, CBRE expects U.S. gross domestic product (GDP) to grow by 2% to 2.5% in 2025, with inflation easing closer to the Federal Reserve’s 2% target and unemployment remaining stable around 4.5%. These macroeconomic conditions are seen as sufficient to support a gradual uptick in real estate activity, especially as market participants adapt to the new normal of higher interest rates.
Sector-by-Sector Outlook
The office sector remains the most vulnerable, with vacancy rates peaking near 19% and only modest leasing recovery expected. Still, CBRE forecasts that office leasing volume could rise by around 5% in 2025, led by flight-to-quality trends. Tenants are showing increased demand for modern, amenity-rich buildings in prime locations, while older assets face longer-term obsolescence unless redeveloped or repurposed.
Retail, in contrast, is emerging from the downturn as one of the stronger-performing asset classes. Suburban retail centers and Sun Belt locations are experiencing renewed leasing interest as population migration patterns continue to favor these regions. With the lowest vacancy rates among major property types, retail is expected to see increasing institutional investment in 2025, particularly in service-oriented and experiential retail formats.
The industrial sector, after experiencing a pandemic-era boom, is settling into more sustainable growth. Leasing volumes are projected to return to pre-pandemic levels, with demand driven by e-commerce, logistics, and reshoring of supply chains. However, vacancies in older industrial buildings may remain elevated as tenants gravitate toward newer facilities with modern specifications.
Multifamily housing remains a cornerstone of commercial real estate investment. While the market saw a surge in new supply in 2024, absorption is expected to strengthen in 2025 amid steady job growth, rising wages, and barriers to homeownership. As mortgage rates remain high, many would-be buyers are staying in rental markets, keeping demand strong for well-located apartment communities.
Capital Markets and Investment Sentiment
CBRE’s 2025 Investor Intentions Survey found that a significant majority of institutional investors plan to expand their real estate holdings, particularly in industrial and multifamily sectors. About 75% of respondents indicated intentions to make new acquisitions in the first half of the year. This reflects a growing belief that current market conditions offer a strong entry point for long-term investors, even as many remain cautious due to refinancing risks and asset repricing.
Transaction volumes are forecast to grow by up to 10% in 2025, with pricing stabilization expected as interest rates plateau and capital becomes more accessible. Non-bank lenders and private capital are increasingly stepping in to fill gaps left by traditional financing sources.
Risks and Policy Implications
Despite the improved outlook, several risks could derail the recovery. Elevated federal debt levels and geopolitical uncertainty continue to exert upward pressure on interest rates. Meanwhile, the commercial sector faces an estimated $1 trillion in debt maturities over the next two years, raising concerns about refinancing viability and potential distressed asset sales.
CBRE also points to policy measures—such as potential Federal Reserve rate cuts and local zoning reforms—as critical levers that could accelerate recovery. If borrowing costs ease later in the year, transaction activity and development pipelines may expand more rapidly.
Conclusion
While the commercial real estate sector is unlikely to return to the robust growth seen in previous cycles, CBRE’s 2025 outlook suggests a shift toward stability and cautious optimism. As the economy holds steady and capital adapts to new interest rate realities, the market is poised for a moderate, sector-specific rebound. Investors focusing on quality assets in growth markets may find meaningful opportunities as the year progresses.