Commercial Real Estate Deal Volume Drops for the First Time in Almost Two Years
In October 2025, a trend of slow but steady recovery in the U.S. commercial real estate (CRE) market hit a bump. For the first time since early 2024, CRE deal volume fell on a year-over-year basis, according to a new report from Moody’s, shared exclusively with CNBC’s Property Play.
This drop marked the first real setback after a year of steady recovery that followed the post-pandemic slump. While interest rates have played a role in this shift, the ongoing economic uncertainty and shifting policy changes are also contributing factors to the cooling of the market.
October’s Decline: A Result of Stalemate Between Buyers and Sellers
Despite the negative year-over-year change, October remained an active month for CRE deals, with a total of $24.4 billion in property sales roughly 70% of what was recorded in October 2019. While this represents growth compared to 2024, the report highlights that the momentum from last year has significantly slowed in comparison to 2023.
According to Kevin Fagan, head of CRE capital market research at Moody’s, the drop in deal volume isn’t a clear signal of a market downturn but rather reflects a stalemate between buyers and sellers. High interest rates and economic uncertainty have caused hesitation on both sides of the transaction, lengthening what was once considered the bottom of the market recovery cycle.
Sector-Specific Performance: Mixed Trends in CRE
Despite the overall decline, certain sectors in the CRE market showed stronger performance in October.
Industrial and Multifamily Sectors Lead: Industrial and multifamily properties continued to lead in terms of deal volume in the top 50 CRE transactions. However, the multifamily sector saw the steepest pullback, with transactions down 27% compared to the previous year. This sector had seen better-than-average performance in the first half of 2025 but slowed down due to ongoing affordability issues and market adjustment.
Hotels Show Growth: One bright spot was the hotel sector, which saw a 6% growth in deal volume from last year, reversing the decline from the previous quarter. A notable hotel sale in October was the New York Edition Hotel, sold for $231.2 million. The buyer, Kam Sang Co., a real estate development firm, acquired the property from the Abu Dhabi Investment Authority, highlighting both the high value and the ongoing shifts in foreign investment in U.S. real estate.
Office Sector Recovery Continues: The office sector remains one of the more challenging parts of the market, with property conversions and discounted prices becoming more common. For example, the top sale in October was the Sotheby’s headquarters in New York, which was sold to Weill Cornell.
Looking Ahead: What’s Driving the Slowdown?
The slowdown in commercial real estate transactions can be attributed to a few key factors:
- High Interest Rates: Elevated interest rates are putting a strain on both buyers and sellers, making financing more expensive and increasing hesitation to close deals.
- Economic Uncertainty: Ongoing concerns about inflation, global economic disruptions, and policy changes have added to the overall market unease.
- Supply and Demand Imbalance: Despite a slight increase in listings, the market continues to grapple with a mismatch in supply and demand, which is particularly noticeable in certain sectors like multifamily housing and office spaces.
A Mixed Picture for CRE Moving into 2026
While October saw some slowdown, the commercial real estate market remains active, and some sectors are showing resilience. As we move into 2026, much will depend on the broader economic climate and how interest rates, inflation, and investor sentiment evolve.
For now, the CRE market may be experiencing a temporary pause, but the recovery story is far from over. Expect to see some continued volatility as buyers and sellers adjust to the changing economic landscape. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.
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