US Commercial Real Estate Thrives as Homeownership Costs Surge - RealEstateAbroad

US Commercial Real Estate Surges Amid Rising Homeownership Costs

The US commercial real estate market is experiencing notable growth, driven by rising homeownership costs that have led more individuals to opt for renting. This trend has tightened vacancies and boosted rent growth, particularly impacting higher-income renters in mid-tier products. As new housing supply remains limited, the focus on commercial real estate has intensified. Additionally, changes in the availability of foreign-born workers are affecting the construction and manufacturing sectors, further influencing market dynamics. These shifts reflect broader economic trends, including tariff negotiations and slower global growth patterns that impact real estate fundamentals both within the US and globally.

Multifamily Sector Sees Strong Absorption and Lower Vacancy Rates

According to the CBRE's 2025 Midyear Review, the multifamily sector has shown stronger-than-expected absorption, leading to a vacancy rate decrease to nearly 4% in the first half of 2025. This demand has been driven by the economic shift that makes homeownership less attainable for many, leading to increased interest in rental properties. Despite economic uncertainties and a lowered GDP growth forecast to 1.5%, the multifamily market continues to display resilience, attributing its success to favorable tax treatments for real estate and easing geopolitical tensions. The outlook for the remainder of the year remains optimistic, though investment activity is still 18% below pre-pandemic levels.

Office Investments Rebound With 42% Growth

The office sector is experiencing a significant revival, with investment surging by 42% in the first half of 2025. As reported by CRE Daily, office sales volume jumped to $25.9 billion, indicating renewed investor confidence. Factors contributing to this growth include falling interest rates and larger deal sizes, spurring a transition from market hesitancy to conviction. Notably, demand for assets valued at $100 million or more surged by 130% year-over-year. The number of bids per transaction increased by 50%, reflecting the heightened competition and interest in high-value office assets.

Warehouse Leasing Boosted by Supply Chain Optimizations

As supply chains become more streamlined and reliable confidence grows among logistics and manufacturing sectors, warehouse leasing is set to benefit. The improvement in supply chain structures aligns with the current demands of the commercial real estate market, particularly in the industrial sector. Although NAR insights indicate a slowing in industrial activity due to construction outpacing demand, the broader outlook suggests potential growth as companies optimize logistics and reduce reliance on foreign supply chains.

Regional Trends Highlight Divergence in Vacancies

Regional variations in vacancy rates and rent growth have become more pronounced. According to the CommercialCafe report, cities like Seattle, Austin, and San Francisco witnessed high office vacancy rates exceeding 25% in August 2025, while markets like Manhattan led in sales volume, nearing $5 billion through August. These divergences highlight the varying recovery speeds and investment attractiveness across different regions. The national office vacancy rate saw a modest decrease, trending closer to 18.7%, as top-quality assets continue to drive leasing activity, albeit with a modest construction pipeline.

Future Implications for US Commercial Real Estate Market

The future of the US commercial real estate market looks promising as it adapts to shifting economic realities. Improved investor confidence, particularly in the office sector, coupled with strong demand in multifamily properties, sets a positive trajectory for the market. As highlighted by Altus Group, national CRE transactions reached $115 billion in Q2 2025, indicating a 3.8% year-over-year increase, driven by the multifamily and office sectors. With ongoing economic adjustments, such as revised supply chains and increased renting trends, the commercial real estate market is poised to capitalize on these shifts, continuing its growth trajectory.