A Promising Future for Commercial and Hospitality Assets Once the Capital Markets Settle Down
The East Coast’s commercial real estate and hospitality sectors offer significant growth potential, driven by several key factors, including the region’s dense population — nearly 60% of the U.S. However, the macroeconomic landscape and recent geopolitical headwinds affecting capital markets have caused a consequent ‘pause’ in decision-making, which has created near-term stagnation in the region and more broadly.
Factors include an evolving U.S. tariff policy, leading to ongoing trade tensions with other countries, with the repercussions yet to play out. Interest rates remain relatively high despite recent reductions in the federal interest rate and, most recently, the government shutdown. These macroeconomic factors are leading to delayed and less trustworthy economic data and are stoking further caution among the investor community.
Looking at the commercial real estate data in the eastern U.S., SitusAMC’s latest ValTrends quarterly report reveals that investor recommendations to buy commercial assets fell by 5% to 18% from the first quarter to the second quarter of 2025, as many adopt a ‘wait-and-see’ approach. Developers and operators rely on investment, and in a more risk-averse and volatile environment, funding can be impacted; potential project delays or cancellations are likely to result from these macroeconomic factors.
CBRE suggests that commercial office leasing activity has increased modestly to $437 billion in the region. However, that is still 18% below the pre-pandemic average. New construction is expected to continue to be stymied. Yet the report notes that the underlying sector fundamentals remain strong, albeit with a widening gap between prime and non-prime assets.
The East Coast has the largest commercial markets in the U.S., with New York and its surrounding areas leading the charge, followed by Washington D.C., and the Carolinas. According to JLL’s Q3 2025 research, New York leasing activity has been relatively stable, with third-quarter volumes hitting 6 million sq ft. The total quarterly vacancy rate decreased to 14.8% (the lowest since before the pandemic), while rents reached over $80 per square foot with further rises anticipated as the flight to quality continues when it comes to commercial space — this is vital as occupiers try to attract employees back to the office. As reported elsewhere, for this reason, there has been more attention on Class A and top Class B space in Midtown and certain Downtown submarkets.
New York is a global city that will always remain a gateway for investment. Nevertheless, recent investment volumes have seen a decline, reflecting the wider caution. In turn, there is a ripple effect from New York into the Washington DC market and secondary markets in the Carolinas. Despite the space supply issue, once there is some resolution to the economic crosswinds, we will see an acceleration in the commercial real estate sector, especially in the larger markets.
The hospitality industry is in a similar position to the commercial real estate industry. Having just emerged from the industrywide recession and heading in a strong direction over the past 18 months, this sector has also stalled due to capital market dynamics. As a result of the general economic outlook, inflation and other concerns, many U.S. citizens have scaled back on luxury travel. There has been a significant slowdown in domestic leisure travel growth. While international travel has dropped by over 3% year-on-year in the first quarter of this year, inbound corporate travel from Europe and Canada has conversely seen an improvement, increasing by 10% and 17% respectively.
The American Hotel & Lodging Association’s 2025 State of the Industry Report shows that, following a recovery in demand post-pandemic, the overall U.S. hotel industry has undergone a period of stagnation, with total occupancy forecast to reach approximately 63% in 2025 (compared with 65.8% in 2019). Once again, as the foremost market, New York outperforms and serves as a bellwether for others.
While the East Coast’s commercial real estate and hospitality sectors remain fundamentally strong and strategically positioned for long-term growth, they are currently navigating a complex landscape shaped by macroeconomic uncertainty, geopolitical tensions, and cautious investor sentiment. The region’s dense population and the global appeal of cities like New York and Washington, D.C. continue to anchor demand, however capital market volatility has led to a temporary slowdown in investment and development activity. Hospitality, similarly, is experiencing a pause after beginning a post–pandemic rebound, only to be stalled by the same factors, compounded by domestic leisure travel softening and corporate travel showing selective resilience. As economic conditions stabilize and confidence returns, both sectors are poised to accelerate, particularly in primary markets. Additionally, it will be interesting to see how New York’s newly elected mayor can positively impact the city’s economy and resilience, as well as investor sentiment across property markets wider afield.
