Lease expirations are a tense time for landlords. Do they increase the rent to improve NOI or offset increased operational costs? Keep it flat? Lower the rent to retain tenants? Or leave a space open and hope for a new tenant at a better-asking rate?
Data from Trepp suggests that many CRE landlords will face those questions in 2025 as more than 265 million square feet of leases are set to expire. Depending on the answer and the following events and markets, the results can be a positive or negative change in cash flow and NOI, which together can have implications for profitability, marketability, and financing.
The impact varies on the property type and the conditions of their particular markets, macroeconomics, local considerations, and lease durations. A hotel turns over space in days. Multifamily is in months or years. Retail, office, and industrial typically in years up to decades.
Recommended For You
Industrial will face the largest impact, both by the total amount of square feet (100 million) and percentage of inventory (11% of total square feet in CMBS facing renewal in 2025).
Industrial landlords enjoyed “significant pricing power” over the last decade, Trepp said. The pandemic bolstered the position as more consumer demand went through online commerce and more diversified and short-turnaround fulfillment, requiring more warehousing and logistics facilities. While the average rental revenue per available square foot continued to grow, the pace of growth started to slow in 2024.
Office has the second-largest exposure to lease expirations with 85.5 million square feet, or 5.8% of total CMBS office inventory, up for renewal or vacancy through 2025. Retail is in third place with 58.5 million square feet, or 6.6% of inventory, facing lease maturity this year.
Office is in a very different position after the COVID pandemic, with the heavy introduction of hybrid or work-from-home employment putting downward pressure on companies’ needs for real estate. Attempts to push for a return-to-office have had mixed effects at best. There is also the bifurcation between trophy and A-class properties on one side with strong demand and pricing power and B- and C-class having far less interest from tenants and a heavy percentage of obsolescence on the other.
Retail, though, will likely benefit from the market conditions. Consumer spending remains up and retail demand for space is surging, but there is a shortage given past oversupply and the lack of construction that followed. So, chances are that landlords will be able to pursue rent increases with the knowledge that, at least in desirable areas, getting replacement tenants won’t be difficult.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
