Archives for 2025

Commercial Real Estate Market Shows Signs Of Recovery As Bid Intensity Increases

September 13, 2025 by CARNM

Economic uncertainty led to a slowdown in the commercial real estate market earlier this year, but one indicator has finally ticked up. This suggests signs that capital is returning to the commercial real estate market, which may be a positive sign for investors. Although there is still uncertainty, investors may have reason to be optimistic going forward.

The Bid Intensity Index

In July, real estate firm JLL’s Bid Intensity Index ticked up for the first time this year. The global Bid Intensity Index is a proprietary indicator that tracks competitiveness in the direct investment market. It combines three sub-indices — bid-ask spread, bids per deal and bid variability — derived from bid data.

By combining bid data from multiple sub-indices, the Bid Intensity Index aims to provide forward-looking insights into the momentum and liquidity of capital markets. The index provides insights into the market’s competitiveness before transaction volumes confirm the trends, JLL says

An Uptick in July

The Bid Intensity Index in July saw its first improvement since December. The firm says this indicates market-wide investment sales bidding activity is getting competitive again after a period of uncertainty.

At the beginning of 2025, the index eased due to more volatile bond markets, which affected underwriting. Additionally, uncertainty surrounding trade policy further softened the index. After months of uncertainty, the index is finally stabilizing, indicating an increase in market competitiveness.

Sector Breakdown

JLL provided a sector-by-sector breakdown in its report, illustrating how market dynamics impact various property types. The breakdown includes:

Living/multi-housing: Leads bidding competitiveness due to high liquidity and housing shortages.

Industrial & logistics: Lagging the living/multihousing sector somewhat due to a slowdown in leasing in the U.S. and other markets.

Retail: Bid intensity has improved since 2024, driven by strong competitiveness across most markets. Supply and demand are in balance, and consumer spending is strong.

Office: Showing improvements in competitiveness thanks to an increase in the number of bidders and a larger number of lenders willing to make loans on these properties.

The sector breakdown indicates improvement across most markets, resulting in an overall increase in competitiveness.

Market Drivers & Investor Sentiment

Several factors are contributing to the recent uptick in competitiveness, including market drivers and investor sentiment. Investors are returning to the market with increased liquidity, and JLL says they are willing to accept more risk today, referring to this as “risk-on mode.”

In addition, borrowing costs and real estate values have stabilized in most markets, JLL reports. As a result, the firm expects momentum to pick up in the second half of the year.

Although market uncertainty contributed to a softening of the index in the first half of the year, investors appear willing to accept some uncertainty, such as trade and geopolitical tensions. the new normal.

JLL also highlights strength in the debt markets as a potential driver of continued growth in capital flows. The combination of these factors is driving stronger investor sentiment and an improvement in bidding dynamics, the firm said.

Source: “Commercial Real Estate Market Shows Signs Of Recovery As Bid Intensity Increases”

Investors Stay Selective as Multifamily Cap Rates Edge Higher

September 12, 2025 by CARNM

Investors are seeing opportunities in multifamily markets with durable job growth and limited new deliveries, but they remain highly selective about where they choose to invest, according to Crexi’s August 2025 report.

Median cap rates for multifamily properties sold rose slightly to 6.36% while asking cap rates slipped to 7.19%. The spread between the two indicated ongoing price discovery and selective bidding for quality “even as multifamily proves to be a less risky investment than other asset classes amid a national housing shortage,” Crexi said.

The median price for multifamily property sold rose to $210.28 per square foot — up 3.55% month-over-month and 1.2% year-over-year. That was about 20.48% more than the median asking price of $174.53 per square foot. Crexi said this discrepancy was likely due to differences in the mix of assets for sale, “with traded properties skewing more toward stabilized or growing, well-located communities.”

However, multifamily properties took longer to sell than the previous year. In August 2025 they remained on the market for an average of 152 days, compared to 146 days in August 2024, suggesting increased caution on the part of buyers Nevertheless, “overall sales velocity remains healthier than in the office or industrial sectors,” the report commented.

Crexi said the data showed that national rent growth is stabilizing at low single digits with modest monthly increases likely. Some coastal markets were overperforming, including San Francisco, where median rents surged, driven by limited vacancy and more people going back to work in offices. In addition, apartment rental demand was being driven by people unable to buy homes.

The data also showed uneven regional performance as the excess supply of apartments worked through the system. “Investor activity remains selective but improving in markets with durable job growth and limited new deliveries. If the Fed transitions toward rate cuts later this year, cap-rate pressure could ease and facilitate more multifamily transactions,” the report predicted.

Source: “Investors Stay Selective as Multifamily Cap Rates Edge Higher”

August 2025 Commercial Real Estate Market Insights

September 8, 2025 by CARNM

In July 2025, the Federal Reserve held its benchmark rate at 4.5% for the fifth consecutive meeting, holding steady after last year’s cuts. Inflation was virtually unchanged at 2.7%, remaining above the Fed’s 2% goal. Job growth weakened, with payrolls up just 73,000 after sharp downward revisions in May and June, while unemployment edged up to 4.2%. The economy, however, showed some resilience, with GDP rebounding 3% in Q2, driven by stronger consumer spending and lower imports. With the labor market cooling, the Federal Reserve is anticipated to cut the rates as soon as September, eventually easing borrowing costs in the commercial real estate market.

Under this economic environment, office absorption declined again in July. Losses, however, were far milder than last year, with vacancies stuck at record highs and rent growth remaining subdued. The multifamily market continued to stabilize, with absorption holding steady while new deliveries outpacing demand, but with the gap slowly narrowing. Even so, vacancies continued to increase in this sector as supply pressures persisted. Retail demand weakened further, with absorption turning sharply negative and vacancy rising to 4.3%, even as it retained the fastest rent growth among major sectors. Industrial momentum also cooled further, with absorption falling to a decade low, vacancy climbing to 7.5%, and rent gains slowing in line with oversupply.

Office Properties

After nearly turning positive in early 2025, office absorption slipped back into negative territory in the second quarter and has remained there through July – this time at a much milder pace than last year’s steep losses. Vacancy held steady at 14.1%, while landlord concessions continued to keep rent growth subdued at 0.7%. Class A properties managed another quarter of positive absorption, but conditions in Class B offices weakened further, even as rents held up better than average. Class C space remained under pressure, facing continued tenant losses and rising vacancy.

Multifamily Properties

As of July 2025, the multifamily market shows continued signs of stabilization, with net absorption steady at 512,000 units and new completions down 16%. Vacancy edged up to 8.1% as supply still outpaces demand, though the gap is narrowing. Rent growth held at 1.0%, with Class B properties capturing stronger demand, while Class A maintained the highest vacancies and Class C continued to vacate units despite firmer rent gains. Oversupply weighed on several Sun Belt metros, while San Francisco, CA, and South Bend, IN, posted the strongest rent growth in the nation.

Retail Properties

Retail demand has softened over the past year, with 12-month net absorption dropping from 29.4 million to –10.9 million square feet, while rent growth slowed to 1.8% yet remained the strongest among major CRE sectors. Vacancy edged up to 4.3% in July but remained the lowest of all major sectors. General retail remained the sector’s bright spot with positive absorption and the lowest vacancy, while neighborhood centers and malls were the weakest performers. Power centers and neighborhood centers continued to show relative strength on the rent side, underscoring the resilience of well-located and necessity-driven retail formats.

Industrial Properties

The industrial sector’s momentum has cooled, with oversupply and weaker demand driving a 54% year-over-year drop in net absorption to a decade-low 60.5M SF. New completions outpaced demand by 4 to 1, pushing vacancy up to 7.5%. Rent growth slowed to 1.7%, underscoring the sector’s loss of momentum. Logistics properties remained the main source of demand, supported by a surge in specialized facilities, while flex space continued to shed tenants.

Hotel/Motel Properties

The hospitality industry remains stable in July 2025. Hotel occupancy stands at 62.9%, still 3.1% below pre-pandemic figures, primarily due to ongoing remote work patterns and reduced corporate travel affecting urban markets. Even so, both average daily rates and revenue per available room have exceeded pre-pandemic levels, indicating a strong recovery in profitability.

Source: “August 2025 Commercial Real East Market Insights”

The National Observer: Construction slows in high-growth markets

August 21, 2025 by CARNM

Billy Bastek, executive vice president of merchandising for the Atlanta-based home-improvement retailer, said during an earnings call this week the company is planning for “modest price movement” across some product categories during the second half of this year. Tariffs rates on some items have increased significantly this year, although the company will work to keep prices competitive broadly, Bastek said.

Although tariffs have not yet had a major impact on inflation, according to Consumer Price Index data, it’s may only be a matter of time before their impacts begin to be seen in the CPI and other readings.

Other retailers have said they plan to raise prices in response to tariffs, including children’s retailer Carter’s, payments company NCR Voyix and soft-drink giant The Coca-Cola Co.

On the map: A closer look at potential Opportunity Zones in the revamped program

Opportunity Zones 2.0 is coming — and real estate investors are expected to have a lot fewer certified tracts to pick from this go around.

That’s because the sweeping federal tax-and-spend legislation enacted in July changed the criteria included in the previous OZ program in a way that ultimately will shrink the number of eligible areas, reports The Playbook‘s Andy Medici.

By the numbers: In the original program, passed during Trump’s first term as part of the Tax Cuts and Jobs Act of 2017, 42,176 census tracts were eligible to become designated Opportunity Zones. Ultimately, governors in each state and territory picked 8,764 of those locations to be OZs. But, according to an analysis of the new criteria that was applied to census tracts and the most recently available poverty data, about 26,000 tracts could meet the eligibility criteria for an Opportunity Zone designation under the parameters of the revamped program. If governors were to then pick the maximum-allowed 25% of those sites to be Opportunity Zones, that would mean about 6,500 zones in the program.

Medici mapped the potentially eligible OZs in the upcoming program, which can be viewed here. The federal government has not yet published an official list of eligible tracts under the new law, and governors will be able to pick OZs by July 2026.

Carey Heyman, managing principal of industrial and real estate at CliftonLarsonAllen, said in an email to Medici the narrowed eligibility for the upcoming program is a “double-edged sword.”

“On one side, the revised criteria aim to refine the program’s focus and better align with its original intent, which is driving capital into truly distressed communities,” Heyman said. “On the other side, this restriction may come at the cost of the program’s momentum.”

Tech giants hunt for Bay Area industrial space

Technology groups in industries like artificial intelligence aren’t only propping up the San Francisco Bay Area’s office market — some tech companies are eager to snap up industrial space in the area.

That’s because the market is seeing an influx of manufacturing and hardware tenants that need space to build self-driving cars, create precision manufacturing facilities for chips that power AI models and assemble robots, reports Sarah Klearman at the San Francisco Business Times.

And big names in the space, including Amazon and Alphabet’s Waymo, are zeroing in on San Francisco specifically — as opposed to outlying submarkets that’ve historically been more popular for industrial users — to be close to the AI boom that’s overtaken the city.

They said it: “Being in San Francisco has become much more meaningful for all kinds of technology tenants,” said Robert Sammons, senior director of research at Cushman & Wakefield. Manufacturing tenants seemingly “popped up out of nowhere the last year,” he added.

In fact, in the area, Cushman is now newly tracking a category it calls production, distribution and repair, or PDR, space — last year, it was tracking one tenant seeking about 3,000 square feet of such space in San Francisco, but at the end of July, nine tenants seeking a total of 655,000 square feet of PDR space were in the market.

Most tenants seeking PDR space are looking for at least 100,000 square feet, and sources tell Klearman a space-robotics division of Amazon has been touring spaces in San Francisco and the San Francisco Peninsula. Amazon declined to provide details when reached.

Building slows in some high-growth markets

It probably doesn’t come as a surprise to anyone, given the national slowdown we’ve seen in the for-sale housing market and new challenges thanks to volatile tariff policy, but homebuilding starts are down, even in red-hot growth markets.

Adding it up: Housing data company Zonda recently found there were 250,541 future lots in the Austin, Texas, metro — a 12% year-over-year increase and a 46% increase since 2020. About 91% haven’t been touched. On top of that, Austin’s annual home starts are down 15% year over year, much higher than other Texas cities: Houston is down 1%, Dallas is level and San Antonio is up 4%.

Developers told Justin Sayers and Cody Baird at the Austin Business Journal the biggest reason for the slowdown is economics — efforts to bring prices down to a point palatable for them and buyers are complicated by the minimum sale-price threshold needed to make a profit. A lengthy entitlement and building timeline, the costs of land and other factors are also making homebuilding complicated.

Garrett Martin, CEO of Austin-based homebuilder MileStone Community Builders LLC, said Austin is at a point where supply is increasing but it’s still challenging for both the consumer and developer.

“As such, that’s putting a lot of pressure on pricing, and it’s creating a situation where more people are renting rather than buying, which is frankly unfortunate because peoples’ homeownership tends to be overwhelmingly their path to wealth in life,” Martin said.

Less new construction will eventually put more pressure on home price, as we know constrained supply while demand is strong — or even begins to pick up again in the future — will increase competition for homes already built.

Building boomtowns: Some places around Austin are seeing a sizable amount of new home construction relative to their size and current inventory, headlined by Kyle (with nearly 44,000 homes) and Georgetown (nearly 32,000), Sayers and Baird also report.

Source: “The National Observer: Construction Slows in High Growth Markets“