Unique dynamics in metro areas mean that some office and multifamily markets are on the upswing while others still face negative absorption and lower rent prices.
Office buildings
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The market for office space is seeing real signs of improvement as vacancy rates turn the corner into positive absorption of square footage. But the upturn isn’t being felt evenly across the country.

“Economic trends—whether it’s interest rates, job growth or inflation—have a direct impact on how businesses and investors approach commercial properties,” said Nadia Evangelou, senior economist and director of real estate research at the National Association of REALTORS®, who shared the outlook for the commercial real estate market during the association’s Real Estate Forecast Summit last week. “In the meantime, commercial real estate has been through a roller coaster ride over the past year.”

The glimmer of hope in the office sector comes as companies continue to downsize and vacancies rise. About 2.3 million square feet of office space in the Southeast was absorbed in the first quarter of the year, marking a significant shift after years of negative absorption. “But let’s be honest: This doesn’t mean that the office market is back,” Evangelou said. Vacancy rates are still at a record high of 14% nationwide, and the absorption rate is far below the pre-pandemic average of 75 million square feet of absorption.

Businesses are facing large regional variations in the performance of office space. While some areas are seeing a full comeback to pre-pandemic levels—or even better—others are still struggling. NAR’s analysis of CoStar data shows that the office market can be divided into three speeds:

  1. Better than pre-pandemic: 25% of metro areas have larger net absorption, including New York; New Haven, Conn.; and Columbia, S.C.
  2. Better than a year ago: 52% of metro areas have larger net absorption and 26% of metro areas turned negative absorption to positive. These include Dallas-Fort Worth, Texas; Philadelphia; and Sacramento, Calif.
  3. Still negative: 46% of metro areas have negative net absorption, including Boston; Washington, D.C.; and San Francisco.

“What all of this tells us is that that the office market trajectory depends substantially on local dynamics. So, some areas are thriving, others are stabilizing, and a significant portion of them are still struggling,” Evangelou said. “[Certain] markets continue to face challenges from persistent remote work trends, companies that are downsizing and an oversupply of office space that hasn’t yet found new demand.”

The markets with strong healthcare and education sectors, such as Columbia, S.C., which has seen an impressive increase in net absorption to above 850,000 square feet, have seen their office sectors recover most quickly in 2025.

Another topic of national concern is the sale of government office space, especially in Washington, D.C., and Texas. According to the General Services Administration, there are about 8,500 buildings the government owns and leases across the country; 21% of them are owned and the rest are leased. NAR will continue to monitor the effect of the Department of Government Efficiency (DOGE) on the distribution of government buildings for sale, Evangelou said.

Meanwhile, the multifamily sector has been one of the strongest performers in commercial real estate in the past year. Demand for rental housing has remained strong, and in the last year alone, more than 550,000 units were absorbed, according to NAR’s analysis. However, rent prices remain relatively flat, with growth hovering around 1% for the past several months.

Why the contradiction between high housing demand and low rent growth rates? “The reason seems to be the wave of new construction during the pandemic,” Evangelou said. “These low rates in 2021 and 2022 created a construction boom, especially for apartment buildings, and these new buildings are now available in the market. And even though demand for apartments is very strong, this additional supply increases vacancy rates.”

And just like the office market, the success of the multifamily sector faces significant regional variations:

  • Better than pre-pandemic: 28% of metro areas had higher rent growth and a lower vacancy rate, including Chicago; Kansas City, Mo.; Omaha, Neb.; and Madison, Wis.
  • Declining rent prices: 15% of metro areas saw rents decline, including Austin, Texas; Denver; Naples, Fla.; and Phoenix.

In the Sunbelt, where new construction has been the norm since 2020, the question remains if these popular destinations will soon see an oversupply of multifamily units or continue to see rental demand as people relocate to warm, economically thriving destinations.