Commercial Real Estate Market Outlook 2025: Key Signals by Sector
The commercial real estate market in 2025 defies simple characterization. While aggregate transaction volume remains below the 2021–2022 peak, the sector-level picture reveals a market of dramatic divergence — with some asset classes experiencing unprecedented demand while others navigate structural challenges.
Here is a data-driven overview of where each major sector stands.
Data Centers: The Demand Supercycle
Data centers are experiencing the most powerful demand cycle in CRE history. Global data center capacity is projected to more than double by 2030, driven primarily by AI workloads. According to JLL, North American data center absorption exceeded 2,800 MW in 2024 — more than double the previous record.
Key signals: vacancy below 3% in primary markets, pre-leasing rates above 80% for projects under construction, rent growth of 15–25% year-over-year in constrained markets, and a development pipeline exceeding $150 billion globally.
The constraint is not demand — it's delivery. Power availability, permitting timelines, and construction capacity limit how fast new supply can be brought online. Developers who can navigate these constraints fastest will capture outsized returns.
Industrial: Reshoring Meets Normalization
The industrial sector is transitioning from a period of extraordinary pandemic-driven demand to a more normalized — but still fundamentally strong — growth trajectory. National vacancy has risen from historic lows of 3.1% to approximately 6.5%, primarily due to new supply delivery rather than demand contraction.
Key signals: net absorption remains positive nationally, reshoring and nearshoring continue to drive manufacturing-related demand, last-mile logistics facilities maintain sub-4% vacancy in major metros, and rent growth has moderated from double-digit rates to a more sustainable 3–6% annually.
The market is bifurcating. Modern, well-located Class A product continues to perform strongly. Older, functionally obsolescent industrial space faces rising vacancy and pressure on rents.
Multifamily: Supply Wave Cresting
The multifamily sector is absorbing the largest wave of new supply in four decades. Over 500,000 units were delivered in 2024, with a similar volume expected in 2025. This supply wave has pushed national vacancy rates above 7% and moderated rent growth to 1–3% nationally.
Key signals: supply deliveries are expected to peak in mid-2025 and decline sharply in 2026–2027 as construction starts have fallen, Sun Belt markets (Austin, Nashville, Phoenix, Raleigh) are absorbing supply faster than expected, and institutional capital is positioning for a recovery by acquiring stabilized assets at attractive bases.
The setup for 2026–2027 looks favorable: declining supply, continued population growth in target markets, and a normalized interest rate environment should restore rent growth and compress cap rates.
Office: The Great Bifurcation Continues
The office market remains the most challenged CRE sector, but the narrative is more nuanced than headlines suggest. National vacancy exceeds 20% — a historic high — but that figure masks enormous variation.
Key signals: Class A trophy office in top-tier CBDs is performing well, with vacancy below 10% and rent growth in the 3–5% range. Class B and C office faces vacancy exceeding 25% in many markets, with negative rent growth and rising obsolescence.
The conversion narrative is gaining traction. Several major markets — New York, Chicago, Washington D.C., Los Angeles — have implemented programs to facilitate office-to-residential conversions, though the economics remain challenging for most buildings.
Life Sciences: Oversupply Correction
The life sciences real estate sector is experiencing its first meaningful supply correction after years of speculative development. JLL reports approximately 18.7 million square feet of surplus lab space nationally, concentrated in Boston/Cambridge, the San Francisco Bay Area, and San Diego.
Key signals: vacancy has risen sharply from sub-5% to over 15% in some submarkets, speculative lab construction has largely halted, and tenants have significant leverage in lease negotiations.
The correction is healthy. Developers and investors who can accurately assess which markets and submarkets will recover first — using AI-powered demand analysis rather than backward-looking rules of thumb — will position themselves for the next growth cycle.
Where AI-Native Operators Find Advantage
Market transitions reward operators who can process more information, evaluate more opportunities, and move faster than competitors. This is precisely what AI-native platforms enable.
At Build, our agentic AI platform synthesizes the data points described above — and thousands more — into actionable intelligence for development firms and institutional investors. Market analysis that traditionally takes weeks is delivered in hours, updated continuously as new data becomes available, and calibrated to the specific asset class, geography, and investment criteria of each client.
In a market defined by divergence, the ability to see clearly through complexity is the defining competitive advantage.