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**U.S. Economic Growth and Its Impact on Commercial Real Estate**
The U.S. economy expanded at a robust pace during the third quarter of 2025, with Gross Domestic Product (GDP) increasing by 4.3%. Simultaneously, personal income saw a modest gain of 0.4%. Despite this growth, international trade metrics were less favorable, as the International Trade in Goods and Services and Q2 International Transactions declined by $52.8 billion and $251.3 billion respectively.
According to Marcus & Millichap’s December “Gross Domestic Product” report, the real GDP growth was largely propelled by heightened consumer spending—particularly on nondurable goods and services—as well as increased government expenditures and stronger net exports.
However, these figures reflect conditions prior to the federal government shutdown that lasted from October 1 to November 12. The shutdown delayed critical economic data and cast a shadow over GDP momentum moving into Q4.
“Given the impact of the federal government shutdown and a slight decline in private domestic investment, Q3 GDP momentum is unlikely to carry over into Q4,” stated Marcus & Millichap. For the full year, the firm projects GDP to expand by approximately 2%.
**Labor Market and Inflation Trends**
The labor market remains mixed. As highlighted in Marcus & Millichap’s “Economic Update” brief, the private sector experienced only modest payroll gains in October and November. Meanwhile, government employment declined, largely due to earlier layoffs and the expiration of severance periods.
Inflation offered some positive signs, with core CPI in November rising by 2.6% year over year. However, data gaps caused by the shutdown may have understated actual inflation levels. The brief warned that if inflation ticks higher amid soft hiring, household budgets could be squeezed—though lower borrowing costs and continued fiscal support may balance some of the pressure and help stabilize economic activity.
**Implications for Commercial Real Estate Sectors**
The evolving economic landscape is having varied impacts across the four major commercial real estate sectors:
**Multifamily: A Mixed Bag**
Homeownership remains out of reach for many, keeping a significant portion of the population in the rental market. This has helped reduce vacancy rates, especially as 2025 saw the lowest number of completed apartment units in the past three years. However, the multifamily market is seeing a split: more concessions are being offered, particularly among Class C properties. Roughly 20% of these lower-tier units were offering incentives as of November, much higher than those at Class A or B properties.
**Retail: Stable, but Vulnerable to Headwinds**
Retail vacancies remain low despite over 13 million square feet being relinquished earlier in the year. Slower construction and active backfilling have helped maintain stability. However, ongoing economic uncertainty, potential declines in consumer confidence, and stagnant disposable personal income may compel retailers to hold off on expansion, potentially leading to reduced consumer spending at brick-and-mortar stores and restaurants.
**Office: Gradual Recovery and Realignment**
The office sector is beginning to gain traction amid a shrinking construction pipeline and resurging demand. Class A, amenity-rich properties in major metro areas continue to be attractive to tenants. There is also a noticeable shift toward newer, smaller suburban offices. Analysts anticipate a smaller construction pipeline in 2026, which could reduce supply of modern offices and redirect demand to renovated older buildings.
**Industrial: Supply Outpaces Demand**
Even as the pace of industrial completions begins to ease, the number of deliveries has exceeded the long-term average for nine consecutive years. This wave of supply has led to a rise in overall vacancy rates. Still, about half of the new deliveries were concentrated in just ten major markets. As a result, nearly one-third of large metros reported Q3 vacancy rates below the national average.
As the U.S. closes out 2025, GDP growth remains a bright spot despite mixed signals from the labor market and inflation data. For commercial real estate, nuanced sector-specific dynamics will continue to define opportunities and risks as economic variables evolve heading into 2026.
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