August 27, 2024, Moody’s Headquarters, New York.
Gina Moon | Bloomberg | Getty Images
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Commercial real estate transaction volume fell for the second month in a row in December, but full-year numbers reveal some progress and could provide some much-needed momentum this year.
According to monthly data provided by Moody’s exclusively for CNBC’s Property Play, total transaction volume was down 20% in December compared to the same month last year. It tracks the top 50 commercial real estate sales nationwide in core segments such as multifamily, office, industrial, retail, and hotels.
For 2025 as a whole, transaction volumes increased by 17% compared to 2024, expanding well, but lower than the previous year’s annual growth rate of 24% and still 30% below the pre-pandemic 2019 benchmark.
“The U.S. commercial real estate (CRE) market in 2025 will be defined by a slow and steady rise toward stabilization,” said Kevin Fagan, head of CRE capital markets research at Moody’s. “Despite a significant economic slowdown, policy uncertainty, large loan maturity barriers and continued high interest rates compared to three years ago, the recovery has proven resilient.”
This situation was driven by the multifamily housing and office sectors. The office recovery is accelerating as return-to-office orders and a boom in AI hiring counter narratives that the office is over due to the pandemic.
Total office transactions in 2025 increased by 21% compared to the previous year. However, investors continue to favor Class A or trophy assets as the rest of the market struggles.
Multifamily housing, with declining fundamentals such as occupancy and rents, continued to lead transactions in 2025, with transaction volume increasing 24% from 2024. Benefiting from rising mortgage rates in the single-family condominium market, it prevented more renters from becoming buyers.
Retail trade also recorded a significant increase of 19%. The sector’s fundamentals were strong, particularly grocery-focused and essentials-based centers, which fended off continued pressure from e-commerce.
“Retail has officially re-entered the conversation as a durable investment-grade asset class, with investors focusing more on the nuances of normal underwriting than on potential functional obsolescence or the ‘retail apocalypse,'” Fagan said.
Last year saw signs of a revival in large dollar-denominated CRE transactions, which had been struggling for some time. Sales of more than $100 million were up 23% from 2024, according to Moody’s. These transactions reflect institutional investors, corporate owner-occupiers, and some REITs. However, this segment remains the furthest from recovery, remaining at only half of 2019 levels.
The smallest deals under $5 million are currently running 4% ahead of their 2019 pace. They tend to favor private capital and retail investors who are more active and liquid throughout this interest rate cycle. The transaction value between $5 million and $15 million is just 12% below 2019’s transaction volume.
Mid-sized deals, between $15 million and $100 million, continue to struggle as they are most vulnerable to financing difficulties.
Another key trend in 2025 was alternative plays in sectors outside the core five, such as healthcare real estate, data centers, and student housing. The largest sale of 2025 was the 296-property medical office portfolio that Remedy Medical Properties purchased from Welltower. This was also the largest ever sales in this category.
The seemingly desperate need for data was also evident in the top 50 deals of 2025. Amazon and googlewas particularly active. The ninth largest sale of the year was a $615 million land deal in northern Virginia. SDC Capital Partners has purchased a 97-acre entitled data center site in Leesburg from Chuck Kuhn’s JK Land Holdings. This is a record deal for more than $6.3 million per acre.
The data also led to a surge in business owner-occupiers, particularly technology giants such as: apple And Amazon. In fact, Fagan said, Apple has been on a buying spree, spending more than $1.1 billion in Santa Clara County, California alone, including several office buildings, offices, and a research and development campus.
“By purchasing these assets, Apple is securing long-term operating space while taking advantage of 20% to 30% discount pricing in the Silicon Valley office market compared to its peak in 2022,” Fagan added. microsoft A similar move was made last year.
The rally in 2025 bodes well, albeit cautiously, for commercial real estate as it sees portfolio rebalancing. While institutional investors have certainly returned to the sector, some large publicly traded REITs have sold large multi-tenant portfolios to private equity firms. The latter has now turned out to be a major player and is looking to deploy significant capital that has been on the sidelines in the recent high interest rate environment.
“Market participants are generally optimistic and expect fiscal support from a more dovish Fed under the next chairman and potential tax cuts,” Fagan said. “However, interest rates are unlikely to fall sharply, and 2026 is expected to see a gradual acceleration of current momentum rather than a return to an era of ultra-cheap capital.”
