United States: Mid-Year Outlook
As we reach the midpoint of 2025, the U.S. commercial real estate landscape reflects a dynamic blend of resilience, recalibration, and cautious optimism. To establish a deeper nationwide sentiment for the rest of the year, we surveyed more than 250 Avison Young real estate professionals across the United States. What we’ve found is that, looking ahead to the second half of the year, sentiment across the industry is cautiously constructive. All our surveyed experts believe that the remainder of the year will see either the same or increased activity across the U.S. markets.
Source: Avison Young Professionals
Across sectors—from office and industrial to retail, healthcare, and multifamily—there’s a clear theme of transformation driven by evolving user demands, technological integration, and shifting economic conditions. While AI and automation are fueling growth in data centers and tech, traditional sectors like office and retail are navigating bifurcated markets, where premium assets thrive while others lag. Despite macroeconomic headwinds, including tariff uncertainty and supply chain disruptions, many sectors are finding new footing through innovation, strategic repositioning, and a renewed focus on quality and experience.
Survey results found that overall commercial real estate fundamentals would remain mostly stable, yet leasing and investment activity, as well as tenant tours, would trend higher into the remainder of the year.
Source: Avison Young Market Professionals
Overall, some stakeholders are embracing a “wait-and-see” approach in areas where cost pressures and policy ambiguity persist, yet many remain agile in capitalizing on emerging opportunities. The consistent thread across all sectors is adaptability—whether it’s healthcare providers leveraging AI for site selection, retailers reimagining tenant mixes, or multifamily developers responding to demographic shifts.
Project management professionals are anticipating that construction activity will either increase or remain the same for the second half of the year, with the most magnetic sectors being industrial, multifamily, and special purpose such as data centers. More than half of Avison Young project management experts believe tariffs will be the focal point for developers for the remainder of the year. With the high price of construction costs, it’s uncertain how much tariffs will affect pricing for materials.
Source: Avison Young Market Professionals
Factors driving growth
The office market remains bifurcated in both investment and leasing fundamentals, with performance varying widely by region and asset class. Key markets like Manhattan continue to perform well, while several Texas markets are showing positive momentum with improving availability rates. San Francisco, which lagged in prior quarters, has accelerated over the past 12 months, driven largely by renewed activity in the tech sector—resulting in increased supply and demand.
At the top of the market, demand for trophy and class A space remains strong. As prime space becomes increasingly limited, competition among large occupiers is intensifying. Over the past 24 months, most major tenants have already secured premium office space, setting the stage for a trickle-down effect into the broader class A segment over the next year.
Meanwhile, return-to-office (RTO) policies have become more firmly established in many urban markets. Cities like Miami, Manhattan, West Palm Beach, and Washington, D.C. have seen increased office activity as more companies implement and enforce structured RTO mandates. This trend is helping stabilize foot traffic and support office occupancy rates in these high-demand locations. Brokerage professionals consistently see walkable amenities and proximity to transit at the top of tenant lists when touring space in central business districts, while well-amenitized buildings are key for suburban locations.
Also according to our expert survey, the sectors consistently driving the most office demand across the U.S. in the second half of 2025 will be financial services, technology, and law firms.
Factors inhibiting growth
Many landlords of class B and C office properties in the U.S. are struggling to compete in the market, as their buildings lack the modern amenities and finishes that tenants increasingly demand. These office properties have limited access to capital for necessary upgrades and improvements. As a result, these assets remain underperforming, leading to a bifurcated market across the U.S.
However with overall office supply tightening—particularly at the top of the market—a trickle-down effect is expected over time, going from trophy and class A product, eventually driving increased demand for class B and C spaces. Until that shift materializes, the outlook remains uncertain, and these markets are in a “wait-and-see” mode. Landlords and investors will need to carefully assess whether and when to invest in renovations or repositioning strategies to capture future demand once it reaches these tiers.
In key markets, our Market Intelligence office experts performed a scenario analysis on availability rate predictions for the remainder of the year and noted the best, likely, and worst-case outcomes. Overall, most experts believe the likely outcome is that vacancy will show slight year-end increases in the San Francisco, Greater Boston, Chicago, and Washington, D.C. areas. Manhattan, on the other hand, is expected to show a slight decrease as office activity remains strong.
Source: Avison Young Market Intelligence, CoStar
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Understand the power of reading and the knowledge you can obtain.
Factors driving growth
The current administration’s emphasis on strengthening domestic manufacturing—particularly in strategic sectors such as automotive, semiconductors, steel, aluminium, defense, and pharmaceuticals—is driving a wave of new investment commitments across the United States.
As these ecosystems develop, industrial real estate demand is expected to rise significantly, especially within a 6- to 8-hour-driving radius of major production facilities. This emerging pattern is reshaping regional economies and reinforcing the need for well-located industrial infrastructure.
Factors inhibiting growth
Tariffs have heightened market uncertainty and exposed vulnerabilities that could constrain growth across industrial sectors. Disruptions in global supply chains have increased production and manufacturing costs for technology companies, resulting in higher prices for consumers. Moreover, the use of tariffs as leverage in ongoing trade negotiations has created additional uncertainty. This has made it difficult for decision-makers to finalize location and expansion plans, as they await clarity on how new trade agreements will reshape supply chain networks within their industries.
Avison Young industrial experts surveyed expect their market demand to remain neutral in the second half of 2025 amid tariff negotiations. However, this sentiment varies based on U.S. region: the Northeast teams expect the market to lose a small percentage of demand by approximately 0-4% whereas the West Coast will see a gain of 0-4%.
We asked our professionals to weigh in on how much they believe manufacturing demand will change in the coming months from the market peak in 2022. The majority expect to see it increase slightly (0-9%) or remain netural through the remainder of the year. Our Northeast teams anticipate seeing more neutrality, while the Southeast region expects to see modest gains.
Peter Kroner
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- Director, National Industrial, Market Intelligence
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- Industrial
- Strategic Business Advisory
- Market Intelligence
Bonus personal question: What advice would you give your 10-year-old self?
Always remain curious, and don't be afraid to admit and ask for clarity if you don't recognize, or understand something. Many people are too proud to admit when they don't understand something, so do your best to express interest in what you do not understand.
Factors driving growth
Retail real estate continues to be one of the tightest sectors in CRE, marked by historically low vacancy and an ongoing lack of substantial new construction. Tenant demand remains strong, though select retailers have slowed expansion plans amid tariff and trade policy uncertainty. Despite macroeconomic headwinds, consumer spending remains resilient, and secondary markets are thriving as affordability pushes migration beyond major metros.
Retail is undergoing a major transformation in tenant mix. Health, wellness, and medical services are rapidly replacing traditional retail uses. Industry giants like Amazon and Walmart are repurposing obsolete mall space, removing significant gross leasable area from circulation and intensifying the supply-demand imbalance. In urban cores, suburban brands are seizing large-format vacancies, while experiential retail—entertainment, sports, social venues, and curated concepts—continues to fuel traffic and footfall.
After years of stagnation, retail investment sales are gaining traction. With capital re-entering the market, the stage is set for leasing momentum, third-party services expansion, and renewed portfolio growth.
According to our expert survey, we expect discount retailers to show the most interest for new locations and expansion, followed by health and wellness as the convergence of medical care and pharmacy continues to grow.
Factors inhibiting growth
Tariffs, trade wars, and ongoing policy uncertainty are the primary challenges facing the retail market today. These factors have contributed to declining consumer sentiment, threatening to weaken demand and consumer spending. Consequently, many retailers are pausing expansion plans and holding back on open-to-buy (OTB) decisions until there is greater clarity on tariff directions. Retailers are also experiencing margin pressures as they absorb rising costs, while risking passing higher prices on to consumers. Supply chain disruptions have resurfaced, further complicating operations.
Meanwhile, ecommerce continues to intensify pressure on retailers to balance physical and digital channels. Retailers must adapt to rapidly shifting consumer preferences by right-sizing their brick-and-mortar store fleets while ensuring a seamless online shopping experience. The sector is also seeing an increase in bankruptcies and store closures, with certain segments—such as pharmacies—facing chronic vacancy risks that are likely to worsen with further closures.
Our experts anticipate department stores and hobby retailers to be the most heavily impacted by store closures and lack of active demand to backfill space over the next six months. Our survey predicts overall vacancy to remain neutral for the second half of the year as retailers await greater clarity on tariff directions.
Meghann Martindale, CLS
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- Principal, Director Market Intelligence, Retail
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- Retail
- Market Intelligence
Bonus personal question: What advice would you give your 10-year-old self?
Always trust your intuition personally and professionally.
Factors driving growth
AI—and increasingly, robotics—is expected to remain a major driver of demand for data center capacity, pushing requirements well beyond current supply levels. This surge is being compounded by the continued growth of data-intensive technologies such as cloud storage, video streaming, and autonomous vehicles—all of which require robust digital infrastructure.
Although early in the quarter there were concerns about a potential slowdown in tech investment, first quarter earnings reports from major hyperscalers—including Amazon, Microsoft, and Google—reaffirmed their commitment to expanding data center footprints, with capital expenditures projected to surpass initial forecasts. This signals a deepening reliance on physical infrastructure to support the next wave of technological advancement.
Factors inhibiting growth
Power constraints continue to be the primary challenge for new data center development. Additionally, potential tariff increases—especially on semiconductors and construction materials—are expected to substantially raise costs and cause project delays. Broader economic uncertainty stemming from shifting trade policies may further prompt companies and developers to adopt a cautious approach toward new investments.
Technologies such as AI, autonomous vehicles, cloud storage, and 5G networks have pushed data generation to unprecedented levels. In the U.S., data centers have averaged a compounded annual growth rate in the last five years. Using that projection, the market will nearly quadruple by 2030, to 180 gigawatts (GW). That would be approximately one-third of the country’s current electricity generation capacity.
Howard Huang
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- Market Intelligence Analyst
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- Data Centers
- Life Sciences
- Office
- Market Intelligence
Bonus personal question: What advice would you give your 10-year-old self?
Put all your money in Nvidia stock.
Factors driving growth
As healthcare systems and physician groups increasingly adopt strategic location planning to boost local market share and enhance the patient experience, profitability is rising—driving up real estate costs across the healthcare sector. The growing integration of artificial intelligence in both internal operations and site selection is accelerating this trend.
Tools such as Avison Young’s Healthcare Location Intelligence enable tech-savvy organizations to identify optimal locations with precision, reducing uncertainty for both occupiers and investors. As a result, these healthcare providers are not only clearer on the real estate they need, but also more willing to pay a premium for properties that align with their strategic goals. This convergence of technology, data-driven decision making, and demand for high-performing sites is fueling continued growth in healthcare-related commercial real estate values and costs.
Factors inhibiting growth
While healthcare is often considered a “sticky” good in economic terms, consumer costs in the U.S. have risen significantly faster than most other goods over the past decade. This steep increase has led to reduced access to care and declining patient demand, as evidenced by healthcare utilization rates that remain below pre-pandemic levels. At the same time, providers have faced slower reimbursement growth, influenced by rising Medicaid and Medicare enrollment and a less favorable payor mix.
Combined with inflation and recent regulatory changes creating uncertainty, these factors have constrained healthcare providers’ growth potential compared to previous years. This environment makes it more challenging for providers to justify increased spending on real estate—a key driver for growth in the healthcare real estate sector. Despite these challenges, supply for medical outpatient facilities remains tight, meaning that demand would need to shift significantly before growth in healthcare real estate begins to slow.
Bonus personal question: What advice would you give your 10-year-old self?
I would tell him to be less stubborn and take learning a new language seriously. What would have taken that little guy a year or two to become fluent in is taking me significantly longer to learn, and I would mention that someday (maybe when I am working for a global company) it might be cool to just know French, Spanish, Mandarin or maybe even multiple languages.
Factors driving growth
The availability of multifamily housing is poised to shape future demand, with more options than ever before across the U.S. New supply has increased significantly, featuring higher-quality living spaces with enhanced amenities. Approximately two-thirds of the units currently under construction are expected to be completed this year. However, following this wave, construction activity is likely to slow considerably due to cost uncertainties, leading to a “wait-and-see” approach—particularly in Southeast markets.
Multifamily housing today reflects a tale of two distinct markets. In high-cost cities such as San Francisco, New York, and Los Angeles, construction remains expensive, limiting new supply. Conversely, Southeast and Sun Belt markets like Atlanta, Denver, Charlotte, and Austin are experiencing more moderate construction costs, but some of these areas may face flat or even declining rents over the next several months. Miami stands out as an exception in the Southeast, maintaining strong occupancy rates around 95%, which supports steadier rent growth.
Factors inhibiting growth
The high cost of homeownership, combined with elevated interest rates, continues to keep many potential buyers out of the single-family housing market which in turn fuels increased demand and activity in the multifamily sector. Looking ahead, there are concerns about the long-term outlook for multifamily housing. Many millennials—now over the age of 30 and starting families—are less likely to remain in multifamily rentals long-term, as their housing preferences evolve toward single-family homes or other residential options. Rising housing costs are a key driver of growth in the rental market, while return-to-office (RTO) mandates are encouraging more people to return to physical workplaces, which may impact location preferences.
Meanwhile, ongoing uncertainty related to tariffs and broader market conditions is likely to keep some potential buyers and renters on the sidelines, further complicating demand forecasts. For investors and developers, this suggests the need for a nuanced approach that considers shifting demographic trends, affordability challenges, and evolving lifestyle preferences when evaluating multifamily and residential rental investments.
New supply has slowed in core markets, due to the high cost of rents over the last 12 months. Meanwhile, the Sun Belt and lifestyle markets have seen a surge in development activity that is expected to place a downward pressure on rents in the coming months.
Grant Hayes
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- U.S. Multifamily & Client Data Solutions Lead
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- Capital Markets Group
- Multifamily
- Market Intelligence
Bonus personal question: What advice would you give your 10-year-old self?
Find what you like to do and keep doing it!
Factors driving growth
AI adoption continues to accelerate nationwide, fueling innovation and transforming industries at an unprecedented pace. A recent McKinsey study found that 78% of organizations were using AI by the end of 2024—a sharp increase from 55% the previous year. Companies increasingly recognize AI as a strategic tool to boost operational efficiency, reduce costs, and unlock new business opportunities.
This momentum has led to a surge in AI-focused startups and next-generation tech firms operating in adjacent fields, such as data infrastructure, automation, and advanced analytics. These companies are rapidly scaling operations in key innovation hubs like California, Manhattan, and Austin, shifting from lean, cost-conscious setups to premium office environments as they attract talent and capital.
Factors inhibiting growth
Tariffs have amplified market uncertainty and highlighted vulnerabilities to growth within the AI and broader tech sectors. Disruptions in global supply chains have driven up production and manufacturing costs for technology companies, resulting in higher prices for consumers. As operational expenses rise, there is a growing risk that investment in research and development (R&D) may slow, potentially impeding long-term innovation. Startups are especially vulnerable, facing increased costs alongside more limited resources. Furthermore, venture capitalists may become more cautious, potentially reducing funding as ongoing uncertainty and elevated risks weigh on the tech industry’s outlook.
The proximity to tech talent, top universities, and venture capital has continued to allow the Bay Area to act as the nation's center of gravity for AI. As capital pours in, our experts anticipate that AI companies will continue to lease and expand in the region for the rest of the year and beyond
Bonus personal question: What advice would you give your 10-year-old self?
Listen to others! You don't have to figure things out or do things on your own. Sometimes other people know better and want to help you avoid making the same mistakes they made.
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Principal, U.S. Director of Market Intelligence
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Market Intelligence
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Market Intelligence Manager, West Region
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Market Intelligence