Crexi National Commercial Real Estate Report: February 2025

Welcome to the February 2025 release of our Crexi Trends report. We analyze Crexi's database each month to identify relevant activity and patterns and share key insights with our users.

Our report showcases trends across Crexi's commercial property listings in February, evaluating average price per square foot, search behavior, occupancy, and other noteworthy metrics. With this information, we aim to arm commercial real estate professionals with actionable learnings to make well-informed commercial real estate decisions.

Retail

For Sale

Pricing: The median asking price per square foot for retail properties in February 2025 was $261.19, reflecting a slight decrease from January 2025 and indicating a leveling off after previous sharp decreases since July 2024’s most recent high of $280.24. While retail property values remain high, these minor fluctuations suggest market stabilization.

Cap Rates: Retail properties recorded a second consecutive month with a median asking cap rate of 6.55%, holding its slight edging up from the end of 2024. This increase suggests a minimal rise in risk perception or shifting investor expectations, but still weighs in as the least risky asset type compared to others on Crexi.

Searches: Retail spaces saw a noticeable decrease in active searchers in February, with search activity down by 15% reflecting more general market uncertainty last month. However, it was still by far the most searched-for asset class on Crexi, with nearly 40% more searches than the next-highest, multifamily.

For Lease

Asking vs. Effective Lease Rates: The median asking lease rate for retail properties remained one of the highest among asset types, with effective lease rates staying close to asking rates. This suggests continued strength in tenant demand, though minor concessions may be occurring.

Broader Trends

The retail sector has demonstrated resilience, with stable occupancy rates and modest growth in lease rates. As an example, Simon Property Group reported funds from operations (FFO) of $3.68 per share in Q4 2024, surpassing market expectations, driven by steady leasing demand at U.S. malls and premium outlets. The company’s occupancy rate increased to 96.5% from 95.8% the previous year, and the base minimum rent per square foot rose by 2.5% to $58.26.??

Furthermore, the U.S. Real Estate Market Outlook 2025 by CBRE anticipates continued growth in the retail sector, supported by consumer spending and easing financial conditions. The report suggests that retail and data centers have been bolstered by longer-term trends, with all other real estate sectors expected to see the start of a new cycle.?

However, the Trump administration’s recent threat of tariffs (25% on imports from Mexico and Canada, and 10% on Chinese goods) has raised concerns about potential price increases for a variety of consumer products, including food, electronics, and automobiles. Economists warn that these higher costs could lead to reduced consumer spending, which may negatively impact the retail sector.??

Additionally, the administration’s aggressive trade policies have contributed to a decline in consumer confidence. A University of Michigan survey reported a 5% drop in consumer sentiment, reaching its lowest point since July 2024. This growing unease among consumers could result in decreased retail sales, thereby affecting demand for retail commercial real estate.

Office

For Sale

Pricing: The median asking price per square foot for office properties was $230.49 in February, remaining stable after January’s gains. This signals investor confidence, particularly in Class A office assets.

Cap Rates: The median cap rate for office properties was 7.08%, reflecting a slight decline from last month. This could indicate increasing investor appetite for well-located office properties in markets with strong tenant demand.

For Lease

Asking vs. Effective Lease Rates: The gap between asking and effective lease rates in the office sector has narrowed, suggesting that landlords may be offering fewer concessions as demand stabilizes.

Broader Trends

The office sector remains deeply segmented, with Class A properties seeing the most leasing activity, while older Class B and C buildings struggle with high vacancies. Companies are increasingly willing to pay premium rents for high-quality spaces in prime locations, while older office stock is being repurposed or left vacant. Major markets like New York and San Francisco continue to grapple with high vacancy rates, while emerging secondary markets like Nashville and Austin show signs of growth.

Hybrid work remains a dominant trend, but some corporate tenants are opting for smaller but higher-end office spaces to encourage employee attendance. The federal government has also announced plans to consolidate its office footprint, further impacting demand for certain submarkets. Upcoming interest rate decisions may play a role in determining how quickly office investment activity rebounds.

Industrial

For Sale

Pricing: The national median asking price per square foot for industrial properties stood at $109.22 in February, continuing a flatline in pricing movement that’s lingered since August 2024. This trend may reflect market stabilization after years of rapid growth, with a potential pricing increase on the horizon.?

Cap Rates: Industrial cap rates fell again in February to 7.30%, marking an 4-month gradual decline from October 2024’s high of 7.45%. This suggests investors are factoring in lower perceived risk and adjusting to new pricing expectations, though these expectations may be hampered by upcoming economic uncertainty influenced by tariffs and higher supplies costs.

Absorption: The industrial sector’s absorption rate on Crexi remains positive, with steady tenant activity, though at a slightly moderated pace. In the same period, sold price for square foot jumped up dramatically to $107.96 in February, over 21% higher than year-over-year comps.

For Lease

Asking vs. Effective Lease Rates: Industrial lease rates have remained strong and continued a 6th consecutive month of modest asking rate increases, with only a negligible gap between asking and effective rates.

Broader Trends

The industrial real estate sector is navigating a complex landscape shaped by recent tariff implementations and their cascading effects on e-commerce and property demand. As of early March 2025, the U.S. administration imposed a 25% tariff on imports from Canada and Mexico, along with a 10% tariff on Chinese goods.

These measures have introduced significant challenges for businesses reliant on global supply chains, particularly in sectors like IT hardware, automotive, and consumer goods. The increased costs associated with these tariffs are anticipated to drive up consumer prices, potentially dampening demand and contributing to stagflation—a scenario characterized by slowing economic growth and rising inflation.??

In response to these tariffs, companies are reevaluating their supply chain strategies to mitigate potential disruptions. Notably, Chinese e-commerce and third-party logistics providers have significantly expanded their warehouse leasing in the U.S., accounting for a fifth of net new leases by the third quarter of the previous year. This surge in warehouse acquisitions, particularly in regions like New Jersey, is part of a strategy to maintain a steady supply of goods shielded from potential tariff increases. By stockpiling inventory in U.S. warehouses, companies aim to navigate the evolving trade landscape more effectively.??

These developments underscore a growing demand for industrial properties, especially warehouses and distribution centers, as businesses adapt to new trade policies. The need for strategic inventory management and localized fulfillment is driving this trend, positioning sub-market and last-mile industrial real estate as a critical component in the evolving e-commerce ecosystem. However, the long-term impact of tariffs on consumer behavior and overall economic growth remains uncertain, necessitating close monitoring by stakeholders in the industrial real estate market.

Multifamily

For Sale

Pricing: The median asking price per square foot for multifamily properties was $162.76 in February, showing a modest decrease from January. Pricing has adjusted down for the last four? months in a row, but deals are still trading, with 1.2% absorption last month - the highest of all main asset classes on Crexi.

Cap Rates: Multifamily cap rates rose slightly in February to 7.08%, suggesting that investors are pricing in higher borrowing costs but remain committed to the sector. This continues a climb in cap rates that began in May 2024, where multifamily hit its 12-month low of 6.9%.

Absorption: Despite asking price dips, multifamily absorption rates remained healthy last month, reflecting steady renter demand even as new supply comes online. Sale price per square foot was noticeably higher than asking at $189.26, showing that well-positioned assets are still able to attract ready capital despite climbing cap rates.

Broader Trends

The multifamily real estate sector is poised for a growth year in 2025, influenced by a confluence of supply, demand, and economic factors. Developers are projected to add more multifamily units to the U.S. housing market than at any time since the 1970s, with most new supply concentrated in the Sun Belt and Mountain regions. This surge is expected to elevate the average multifamily vacancy rate to 4.9% by year’s end, accompanied by an average annual rent growth of 2.6%.??

However, the sector faces challenges from recent trade policies. In February 2025, the administration imposed tariffs on steel and aluminum imports, leading to increased construction costs for mid- and high-rise apartments. These higher costs may result in elevated rents, as developers might pass on expenses to tenants or delay projects, exacerbating housing affordability issues.? Despite these hurdles, the multifamily market is expected to stabilize toward the end of 2025, as supply chain disruptions ease and interest rates potentially decline, fostering a more favorable environment for both developers and investors.

Regional Breakdown: Median Cap Rates & Changes by Top MSAs – February 2025

Disclaimer: This article's information is based on Crexi's internal marketplace data and additional external sources. While asking price in many ways reflects market conditions, variations in pricing are affected by changes in inventory, asset size, etc. Nothing contained on this website is intended to be construed as investing advice. Any reference to an investment's past or potential performance should not be construed as a recommendation or guarantee towards a specific outcome.

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