Commercial real estate needs evolved in 2025

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As employers continued to rethink their post-pandemic needs for hybrid and in-office staffing options, the commercial real estate market started to see some gains in 2025. 

Jody King, a senior vice president with commercial real estate brokerage CBRE, said office occupancy in 2025 was the highest it’s been since 2020. 

But, she said, the needs are definitely changing. 

“Companies are still working out what they’re doing with hybrid workspace, but they are making longer term commitments as they try to right size their operations,” King said 

She said companies are paying particular attention to what kind of experience they are offering their employees working out of offices, making sure the perks and amenities being offered make it worth their while to work in person. 

“The flight to quality is a real thing,” King said. “I think that’s going to continue into next year.” 

She said employers are saying they are looking for space where employees can collaborate effectively and focus on their work. 

Leah Balerno, another senior vice president at CBRE, said flight to quality is also a term being used frequently in industrial and logistic real estate, but it’s a different definition of the concept. 

“For these tenants are looking at dock counts, space configuration and parking,” Balerno said. “Before, demand was so high it was more like ‘this one is available, we’re going to take it.” 

She said these tenants want to find the space that is going to be most productive for them overall. 

Inventory is more available than it has been, but King said rents still remain on the higher side. 

“We’ve seen a fluid conversation with rental rates,” she said. “It seems like we’re going to see an uptick in the future.” 

Meanwhile, she said third-party logistics remain the biggest leasers of commercial real estate space followed by food and beverage manufacturing. 

It’s in food and manufacturing that she’s seeing the biggest demand for higher quality facilities because of the utility needs such companies have for things like water and wastewater treatment. 

For 2025, King said it was the retail space that was the most resilient in commercial real estate. 

“Retail is constantly reinventing itself,”  King said. “They’ve been adapting to the way people shop and have come out of 2025 very strong.” 

She said experience-driven activities and food and beverage options are helping to drive customers back to in-person retail shopping versus ecommerce. 

Retailers are looking to locate in areas with strong demographics and in mixed use areas to draw in the most customers.