By Lielle Sosa, Director of Acquisitions and Investments, Levy Realty Advisors
As we move into 2025, the commercial real estate market is being shaped by dynamic trends and emerging opportunities. Industrial properties, such as warehouses and logistics centers, remain in high demand, particularly in the Sunbelt, where a manufacturing boom is driving growth. Retail spaces are proving resilient, with grocery-anchored centers and experiential retail leading the way, while non-discretionary sectors continue to perform strongly. Office spaces in cities like New York are making a comeback, with a “flight to quality” driving demand for modern, amenity-rich Class A buildings. Multifamily properties thrive in high-growth areas like South Florida, while newer asset types, including data centers and life sciences facilities, gain momentum thanks to advancements in technology and healthcare innovation. PropTech solutions like AI and predictive analytics are transforming property management and investment strategies, and with financing conditions expected to improve, capital is becoming more accessible. Staying adaptable and informed will be essential to capitalize on these trends
Retail Stability and Growth: A Nationwide Perspective
Retail is making a strong comeback, led by resilient sectors like grocery and healthcare. Grocery-anchored centers continue to offer reliable foot traffic and long-term returns for investors, while experiential retail is driving consumer engagement with interactive shopping concepts. National retail vacancy rates have dropped to a 15-year low of 4.8%, with rents increasing 2.4% year-over-year, according to JLL’s Q3 2024 Retail Market Report. These indicators highlight the growing strength of the retail sector, particularly in high-demand markets like South Florida.
Beyond South Florida, cities in the Midwest and Southeast, such as Indianapolis and Cincinnati, are gaining traction among investors. Colliers notes that grocery-anchored centers in these areas offer cap rates of 6-7%, compared to South Florida’s tighter range of 5-6%. Rising property prices in South Florida have also prompted local investors to explore out-of-state opportunities, leveraging favorable tax policies and diversification benefits in secondary markets. This strategic shift positions them to capitalize on underserved regions while balancing portfolio risk and returns.
Multifamily Assets: Resilient and Thriving Nationwide
Multifamily properties remain a cornerstone of commercial real estate, showing resilience and consistent demand even amidst economic fluctuations. High-growth areas like South Florida continue to benefit from steady migration trends, creating strong demand for quality rental housing. According to CBRE’s 2024 U.S. Multifamily Outlook, rental growth in South Florida is projected to outpace national averages, with Miami seeing year-over-year rent increases of 5.2%. Suburban markets in the region are also thriving, as residents seek more space without sacrificing proximity to urban amenities.
On a national level, cities like Austin, Dallas, and Atlanta lead the multifamily sector, fueled by population growth and job creation. CoStar data reveals that multifamily vacancy rates remain below 5% in these metros, while average rents are forecasted to rise by 3-4% in 2025. Investors are increasingly targeting suburban markets for opportunities, as they offer higher yields compared to densely populated urban areas. This trend aligns with South Florida investors expanding their reach, diversifying portfolios to capture growth in other high-demand regions across the U.S.
Office Market Recovery
The U.S. office market is stabilizing, with vacancy rates holding steady at 19% in Q3 2024, signaling an end to nine consecutive quarters of increases, according to CBRE’s U.S. Office Figures Report. Class A buildings, offering modern layouts, advanced technology, and on-site amenities, continue to dominate demand, accounting for 76.2% of leasing activity in the first half of 2024. Suburban markets, including South Florida, are leading the recovery, with suburban office valuations declining by 18% since 2022, compared to a steep 50% drop in downtown properties, as reported by MSCI Real Assets. This trend reflects a growing preference for workspaces closer to residential areas and with high-quality facilities.
Looking ahead to 2025, older office buildings are expected to trade at significant discounts, with some properties in key markets priced as low as 40% below their pre-pandemic values, according to JLL. This creates opportunities for investors to reposition and modernize these assets to meet evolving tenant demands. Additionally, limited new office construction—currently at its lowest level in over a decade—underscores the importance of adapting existing properties to align with the increasing demand for flexible layouts and shorter lease terms. As Colliers highlights, Landlords offering dynamic spaces and strategic renovations will be best positioned to capture market share in this changing environment.
Levy Realty Advisors’ Strategy for 2025 and Beyond
At Levy Realty Advisors, with nearly 50 years of experience, we focus on acquiring properties that deliver lasting value—multifamily units, retail centers, and office spaces that meet evolving market demands.
As South Florida continues to thrive, we’re also expanding our focus to markets beyond the region, targeting areas with lower barriers to entry, strong population growth, and untapped potential. This approach allows us to diversify our portfolio and capitalize on opportunities in underrepresented markets where demand is rising but competition remains manageable. By aligning with national trends and identifying areas primed for long-term growth, we’re positioning ourselves and our partners to stay ahead of the curve in 2025 and beyond.
Sources:
CBRE: U.S. Office Figures Q3 2024
MSCI Real Assets: U.S. Office Market Trends Report
JLL: 2024 Office Investment Outlook
Colliers: Grocery-Anchored Retail Trends
Marcus & Millichap: 2024 Retail Investment OutlookColliers: Future of Flexible Office Space
JLL: Q3 2024 Retail Market Report
CBRE: 2024 U.S. Multifamily Outlook
CoStar: Multifamily Market Trends for 2024-2025
Yardi Matrix: U.S. Multifamily Rent Growth Report
