After several challenging quarters, 2024 brought a measurable rebound in CRE real estate. Key market indicators began to improve, and by year-end, recovery was visible on balance sheets and in leasing activity.
As 2025 unfolds, the question isn’t whether the recovery is happening but which sectors are pulling ahead.
Industrial and multifamily assets continue to outperform because of demand for logistics space and rental housing. Retail — once written off too quickly — is also rebounding in select markets where high-performing national brands attract steady local foot traffic.
These differences reveal how uneven the recovery is across CRE real estate — and why a sector-specific strategy matters more than ever.
Let’s take a closer look at the types of commercial real estate that are doing well this year and what investors should keep in mind when choosing top performing CRE asset classes in 2025.
Industrial: E-commerce’s Powerhouse
Industrial real estate — including corporate real estate that supports business operations, such as headquarters, warehouses, and R&D facilities — continues to show strong results due to sustained high demand for logistics and distribution space.
Average national in-place rents reached $8.22 per square foot in October 2024, up 6.8% year-over-year.
And while 358.8 million square feet of industrial space and office real estate are currently under construction, Colliers reports that the development pipeline is shrinking.
Steady absorption has kept vacancy rates stable as well, giving investors encouraging signs.
Several commercial real estate industry trends are driving this demand:
- As online shopping continues to expand, e-commerce businesses need more space in their commercial industrial property for warehouses and last-mile delivery hubs.
- Businesses are building more localized supply chains, creating demand in emerging US markets (especially in the Midwest).
- Companies are stocking up to avoid disruptions, which increases the need for storage and distribution facilities. Just-in-case inventory strategies help businesses manage unpredictable demand or unreliable suppliers without sacrificing production.
Related blog: Understanding the Lifecycle of Commercial Real Estate Assets
Investment considerations
Industrial assets offer stability and appeal to tenants looking for long-term leases. These properties typically require fewer custom improvements and are easier to manage. They’re also known for holding their value well even during economic shifts.
However, with high demand comes higher pricing — cap rates have compressed and prime markets face limited availability.
Investors may also need to navigate zoning or entitlement challenges when acquiring or developing industrial sites. Do keep these in mind when comparing options in industrial vs multifamily vs retail investment.
2025 Outlook
Industrial class assets are poised for continued growth especially in tech-focused markets. Here’s what analysts are saying:
- Vacancy rates may decline further as new supply slows.
- Demand for advanced facilities will rise because of automation and AI-based logistics.
- Rental income is likely to increase particularly in fast-growing regions.
- Strong job markets should continue to fuel interest in industrial properties across key metros.
Multifamily: The resilient income generator
Five years after the pandemic reshaped where and how people live, multifamily housing has become one of the best commercial real estate investments in 2025.
Much of that growth ties back to post-pandemic migration: More people moved to Sun Belt cities for affordability and lifestyle.
Cities like Austin and Miami experienced rapid rent increases as remote work and cost of living drove large-scale relocation.
- Austin expanded its apartment inventory by 30.2% over the past five years — more than any other US metro — pushing the vacancy rate to 11.6%.
- South Florida metros including Miami and Fort Lauderdale saw the steepest rent increases since March 2020. The combination of steady population growth and constrained development drove this upward trend.
- Looking ahead, the Southeast is expected to remain a strong performer. Analysts expect to see rent increases of around 4.2% year-over-year by January 2026 in key markets in the region.
Related blog: Co-Living: An emerging Niche Asset Class
What investors should consider
Multifamily properties continue to attract investors thanks to steady income potential and access to financing through agencies like Fannie Mae and Freddie Mac.
Long-term demand is supported by shifting demographics, with Millennials renting for longer periods and Gen Z beginning to enter the rental market.
Still, rising construction costs can impact project feasibility while rent control legislation remains a risk in certain jurisdictions. And like other sectors, cap rate compression in high-demand areas may limit returns.
Related blog: Asset-Backed vs. Mortgage-Backed Securities
Looking ahead to 2025
Multifamily assets are expected to hold their ground although investors may need to adjust expectations around yields in major markets.
Some of the best opportunities may come from value-add deals and emerging secondary markets. Here’s what to watch for:
- Continued migration to the Northeast and Midwest could drive rent growth in cities like Dallas-Fort Worth and Houston.
- Lower Treasury yields and possible interest rate cuts by the Fed are creating a more favorable financing environment for buyers.
- Persistent demand for affordable housing and ongoing absorption point to strong fundamentals.
Retail: Reinventing and rebounding
Retail commercial property seems to be holding its ground in 2025. According to CBRE, the sector closed Q3 2024 with an overall availability rate of just 4.7% — marking the fifth straight quarter of high occupancy.
While rising construction and borrowing costs have made expansion more difficult and some retailers remain cautious about taking on more space, demand hasn’t slowed in top-performing markets.
Cities like Miami and Boston saw rent growth climb over 6% year-over-year, driven in part by limited available inventory.
Several retail segments in particular are showing strong performance:
- Grocery-anchored shopping centers
- Neighborhood retail strips
- Service-focused and experience-driven businesses
- Retail formats less affected by online shopping
What investors should consider
Retail properties typically offer higher yields compared to industrial and multifamily assets. Investors may find opportunities to purchase underperforming properties at a discount and reposition them—especially those with long-term tenants and strong brand presence.
Still, there are risks to consider. Traditional malls and big-box stores face higher vacancy potential. E-commerce continues to pressure some retail categories, and certain markets deal with frequent tenant turnover, which can impact your return.
Looking ahead to 2025
- As inflation eases and spending increases, retail demand is expected to rise—especially for neighborhood centers, mixed-use spaces, and essential retail.
- Texas markets are forecast to experience particularly strong demand, supported by expanding populations and local economies.
- Developers may find new opportunities as construction and financing become more accessible.
If you’re evaluating retail assets, take a close look at tenant credit strength before making a move.
Related blog: Understanding Asset Based Lending in Commercial Real Estate
Conclusion: Which asset class should you choose?
Every asset class brings something different to the table and the right choice ultimately depends on your investment strategy and risk appetite, as well as your familiarity with the market.
It might give you an edge to focus on one segment — this makes it easier to gain a deeper understanding of key metrics of vacancy rates and cap rates so you can evaluate deals more accurately.
Avoid jumping between asset types without doing the work. This may slow you down and weaken your investment decisions.
Here are a few things to consider as you compare types of commercial real estate and weigh your options:
- Multifamily is a dependable choice if you want to create a stable income stream.
- For long-term growth potential, industrial real estate delivers stable tenant demand and steady rent growth — but entry costs are higher.
- If you’re after stronger yields, retail in well-trafficked areas may generate attractive returns.
- Want to diversify your portfolio? Combining residential and commercial properties can help smooth out performance across market cycles. This strategy balances steady income with the chance for value appreciation down the road.
Ready to move forward with your next CRE real estate investment? Call us at 972-865-6206 to learn more about financing solutions for industrial, multifamily, or retail properties. Our team of private commercial lender at Private Capital Investors is here to guide you every step of the way.
Sources
- https://www.duckfund.com/blogs-re/cre-asset-classes
- https://www.netsuite.com/portal/resource/articles/inventory-management/just-in-time-vs-just-in-case.shtml#:~:text=What%20is%20just%2Din%2Dcase,re%20also%20tying%20up%20cash.
- https://www.linkedin.com/pulse/outlook-multifamily-real-estate-market-second-half-2025-john-dragone-2ptpe/
- https://www.linkedin.com/pulse/your-guide-choosing-right-asset-class-focus-mike-sowers-ccim/
- https://www.cohenandsteers.com/insights/the-real-estate-reel-the-potential-benefits-of-blending-listed-reits-and-private-cre/
- https://www.mrisoftware.com/blog/asset-classes-in-real-estate-how-to-maximize-your-investment-potential-and-diversification/
