Commercial Real Estate Transactions Slow, But Office and Open-Air Retail Sectors Shine

The commercial real estate (CRE) market is in a period of stagnation as we close out 2025, with deal volumes and transaction values noticeably slower than they were in the post-pandemic recovery period. While there is still activity, it remains significantly below pre-COVID levels, with new data from Moody’s showing a modest 5% increase in the overall dollar value of commercial real estate deals compared to last year, as of the third quarter.

However, within this broader slowdown, there are a few standout sectors that are attracting investors and making a significant impact, even as broader uncertainty affects other parts of the market. Trends revealed by Moody’s in September show a few key patterns: flight to quality, economic uncertainty hitting the hotel sector hard, and a growing interest in two traditionally challenged sectors—office and retail.

Flight to Quality: Larger, Premium Deals on the Rise

Despite the overall slowdown in commercial real estate activity, there’s been an increase in the size and value of premium deals. The average dollar size of sales in September rose to $12.7 million, up from $11.2 million over the two previous years. This shift suggests that investors are doubling down on higher-quality assets that can provide more certainty in uncertain economic conditions.

Notably, a significant portion of the top 50 CRE deals in September were on the higher end of the spectrum. 29 deals were valued at over $100 million, a 35% increase in the volume of large deals compared to last year. Smaller transactions, however, have largely stagnated, reinforcing the trend that investors are now seeking safer, higher-quality properties.

Kevin Fagan, head of CRE capital market research at Moody’s, explained, “After the recovery from the first Fed rate hikes in 2022 and 2023, 2024 saw strong volume growth, but uncertainty has caused a pause in 2025, except for large transactions.” This shows that sovereign wealth funds and institutional investors are willing to place their money into higher-quality real estate where the outlook is more stable, despite overall market volatility.

Hotel Sector Struggles Amid Economic Uncertainty

One of the most significant areas of concern in the commercial real estate market right now is the hotel sector. Deal value in September alone dropped by 30% compared to the same month in 2024. The downturn in hotel transactions is largely attributed to declining international and business travel, compounded by economic uncertainty.

Fagan noted that companies have been cutting costs by reducing travel, and this trend is reflected in the weak demand for hotel assets among investors and lenders. As a result, the hotel market continues to feel the pressure of shifting consumer behavior and the fallout from global economic instability.

Office Space: Tech Giants Seize Discounted Opportunities

In contrast to the hotel sector, office real estate has seen some notable wins. Apple, for example, spent $365 million to acquire an office property portfolio in Sunnyvale, California, while Nvidia spent $83 million on a single office building in Santa Clara. Notably, Metlife secured a 39% discount on an office property in Newport Beach, California, signaling a shift in how office space is being valued and acquired.

Fagan observed that the office market has been showing signs of discounted sales, with many sellers “throwing in the towel.” This has presented opportunities for large tech companies, like Microsoft in Seattle, to purchase office campuses at a fraction of what they might have paid previously. These types of discounted deals are becoming more attractive for companies sitting on large amounts of cash and looking to expand or consolidate their operations.

Retail Real Estate: Open-Air Centers Draw Big Bets

Another bright spot in the commercial real estate market is open-air retail, particularly grocery-anchored, open-air strip centers. These properties have been gaining investor interest, despite broader retail challenges, as they cater to the everyday consumer needs and remain resilient in uncertain times. In September, major real estate firms like Nuveen, Tanger, InvenTrust Properties, and MCB Real Estate poured nearly half a billion dollars into open-air retail properties.

These deals are notable because they represent confidence in the consumer sector, even as overall consumer sentiment has been faltering.

Chad Phillips, global head of real estate at Nuveen, emphasized the benefits of investing in this sector, noting that these properties are bought at less than replacement cost and are part of a resilient, essential real estate strategy. “The total returns are good, and they’re in a high-demand area, making them a solid investment for the long term.”

Phillips has been especially bullish on this segment, noting that it’s a smaller, more manageable investment compared to larger mall properties, which have seen much higher vacancy rates in recent years.

What’s Next for CRE?

While some sectors are showing positive signs of resilience, others, like hotels, continue to face significant challenges. For investors, the flight to quality is a clear theme, as larger, premium properties seem to weather economic turbulence better than smaller, lower-tier assets. As the economic uncertainty of 2025 persists, office and open-air retail appear to be the sectors attracting the most investor interest, particularly as tech companies take advantage of discounted office assets, and consumer-focused real estate continues to draw large sums. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.