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*Source: Lee & Associates Q3 2025 North America Market Report

The report from Lee & Associates discusses the implications of the Federal Reserve's "higher for longer" interest rate policy on commercial real estate (CRE) investments in 2025. Following a modest 0.25% rate cut in September 2024, bringing the benchmark to 4.00%-4.25%, the Fed signals cautious easing amid persistent inflation (core at 3.1%, headline at 2.9%) and internal debates on neutral rates (ranging from 2.5% to 4%). This environment shifts CRE from momentum-driven to performance-based strategies, with elevated borrowing costs (often >6%) repricing risk, portfolios, and values. Key themes include structural rate pressures, refinancing crises, sector divergences, cap rate tensions, and adaptive investment approaches.

Key Challenges

• Persistent Rates and Inflation: Sticky inflation in housing and services keeps rates high, with 10-year Treasuries near 4%. Lenders demand stronger sponsorship, conservative leverage, and NOI stability, leading to tighter spreads and shorter terms. The recent cut offers short-term relief but minimal impact on long-term capital.
• Refinancing Risk: $1.5 trillion in CRE loans mature by end-2025, prompting short-term extensions. Properties from peak eras face shortfalls, especially in office and multifamily sectors. Markets like Dallas, Atlanta, and Phoenix see stretched debt-service ratios, forcing sales, payoffs, or defaults.

Sector-Specific Impacts

• Office: Undergoing restructuring with vacancies >20% in cities like Denver, Chicago, and San Francisco (especially Class B/C). Flight-to-quality persists, but even premium assets face tenant risks. Conversions to lab/residential/flex space rise, with trades at 30-70% discounts from peaks.
• Multifamily: Favored but divergent—urban cores (e.g., New York, Boston, LA) stabilize with low vacancies; Sun Belt oversupply (e.g., Austin, Raleigh) leads to concessions and 10%+ vacancies. High costs, rent caps (e.g., Washington's ~9.7% in 2026), and extended lease-ups complicate deals. Private buyers target below-replacement-value assets.
• Industrial: Remains strong but cooled, with national vacancy at 7.4%. Big-box absorption slows in Phoenix and Chicago, but infill/last-mile/flex/cold storage thrives in constrained markets due to tenant retention and limited supply.
• Retail: Resilient with 4.3% national vacancy. Grocery-anchored and experiential assets outperform in Miami, Charlotte, and San Diego. Bifurcation exists: outdated centers in tertiary markets soften, while cash-flowing properties attract private capital.

Cap Rates and Valuation

Cap rates appear stable nationally but mask a buyer-seller standoff—sellers cling to peak pricing, buyers factor in risks. Tension persists into late 2025, especially in multifamily and industrial, with repricing often subtle rather than overt yield shifts.

Investment Strategies for the New Normal

Investors shift from Fed-pivot anticipation to disciplined execution:

• Prioritize In-Place Cash Flow: Stabilized income hedges against costs and dislocations.
• Operational Execution: Focus on leasing, expense control, and targeted repositioning over major capex.
• Underwrite Exits Upfront: Deals must stand alone, assuming full-cycle ownership.
• Creative Financing: Use seller carrybacks, preferred equity, and hybrids to bridge gaps.
• Value-Add Focus: Target assets with fixable issues (e.g., leasing friction) without overcapitalizing.

Conclusion

The report emphasizes CRE's maturation in a rate-sensitive era, rewarding pragmatism and local insight. The Fed's cut boosts confidence modestly, but elevated rates are the baseline—opportunities lie in fundamentals, not speculation. Insights from Lee professionals highlight fragmentation and selectivity.

Just Closed – September 2025

Lee & Associates is proud to announce the successful sale of 125 W. 157th St, Gardena, CA 90248 – a standout freestanding industrial property that checked every box for functionality, location, and value.

🔹 Key Highlights:

• Building Size: ±18,000 SF
• Lot Size: ±36,000 SF (fully fenced & paved yard)
• Zoning: LA Unincorporated M2 – No City Business Tax
• Access: 3 Ground Level Doors (Dock High Possible)
• Bonus Features:
  • Unfinished mezzanine for expansion
  • Solar lighting
  • Glass kiln/oven included
  • 4 restrooms + office space

📍 Strategic Location

Nestled in the heart of Gardena’s industrial corridor with direct proximity to the 110, 405, 91, and 105 Freeways, this property offered unmatched logistics efficiency.

🎯 Why It Sold Fast

• Freestanding flexibility
• Yard space for operations & storage
• Cost-saving unincorporated zoning
• Move-in ready with growth potential

Congratulations to the buyer and seller on a smooth transaction!

👤 Ron Mgrublian | Principal | DRE# 01902882 

📞 +1 (562) 354-2537

✉️ rmgrublian@leelalb.com

Another successful close powered by local expertise and global reach.

Available : ±1,800 – ±6,600 

Lot Size: ±40,847 SF of Land

Zoning: C-P (PCD)

APN: 8447-031-038

Park-like setting: The building is situated in a serene environment with beautiful views of the park.

Ample parking: Large lot with ±28 Parking Spaces

Next to 10 Freeway with close access to 57, 71, 210 & 60 Freeway

16400 Garfield Ave, Paramount, CA 90723

Lee & Associates is proud to present an outstanding owner-user or investment opportunity in the heart of the Mid-Counties industrial corridor.

Property Highlights:

• ±27,750 SF freestanding industrial building
• Situated on an oversized ±77,145 SF (1.77 acre) M2-zoned lot
• Large fenced, paved, and gated yard
• Ample parking with 56 marked spaces
• Two (2) dock-high loading doors
• Excellent visibility and frontage along Garfield Avenue
• Immediate proximity to the 91 and 710 Freeways

Pricing:

• For Sale: Price Negotiable – Owner is highly motivated – bring all offers!
• For Lease: Rate Negotiable
• OPEX: Only $0.17/SF – the lowest in the market!

This rare freestanding asset offers maximum flexibility with its generous yard, abundant parking, and prime location just minutes from major transportation arteries. Perfect for manufacturing or distribution.

Contact:

Ron Mgrublian

Principal | Lee & Associates 

P: (562) 354-2537 

E: rmgrublian@leelalb.com

DRE# 01902882

Virtual tour available – submit your offer today! 🚨

Located at 2403 E. 223rd Street, Carson, CA 90810, this rare ±4.2-acre (±182,746 SF) parcel offers exceptional I-405 Freeway visibility with over 310,000 average daily vehicles passing directly in front of the site – perfect for branding, automotive, EV charging, or any high-exposure use.

Key Highlights:

• Size: ±182,746 SF (±4.2 acres) of flat, usable land
• Sale Price: $9,685,538 ($53.00 PSF)
• Lease Rate: $70,000 per month (Net)
• Zoning: Commercial Automotive (Carson Auto Row) – broad range of uses including auto sales, service, EV charging stations, etc.
• APN: 7315-012-002 & 7315-012-804
• Direct adjacency to the 405 Freeway and close proximity to SCE Hinson Substation
• Carson’s business-friendly environment: low business license fees & utility taxes
• Heavy traffic counts: 405 Freeway segments show 264,000–291,000+ ADT

Location Advantages:

• Situated in the heart of Carson’s established Auto Row
• Excellent access to 405, 710, and 91 freeways
• Strong surrounding demographics with median household incomes of $84,000+ (1-mile) rising to over $93,000 by 2028

This high-profile site is ideal for auto dealerships, EV charging hubs, equipment storage, or any operation that benefits from maximum freeway exposure and easy access.

Contact:

Ron Mgrublian, 

Principal Lee & Associates 

+1 (562) 354-2537 | rmgrublian@leelalb.com

DRE# 01902882

We are excited to announce the successful sale of Suite 18-C at 10680 Silicon Avenue in Montclair, CA – a pristine, brand-new industrial condominium totaling ±3,444 SF.

Property Highlights:

• Newly constructed with modern finishes
• Impressive high warehouse clearance
• M1 zoning for flexible industrial uses
• Located in a highly desirable business park setting
• Prime Inland Empire West location with excellent access to the 10, 71, and 60 Freeways

This sale underscores the continued strong demand for high-quality, new-construction industrial space in one of Southern California’s most strategic logistics corridors.

Congratulations to everyone involved in the transaction!

Interested in owning or leasing similar industrial condos in the Inland Empire? Contact Ron Mgrublian, MBA at 562.354.2537 or rmgrublian@leelalb.com for current opportunities.

• Demand for industrial space declined for the tenth consecutive quarter in Q2 2025.
• Vacancy rate increased to 6.1%, up from a record low of 1.8% in late 2022.
• Higher vacancy rates have led to improved market conditions for tenants, with rental rates dropping over 10% from their recent peak.
• Reduced demand is primarily driven by concerns over tariff impacts, contributing to decreased cargo volumes at the Los Angeles port complex.
• Year-over-year container traffic in May 2025 fell by 5% at the Port of Los Angeles and by 8.2% at the Port of Long Beach.
• Rising vacancies are fostering a more balanced industrial market.
• The overall vacancy rate reached 6.1% at the end of June 2025, the highest since 2012.

South Bay Submarket Q2 2025 Overview Summary

• Vacancy/Availability: Total vacancy hit 6.4%, the highest since early 2023, with a 70-basis-point quarterly rise; available space reached 19.4 million square feet, up 2.5 million SF since Q4 2024, driven by returning leased properties and slow lease-ups; sublet vacancy rose to 1.0%, hinting at tenant downsizing; absorbing 4.8 million SF is needed to reach a 4% vacancy rate, excluding new deliveries.
• Rental Rates: Asking rents softened to $1.54 NNN per square foot from $1.61 in Q1 and a $1.69 peak in Q2 2024, marking two consecutive quarterly declines since the pandemic recovery; direct rents dropped more than sublet rents, reflecting landlord pressure from rising vacancies and slow leasing; despite high historical levels, tenants are gaining negotiation leverage.
• Construction: Only one building (504,000 SF) was delivered, with the pipeline shrinking to 742,000 SF, down 60% from 1.9 million SF a year ago, due to caution over vacancies, slow leasing, and softening rents; graded sites are on standby awaiting tenants or better conditions; no preleased projects suggest rising vacancy risks if leasing doesn’t improve.
• Leasing Activity/Absorption: Negative net absorption of -1.15 million SF marked a downturn from 544,000 SF last quarter, the third negative quarter in four, indicating tenant contraction; leasing activity fell to 1.12 million SF leased and 84 deals, below the 105-deal historical average, reflecting occupier caution, especially for larger spaces.
• Sales Activity/Investment Trends: Sales totaled 19 transactions at $93.5 million, up from 16 in Q1 but far below $375 million in Q4 2024; the average price per square foot dropped to $211.83, the lowest in over a year, as buyers adjust to vacancies and rents; cautious investor sentiment persists due to delayed Fed rate cuts and tariff uncertainty, though strong fundamentals attract future capital.

The South Bay industrial market faces challenges with rising vacancies, softening rents, and reduced activity, tempered by potential for recovery as market conditions stabilize.

Midcounties, Central, Inland Empire Submarkets also included in report

AVAILABLE: ±25,660 SF of Land

ASKING RATE: $0.33 / SF Gross

ZONING: I2

TERM: 3-5 Years

• Block Wall

• Paved Yard

• Power and Water Available

• Office Trailer

• Close to 60, 71 and 10 Freeways

AVAILABLE: ±27,896 SF(±0.64 Acres) of Land

ASKING RATE: $7,532 ($0.27 PSF Gross) Per Month

• Short Term Lease

• Truck Parking Possible

• Fenced Yard with Aggregate

• Water/Power Possible

• Close to 10 and 210 Freeways

AVAILABLE: ±27,750 SF Bldg on ±77,145 SF Lot

$0.16 OPEX

APN#: 7102-020-001

ZONING: M2

• Owner Motivated - Submit Your Offer Now!

• Large Fenced and Paved Gated Yard

• Abundant Parking – 56 spaces

• Two (2) Dock High Loading Doors

• Free Standing Building

• High Visibility

• Close to 91 & 710 Freeways