Commercial Real Estate Beats Residential in Mixed October Fed Beige Book
The October 2025 Federal Reserve Beige Book reports a mixed and localized real estate market, with commercial real estate generally showing slightly more resilience or stability than the residential sector. Activity in both areas remains highly sensitive to economic uncertainty and cost pressures.
Residential Real Estate Slows Down
Residential real estate activity was generally flat or decreased slightly across reporting districts.
Decreasing Demand and Inventory: Districts like San Francisco and Atlanta reported a decline in activity and demand for both new and existing single-family homes, with inventories rising and properties staying on the market longer. The Boston Fed also noted flat home sales but a notable increase in housing inventory.
Price Adjustments: Some areas are finally seeing prices stabilize or ease after years of strong growth, with contacts in the Richmond and San Francisco districts observing price reductions. For instance, a Chicago contact felt the single-family market had shifted from a seller's market to "barely a seller's market."
Construction and Rental: New residential construction remains limited. In the multifamily rental sector, rent concessions for new tenants have become more common, even as apartment rent growth has slowed (Boston) or remained modest (Chicago).
Renovation Over Buying: Firms tied to home construction reported soft activity, but a strong demand for replacement windows suggests homeowners are opting to renovate their current homes rather than selling or buying a new one.
Commercial Real Estate is Subdued but Stable
Commercial real estate (CRE) activity was generally unchanged or saw only a slight uptick, with performance varying significantly by property type.
Bright Spots: New commercial construction is subdued overall but is being buoyed by demand for specific sectors, including data centers, healthcare facilities, and public/private infrastructure projects. Retail space and medical offices were also reported as performing well in the Richmond District.
Office Market Woes: The Class B and lower-tier office market continues to struggle, as the "flight to quality" persists. Brokers expressed concern about these properties potentially heading for receivership, noting that the high cost of upfitting older spaces makes the math difficult at current prices (Richmond).
Leasing and Pricing: Commercial leasing activity was generally stable, with some contacts noting a small pickup in demand as businesses finally decide on space needs (San Francisco). Office rents were mostly flat, while sellers have had to bring down asking prices for some properties to generate movement. Industrial vacancy rates are still low, but available space is sitting longer (Chicago).
Overall, conditions in both residential and commercial real estate were mixed but remained sensitive to prevailing economic uncertainty and interest rates, with general price stabilization/easing and rising inventories for residential properties, and a widening divide in performance across commercial property types.
Link to the full October 2025 Beige Book:
https://www.federalreserve.gov/monetarypolicy/files/BeigeBook_20251015.pdf
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