The commercial real estate (CRE) market in the United States continues to evolve in 2025, driven by a combination of economic recovery, shifting workplace dynamics, and technological advancements. As the demand for traditional office spaces fluctuates and new types of commercial properties gain prominence, investors, developers, and brokers must navigate this transformation carefully. Here’s an in-depth look at what’s happening in the CRE sector in 2025.
Post-Pandemic Shift in Office Space Demand
The most significant trend in commercial real estate in 2025 is the continued transformation of the office space market. Since the pandemic, many companies have adopted remote and hybrid work models, leading to a reduced need for large corporate office spaces in major urban centers. According to a 2025 report from CBRE, the demand for office spaces in cities like San Francisco and New York has decreased by nearly 30% over the past three years.
This decline in demand has caused some developers to rethink their projects. Instead of building traditional office buildings, there has been a growing interest in adaptive reuse of existing office spaces. For instance, former office buildings are being converted into mixed-use properties that include residential units, retail spaces, and flexible workspaces. This trend has gained traction in cities such as Los Angeles and Washington, D.C., where office vacancy rates have reached record highs.
Rise of Flexible Workspaces
Alongside the decline in traditional office demand is the rise of flexible workspaces. Coworking companies like WeWork and Regus have seen a resurgence in 2025, as businesses of all sizes seek more flexible office solutions. These workspaces allow companies to rent office space as needed, offering a cost-effective alternative to long-term leases. Flexible workspaces cater to a variety of businesses, including startups, small companies, and large corporations that need to accommodate remote workers or business teams who meet in person on an as-needed basis.
In response to this demand, commercial landlords are increasingly offering coworking options in their properties. Major property owners such as JBG Smith, a real estate investment trust (REIT), have embraced this model by incorporating coworking spaces into their developments. These changes reflect the growing acceptance of hybrid work models, which have fundamentally altered how companies view their real estate needs.
Suburban and Secondary Markets Gaining Traction
While major urban centers still represent a significant portion of commercial real estate activity, suburban markets are seeing more attention from both investors and tenants. As people continue to work remotely, businesses are exploring office spaces outside the high-rent districts of cities like Manhattan and Silicon Valley.
According to the National Association of Realtors (NAR), suburban areas such as Dallas, Raleigh, and Denver are seeing a rise in office leasing activity. These markets offer lower rents, larger spaces, and a more relaxed atmosphere, which appeals to companies seeking to offer employees a better work-life balance. Additionally, employees who no longer need to commute to city centers are attracted to office spaces located in suburban areas with access to amenities like parks and good schools.
Investors are capitalizing on this trend by targeting suburban and secondary markets. CRE investment firm Cushman & Wakefield reports that more than 40% of commercial real estate transactions in 2025 were focused on suburban properties, a significant increase from the previous year. For developers and investors, the suburban office market represents a promising opportunity, particularly in fast-growing metro areas.
Technology’s Role in Commercial Real Estate
Technology continues to play a pivotal role in the evolution of the commercial real estate industry. In 2025, smart buildings and digital infrastructure are becoming standard in new developments. Buildings equipped with IoT (Internet of Things) devices can now monitor everything from energy consumption to security, making commercial properties more efficient and attractive to tenants.
For example, smart HVAC systems are reducing energy costs and improving the environmental footprint of commercial buildings. Additionally, some CRE developers are incorporating cutting-edge technologies like AI for building maintenance, which helps predict when systems are likely to fail, reducing downtime and maintenance costs.
Moreover, the rise of proptech startups is revolutionizing how properties are managed and leased. Real estate management software like VTS and Dealpath allows landlords and property managers to track leasing activity, manage tenant relationships, and automate administrative tasks. This technology streamlines the leasing process, making it faster and more transparent for both tenants and landlords.
The Future of Retail Spaces
The retail sector within commercial real estate has faced challenges, particularly as e-commerce continues to grow. However, retail space is far from obsolete. Retailers are shifting their focus toward experience-driven stores that offer consumers more than just a place to shop. These stores feature interactive displays, augmented reality experiences, and other tech-driven solutions that enhance the customer experience.
Some large retailers, including Apple and Nike, have embraced this trend by designing flagship stores that prioritize customer experience over traditional retail functions. Additionally, some malls are transitioning into entertainment hubs, offering everything from food courts to live performances, in an effort to attract consumers back into brick-and-mortar locations.
Conclusion
The commercial real estate market in 2025 is marked by a mix of uncertainty and opportunity. The shift toward hybrid work, the rise of flexible workspaces, and the growing importance of suburban markets will continue to shape the industry. For investors, developers, and brokers, staying ahead of these trends and embracing technology will be key to success in the ever-changing landscape of commercial real estate.
