North America real estate market outlook Q4 2025

United States economic outlook

Activity

The underlying pace of growth slowed during the first half of 2025 amid tariff volatility. Our forecasts incorporate subdued growth expectations over the next few years. Peak tariff uncertainty has passed, and there may be a mini-cyclical pick-up from the period of very weak hiring and investment. But higher inflation will weigh on real income growth, which should keep medium-term activity sluggish. Over the longer term, higher tariffs will push down on potential growth. It’s possible the slowdown in the labour market may trigger stalling dynamics, tipping the economy into recession. But this is a downside risk, for now.

Inflation

The tariff-driven pick-up in inflation has been a little slower than we anticipated, but we still expect core inflation to peak at 3.6% later this year – well above the Fed’s target. The delay in the inflation pick-up is explainable in terms of inventories being worked down, trans-shipments, and other issues collecting tariffs. These are set to pass and firms appear able to pass on higher input costs to preserve margins. As long as inflation expectations remain anchored, this should be a one-off level shock, with inflation coming down again. But politicisation of the Fed risks entrenching higher inflation.

Policy

We expect the Fed to deliver two further 25 basis-point (bp) rate cuts this year, in October and December. It’s still plausible that large upside surprises in inflation and/or employment derail these cuts, but it’s also possible that a further slowing in activity leads to more cuts. Fed Chair Jay Powell has been explicit that the labour market has softened and that it’s at greater risk than before. But with inflation still rising, members face a conundrum as to which risk is greater.

Source: Aberdeen, September 2025
Forecasts are a guide only and actual outcomes could be significantly different.

North American real estate market overview 

The Fed finally cut rates by 25 bps in September. With the labour market softening, it looks like another two cuts are on the cards for October and December [1]. However, the Fed also has to contend with the delayed increase in inflation numbers as pre-tariff inventories run down.

The US retail market is still working through the bankruptcies and store closures from the first quarter of 2025. Net absorption remained negative at the end of the third quarter. Space availability has now risen to its highest level in three years at around 30 million square feet.

In multifamily, we are expecting annual net absorption to surpass net deliveries by the fourth quarter of 2025. This would make it the first time since the first quarter of 2022. Vacancy rates have been sliding, moderating from recent highs of between 8.17% and 8.24% [2].

We are positive about data centres, given tight supply and healthy demand coming from artificial intelligence (AI) and cloud services. Healthcare is also another positive sector, as occupancy sits 100 bps above 2018 levels. Higher-quality operators are reportedly pushing 6% [3] rate increases.

North American real estate market trends

Offices 

Earlier in the year, preliminary data suggested net absorption turned positive in the first quarter. But revisions to those numbers confirmed that occupancy losses have accelerated, but less severely than in 2023 and early-2024.

Select east-coast gateway markets, such as New York, are clear winners in the office space. Vacancy rates have dropped 40 bps compared with a year ago. As leasing recovers, and given limited speculative supply, New York offices should outperform other office markets for the rest of 2025 and into 2026.

But for the rest of the US, occupier performance has been largely muted. The final settling of property values – which is expected over the next few quarters – should increase pressure on asking rates, as more buildings transact at significant discounts to prior valuations.

Overall, office performance will be largely bifurcated, not only in terms of the market but also by asset quality. The lack of relevant, competitive supply will support stronger growth in top-tier buildings.

Industrial and Logistics 

The impact of reduced imports from recent highs has begun to show itself in container pricing, especially at the west-coast ports. Pricing for containers shipped from major Asian ports into the west coast have slid 60% since June 2025 [4].

The legal battles surrounding Trump’s use of the International Emergency Economic Power Act to impose tariffs are creating some residual uncertainty. But the stance of the new trade regime is clear and not constructive for logistics and industrials surrounding west-coast ports. West-coast markets are already facing surging availability for newer stabilised properties in the face of weakening demand.

As the global supply chains settle into their new configuration, we expect the east-coast ports to capture a larger share of shipments that resume a long-term trend [5]. Chicago, Dallas and Atlanta are also markets with established intermodal links to watch and should see some pick-up from onshoring and reshoring. But this is unlikely to meaningfully improve rental growth.

Overall, elevated vacancy levels will likely restrict landlords' ability to raise rents on larger properties. The fallout from lower import activity levels may spread beyond properties in the immediate radius of ports.

Retail

Consumer spending has improved slightly, with a 2.5% [6] increase over the prior year in July in inflation-adjusted terms. But recent downward revisions to labour-market data present a downside risk.

The US retail market is still working through the bankruptcies and store closures from the first quarter of 2025. Net absorption remained negative at the end of the third quarter. Space availability has now risen to its highest level in three years at around 30 million square feet [7].

We expect rental growth to decelerate over the next few quarters, as the market works to backfill space from recent closures. But given the lack of quality inventories, rental growth should remain in line with historical averages.

Overall, we think that grocery-anchored retail and lifestyle centres should remain the more resilient group, given the shift in consumer behaviour as economic sentiment begins to look increasingly cloudy.

Multifamily

We are expecting annual net absorption to surpass net deliveries by the fourth quarter of 2025. This would be the first time since the first quarter of 2022. Vacancy rates have been sliding, moderating from recent highs of between 8.17% and 8.24% [8].

Multifamily performance is still highly variable geographically. Midwest and north-east markets had moderate supply increases, which led to more balanced fundamentals and more robust rental growth. 

One market turnaround to watch is San Francisco.Year to date, San Francisco’s annual net absorption reached one of the highest levels in the past decade at 4,200 units [9]. Demand is being driven by hiring from the AI sector, which is continuing to grow.

Stabilised vacancy rates are projected to end the year at or slightly above their starting point – around the upper 6% [10] range. This pattern is projected to support a measured acceleration in rental growth.

Single-family rentals

Worker efficiency seems to have hit a limit, presenting an economic hurdle for new construction. This partly explains why the US has developed a housing shortage, particularly for single-family homes. 

Single-family rentals are also quite sticky, even in periods of economic slowdown. This should mean stable NOI performance in the face of the economic uncertainties that surround the US just now.

Overall, we think that demand in the sector will remain fairly strong, with outperformance bias towards the Midwest and coastal markets. Construction costs are expected to be elevated, but new supply will remain limited. This will drive performance for existing assets.

Alternatives

We believe that the tier-one data centre markets in the US will exhibit convincing rental growth numbers, as lease renewals are worked through 2025 and 2026. Local governments are increasingly pausing development or removing tax incentives in response to infrastructure strain and community concerns. This limits new supply.

An ageing population and the lack of supply for senior housing are positive drivers for the healthcare sector. Occupancy now sits around 100 bps above 2018 levels [11]. Higher-quality operators are pushing 6% rate increases [12] . Yields need to decline further for new developments, so meaningful increases to supply are still two-to-three years away.  

We believe a housing recovery is needed for storage fundamentals to increase, as that transitional customer is key to a recovery. Additionally, regulatory oversight could be a headwind to transactions in some markets. Hence, we have not fully turned positive on the self-storage sector yet. 

Outlook for risk and performance 

US office fundamentals remain challenging, given low job growth in the office sector and a weakening economic growth outlook. Despite return-to-office mandates, technology-led office markets are struggling with a higher amount of available grey space. Performance continues to be highly market- and asset-specific. 

Residential demand for both multifamily and single-family rentals should perform well. Multifamily’s annual net absorption should exceed net deliveries by the fourth quarter of 2025, further accelerating the compression of vacancy numbers. Slow job growth, though, is a key downside risk for residential rental growth.

While leasing velocity was at historic highs in the first half of 2025, given the lack of quality space available, recent economic indicators seem to have dimmed the retail outlook. Rental growth for retail is likely to moderate as retail sales move lower, and as the pool of tenants seeking space becomes shallower. 

Most of the tariff impact has so far been far more noticeable on the west-coast industrial markets. But as imports move lower across the US, the reduced leasing momentum will be felt in the other states and in non-port markets too. We expect rental growth to be modest in the coming year.  

In alternatives, data centres are performing well, given the supply bottlenecks and robust demand exhibited by hyperscalers and colo-cloud players alike. Self-storage remains on a slow recovery trajectory, as we expect the main demand drivers to be muted.