INDUSTRIAL OVERVIEW: DEMAND FALLS UNDER TARIFF PRESSURE
Falling demand for industrial space continued in 2025 under the added strain of the United States’ aggressive trade and tariff policies affecting commercial property markets across North America. In the U.S. net absorption declined again in 2025 as tenant and rent growth fell to their lowest levels since the aftermath of the financial crisis. Meanwhile, inventory growth has been scaled back from a record development wave to pre-Covid levels.
Across Canada, overall net absorption was in the red in 2025 and the vacancy rate hit the highest level since 2017. Net absorption in the U.S. totaled 112.5 million SF in 2025. That was down 13% year over year and off 78% from the record 519 million SF of tenant growth in 2021. In the last three years, U.S. net absorption has been trending downward, averaging 137.9 million SF per year compared to a 388-million-SF annual average from 2020 to 2022.
Deliveries in 2025 totaled 253.6 million SF, down 52% from the 526 million SF record in 2023. For five years prior to the lockdown, completions averaged 211 million SF. Deliveries averaged 381 million SF since the 2020 lockdown compared to the 210-million-SF average for the five years prior to Covid.
Overall rent growth has decelerated from a record gain of more than 10% in 2022, to 6.3% in 2023, 3.2% in 2024 and 1.3% in 2025, the lowest since 2011 when the national vacancy rate was 9.6% following the 2008 recession. READ MORE >
OFFICE OVERVIEW: U.S. POSTS GROWTH; WEAKNESS IN CANADA
North American tenant demand was divided in 2025 with the United States posting its first annual net gain since 2019. The U.S. improvement contrasted with lingering post-Covid weakness throughout Canada, along with added stress from the new trade war with the U.S. in the background.
A strong second-half return of net absorption in the U.S. for premium space combined with record-low new supply to produce positive overall net absorption – albeit less than 1 million SF.
It brought a halt to the six-year, 215-million-SF slide that equaled about 2.6% of total inventory and came as companies leased up a net 17,741,120 SF of Class A space in the second half. The improvement offset another dismal start to the year due to continued weakness in Class B space, which ended the year 10.6-million-SF in the red. As such, overall net absorption for the year totaled 960,163 SF. The national vacancy rate declined a tick from an all-time high in the second quarter to close the year at 14.1%.
Despite the improvement, the demand picture remains complex. For example, performance among large metros was mixed. New York City posted 4 million SF of net tenant expansion, driven by improved office attendance and steady leasing by financial services firms. Dallas-Fort Worth and Houston also outperformed with net gains of 2.1 million SF and 1.9 million SF respectively, reflecting strong population and economic growth. San Francisco reported nearly 2.7 million SF of net growth. READ MORE >
RETAIL OVERVIEW: MARKETS LARGELY HEALTHY; DEMAND MIXED
A recalibration by North American tenants occurred across several types of retail property in 2025 that stabilized many markets and preceded renewed momentum. Although demand for some property types is lagging, the markets are in overall good health.
Following weak demand in the first half of the year in the United States, which was beset with a spate of headline bankruptcies and store closures, there was a second-half rebound with the vacancy rate settling at 4.3%, just off the 2022 record. Nevertheless, net tenant demand declined for the fourth straight year since hitting 71.5 million SF in 2021. Although availability remains near its highest level in nearly three years, it has leveled off at about 12% less than the previous 10-year average.
Net absorption fell from 20.5 million SF in 2024 to 852,722 SF in 2025 despite more than 12 million SF of tenant growth in Q4. Merchant demand was dragged down by negative net absorption of nearly 8.8 million SF in neighborhood and grocery-anchored space and a 2.6-million-SF contraction of power center space, the first annual loss since 2020.
Mall tenants shed 1.9 million SF in 2025. It was the eighth straight year net absorption was in the red, putting some 36.6 million SF back in inventory since 2018. And the inventory of mall space continues to shrink, losing 3.6 million SF of space in 2025 and 12.9 million SF, or nearly 1.5% since 2021. READ MORE >
MULTIFAMILY OVERVIEW: DEMAND COOLS, RENT GROWTH FIZZLES
Demand for apartments cooled across North America in the fourth quarter while rents in some areas receded amid continuing economic concerns. After getting hit occasionally with steep annual rent hikes, apartment dwellers across the United States have enjoyed a respite that appears likely to continue for another year or more as a lingering supply-demand imbalance will keep near-term rent-growth flat and vacancy rates elevated.
Overall U.S. demand has been healthy until recently. But following seven straight quarters with net absorption topping 100,000 units, 2025 closed out with Q4 demand at 33,498 units, the least in three years. Year-over-year demand fell 19%. Meanwhile, there were 102,599 units delivered in the fourth quarter and 520,082 units completed for the year. The vacancy rate closed the year at 8.5%.
After hovering just above 1% year-over-year for two years, rent growth slowed to 0.3% in 2025. Twenty-three of the top 50 markets reported negative rent growth for the year.
Tenant demand was strongest in New York and large Southern and Southwestern markets such as Dallas and Atlanta. Robust net absorption earlier in the year was supported by steady economic growth, with national employment up roughly 1% year-over-year through midyear. However, signs of slowing economic and job growth began to emerge late in the year. As demand settles into a more typical pace, the development cycle is also set to wind down in 2026. READ MORE >
