Bottoming Out: Why Mid-2025 May Be the Ideal Time to Invest in Real Estate

The real estate market in mid-2025 is showing clear signs of stabilization, with multiple asset classes nearing or hitting bottom. Backed by fresh data and sector-specific trends, in today's post we're highlighting where strategic opportunities are emerging for investors ready to position ahead of the next growth cycle.

Market Cycles: Where We Stand in 2025

The data tells a compelling story across real estate sectors in mid-2025: we're witnessing a bottoming process in most asset classes. Different sectors are at various stages of this cycle, but each position ties directly to pandemic impacts from 2020. With transaction volumes normalizing and fundamentals stabilizing, there's solid evidence we're entering a favorable investment window.

Multifamily shows clear signs of gathering momentum. National rent growth has stabilized at 2.2%, just below the long-term average of 2.6%. Vacancy rates hover around 6.2%, slightly elevated but expected to peak soon. Most importantly, new construction has dropped to a 10-year low, creating natural supply constraints that will strengthen fundamentals. Cap rates have settled in the 5.5-5.75% range—far more reasonable than the sub-4% rates seen during market peaks.

The only significant headwind remains negative leverage, with interest rates still above cap rates. If rates moderate in late 2025 as expected, multifamily could accelerate out of this bottoming phase rapidly.

Asset Class Performance Analysis

Retail properties, particularly grocery-anchored shopping centers, demonstrate remarkable stability. Despite e-commerce pressures, well-located retail with essential service tenants continues to perform. Institutional investment in grocery-anchored centers is up 400% from Q1 2024, showing smart money recognizes the value proposition. Limited supply and steady demand have kept occupancy high, with some markets seeing 6% rent growth.

Industrial real estate remains fundamentally sound, though with two distinct segments. General industrial (100,000+ sq ft) experienced COVID-driven oversupply but is now returning to balance with 7-8% vacancy rates. Small-bay industrial—the type AAA Storage develops—shows extraordinary strength with just 3% national vacancy and zero availability in markets like Las Vegas. This product type benefits from multiple demand drivers: local service providers, last-mile logistics, light manufacturing, and even emerging consumer uses like pickleball courts and batting cages.

Office space continues facing challenges, with vacancy projected to peak at 19% during 2025 before starting to decline in 2026. Class B and C properties face significant headwinds, while Class A buildings in core markets show early stabilization. New construction has plummeted 60% below the 10-year average, helping the eventual recovery. Interestingly, companies with fewer than 1,000 employees are expanding their office footprints while larger corporations are shedding space.

Self-Storage: Stabilization Underway

Self-storage is firmly in stabilization mode after a 28-month period of declining street rates. The development pipeline has decreased from 3.2% to 2.8% of current stock, with projections showing further reductions to 2.3% in 2026 and 2% in 2027. Street rates have stabilized and begun moving upward again.

For developers, the typical four-year lease-up timeline means facilities breaking ground today won't stabilize until 2029—when the market should be in excellent condition with compressed cap rates and attractive valuations. While properties purchased at peak (2021-2022) may have experienced 30% value declines, new developments positioned for the 2026-2030 window should perform exceptionally well.

Investment Strategy for the Current Cycle

The data presents a clear picture: 2025 is the year markets are getting their legs under them, creating an excellent entry point for strategic real estate investment. Multifamily and self-storage lead the pack in terms of recovery positioning, followed closely by industrial. Grocery-anchored retail offers stability and strong cash flow, while office remains too risky for most investors.

Rather than trying to perfectly time the bottom, the optimal approach is deploying capital consistently over the next two years across multiple deals in the stronger sectors. This dollar-cost averaging strategy positions investors to capture the upcoming recovery cycle regardless of minor timing variations.

Conclusion

Assuming moderate interest rate reductions and no major geopolitical disruptions, the data strongly suggests mid-2025 is an exceptional time to begin deploying capital into real estate—particularly self-storage, multifamily, and select retail properties. The fundamentals are stabilizing, and smart investors are already positioning themselves for the next growth cycle.