Commercial real estate asset types have shown a fluctuation in performance, but many indicators point to stabilization in sale prices and cap rates, according to a Crexi March 2025 national CRE report.
Despite retail property sale prices decreasing 1.69% year-over-year in March to $259.54 per square foot, the sector is experiencing robust demand as evidenced by sustained investor confidence and higher absorption, particularly in prime locations, according to the report. Elevated building costs have curtailed development, prompting investors to compete for existing properties and leading to steady pricing.
The median cap rate for sold retail properties is 6.7%, even with the previous month. This suggests investors are accepting lower yields in anticipation of continued appreciation and stable income streams from retail assets, said Crexi. Properties anchored by grocery and with essential service tenants remain especially attractive and are attributed to downward pressure on cap rates. The median annual asking lease rates for retail spaces were $18.89 per square foot, while the effective lease rate averaged $18.41 per square foot, a narrow gap that indicates strong tenant demand.
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The office sector is showing signs of stabilization amid return-to-office policies, said the report. Move-outs decreased significantly for the year ended February, although the national vacancy rate rose to 14.1% due to continued negative absorption and new construction delivered.
The median sale price for office properties was $231.71 per square foot, a 15.6% increase year-over-year. The uptick reflects renewed investor interest, particularly in Class A office spaces with modern amenities in central business districts that employers are hoping will entice employees back to the office. Median sold office cap rates were 7.5%, down slightly month-over-month, and asking lease rates averaged $19.95 per square foot annually, while effective rates were slightly lower at $18.92 per square foot.
Industrial continued to be a resilient asset class despite economic uncertainty, underscoring a strong demand for industrial assets driven by the expansion of e-commerce and the need for efficient distribution networks. Properties near major transportation hubs and urban centers that facilitate last-mile delivery are drawing the most interest, said the report.
The median industrial sale price decreased 1.4% year-over-year to $110.67 per square foot, while the median cap rate for sold properties was 7.27%, an increase of 18 basis points from the previous month. This trend indicates sustained investor confidence in the industrial sector, with expectations of continued rental growth and low vacancy rates.
Meanwhile, multifamily absorption was a healthy 1.62% in March, aligning with sustained demand for rental housing. The median sale price for multifamily properties was $163.09 per square foot, down 2.5% year-over-year. The slight dip reflects a recalibration in the market as cap rates expand and debt financing becomes more expensive. The median cap rate for sold multifamily assets was 6.54%, while asking cap rates were slightly higher at 7.11%, suggesting a disconnect between buyer and seller expectations.
Investors are becoming more selective in the multifamily space, targeting properties with operational upside or those located in high-growth secondary markets where affordability and job growth remain strong, said Crexi.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
