CRE Classified: 7 Most Investable CRE Asset Classes Ranked By Performance in 2024

After a rough few years in commercial real estate, 2024 stands as a turnaround year for CRE markets in the United States. Market fundamentals are changing, setting the stage for a potential resurgence in 2025. 

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Leading this charge are this year’s top CRE asset classes – property types that outperformed a slowly recovering but challenged CRE landscape. 

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CRE developers and investors eager to see better returns might double down on their current strategies, hoping to see their portfolio ride out the market cycle and into solid profits. 

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However, the path forward is not so simple. Without critically looking at CRE performance by asset class, real estate professionals risk: 

• Misallocating capital into overvalued and underperforming CRE assets, leading to diminished returns and financial overextension
• Missing investment opportunities and not buying into real estate trends set to shape the coming CRE cycle 
• Underestimating requirements – regulatory and environmental – that can create expenditure burdens in certain CRE asset classes

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To gain an edge in tomorrow’s market, CRE developers have to know which assets performed well in 2024, understand what drove their performance, and use these findings to determine whether and how to invest in these commercial real estate asset classes in 2025.

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Read on to delve into our commercial real estate asset classification as we rank the top 7 CRE assets according to their 2024 performance.  

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[Want to invest in promising CRE assets but have limited liquidity? Duckfund’s soft deposit financing lets you secure CRE property without affecting your cash flow.] 

Top 7 performing CRE asset classes in 2024

With interest rates dropping and commercial property prices having bottomed out early this year, as data from asset manager FS Investment suggests, now seems the time for renewed real estate investment. 

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Source: FS Investments

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CRE investors have many opportunities in a lower-rate environment, from refinancing refinancing and portfolio expansion options.

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Indeed, when auditor Deloitte asked CRE executives about their 2025 market outlook, 68% of respondents said to expect better CRE fundamentals like cost of capital, capital availability, property prices, transaction activity, leasing activity, rental growth, and vacancies. 

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Let’s see in which commercial real estate asset classes these opportunities lay in 2024 and what that says about 2025.

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1. Retail: resilience in a changing market

The retail sector has continued to show resilience in 2024’s CRE market. The top-performing asset class closed Q3 of 2024 with a low overall availability rate of 4.7%, according to investment firm CBRE, maintaining high occupancy for the fifth consecutive quarter after availability rates steadily dropped since the pandemic. 

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This trend shows continued demand throughout the market turmoil. 

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Source: CBRE

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What drove the CRE market for retail property in 2024

Changing commercial real estate market fundamentals this year influenced this asset:

• Rising costs for construction and borrowing led to low levels of new constructions, keeping the vacancy rate steady even though net absorption decreased in Q3
• Many retailers remained cautious about leasing more space due to economic uncertainty
• Property scarcity in high-performing markets like Miami, New York Outer Boroughs, and Boston have pushed year-over-year rent growth above 6%

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What to expect from this asset class in 2025

Retail is a solid commercial real estate investment next year as market fundamentals improve and consumer demand grows:

• A surge in demand for retail as inflation cools and consumers gain more confidence. Expect demand for neighborhood and community retail centers, as well as strip malls
• Opportunities for development of scarce retail space as construction and borrowing costs start to drop
• Expect to see Texas markets have strong demand for retail space due to growing consumer bases and economies
  
  
  

2. Industrial: The powerhouse of CRE growth

Industrial real estate has continued to dominate the CRE landscape in 2024, with national in-place rents averaging $8.22 per square foot in October, up 6.8% year-over-year – market researcher Commercial Edge found. 

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The sector's resilience is evident in the 358.8 million square feet of industrial space under construction, representing 1.8% of total stock. But the construction pipeline is decreasing, investment firm Colliers observed, while absorption rates remain healthy. This is causing vacancy rates to plateau at current levels – and is promising potential for real estate investors. 

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Source: Colliers

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What drove the industrial CRE market in 2024

Industry changes and economic trends led to continued demand for industrial property: 

• A booming e-commerce market and supply chain optimization led to high demand for industrial properties from warehouses to last-mile distribution centers
• Chronic undersupply of industrial spaces in (midwestern) growth markets have locally caused upward pressure in rents 

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What to expect from this CRE asset class in 2025

Growth markets expand and industrial real estate continues to evolve with technological innovations like AI and automation:

• Less new supply and continued demand see industrial vacancy rates drop. Expect higher rental income for CRE investors, with some markets seeing double-digit growth
• Increased focus on high-tech spaces and AI-driven logistics solutions
• Growth market with strong job markets continue to drive demand for industrial properties

3. Mobile home parks: The affordable housing play

As house prices and rents continue to grow in popular markets, mobile home parks show remarkable growth. Occupancy for manufactured homes has been steadily increasing, reaching 94.7% by the end of 2023, CRE firm Walker & Dunlop reported. 

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Coupled with average rents at a 7.3% year-on-year increase, mobile home parks have shown growth in the face of economic downturns. Mobile home park REITs, too, have reported high occupancy rates and steady rent increases while expanding their inventory, real estate advisor Keel Team observed.

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What drove this CRE asset class in 2024

It’s easy to see where the need for affordable housing comes from in the current housing market:

• High demand for affordable housing options
• Limited supply of new mobile home parks
• Decline of mom-and-pop ownership and institutional owners taking over, especially in larger mobile home communities

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What to expect from mobile home parks in 2025

CRE professionals can capitalize on the stable occupancy, rising rents, and increasing demand in this sector:

• As traditional single-family homes become increasingly unaffordable, the demand for manufactured homes is expected to grow
• The potential for increasing regulatory challenges and operating costs in this growing market means strategic investment decisions are crucial
  
  

4. Multifamily: High occupancy and a housing crisis

Multifamily commercial real estate is a hot asset class – especially in a market where housing is unaffordable for a record half of all renters, as a Harvard study found. 

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According to Altus Group’s Q3 2024 U.S. CRE Survey, 69% of investors expect multifamily to outperform other sectors, attributing this to limited residential real estate supply and affordability challenges in the single-family market.

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The multifamily market is showing positive signs going into the new year, with absorption levels rising and a projected modest average rent growth of 1.7%, CRE platform CoStar predicts.

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"We're seeing a very good movement in demand upward from the levels that we saw in 2023," Jay Lybik, who is CoStar's national director of multifamily analytics, told CRE news outlet GlobeSt.com. He added, "The spread between supply and demand has been the lowest we've seen in the last 11 quarters."

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What drove the multifamily asset class in 2024

Low supply and the financial burden of a high rent-to-income ratio affects many Americans:

• Construction pipeline showed signs of slowing down due to rising construction costs
• Migration from expensive cities and to the South affects local housing affordability
• Student housing rent growth outpaced multi-family rent growth over the past two years, analyst Moody’s CRE reports, raising affordability concerns for student

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What to expect from this CRE asset class in 2025

The housing crisis won’t be solved overnight and multifamily properties will remain in demand:

• As migration to the Northeast and Midwest continues, expect regional demand and rent growth in metros like Dallas-Fort Worth, Houston, and Boston 
• Continued shortage of affordable apartment buildings and ongoing absorption signal opportunities
• Improved financing conditions, including lower Treasury yields and a Fed rate cut, are making multifamily more attractive for investors
  
  

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5. Self-storage: A growing market

Self-storage units present an interesting CRE asset class for investors and developers alike. The market size grew from $59.03 billion in 2023 to $63.58 billion in 2024 – representing a 7.7% growth, according to a report from market analyst Research and Markets. 

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With the sector expected to grow at a 7.9% CAGR through 2028, this is one niche asset class to follow closely.

What drove this CRE asset class in 2024

• Increasing urbanization and rising real estate prices increased the demand for self-storage units
• Growing commercial demand and e-commerce expansion 
• Adoption of smart storage solutions enhancing the customer experience

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What Can We Expect from This Asset Class in 2025?

• Growing demand fueled by continued demographic changes
• Rising demand for climate-controlled units and flexible leasing options
• Increased focus on technology integration and value-added services

6. Office space: Strong headwinds but with possibilities

It’s no secret that office buildings have been an underperforming CRE asset type since the pandemic. The national vacancy rate reached 19.4% in October, a 160 basis-point increase year-over-year, according to Commercial Edge. 

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That’s not to say office property doesn’t perform – high-end high-rises in business hotspots are still in demand. Plus, older class B and C properties hold value-add promise for developers.

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What drove the office CRE market in 2024

2024 saw more of the same trends that we’ve seen in recent years:

• Ongoing adjustments to hybrid work models, though return-to-office policies are becoming more dominant
• Flight to quality, with class A commercial property outperforms the overall market
• Local demand in growth markets with strong economies

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What to expect from the office real estate market in 2025

Lower interest rates and construction costs open up new opportunities for savvy CRE developers:

• Continued market bifurcation between prime and secondary assets see prices deviate
• A looming debt maturity wall puts further downward pressure on office property prices
• Potential for conversions and redevelopment of underperforming properties
• Gradual improvement in leasing activity, particularly in key markets like Manhattan and growth markets like DFW and Houston

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7. Special purpose: niche property types outperforming the market

In 2024’s challenging market, certain types of property hold their value better in the real estate industry than others. Special purpose real estate properties are designed and built or repurposed to meet a specific set of needs. 

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If that need persists when markets take a downturn, the properties will hold their value. So what are profitable examples of special purpose properties? Think of:

• Increasing demand for specialized facilities like data centers due to AI and cloud computing
• Growing specialized healthcare needs driving the development of medical offices
• Emerging technologies requiring purpose-built manufacturing plants, like for microchips

Which CRE asset classes will drive your profit?

From the resilience of retail to the continued dominance of industrial, and from the steady growth of multifamily to the niche potential of special purpose properties, how will you give your CRE portfolio an edge in 2025’s promising market? 

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The key to building a strong portfolio and managing risk in an uncertain market is diversification. What else is important for success in commercial real estate? Moving quickly on CRE opportunities when they appear. 

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The key is to align these opportunities with your investment strategies and risk tolerance, and to execute CRE deals swiftly.

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[Closing a great commercial real estate deal isn’t just about finding the best performing CRE asset classes – it’s also fast execution. Duckfund's soft deposit financing helps you quickly secure the funds you need when rare CRE opportunities arise.]