The fundamentals are strong. That’s the takeaway from Marcus & Millichap’s latest commercial real estate research briefs.
In its third-quarter fundamentals report, Marcus & Millichap said that the CRE market’s fundamentals are holding firm. That’s good news.
But that doesn’t mean that commercial real estate professionals won’t face challenges throughout the rest of 2025 and in 2026.
In its latest report, Marcus & Millichap analyzed the state of the commercial real estate sector’s main asset types. The findings? These sectors might not be booming, but they are, mostly, holding steady even during national economic challenges.
Balance is returning to the multifamily market, according to Marcus & Millichap’s report. Demand growth in this sector is moderating, but so is new supply. That could lead to a more stable multifamily market across the United States, Marcus & Millichap reported.
According to Marcus & Millichap, while the national multifamily vacancy rate is still down 100 basis points on a year-over-year basis, this number did increase to 4.6% in the third quarter of this year.
Certain markets have also seen so much new apartment development that they are now experiencing higher vacancy rates. Marcus & Millichap pointed to markets such as Austin, Dallas-Fort Worth and Nashville. On the other side of the equation, markets with limited development, including Chicago, Cincinnati, Cleveland, Detroit and Minneapolis-St. Paul, have seen rent growth higher than 5%, Marcus & Millichap reported.
In a bit of good news, Marcus & Millichap reported that the U.S. office sector continued to post a positive performance in the third quarter, which might signal a modest recovery in some metropolitan areas.
According to Marcus & Millichap, nearly 38 million square feet of office space was absorbed across the United States in the third quarter. That marks the sixth consecutive quarter of positive net absorption in this sector.
This helped drop the national office vacancy rate down 30 basis points to 16.4% in September, Marcus & Millichap reported.
The office vacancy rate fell a strong 170 basis points in Milwaukee, making this Wisconsin city one of the stronger performers in this sector during the third quarter. Marcus & Millichap reported, too, that Cleveland and Indianapolis ranked among the least-vacant office metropolitan areas in the third quarter.
And in the industrial sector? Marcus & Millichap reported that years of heavy industrial supply continue to influence this sector’s performance.
According to Marcus & Millichap, nearly 20 million square feet of industrial space was absorbed from July to September following a second quarter that saw negative net absorption in this sector. Even with the absorption in the third quarter, though, increased construction activity pushed the vacancy rate in the U.S. industrial sector to a 12-year high of 7.8%.
Construction activity is the reason behind this higher vacancy rate. Marcus & Millichap reported that about 3.5 billion square feet of industrial space has been completed during the past 10 years in the United States. That space is still being absorbed.
The retail sector is holding steady, according to Marcus & Millichap. Net absorption in this sector was positive in the third quarter, but its vacancy rate edged up to a below-average 4.9%.
Retail vacancy rates, though, were below 3.5% in Indianapolis and Minneapolis-St. Paul. Marcus & Millichap reported that well-located retail space, especially space in centers with a higher concentration of necessity retailers, remains in demand by investors.