Commercial real estate deals are slowing, but two sectors shine: Moody’s
A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and emerging opportunities for real estate investors, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. become a member to receive future editions straight to your inbox.
Commercial real estate buying and selling, which gained significant momentum after the pandemic, is experiencing a difficult year 2025. Transactions are still ongoing but have stalled well below pre-Covid levels.
The overall dollar value of deals was up just 5% from last year as of the third quarter, according to new monthly data provided by Moody’s as a media exclusive to CNBC’s Property Play. Tracking the top 50 CRE property sales across the US
September trends reveal several themes: a flight to quality, economic uncertainty hitting the hotel industry hard, and growing interest in two beleaguered sectors: office and retail.
The flight to quality can be seen in the average dollar size of sales in September, to $12.7 million, compared to an average of $11.2 million in the previous two years.
Of the top 50 deals closed, 29 were over $100 million. The volume of deals exceeding $100 million in the third quarter increased 35% compared to last year, while the volume of smaller deals remained flat or is shrinking.
“We had a lot of volume growth and recovery following the Fed’s first rate hikes in 2022-2023. 2024 was a pretty good year,” said Kevin Fagan, Moody’s head of CRE capital markets research. “We’ve seen significant volume growth and despite the large transactions, which tend to be higher quality properties, that’s really stalled because of all the uncertainty in 2025.”
Fagan said there was much more certainty among investors about higher quality properties and that they were therefore seeing an influx of money from multiple sources, including government debt funds.
One of the glaring weaknesses is in the hotel industry; In September, deal value fell 30% compared to the same month in 2024. This was the only asset class to post a significant decline last month, likely due to a decline in international and business travel.
“A lot of companies are reducing their margins, and one of the ways they do that is to use certain types of travel less,” Fagan said. “So we really feel there is an avoidance of hotel assets among lenders and investors, and that’s reflected in the volume data this month.”
While hospitality took a hit, the office triumphed.
In September, Apple spent $365 million on a portfolio of office real estate in Sunnyvale, California. Nvidia spent $83 million on a single office building in Santa Clara, California. Meanwhile, Metlife negotiated a nearly 39% discount on an office property in Newport Beach, California.
“That’s a pretty typical number for offices where you see vendors finally throwing in the towel,” Fagan said. “Given that kind of discount, some of these companies, especially the big tech companies with a lot of money, can get their own campuses at a relatively inexpensive cost. It’s become a bit of a trend. We’ve seen Microsoft do this recently in Seattle as well.”
Another big winner of September was outdoor retail. Buyers including Nuveen, Tanger, InvenTrust Properties and MCB Real Estate collectively spent just under half a billion dollars on retail properties during the month, mostly open-air strip centers with restaurants. This is a big bet for the consumer at a time when confidence is declining.
Nuveen’s global head of real estate, Chad Phillips, told Property Play last week that it has been moving heavily into open-air strip centers for the past two years.
“Overall returns are good. You’re buying for much less than the replacement cost. So you put it all together and this is a very durable, core real estate need where we can generate strong, risk-adjusted returns,” Phillips said.
