Mid-year Update: Data Indicates a Real Estate Bottom

Welcome to our data-driven mid-year 2025 real estate investing review, cutting through speculation to focus on the facts behind each major real estate sector’s position in the current cycle.

COVID-induced shockwaves are still shaping fundamentals, with some asset classes finding their footing and others facing ongoing pressure. We outline where new opportunities are appearing, which sectors have stabilized, and where caution is still warranted—without gloss or hype.

Key Highlights

• Multifamily: Momentum is returning. Rent growth is positive and holding just below the long-term average (2.2% vs. 2.6%), vacancy has stabilized near 6.2%, and new construction is at a decade low. Negative leverage persists due to interest rates, but fundamentals are stronger than a year ago.
• Retail: Stability defines the sector. Grocery-anchored shopping centers remain in demand with low vacancy, supported by a 400% year-over-year jump in institutional investment. Lease volume is limited more by supply than demand.
• Industrial: General industrial is steadying after pandemic-driven oversupply, with vacancies in the 7–8% range. Small bay industrial remains extremely tight nationwide (3% vacancy), pushing demand for service, light manufacturing, and new consumer uses.
• Office: Market faces continued challenges. Vacancy is forecasted to peak at 19% in 2025 and could remain elevated into 2026 or beyond. Class A space in major markets is relatively stable, but Class B and C properties face sharp headwinds as large employers shed space and transactions remain slow.
• Hospitality: Occupancy remains slightly below pre-pandemic levels, but rate and revenue per room now exceed 2019 figures, restoring profitability even with supply-side pressures.
• Self Storage: The sector is stabilizing after a 28-month period of declining street rates. Rates have now leveled, new development is slowing (pipeline down to 2.8% of existing stock, projected to fall to 2% by 2027), and long-term fundamentals remain solid for developers and investors.

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