Before naming names, it helps to define the ingredients investors should be watching right now to determine the best states for commercial real estate growth:
- Population and job growth – More people and more jobs support absorption, rent growth, and long-term demand. States in the South and Southwest continue to attract migration and employment, especially high-cost coastal markets.
- Business climate and taxes – Lower taxes, pro-business policies, and predictable regulations help companies expand, which feeds directly into demand for office, industrial, medical, and retail space.
- Sector mix – Markets anchored by diverse drivers – healthcare, logistics, tech, advanced manufacturing, higher education, are better positioned than those reliant on a single industry.
- Supply vs. demand – Even in high-growth regions, overbuilding can pressure rents and occupancy. The best states balance healthy construction with sustainable absorption.
- Price and yield – In several “Sun Belt darlings,” pricing ran ahead of fundamentals during the boom. In 2025, investors are prioritizing states where cap rates and pricing better match risk.
With that in mind, let’s look at where the numbers and trends line up for investors this year.
1. Arizona – A Migration Magnet with Room to Run
Arizona has become one of the most consistently attractive states for commercial real estate investment, not because of speculative spikes, but because of dependable, long-term fundamentals. Population growth, business expansion, and diversified economic drivers continue to propel demand across multiple asset classes.
As explored in What’s Driving Arizona’s Commercial Real Estate Market?, Arizona’s current trajectory isn’t a bubble. It’s durable, diversified, and backed by real-world economic activity.
Steady Growth, Not a Boom-and-Bust Market
While job growth has cooled from its post-pandemic peak, the Arizona Office of Economic Opportunity still projects the state will outpace national averages through 2026. For investors, this moderation is healthy — it creates stability, not volatility.
“Arizona’s expansion is being shaped by real job creation, population gains, and business investment — not speculation.”
Supporting this theme, Climate Risks to Commercial Property Values highlights why Arizona continues to attract residents and companies seeking resilient, low-risk markets.
A Market Powered by Diverse Demand Drivers
One of Arizona’s greatest strengths is the range of industries fueling demand across commercial real estate.
Advanced Manufacturing, Semiconductor Supply Chain & Logistics
Major investments from household-name manufacturers, suppliers, and distribution operators continue to stimulate industrial absorption. This trend is covered extensively in What’s Driving Arizona’s Commercial Real Estate Market?.
Healthcare & Medical Office Demand
A growing and aging population has made healthcare one of the most powerful and stable demand drivers in the state.
These articles reinforce this across several angles:
- How Medical Real Estate Is Evolving
- Urbanization and Demand for Healthcare Services
- Trends in Leasing Medical Space
Each highlights the shift toward outpatient care, suburban accessibility, and new patient-centric facility design, all powerful drivers of medical office absorption.
Suburban Office & Flex Space
Companies continue to gravitate toward East Valley suburbs where employees live, cutting commute times and improving convenience. Smaller footprints and flexible layouts continue to outperform traditional downtown office towers.
Service Retail in Growing Master-Planned Communities
As new rooftops rise, neighborhood retail and healthcare services follow. Arizona’s migration-driven expansion makes local service retail a durable investment strategy.
Commercial Fundamentals That Still Pencil
Industrial and medical offices remain in two of Arizona’s healthiest asset classes, with rising rents, tightening vacancy, and consistent absorption. Unlike coastal boom markets, Arizona’s development pipeline remains active yet disciplined, a balance that strengthens underwriting confidence.
Two articles support this dynamic clearly:
- Rising Costs, Rising Returns? — showing how higher construction costs are limiting speculative overbuilding.
- Phoenix’s Construction Cost Surge — explaining how supply remains measured across key submarkets.
“Arizona’s pipeline is growing but not overheating — and that’s exactly what investors want.”
2. Texas – Big Economy, Big Opportunity
Texas remains heavyweight for commercial investors. The state continues to post strong economic and job growth, with forecasts calling for ongoing expansion in output, employment, and real estate rents through 2025.
Why it still works:
- Major employers continue to expand in Dallas–Fort Worth, Houston, Austin, and San Antonio according to Area Development
- Dallas and Houston repeatedly show up on lists of top cities for commercial investment in 2025, especially for industrial and logistics, as well as select office and retail.
- No state income tax and a business-friendly environment keep companies and workers coming.
What to watch:
- Some submarkets have seen overbuilding in multifamily and certain office segments.
- Interest rates and construction costs have made some deals tight on day-one yields.
In 2025, the best plays in Texas are often industrial, logistics, data center-adjacent land, and well-anchored retail, with a focus on growing suburban nodes rather than trophy pricing in the urban core.
3. Florida – Slower Migration, Still Strong Demand
Florida’s migration story has moderated from its peak, but it’s far from over. The state led the nation in net migration as recently as 2023, and while inflows are normalizing, Florida is still projected to add about 1.4 million new residents between 2025 and 2030.
Why investors still like Florida:
- Long-term population growth supports steady demand for retail, medical, industrial, senior housing, and hospitality.
- No state income tax and international capital (especially from Latin America) continue to support investment activity.
- Top metros like Miami, Tampa, Orlando, Jacksonville, and the Gulf Coast markets are consistently highlighted as commercial real estate hotspots for 2025.
Risks and nuances:
- Insurance and climate-related costs must be underwritten carefully, particularly for coastal assets.
- Some multifamily and build-for-rent products face competition from a heavy delivery pipeline.
In 2025, convenience retail, medical office, industrial close to port and logistics hubs, and infill mixed-use are bright spots.
4. North Carolina – Mid-Atlantic Growth Story
North Carolina has quietly become one of the country’s most balanced growth stories. The Raleigh–Durham and Charlotte metros continue to attract population, corporate relocations, and institutional capital.
Highlights:
- As reported by Colliers, Charlotte’s industrial market ended in 2024 with over 3 million square feet of net absorption and continued strong leasing into 2025, with more than $1.1 billion in industrial sales traded through the first three quarters of 2025.
- Raleigh’s tech, life sciences, and research base fuels steady demand for office, lab, and flex products.
- Population growth and in-migration from the Northeast and Midwest support retail and housing-linked products.
For investors, North Carolina offers solid cap rates relative to its growth profile, with opportunities in:
- Last-mile and regional industrial
- Suburban and mixed-use office in top school and employment districts
- Medical and life science-oriented real estate
5. Tennessee – Cash Flow and Sun Belt Momentum
Tennessee has emerged as a favorite among investors looking for a blend of cash flow, growth, and favorable tax policy. Reports on top states for real estate investment in 2025 often highlight Tennessee for its no state income tax and relatively low entry prices versus coastal markets.
Key markets include:
- Nashville – Music City has matured into a true secondary investment hub with strong tourism, healthcare, and corporate footprints.
- Knoxville and Chattanooga – Growing regional centers with solid industrial, logistics, and university-driven demand.
Tennessee tends to shine for:
- Neighborhood retail and service centers
- Industrial and distribution along key highway corridors
- Suburban medical and professional office tied to growing populations
6. Ohio (and the Midwest Value Play)
Not every strong market in 2025 is in Sun Belt. Some of the best risk-adjusted returns can be found in Midwest states like Ohio, where acquisition pricing and property taxes are often lower while rent levels still support attractive cash-on-cash yields.
Ohio stands out for:
- Diverse economies in Columbus, Cincinnati, and Cleveland
- Growing logistics presence due to central location and interstate access
- Solid performance in necessity retail, industrial, and workforce-oriented multifamily
Here, the story is less about rapid appreciation and more about steady income, stabilized occupancy, and long-term yield.
How to Use This List as an Investor
This isn’t about chasing hype. In 2025, the investors who win are:
- Reading the local data – absorption, vacancies, rent growth, and supply pipelines by submarket.
- Picking a lane – industrial, medical office, neighborhood retail, or another niche they understand deeply.
- Matching strategy to market – value-add in some states, build-to-suit or ground-up in others, and long-term hold in markets with durable migration and job growth.
- Partnering locally – on-the-ground expertise still matters more than ever: zoning nuance, tenant demand, and local lender appetite can make or break a deal.
Bringing It Back to Arizona and the ICRE Investment Team
All these states offer opportunities, but Arizona continues to stand out as a place where:
- Migration and job growth are still driving real demand
- Medical, office, retail, and industrial assets can be underwritten with real fundamentals
- Investors can find a balance of current income and long-term upside
If you’re looking at commercial investments, especially healthcare, office, or land development in Arizona, having a team that lives and breathes in this market is invaluable. That’s exactly where the ICRE Investment Team comes in.
From site selection and lease-up strategy to underwriting, marketing, and sale, an experienced Arizona-focused team can help you sort through which opportunities truly belong in your portfolio, and which ones to pass on so your next move in 2026 isn’t just in a “hot state,” but in the right deal for your goals.
