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Share Trends in the commercial real estate market January 15, 2026 The commercial real estate market has been defined by resilience in some sectors and readjustment in others. Industrial and multifamily properties continue to perform well thanks to sustained demand and long-term demographic shifts, while office and retail spaces are still finding balance in a changing economic and environmental landscape. At the same time, climate change and rising costs are adding new complexity for property owners. Extreme weather events – such as flood, wind and wildfire – are increasingly influencing how properties are valued, financed and insured. Understanding these shifts can help guide clients toward appropriate risk management strategies and help ensure they’re properly protected. Commercial real estate market trends Each property type is responding differently to changing economic conditions, evolving tenant needs and climate risk. For property owners, this uneven landscape is redefining what stability looks like, and for insurers, it underscores the importance of understating how risk varies across asset classes and regions. Industrial real estate Industrial property has remained one of the most stable sectors over the past year, supported by strong demand for warehouses, logistics hubs and manufacturing space. National net absorption reached 45.1 million square feet in Q3, up 33% year-over-year, while vacancy held only slightly above pre-pandemic levels.1 Office properties The office sector has shown gradual stabilization in 2025 as hybrid work models took hold and leasing broadened beyond major metros. The national office vacancy rate held at 20.7% in Q3, signaling that vacancies may be nearing their peak. Nearly half of U.S. markets reported positive absorption, and sublease availability declined 14.5% since early 2024 as tenants reclaimed or re-leased space.2 Retail properties Retail real estate plateaued in Q3 2025 after several years of steady recovery. National retail vacancy remained flat at 5.8%, near historic lows, but leasing momentum slowed and rent growth softened. Limited new construction continues to support pricing, while tariff and inflation pressures have raised costs for retailers and property owners alike.3 Multifamily properties Multifamily housing remained a bright spot in 2025, with strong renter demand offsetting slower rent growth. In Q3, tenants absorbed over 102,000 units, marking the third straight quarter of robust leasing activity. Overall vacancy improved to 9.0%, while new construction fell 27% year over year.4 Across property types, 2025’s mixed performance highlights a market in transition, one where growth depends as much on adaptability as demand. Industrial and multifamily properties continue to attract investment, while office and retail owners are rethinking space use, modernization and long-term resilience. For the insurance industry, this creates new opportunities to align coverage and risk strategies with how each property type is evolving — from weather resilience and valuation accuracy to climate-adaptive building design and coverage for rising repair costs. Challenges for the commercial real estate industry As commercial real estate adapts to technology demands, economic and environmental pressures, several challenges are shaping how properties are developed, financed and insured. Climate change and rising costs Extreme weather continues to be one of the most significant threats to property performance and insurability. Wildfires, hurricanes and severe convective storms are occurring more frequently and with greater intensity, leading to higher claims costs and growing pressure on insurance markets. According to Nationwide research, commercial property stakeholders are increasingly concerned about climate-driven losses. Rising replacement costs, reinsurance constraints and inflation have compounded the challenge, contributing to overall cost increases. Increased technology use The rapid adoption of digital systems — ranging from property management software to AI-driven analytics — is reshaping how commercial properties are operated and maintained. Smart building technology offers powerful tools for energy efficiency, predictive maintenance and tenant experience, but it also introduces new cyber and operational risks. Connected controls can create exposure to data breaches or system failures that disrupt operations. Interest rate fluctuations Interest rate volatility remains a defining challenge for commercial real estate investors. Higher borrowing costs have slowed transaction activity and delayed new development, particularly in sectors already under pressure like office and retail. Refinancing risk has also grown for owners whose loans originated during the low-rate era; many are now facing significantly higher debt-service costs or tighter lending terms. Even as rates begin to stabilize, the financial ripple effects will take time to work through the market. Projects that once penciled out easily are now being reassessed, with investors focusing on cash flow stability and long-term value retention. Despite these challenges, there are opportunities for innovation and resilience across the commercial real estate landscape. As climate, cost and capital pressures reshape investment priorities, owners are rethinking property design and technology adoption to create longer-term value. Sustainability upgrades, smart-building integrations and risk-based maintenance planning have become competitive advantages. Those who adapt early by investing in climate resilience, cybersecurity and operational efficiency can better control costs, meet evolving tenant expectations and maintain insurability in a changing environment. Commercial real estate opportunities Beyond the sector-specific trends shaping the 2025 market, broader opportunities are emerging that reflect how commercial real estate can evolve to meet long-term needs. These areas extend beyond traditional property performance, focusing instead on innovation and collaboration — key drivers of resilience and growth for the years ahead. Affordable housing development With prices and rents continuing to outpace wage growth, developers are finding new ways to meet demand through adaptive reuse, modular construction and mixed-income projects. Incentives such as tax credits and flexible zoning are helping attract private investment, while success depends on cost control, resilient site selection and mitigation of climate and infrastructure risks. Listen to the Economic Insights by Nationwide podcast for more on the housing industry Effective public-private relationships By combining public resources with private investment, public-private partnerships (P3s) are driving progress in areas like affordable housing, infrastructure and sustainability. These collaborations help share risk and accelerate project timelines while aligning business goals with community impact. Together, these efforts represent a shift toward purpose-driven growth by focusing on affordability, resilience and collaboration. Managing real estate risks The commercial real estate market reflects both the challenges and opportunities of a sector in transition. Yet across every segment — industrial, office, retail and multifamily — there’s a common theme: resilience. Nationwide’s Risk Management and Client Solutions team can help organizations develop strategies to become more resilient to hazards that are specific to commercial real estate, and the commercial real estate library on the Risk Management Solutions Center has resources that can help support these efforts. There, customers can find resources such as our Water Mitigation Program. This program is designed as a guide to help building owners and occupants develop a customized plan to help protect structures and assets from non-weather water damage, which is one of the most common types of property insurance claims. Other articles and resources in our Real Estate library include: Property management maintenance checklist Residential building lock and key security checklist Help prevent weather-related slips and falls Be prepared during wildfire season Identifying and preventing MIC in fire sprinkler systems From updating property valuations and reviewing coverage gaps to supporting clients pursuing sustainable building upgrades or new developments, proactive guidance can make a measurable difference in long-term stability. Appointed agents can contact your territory manager and partner with Nationwide to stay ahead of emerging commercial real estate trends and help your clients navigate risk with confidence. Explore more insights and resources. Citations/Disclaimer: 1 Cushman & Wakefield “Marketbeat United States Industrial Q3 2025,” 2025. 2 Cushman & Wakefield “Marketbeat United States Office Q3 2025,” 2025. 3 Cushman & Wakefield “Marketbeat United States Retail Q3 2025,” 2025. 4 Cushman & Wakefield “Marketbeat United States Multifamily Q3 2025,” 2025. Share
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