What Happened in Commercial Real Estate Q3 2025
Austin’s commercial landscape saw each sector still working through its own version of a reset, but the quarter brought the clearest signals yet that the market is in the process of establishing its floor.
Job growth remains slower, capital is still expensive, and supply from the past few years is being absorbed — yet the data shows a city slowly moving toward balance.
Office – Signs of Life at the Bottom
The office sector showed real movement for the first time in two years. Austin posted nearly 700k SF of positive absorption in Q3, a meaningful shift that pulled direct vacancy to 22% vs 25+%. We’re still far from the 12–14% equilibrium range, but this quarter marks the early stages of stabilization. Key opportunity- Small to medium office assets are running closer to 10% vacancy, we see great upside here.
Asking rents held flat at $45–46/SF, and new construction has essentially stopped — an important ingredient in working vacancy down. Cap rates average 6-7% depending on risk profile.
Takeaway: This is a rare window. Tenants can secure best-in-class space with generous concessions, and investors can acquire quality product at prices unlikely to repeat once job growth kicks back ins
Industrial – Oversupply Today, Tailwinds Tomorrow
Austin’s industrial market is somewhat bloated and is digesting the construction boom of last three years. Q3 vacancy reached 14%, well above the 5–8% balanced range, driven primarily by large spec projects delivering with limited pre-leasing.
Rents hovered at $14.70/SF NNN. Construction starts have dropped substantially. This slowdown is the first step toward a healthier, tighter market ahead. Cap rates widened to 6.5%-7.25%
Takeaway: The softening is short-term but there will be an oversupply for a few years and the market will rebalance. There is a temporary buy opportunity.
Multifamily – The First Meaningful Stabilization
Multifamily posted its most encouraging quarter since 2021. Renters absorbed 5,673 units while 3,764 delivered, pulling vacancy down to 14.5%. A balanced market sits closer to 5%, but the direction is what matters — Q3 was the first real step back toward equilibrium.
Rents still sit around $1,600/month, down 4.3% YoY. Concessions remain prevalent yet rent declines are tapering, a positive sign for all classes. Cap rates seem to be settling into 5.5–6%+ range depending on class.
Takeaway for clients: This is likely the last buyer-friendly chapter of the cycle. The window for value will narrow as absorption continues.
Retail – Austin’s Most Reliable Performer
Retail continues to be the most stable and undersupplied sector in the city. Vacancy sits at 3%, far below the 5–6% equilibrium range, and Q3 recorded a very strong 416,000 SF of absorption.
Rents held around $26/SF NNN, with modest upward pressure. New projects remain disciplined and heavily pre-leased, which will keep vacancy tight well into 2026. Cap rates generally sit in the 6.5–7% range.
Takeaway for clients: If you already own quality retail in Austin, you are well-positioned.
Where the Market Is Heading
The higher-rate environment and tepid job growth remain drags on pricing. Cap rates have widened across all asset classes, but importantly: they’ve stopped rising. Market-wide repricing appears largely complete but again until job growth kicks in, Austin’s commercial markets while stabilizing through 2026 won’t see actual growth. We’re 8 months to year from hitting that stabilization transitioning to growth point.