The commercial real estate (CRE) landscape in the fall of 2025 is not defined by a single narrative, but by a “great divergence.” Far from a monolithic market collapse, data from September and October 2025 reveal a bifurcated market, driven by a pronounced “flight to quality.” This environment is disproportionately rewarding premium assets while penalizing lower-quality properties. At the same time, the industrial sector, previously red-hot, has entered a clear phase of cooling and stabilization.

The Office Rebound: Stabilization Driven by Class A

Contrary to simplistic narratives, the U.S. office market is showing definitive signs of stabilization, albeit unevenly. Reports from late October 2025 announce the first annual decline in the office vacancy rate in over five years. Demand increased in the third quarter, with net absorption reaching 16 million square feet , and gross leasing volume grew 6.5% quarter-over-quarter, sitting near a post-pandemic record.

However, this stabilization is not widespread. It is clear evidence of a “flight to quality.” Market analysis shows that demand is being driven almost exclusively by premium assets:

• Class A Performance: Class A office spaces remain the “primary source of demand.” Specifically, Class A inventory built since 2000 has seen its vacancy rate decline by 104 basis points over the last 12 months, tightening ahead of the broader market. Prime assets in high-demand submarkets continue to outperform the rest.

The Struggle of Lower-Quality Properties

The other side of the divergence is the growing pressure on older assets. While Class A thrives, lower-quality properties are struggling to retain tenants.

• Class B and C Performance: Class B properties are “under more pressure,” and Class C properties “continue to struggle with tenant losses and rising vacancy.”
• Overall Market Metrics: This struggle is reflected in the general market metrics. Although stabilizing, the overall office vacancy rate remains elevated, recorded at 14.1% , with forecasts suggesting it could end the year at 18.9%. Rent growth remains “subdued” at 0.9% year-over-year, as owners of lower-quality buildings rely on concessions to secure tenants.

The Cooling and Stabilization of the Industrial Market

The industrial sector, for years the market’s favorite, has entered a new phase. Reports from September 2025 indicate the sector “has slowed significantly” , and net absorption fell to a “decade low.” Rent growth has also moderated, extending the sector’s “cooling trend” to a year-over-year growth of between 1.6% and 1.7%.

However, “cooling” does not mean collapse. More recent data from the third quarter of 2025 show that the industrial market is, in fact, stabilizing. The vacancy rate held steady at 7.1% (other reports place it at 7.5% ). This stability is largely due to new construction deliveries hitting an eight-year low, which allowed demand (which increased 30% quarter-over-quarter) to catch up with the new supply.