(MENAFN)

The commercial real estate market has seen its fair share of volatility over the past several years, but some subsectors are proving to be consistently resilient. While the headline numbers show convergence across retail, office, and hospitality pricing in Q2 2025, the real story lies beneath the surface. Automotive, restaurant, and medical office properties are not only holding their ground but outperforming in ways that speak to shifting consumer behaviour, demographic realities, and supply constraints. Their stability in the face of market fluctuations is a reassuring sign for potential investors.

Retail provides the clearest example of this divergence. Sector-wide, pricing rose by nearly 19 per cent year-over-year, but the gains weren’t spread evenly. Automotive properties surged by more than 36 per cent, flipping from long-standing discounts to consistent premiums. Once considered secondary assets, gas stations, dealerships, and service centres are now prized for their stability. Resilient demand for repairs and fuel, long leases, and a degree of insulation from e-commerce disruption have made these assets particularly appealing to investors.

Restaurants and bars tell a similarly compelling story. Freestanding dining establishments have sustained a premium for decades, but that premium now sits near 70 per cent above strip centre retail. The drivers are straightforward: prime locations, strong tenant demand, and resistance to digital substitution. Even when delivery apps and ghost kitchens entered the scene, brick-and-mortar restaurants maintained their pull as community anchors. The pandemic briefly narrowed their advantage, but the rebound has been decisive, underscoring their role as stable, income-generating assets.

Altus Group's valuation and advisory services emphasise that medical office properties are carving out their own growth trajectory within the office sector. For years, traditional office buildings have struggled with remote work and downsizing trends, but medical offices continue to post strong results. As of Q2 2025, medical office assets command a 54 per cent premium over general office, fuelled by demographic demand for outpatient care, costly tenant buildouts, and long leases that discourage frequent relocations. The combination of limited new construction and an ageing population points to continued stability, making this segment one of the safest bets in the broader office market.

Hospitality also reflects how constrained supply can elevate values. Full-service hotels, once discounted relative to limited-service properties, now trade at significant premiums. While urban and resort destinations have driven much of the recovery, it is the lack of new construction that has truly amplified asset scarcity. This mirrors the dynamics at play in automotive, restaurants, and medical office properties, with limited substitutes or essential demand drivers naturally rising to the top when capital seeks stability.

What unites these outperforming subsectors is a blend of resilience and necessity. People still need their cars serviced, communities still gather around restaurants, and healthcare remains non-discretionary. In an era where many real estate categories are grappling with disruption, these sectors benefit from fundamentals that don’t easily shift. The essential nature of the demand for these subsectors should provide a sense of security for potential investors.

Looking ahead, convergence at the sector-wide level may continue to mask divergences at the subsector level. For those seeking opportunity in today’s CRE market, the lesson is clear: not all retail, office, or hospitality assets are created equal. The bright spots, automotive, restaurants, and medical offices, demonstrate that the strongest performers are those rooted in everyday demand and reinforced by long-term structural trends. This long-term perspective should instil confidence in the future performance of these subsectors.

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