Archives for 2025

Multifamily Relief, Office Momentum Mark CRE Reset

November 3, 2025 by CARNM

After a turbulent stretch marked by surging construction and uneven demand, the commercial real estate market is beginning to find balance. A new report from Marcus & Millichap indicates early signs of stabilization across major property types, with multifamily pressures easing, office absorption firming, industrial working through excess supply and retail holding steady.

The multifamily sector is seeing relief as the historic wave of new deliveries begins to subside. Although demand growth has moderated, slowing construction should help restore equilibrium, particularly in markets supported by strong economic fundamentals, the firm said. Vacancy inched up to 4.6% during the quarter as absorption cooled from recent highs, yet the rate remains 100 basis points lower than a year ago.

Heavy construction continues to challenge high-growth metros such as Austin, Dallas–Fort Worth, Charlotte, Denver, Nashville and Phoenix, where a glut of new units has intensified lease-up competition. By contrast, markets with limited development—Chicago, Cincinnati, Cleveland, Detroit, Minneapolis–St. Paul and San Francisco—outperformed, posting rent growth above 5%.

In the office sector, modest improvement continued through the third quarter. Nearly 38 million square feet of space was absorbed, the sixth straight quarter of positive gains, bringing the national vacancy rate down 30 basis points to 16.4% in September. Several major markets saw significant progress: vacancy fell 230 basis points in San Jose, 210 in New York City, 170 in Milwaukee and 160 in Orange County. Cleveland, Indianapolis, Miami-Dade, the Inland Empire and Tampa–St. Petersburg recorded the lowest vacancy rates among large office markets.

Industrial properties are still digesting a decade-long construction boom, even as demand has turned positive again. Roughly 20 million square feet was absorbed from July through September after a negative second quarter, though vacancy climbed to a 12-year high of 7.8% as new supply continued to outpace leasing. Over the past 10 years, about 3.5 billion square feet of industrial space has been delivered—a pipeline that is still being absorbed, particularly around key ports and logistics corridors.

Retail performance remains steady. Net absorption stayed positive in the third quarter. And while overall vacancy edged up to 4.9%, rates remain below historical averages— with markets such as Northern New Jersey, Boston, Indianapolis, Miami-Dade, and Minneapolis–St. Paul maintaining a sub-3.5% vacancy. Well-located centers, especially those anchored by necessity-based retailers, continue to draw both tenants and investors, underscoring the sector’s resilience.

Source: “Multifamily Relief, Office Momentum Mark CRE Reset”

Retailers Brace for SNAP Disruption as Government Shutdown Continues

October 31, 2025 by CARNM

Some retailers could face slower sales if the ongoing government shutdown disrupts the Supplemental Nutrition Assistance Program (SNAP), which provides food benefits to roughly 42 million Americans, according to a CNBC report. Recipients of the government program receive an average of about $187 per month.

Wolfe Research analyst Spencer Hanus said a funding lapse could shift consumer purchasing toward lower-margin grocery and household staples while increasing the potential for theft as food budgets tighten. He also noted that lower-income consumer confidence could take a hit heading into the holiday season.

Retailers most likely to cater to SNAP shoppers include Walmart, Dollar General and Dollar Tree, according to data from Numerator. Target, Costco and Whole Foods are less dependent on SNAP spending. Numerator data show that SNAP users spend the most on groceries at Walmart, Kroger and Costco.

In fact, more than 94% of SNAP shoppers have purchased food at Walmart in the past year, with an average annual spend of $2,653, representing 26% of the group’s grocery spending. Nearly 49% shopped at Kroger, spending an average of $1,688 annually, or 8.6% of the cohort’s total grocery spend. Despite its membership requirement, Costco ranks third, with SNAP users spending an average of $1,483 per year there.

SNAP, along with Women, Infants, and Children (WIC) benefits, accounted for 3.6% of in-store grocery sales through September, down from 3.9% in 2024, according to Numerator. SNAP use peaked in November 2021 at 6.5% during the pandemic, but remains above pre-pandemic levels, when between 2.2% and 2.8% of groceries were purchased each month from February 2019 to February 2020.

If SNAP funding expires, recipients may also cut back on non-food purchases.

“Fewer dollars in consumers’ wallets force a reallocation of discretionary dollars toward food and more tepid spending overall,” said Wells Fargo equity analyst Edward Kelly in a note to investors. He added that retailers reporting earnings in November may cite weaker discretionary spending due to the potential expiration of food assistance.

The National Grocers Association warned that grocers could see reduced employee hours, food waste from perishable losses, and declining sales if benefits lapse. When funding is restored, the association said, a surge in demand could strain supply chains as households restock.

For now, some states, including New York, Virginia, Louisiana and Maryland have declared emergencies to avoid disruptions to SNAP benefits. Assuming no last-minute deal to end the government shutdown, the Federal Government will not administer SNAP benefits in November. So it could be up to the states to carry the workload for some time.

Source: “Retailers Brace for SNAP Disruption as Government Shutdown Continues”

September 2025 Commercial Real Estate Market Insights

October 30, 2025 by CARNM

In August, the economy showed mixed signals as markets looked ahead to the Federal Reserve’s widely expected rate cut in September. Job creation slowed, reinforcing the case for policy easing, while inflation ticked up to 2.9%, remaining above the Fed’s target. At the same time, overall economic growth remained solid. Despite this resilience, rising concerns about labor market softness have given the Fed additional room to cut rates in September and potentially twice more before year-end.

Interest rates remained elevated, and the commercial real estate market remained soft in August, though conditions varied by sector. The office market continued to post negative demand, but losses have eased compared to past years, keeping vacancy rates steady. The multifamily sector showed steady absorption and gradual stabilization, though oversupply kept vacancy elevated and rent growth subdued. Retail softened as new supply added pressure, yet it still posted the fastest rent gains, driven by general retail. Industrial cooled further as completions far outpaced demand, pushing vacancy higher and slowing rents across property types.

Below is a summary of the performance of each major commercial real estate sector in August of 2025.

Office Properties

The office market continues to record negative absorption, but recent losses are relatively modest compared to the steep declines of prior years. Vacancy is holding at 14.1%, and rent growth remains subdued at 0.9% year-over-year as landlords rely on concessions to secure tenants. Class A space remains the main source of demand, while Class B is under more pressure despite slightly stronger rent growth. Class C properties continue to struggle with tenant losses and rising vacancy.

Multifamily Properties

As of August 2025, the multifamily market continues to stabilize, with absorption steady at about 506,000 units and new completions down 18%. The sector is still working through past oversupply, with new supply still outpacing demand. As a result, vacancy edged up to 8.2% and rent growth eased to 0.9% year-over-year. By class, Class A properties continue to carry the highest vacancies but have posted modest rent gains, while Class B properties have seen stronger leasing activity but weaker pricing power. Class C remains under strain with ongoing tenant losses, though it continues to deliver the strongest rent gains.

Retail Properties

The retail sector remains under pressure as e-commerce and the pandemic’s lasting effects continue to weigh on demand. Over the past year, absorption turned negative, and vacancy edged up to 4.3%. However, rent growth in retail spaces remains the highest among CRE sectors. General retail was the only category to post positive absorption and continues to hold the lowest vacancy, while neighborhood centers saw a sharp reversal, and malls recorded further losses despite trimming inventory.

Industrial Properties

The industrial sector has slowed significantly, with absorption dropping to a decade low as demand softened and new completions far outpaced leasing. Vacancy rose to 7.5%, while rent growth eased to 1.6%, extending the sector’s cooling trend. Logistics remained the main driver of demand, supported by specialized facilities, while flex space continued to lose tenants. Rents declined across all property types, with logistics and specialized facilities seeing the steepest drops.

Hotel/Motel Properties

Hospitality performance held steady in August 2025, with occupancy at 62.8%, still 3.2% below pre-pandemic levels due to remote work and softer corporate travel in urban markets. ADR and RevPAR have both surpassed 2019 benchmarks, rising 22% and 16% and supporting profitability. Investment activity has slowed as higher financing costs and economic uncertainty weigh on transactions despite solid fundamentals. Leisure destinations such as Hawaii continue to post record highs, while urban areas, including San Francisco and parts of Texas, remain well below pre-pandemic norms.

Source: “September 2025 Commercial Real Estate Market Insights”

CRE Leaders Talk Low Supply and Robust Logistics Sector

October 21, 2025 by CARNM

The past couple of years or so have been a challenging environment for many CRE players to operate in — with high interest rates and now tariffs causing volatility and uncertainty. However, some see favorable conditions in their footprint and opportunities to play offense.

This was a sentiment shared during a panel at CREtech New York 2025, moderated by Vaibhav Gujral, senior partner at McKinsey & Company, which focused on the state of CRE. Industry leaders with expertise involved in a variety of asset classes, including Stephen Yalof, president & CEO of Tanger, Toby Bozzuto, President & CEO of Bozzuto, Luke Petherbridge, CEO of Link Logistics, Andrew Holm, partner and head of U.S. diversified equity at Ares Management and Cathy Marcus, co-head & global chief operating officer of real estate at PGIM Real Estate, all weighed in with their perspective of 2025.

Robust Logistics and Developments Slowdown Provides Favorable Conditions

While Petherbridge did not downplay the economic uncertainty that exists, he sees robust activity within the logistics asset class.

“We’ve leased more space, year to date, than we did a year ago, he revealed.

“That’s with tariffs, an incredible amount of uncertainty at length; we own about half a billion feet. About 5% of the US economy flows through our 8,000 customers.”

Petherbridge attributes the strong demand to what he calls the “re-industrialization of America,” which includes new data center developments and e-commerce growth, supported by a resilient consumer despite the economic headwinds.

For multifamily, the conditions now are also pretty favorable for Bozzuto, which manages 130,000 apartments. Toby Bozzuto noted that the once-influx deliveries in the sector in many cities are now starting to taper — resulting in a “positive landlord market.”

“Depending on the city, it’s beginning to burn off,” he said of the supply dynamics. “There’s still some hangover in Miami, Atlanta and national places like that, where there had been a large amount of supply, but generally it’s getting absorbed.”

From the point of view of retail, Yalof said that new development has been scarce. What you’re seeing instead is closures, with the “department store business contracting,” in particular, according to Yalof.

Holm also points to a “dramatic decrease in new supply” across CRE, coupled with Ares’ “industrial leasing going up fairly materially this year over last year.” Plus, Holm noted retail activity has been better over the past year to 18 months versus the decade prior.

Ares, of course, invests in a range of asset classes from logistics, multifamily, to hospitality.

One Gloomy Perspective

Meanwhile, Marcus offers the most gloomy view on CRE currently. While she does note that transaction activity is rising now, it’s not nearly where she would have hoped it would be at this point in 2025.

“I would hardly say capital is flooded into the market,” Marcus admitted. And it’s not because of the available credit.

“So you have a liquid market, from a credit perspective, you have a complete repricing of the market pretty much across the globe and across sectors, and yet you still don’t have that investor behavior that every other cycle I would have seen would have told me was going to happen,” she added.

Challenges Come with Opportunity

In the current landscape, some are looking for ways to play offense.

For example, given the limited retail development — Tanger is shying away from starting new projects. Rather, the company is looking to acquire properties at a discount and leverage its analytical tools to do so.

“It’s an acquisitions business, and we acquired a shopping center in Kansas City two weeks ago for 40 cents on the replacement dollar, Yalof highlighted.

“It’s a pretty amazing market. If you’ve got access to capital, then you can take advantage of the opportunity to run and buy stuff.”

Bozzuto is following that same mindset — but for multifamily. The Greenbelt, Maryland-based company has launched a fund, focusing on high-quality buildings. “The thesis there [is] five full class A buildings at a 10 or 20% discount,” Toby Bozzuto said, while adding, “these down times are where you find immense opportunities.”

To sum the thought up — yes, it’s a challenging market filled with uncertainty — but opportunities might be there if you have the capital to deploy.

Going into 2026, the panel seemed to share bullish sentiment about CRE conditions improving next year. Marcus, in particular, noted she feels “very optimistic about 2026” despite the disappointing landscape to this point in 2025.

Source: “CRE Leaders Talk Low Supply and Robust Logistics Sector”