The past five years have been marked by unprecedented extremes in the U.S. economy and real estate markets. The pandemic era (2020–2022) brought massive stimulus, pent-up consumer demand, record job openings, ultra-low bankruptcies, and historically cheap financing. Real estate rode those waves—hotels boomed, labor shortages persisted, and CRE values surged on easy money.
But by 2025, the pendulum has swung back. Hotels have plateaued after a surge in leisure demand, labor markets are cooling without collapsing, bankruptcies are rebounding to more normal levels, and commercial real estate is showing clear winners and losers.
This is not a crash. It’s a return to balance—an environment that demands sharper analysis and more selective investing.
Hotels – Plateau After the Boom
Hotels, one of the most visible real estate sectors, are now cooling after three years of strong growth.
Flat RevPAR, Big Market Gaps
Nationwide, hotel RevPAR is flat in 2025, but performance diverges sharply across markets. St. Louis (+18.3%) and Chicago (+12.8%) are seeing healthy growth from conventions and business travel. In contrast, Houston (-28.7%) and Las Vegas (-13.9%) are suffering steep declines, driven by tough year-over-year comparisons and softer demand.
This unevenness underscores how localized hotel performance has become.
Transactions Reflect the Plateau
Recent transactions highlight the recalibration underway:
- Embassy Suites Nashville at Vanderbilt (208 rooms) sold for $57.5M ($276k/key) in April 2025 to Reade Hotel Capital. A strong price per key shows investor confidence in Nashville’s fundamentals, despite national softening.
- Kimpton Hotel Eventi, New York (292 rooms), traded for $175M ($599k/key) to Blackstone in May 2025. The high price per key reflects NYC’s long-term appeal, though buyers required $125M in acquisition financing from Wells Fargo, highlighting how debt is shaping valuations.
- Virgin Hotel Chicago (250 rooms) sold for $77.4M ($310k/key) to Accelerated Assets in June 2025. The buyer was attracted to the repositioning upside, but pricing suggests more conservative underwriting compared to peak years.
- Hilton New Orleans St. Charles (252 rooms) traded for $47M ($187k/key) in June 2025. Cap rates were in the high single digits (8.7%), underscoring how secondary markets are demanding higher yields.
These deals reflect a pattern: strong gateway and growth markets (NYC, Nashville, and San Francisco) still command premium pricing, but most trades are happening with higher cap rates, lender creativity, and selective buyer appetite.
Demand & Pricing Outlook
Industry forecasts show muted demand growth (0.4%–0.1% in 2025), limited occupancy recovery, and ADR growth of just ~1%. With consumers more price-sensitive, operators are turning to discounts, promotions, and group business to fill rooms.
Even large hotel REITs are pruning portfolios. Host Hotels’ sale of the Washington Marriott at Metro Center in 2025 at a ~$170M valuation illustrates how even core-market hotels are being monetized, often with seller financing to get deals across the finish line.
Labor Market – Cooling, Not Crashing
Labor markets have cooled significantly since their peak in 2022, but remain far from weak.
- Job openings have fallen from nearly 12 million in 2022 to 7.18 million in mid-2025 (the lowest since 2024).
- Job gains have slowed dramatically, with payrolls rising just 22,000 in August 2025, compared to monthly averages of 168,000 in 2024.
- Unemployment stands at 4.3%, up from pandemic-era lows but still healthier than pre-2015 averages.
The Federal Reserve’s Beige Book (August 2025) noted that consumer spending has weakened, with hospitality and retail sectors resorting to discounts and promotions to sustain demand. In addition, six Fed districts reported reduced immigrant labor availability, tightening supply in service sectors.
Still, historically, today’s job market remains solid. Even at 7 million job openings, the U.S. is well above the long-term average of ~5 million pre-2020.
Bankruptcies – Normalization in Motion
Bankruptcy filings are rebounding after years of artificially low levels.
- 2025 filings: 529,000 (a 13% increase from 2024).
- Pandemic years (2021–2022): historically low levels (231,000–265,000).
- Great Recession peak: over 1.1 million annually.
This trend reflects the lagged impact of higher financing costs, fading stimulus buffers, and tighter consumer budgets. As Chamath Palihapitiya recently noted, bankruptcies today look elevated only because they follow years of unusual suppression. Compared to the 2015–2019 cycle, current numbers look much more like “normal” than “distressed.”
The point is clear: zoom out. We’re not facing a credit collapse but simply a reversion to long-term averages.
Commercial Real Estate (CRE) – A Market of Contrasts
CRE’s story in 2025 is one of extremes—clear winners and clear laggards.
Winners: Data Centers and Industrial Strength
Data centers are the standout. Multiple Fed districts (Philadelphia, Cleveland, and Chicago) reported a surge in new construction to meet AI and cloud demand. Industrial assets, particularly warehouse and distribution space in New Jersey and Chicago, remain highly sought after, driving record rents in some submarkets.
Weak Spots: Office, Multifamily, Retail
- Office: Still in “modern turmoil,” per Richmond Fed contacts. Many outdated office buildings are being demolished for land value. Class A space in New York is strong, but B/C assets are deeply challenged.
- Multifamily: Oversupply persists, especially in Sunbelt markets. Rent concessions are widespread, and absorption lags.
- Retail: Pressure is mounting. Small tenants hit hardest by inflation are demanding rent relief, while consumer spending remains soft nationwide.
Construction & Financing Headwinds
Developers face high financing rates, rising contractor costs, and expensive materials. Kansas City Fed contacts noted larger contingency funds and escalator clauses are now standard. Across districts, new starts are subdued, with activity limited to projects with subsidies or tax abatements.
A New Normal
The U.S. real estate market in 2025 is not crashing—it’s normalizing. Hotels are no longer in a boom, the labor market is cooling without breaking, bankruptcies are trending back toward historical averages, and CRE reveals both resilience (data centers, industrial) and structural weakness (office, oversupplied multifamily, retail).
For hotel investors and owners, this shift means a more selective, fundamentals-driven environment. Markets such as New York and Nashville are still commanding premium valuations, while secondary and tertiary markets face more scrutiny and higher yield requirements. In this balanced environment, the most successful sellers are those who understand timing, buyer appetite, and creative deal structures.
If you are considering selling a hotel, repositioning an asset, or exploring your property’s market value, our team specializes exclusively in hotel transactions. Contact us today to discuss how we can help you achieve maximum value in today’s market.