In September 2025, U.S. job growth remained sluggish, with only modest gains, and unemployment edged higher. Recent labor revisions pointed to fewer jobs than previously estimated, underscoring a softer employment landscape. Inflation remained above the Fed's target, though cooling rents suggest some relief ahead. In response to slower job creation, the Federal Reserve delivered a long-awaited rate cut, signaling the beginning of an easing cycle. Despite these headwinds, the broader economy continued to expand at a solid pace, supported by steady consumer spending and underlying private-sector strength.
Elevated borrowing costs continued to challenge commercial real estate in September, though performance varied across sectors. Office demand is slowly improving, with annual losses narrowing and vacancy ticking lower. Multifamily remained relatively balanced as slower construction helped absorption keep pace with new supply. Retail activity softened but remained the top-performing property type in rent growth, supported by strong general retail performance. Industrial activity stayed positive but slowed further as construction continued to outstrip demand, nudging vacancy higher and rents lower.
Below is a summary of the performance of each major commercial real estate sector in September 2025.
Office Properties
The office market continues to show tentative improvement, with annual losses narrowing sharply and quarterly absorption turning positive for the first time since 2021. Vacancy edged down to 14.0% for the first time in 6 years, and rent growth eased to 0.7% as landlords rely on incentives to attract tenants. Class A offices remain the main source of demand despite higher vacancies, while Class B space is showing gradual improvement after a long stretch of losses. Class C properties continue to lose tenants, though at a much slower pace than before.
Multifamily Properties
The multifamily market continued to move toward balance in September, with net absorption holding steady at just over 506,000 units as developers slowed construction activity. Vacancy edged lower while rent growth softened, reflecting a market gradually adjusting to more sustainable demand. Class A properties showed renewed strength, Class B remained stable, and Class C continued to benefit from steady demand for affordable housing. Sun Belt metros saw rents slip amid excess supply, while urban markets like New York and Dallas-Fort Worth maintained healthy leasing activity.
Retail Properties
The retail sector softened, with net absorption falling to – 4.3 million square feet over the past year ending in September and rent growth easing to 1.9%. Even so, retail remains the strongest performer among commercial property types, supported by low vacancy and steady consumer activity. General retail led demand, while neighborhood centers and malls rebounded from earlier losses. Southern markets like Raleigh and Charlotte, NC, posted robust rent gains, whereas Chicago continued to face declining occupancy amid broader economic challenges.
Industrial Properties
Industrial absorption remained positive in September, though the sector continued to lose momentum as new construction outpaced tenant demand. Vacancy inched higher and rent growth eased, reflecting a market still digesting several years of rapid expansion. Logistics facilities drove most leasing activity, while flex and specialized spaces saw mixed results. Major hubs such as Dallas–Fort Worth and Savannah continued to expand, whereas markets like Memphis and Baltimore experienced pullbacks, highlighting the uneven nature of the slowdown.
Hotel Properties
The hospitality sector showed consistent performance in September 2025, maintaining an occupancy rate of 62.7%. While still about 3% below pre-pandemic norms, lingering remote work trends and subdued corporate travel continue to restrain urban demand. On the other hand, revenue metrics have strengthened, with ADR and RevPAR exceeding 2019 levels by 22% and 16%, respectively, supporting healthy profit margins. Investment activity, however, has moderated as high financing costs and broader economic caution slow transaction volume. Leisure markets such as Hawaii remain standouts, while recovery in business-focused hubs like Oakland, CA, and several Texas metros remains incomplete.
