CRE Market Deep Dive: Office is a bloodbath, industrial holding strong, retail surprisingly stable
Over the past few weeks, the Dealsletter team has been digging into national market reports, CMBS data, and broker intel to see where commercial real estate is headed. The short answer? The market is as fragmented as we've ever seen it.
We've analyzed the latest CBRE and JLL reports alongside data from our network of brokers and lenders. Here's the breakdown:
Office sector is a complete shitshow (but hear me out)
Vacancy just hit 20.8% nationally, with some markets in free fall:
- •SF Bay Area: 28%+ in older Class B buildings
- •Austin: 25% and climbing as tech cutbacks ripple through
- •Dallas Class B: 22% (overall market around 18%)
Delinquency rates are at 11.08% according to CMBS data—meaning a wave of distressed office assets is coming.
Example: A 180,000 sq. ft. downtown Houston building likely to trade at $45/sq. ft., down from $185/sq. ft. just three years ago. If you have the stomach for risk, the math is getting interesting.
Loans maturing in 2025
$957 billion in CRE loans mature in 2025. That's not a typo.
- •Hotels are getting crushed with 35% of their loans coming due
- •Office is 24%
My lender buddy told me last week they're seeing loan modifications left and right because nobody can refi at current rates. Prime + 200-300 bps when these guys originally got prime + 50.
Industrial is holding up better than everything else
Vacancy ticked up to 8.5% but rent growth is still at 2.5% - highest among all property types. The thing is, e-commerce is projected to hit 25% of total retail sales by 2025 and that's driving everything.
- •Cleveland's at 2.6% vacancy with $4 PSF asking rents
- •Nashville and DFW are absolute machines right now
- •Even with construction slowing, demand is nuts
Cap rates averaging 6.4% vs 8.9% for office. Do the math.
Retail has been surprisingly stable
Vacancy around 5.2-5.8% depending on format - still among the lowest of any sector.
The weird thing? All those Party City and Rue21 closures actually helped. TJX Companies, Hobby Lobby, and Dollar General are expanding like crazy into those spaces. Grocery-anchored centers are printing money.
Jack Hayes @JackHayesSH • Aug 5
Nothing in commercial real estate has pricing power potential like high end retail. Maybe Hotels, but that's a much harder way to make a dollar.
Example: A strip mall in suburban Phoenix trading at a 7.2% cap, anchored by Kroger with 12 years left. Sometimes boring wins.
Multifamily is where it gets interesting
Net absorption hit 100,600 units in Q1 - highest Q1 since 2000. But here's the kicker: housing affordability crisis is driving rental demand like I've never seen.
- •Austin and Phoenix are still digesting 2024 oversupply
- •Dallas-Fort Worth and Atlanta are absolutely eating
- •Rent growth back to 1.7% nationally and accelerating
Robbie Hendricks @roberthendricks • Jul 16
My sister is the CFO of a multifamily firm that owns and manages 35k units. Asked her for an update - they're building like crazy. New deals in Seattle, Denver, Boca, Orlando, Boston. Their thesis is simple: renter nation is here.
The sector nobody's talking about: Data centers
This is where the real money is moving. 1.6% vacancy rate. THIRTY-FIVE TO FORTY-FOUR PERCENT rent growth since 2021.
AI revolution + cloud computing + 5G deployment = perfect storm. Cap rates at 5.8% and dropping.
I know a guy who bought a data center in Northern Virginia last year for $180M. Just got an unsolicited offer for $275M.
What we're actually doing with the money:
- 📊Watching office distress - not buying yet but man, some of these deals are tempting
- 🏭Still heavy on industrial - especially last-mile delivery in Sun Belt markets
- 🏨Eyeing hotel plays - occupancy back to 63%, ADR around $160. Extended stay is killing it
- 🚫Zero new development unless it's shovel-ready with locked financing
The numbers that keep us up at night:
Commercial mortgage rates:
- • Multifamily: 5.34%
- • Industrial/Office/Retail: 6.38%
- • Hotels: 7.50%
CMBS delinquencies:
- • Overall: 7.13%
- • Office: 10.3%
Private equity sitting on $350B+ in dry powder waiting for the bottom
This is the most bifurcated CRE market we've seen in 15+ years. You're either buying trophy assets at premium pricing—or scooping up distress. The middle ground is thin.
What are you seeing out there?
Are you actively pursuing office right now? Any surprising retail trends locally? Drop your observations in the comments or DM us.
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