Archived outlook. This page was written as a 2025 outlook for U.S. commercial real estate. It was revised in October 2026 to correct figures to primary sources, remove figures we could not verify, and add a short review of what happened in 2025. For current conditions, see the live data below and our NNN cap rates page.
Entering 2025, U.S. commercial real estate was recovering from the sharp rise in interest rates of 2022 and 2023. This outlook looked at the capital markets backdrop and at each major property sector from the perspective of an investment grade investor: one focused on durable income, strong tenant credit, and conservative underwriting. For how credit ratings work, see the investment grade guide.
How Big Is the U.S. Commercial Real Estate Market?
Estimates vary with what is counted. A 2024 report by Rosen Consulting Group with Clarion Partners estimated the U.S. commercial real estate investable universe at about $26.8 trillion, of which about $11.7 trillion met institutional property criteria for size and quality. “Institutional quality” describes the property, not a credit rating; in this site’s usage, “investment grade” refers to the credit rating of the tenant or issuer, BBB‑ or Baa3 and above.
Capital Markets Going Into 2025
The Federal Reserve began cutting rates on September 18, 2024 with a half-point reduction to a target range of 4.75% to 5.00%, followed by further cuts later in 2024. Lower short-term rates did not translate into much lower long-term rates, and the 10-year Treasury yield, which drives cap rates and mortgage pricing, stayed above 4% for most of the period.
Refinancing was the main pressure point. The Mortgage Bankers Association estimated that $957 billion, or 20% of the $4.8 trillion of outstanding commercial and multifamily mortgages held by lenders and investors, would mature in 2025, up 3% from the $929 billion that matured in 2024. Loans originated at low rates and high values in 2020 to 2022 faced higher rates at refinancing, which pushed some owners to add equity, extend loans, or sell.
Sector Outlook for 2025
Net lease and necessity retail
Single-tenant net lease properties leased to rated tenants were the most bond-like part of the market, with returns driven by the tenant’s credit and the lease term rather than by occupancy. Grocery-anchored and other necessity retail held up better than malls and older big-box space. Check tenant credit in our tenant ratings database.
Multifamily
Demand stayed solid, but heavy new supply in many Sun Belt markets held back rent growth, and higher borrowing costs pressured highly leveraged owners. Long-term fundamentals depend on household formation and the pace of new construction.
Office
Office remained the most challenged sector because of remote and hybrid work. Vacancy stayed high, older buildings faced the greatest pressure, and some cities pursued conversions of obsolete office buildings to other uses. Leases to strong-credit tenants with long remaining terms were the exception rather than the rule.
Industrial
Industrial demand normalized after the pandemic e-commerce surge, and new supply raised vacancy from very low levels. The sector’s long-term drivers, including e-commerce and supply-chain reconfiguration, remained in place.
Hospitality
Hotel growth slowed in 2024. Industry hotel data showed national occupancy of 63.0% (flat), average daily rate of $158.67 (up 1.7%), and RevPAR of $99.94 (up 1.8%), the lowest ADR and RevPAR growth since 2020. Hotels are operating businesses, so their income is more volatile than leased real estate.
Healthcare and senior housing
An aging population supports demand for outpatient medical facilities and senior housing. Medical office leases to hospital systems and large physician groups can carry strong credit; senior housing is an operating business whose results depend heavily on occupancy and labor costs.
Data centers
Demand from cloud computing and artificial intelligence made data centers one of the fastest-growing sectors, concentrated in markets such as Northern Virginia, Dallas, and Phoenix. Power availability became a key constraint on new development.
Build-to-rent
Single-family build-to-rent communities attracted institutional capital as an alternative to homeownership for renters, particularly in Sun Belt suburbs.
What Happened in 2025
The Federal Reserve held rates steady through the first part of 2025, then cut by a quarter point on September 17, October 29, and December 10, 2025, ending the year at a target range of 3.50% to 3.75%. The 10-year Treasury yield traded between 3.97% (October 22, 2025) and 4.79% (January 13, 2025), and ended the year at 4.18% (Federal Reserve data via FRED). As in 2024, cuts to short-term rates did not bring long-term borrowing costs down by the same amount.
Current Conditions
Rates and cap rates have moved since this outlook was written. Current figures from our live data:
| Measure | Current | As of |
|---|---|---|
| 10-year Treasury yield | 5.24% | October 1, 2026 |
| ICE BofA US Corporate Index yield (investment grade) | 5.99% | October 1, 2026 |
| ICE BofA BBB US Corporate Index yield | 6.19% | October 1, 2026 |
| Median asking cap rate, net lease listings we track | 6.39% | October 9, 2026 |
For tenant-by-tenant cap rates and credit ratings, see NNN cap rates and the tenant ratings database.
Buying or Selling a Net Lease Property?
We can price a property against current listings and review the tenant’s credit and lease. On the majority of transactions, there is no separate fee to you as the buyer for representation; the listing broker pays a cooperating commission.
Frequently Asked Questions
How big is the U.S. commercial real estate market?
A 2024 Rosen Consulting Group and Clarion Partners report estimated the U.S. commercial real estate investable universe at about $26.8 trillion, with about $11.7 trillion meeting institutional property criteria. Estimates vary with what is counted.
When did the Federal Reserve start cutting rates?
The Federal Reserve began its easing cycle on September 18, 2024, with a half-point cut to a target range of 4.75% to 5.00%. It cut three more times in 2025, ending the year at 3.50% to 3.75%.
How much commercial real estate debt matured in 2025?
The Mortgage Bankers Association estimated that $957 billion of commercial and multifamily mortgages, 20% of the $4.8 trillion outstanding, would mature in 2025.
What was U.S. hotel RevPAR in 2024?
Industry hotel data showed 2024 national RevPAR of $99.94, up 1.8%, with occupancy of 63.0%.
Educational content only. InvestmentGrade.com is a commercial real estate brokerage and educational publisher. We do not sell, broker, underwrite, or solicit any bonds, securities, or investment products. Yields, ratings, and prices referenced fluctuate continuously and are sourced from public market data as of the date noted. Nothing on this page constitutes investment advice, an offer to sell, or a solicitation to buy any security. Consult a licensed broker-dealer, registered investment advisor, or tax professional before making any investment decision. For SEC investor education, visit investor.gov.
