Commercial real estate deal volume drops for first time in nearly 2 years

The commercial real estate (CRE) market has experienced a slow and bumpy recovery, closely tied to interest rate policy over the past few years. After gaining momentum post-pandemic, 2025 has been a challenging year, with October marking the first month of negative year-over-year transaction volume growth since early 2024, according to data from Moody’s. This data, exclusive to CNBC’s Property Play, tracks the top 50 CRE property sales across the US.

Deal volume growth turned positive in early 2024, approaching pre-Covid levels by the end of the year. However, the recent slip into negative growth reflects a stalemate between buyers and sellers, rather than an imminent downturn in CRE capital markets. Kevin Fagan, head of CRE capital market research at Moody’s, attributes this to persistently high interest rates and economic uncertainty in 2025. Despite this, October remained an active month, with $24.4 billion in sales, roughly 70% of October 2019 sales.

Property Trends and Notable Sales

Industrial and multifamily properties led the top 50 deals, with the hotel sector being the only one to show improvement in deal volume compared to last year, with 6% growth. A notable sale was the New York Edition hotel at 5 Madison Avenue, sold for $231.2 million by the Abu Dhabi Investment Authority to the Kam Sang Company. This sale is interesting not only due to its high price but also because it involves a Mideast sovereign wealth fund pulling out of NYC and the building’s rich history, having originally been the MetLife Clock Tower, the tallest building in the world from 1910 to 1913.

The multifamily segment saw the biggest pullback in October, down 27% from 2024, although buildings were mostly trading at a premium to previous sales. Office space continued its rocky recovery, with either discounts or property conversions being part of the story. The top October sale was of the Sotheby’s headquarters to Weill Cornell, likely to be repurposed for healthcare or medical offices. New York Life also acquired a distressed Manhattan office building from BGO for almost half of its last sale price in 2015, demonstrating institutional interest in offices sold at discounts and reinforcing the long-term value of such properties in good markets.

Market Outlook and Insights

Despite the challenges, the total dollar volume of sales this year remains higher than last year, albeit with significantly slowed growth momentum since 2023. The CRE market’s recovery is complex, influenced by interest rates, economic uncertainty, and the evolving preferences of buyers and sellers. As the market navigates these factors, certain sectors like industrial and multifamily continue to attract investment, while others, such as office space, face a more uncertain future, with potential for repurposing and redevelopment.

For investors and industry watchers, understanding these trends and notable sales provides valuable insights into the current state and future directions of the commercial real estate market. As the market continues to evolve, staying informed about the latest developments and analysis from experts like Kevin Fagan and publications like CNBC’s Property Play will be crucial for making informed decisions in this dynamic and often unpredictable sector.