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Commercial Real Estate Gloom Is Dissipating – in Some Places

March 14, 2025 | 1 minutes reading time | By John Hintze

Office vacancies continue to be a drag on the market; trophy properties are exceptions.

Although U.S. commercial real estate is not out of the doldrums, the outlook has turned at least selectively positive.

While some geographical areas remain cyclically challenged, and the office segment is facing a long period of readjustment, the data center and warehouse sectors are particularly strong, as are specialty properties such as medical offices, according to Cris deRitis, deputy chief economist at Moody’s Analytics.

Demand for retail properties has largely recovered, in some cases even exceeding pre-pandemic levels. “There were death spiral stories [about closed-air malls] going around for years with the popularity of online shopping, but now it seems like even those properties are being transformed,” deRitis said. “Retail today is battle-tested, having survived two existential crises.”

Banks significantly scaled back CRE lending after interest rates ramped up in 2022. As the pandemic’s impact subsided, investors in commercial mortgage-backed securities (CMBS) stepped up. They bought $103.6 billion in CMBS securities last year, nearly tripling 2023’s $40.6 billion, according to Trepp.

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Commercial Real Estate Gloom Is Dissipating – in Some Places

March 14

Office vacancies continue to be a drag on the market; trophy propertie...

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