Integra Realty Resources (IRR), one of North America’s largest independent commercial real estate valuation and consulting firms, has released its 2025 Mid-Year
Commercial Real Estate Report, offering data-driven insights into pricing, performance, and market cycles across the office, industrial, multifamily, and retail sectors. The report shows the balance is beginning to tip, with recovery gaining ground—even as economic uncertainty continues to weigh on decision-making.
“The U.S. commercial real estate market is actively recalibrating,” said Anthony M. Graziano, MAI, CRE, CEO of Integra Realty Resources. “Our mid-year analysis shows that more markets are in recovery than recession for the first time in years—an encouraging shift, though confidence remains uneven. As broader economic uncertainty continues to shape investment decisions, staying disciplined and focused on fundamentals will be the key to navigating a fragmented and fast-moving market.”
IRR’s report also highlights a continued bifurcation in asset performance, as capital and tenant demand reflect a clear flight to quality. Investors and occupiers alike are prioritizing high-performing assets that meet modern operational needs. IRR notes that capital is becoming more selective, with underwriting driven less by broad market momentum and more by long-term staying power, location, and resilience.
The 2025 Mid-Year Report features a national summary and over 220 detailed local market reports, covering more than 50 U.S. metropolitan areas. It builds on IRR’s annual Viewpoint report, released each January, and offers updated cap rate trends, market rents, vacancy rates, and cycle positioning for the four major property sectors: office, multifamily, retail, and industrial.
Key Insights from IRR’s 2025 Mid-Year Report
Office
Office market remains bifurcated, with ongoing challenges in legacy cores but signs of recovery in lifestyle and Sun Belt metros.
- Vacancy remains elevated nationally, particularly in urban cores like San Francisco and Chicago, where hybrid work and downsizing continue to impact demand. However, Sun Belt and lifestyle-oriented metros—such as Miami, Charleston, and Boise—are showing signs of stabilization.
- Demand continues towards high-quality, well-located assets, reinforcing the ongoing flight-to-quality trend. The widening performance gap between Class A and commodity space is shaping both leasing and investment strategies.
- New construction has slowed significantly, with activity mostly limited to build-to-suit, life sciences, and medical office. Speculative projects have declined amid weaker pre-leasing and tighter capital.
- Office Sector Metrics:
o Cap Rates: CBD Class A rose 23 bps to 8.22%
o Vacancy: Class A increased to 21.22%; Class B decreased to 20.67%
o Market Rents: Class A increased 1.15% to $33.37; Class B rose 0.84% to $23.69
o Cycle Shift: Recession-phase markets dropped from 63.9% to 57.4%; recovery-phase
markets rose to 24.6%, led by gains in the South (+9.8%).
Multifamily
Multifamily is stabilizing nationally, with recovery led by Northern and Midwestern metros while Sun Belt markets work through supply.
- Cities like Chicago, Philadelphia, and Minneapolis are seeing greater stability as new supply slows, while markets in the South and West—such as Austin and Phoenix—continue to adjust to prior construction activity from 2021-2023 delivered in the past 18-24 months.
- Rent growth has moderated in oversupplied areas, but remains healthy in infill, high-barrier, and affordable markets like Indianapolis, Northern New Jersey, Los Angeles, and San Diego.
- Rising capital and construction costs are curbing new development, with pipelines tapering and developers shifting toward more selective, absorption-focused projects.
- Multifamily Sector Metrics:
o Cap Rates: Urban Class B rose 6 bps to 6.27%; Suburban Class A declined 1 bps to 5.68%
o Vacancy: Class A increased to 7.46%; Class B rose to 5.16%
o Market Rents: Class A rose 6.16% to $2,070.69; Class B increased 3.35% to $1,351.50
o Cycle Shift: Recovery-phase markets rose to 32.8%; recession-phase markets fell to 9.8%
Retail
Retail continues to outperform expectations, with strength in mixed-use, grocery-anchored, and lifestyle centers.
Retail Sector Metrics:
o Cap Rates: Community retail declined 8 bps to 7.17%; Neighborhood retail declined 11 bps to 7.15%
o Vacancy: Community retail decreased slightly to 10.28%; Neighborhood retail declined to 10.61%
o Market Rents: Community retail rose 0.88% to $22.17; Neighborhood retail increased 1.02% to $20.06
o Cycle Shift: Recovery-phase markets rose to 45.9% (including +3.3% in the Central region and +6.6% in the West); Recession-phase markets dropped to 3.3%.
Industrial
Industrial remains healthy overall but is entering a transition period, as speculative development deliveries push vacancy higher in some major markets.
- Vacancy is on the rise in metros like Dallas–Fort Worth, Indianapolis, and Philadelphia, where new product is outpacing absorption.
- Rent growth is flattening in oversupplied areas, but remains positive in land-constrained and infill markets such as San Jose and Richmond.
- Construction pipelines are becoming more disciplined, with new starts focused on build-to-suit and adaptive reuse as investors prioritize tenant durability and location quality.
- Industrial Sector Metrics:
o Cap Rates: Warehouse rose 6 bps to 6.48%; Flex Industrial rose 3 bps to 6.97%
o Vacancy: Warehouse increased to 7.16%; Flex Industrial rose to 7.20%
o Market Rents: Warehouse increased 2.26% to $7.74; Flex Industrial rose 2.26% to $12.28
o Cycle Shift: Recession-phase markets rose to 14.8% (driven by a +6.6% increase in the West and +3.3% in the South); Hypersupply-phase declined to 44.3%.
Looking ahead, IRR notes that while signs of stabilization are emerging, elevated capital costs, shifting demographics, and policy uncertainty remain key headwinds heading into year-end. For more insights, download IRR’s 2025 Mid-Year Commercial Real Estate Report and more than 230 local market updates.
