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”
