Which sectors are providing CRE brokers opportunities, and which are best to avoid
It’s been a newsworthy first seven months in the mortgage market in Washington, DC, since President Donald Trump began his second term. Policy changes, federal layoffs and terminations, and return-to-work mandates have caused waves in the nation’s capital.
And it’s not just the consumer mortgage market that has felt the effects of the changes. The commercial market has also felt the effects, although they range widely depending on the sector.
Brian Gould (pictured top), managing director of mortgage banking with Berkadia, said some sectors are doing well, while others are struggling. Commercial real estate brokers will have opportunities, but maybe not in all sectors.
“The Washington DC metro commercial real estate market presents a tale of stark contrasts in 2025, with significant divergence across asset classes,” Gould told Mortgage Professional America. “While some sectors face unprecedented challenges, others are experiencing robust growth, creating both headwinds and opportunities for investors.”
Areas of strength
For brokers looking for opportunities, Gould notes that the multifamily, retail and industrial markets have withstood most of the headwinds and are performing strongly.
“The multifamily market is maintaining strong performance with low vacancy rates, supported by robust rental demand and housing shortages,” he said. “Investment activity remains active.”
However, Gould notes that there are challenges in the multifamily market, which include material cost inflation, labor shortages, and financing challenges due to elevated interest rates.
Meanwhile, the retail market has benefited from the return-to-work mandates, bringing more people back to the capital, who are frequenting local businesses. However, Gould said the volume of customers hasn’t returned to pre-COVID levels.
“The retail market is demonstrating resilience with vacancy rates around 5%+, though with geographic disparities where suburban markets like Fairfax County, Alexandria, and Manassas outperforming downtown DC,” Gould said. “While Downtown retail foot traffic has rebounded somewhat thanks to return-to-office, it is still below pre-pandemic levels, which is affecting urban retail performance.”
Industrial and data centers are also thriving. He notes that due to the AI boom, data centers in Northern Virginia are among the nation’s leaders. Low vacancy rates are also boosting the industrial sector.
“Industrial is performing exceptionally strong with warehouse vacancy rates of just 3.7%, driven by e-commerce demand and low supply,” he said. “Investment demand is high. Strong performance is also driven by DC’s strategic location, with access to Baltimore's deep-water port and high-income consumer base.”
Downsizing hurting office sector
While the return-to-office mandate might have brought some workers back to office spaces, the massive federal layoffs and terminations have kept the sector struggling.
“Office is struggling with record-high vacancy rates, facing federal downsizing, flight-to-quality trends, and office conversion projects,” Gould said. “Investment activity remains cautious with focus on distressed opportunities. The federal government's reduction in office space is reshaping the market fundamentally.”
Gould notes there is a trend in the investment space of “flight to quality.” This occurs when investors move from higher-risk investments to assets perceived as lower risk. It’s not just investors who are making this move, but tenants as well, who are signing up for higher-quality office space instead of older, outdated space.
Investors are losing patience in a choppy CRE market. Brian Good (iBorrow) warns brokers to act fast before capital shifts elsewhere.https://t.co/qjk5NH1k4S
— Mortgage Professional America Magazine (@MPAMagazineUS) August 20, 2025
This presents a challenge, because Gould notes that new office construction in the DC area is at a two-decade low. Brokers may continue to find new construction projects hard to get funding for until economic conditions change.
“The flight-to-quality trend reflects tenants' preference for modern, well-located buildings that align with evolving workplace strategies,” he said. “The office construction pipeline is at its lowest level in 20 years, with only approximately 400,000 square feet under development. No new office projects were completed in Q1 2025, representing a drastic drop from the peak in 2017 when over 6 million square feet were under construction.”
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