A version of this article first appeared in the CNBC Property Play newsletter with Diana Orrick. Property Play covers new and evolving opportunities for real estate investors, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large publicly traded companies. Sign up to receive future editions directly to your inbox.
Although commercial real estate transactions gained significant momentum from the pandemic, 2025 will be challenging. Trading is still occurring, but it has stalled at levels well below pre-coronavirus levels.
According to new monthly data provided by Moody’s exclusively for CNBC’s Property Play, total transaction volume was only up 5% year over year in the third quarter. Tracks the top 50 CRE real estate sales in the United States.
September’s trends revealed several themes, including a flight to quality, economic uncertainty hitting the hotel industry hard, and increased interest in two struggling industries: office and retail.
The flight to quality can be seen in the fact that average sales in September were up to $12.7 million, compared to an average of $11.2 million over the previous two years.
Of the top 50 completed deals, 29 were for $100 million or more. Deal value of $100 million or more increased 35% year-over-year in the third quarter, while smaller deal value remained flat or declined.
“After the first Fed rate hike in 2022-2023, volumes grew significantly and rebounded. 2024 was a pretty good year,” said Kevin Fagan, head of CRE capital markets research at Moody’s. “While we saw significant deal volume growth, given the uncertainty of 2025, that momentum has actually stalled, albeit in larger deals that tend to involve high-quality real estate.”
Fagan pointed out that there is much more confidence among investors in high-quality real estate, which is why capital is flowing in from multiple sources, including sovereign debt funds.
One obvious weakness is the hotel sector, where deal value was down 30% in September compared to the same month in 2024. It was the only asset class to record a significant decline last month, likely due to a decline in international travel and business travel.
“Many companies are cutting margins, and one of the ways they’re doing that is by cutting back on certain types of travel,” Fagan said. “We’re seeing a shift away from hotel assets among lenders and investors, and that’s reflected in this month’s volume data.”
Hospitality suffered, but office triumphed.
In September, Apple spent $365 million on an office real estate portfolio in Sunnyvale, California. Nvidia spent $83 million on an office building in Santa Clara, California. Meanwhile, MetLife has signed an approximately 39% discount on office property in Newport Beach, California.
“That’s a very typical number in the office industry, where the sellers eventually gave up,” Fagan said. “Given those discounts, some of these companies, especially the big tech companies that have a lot of money, can scoop up their own campuses at a relatively low cost. So it’s become a bit of a trend. We recently saw Microsoft do something similar in Seattle.”
Another big winner in September was outdoor retail. Buyers including Nuveen, Tanger, InvenTrust Properties and MCB Real Estate collectively poured just under $500 million into retail real estate, mostly outdoor strip centers with restaurants, in the same month. This is a big gamble for consumers at a time when confidence is waning.
Chad Phillips, head of global real estate at Nuveen, told Property Play last week that the company has been leaning heavily toward outdoor strip centers over the past two years.
“The total return is good. You’re buying for a lot less than your replacement cost. So when you put it all together, it’s a very resilient, essential real estate need that can give you a great risk-adjusted return,” Phillips said.
