Commercial real estate deal volume experienced a mixed finish to , with a decline in December offsetting overall annual growth, according to data released by Moody’s and reported by multiple outlets. While total deal volume for the year increased by 17% compared to , December saw a 20% year-over-year drop, marking the second consecutive monthly decline.
Despite the late-year slowdown, the figures represent a positive, though decelerating, step toward stabilization for the US commercial real estate (CRE) market. “The US commercial real estate (CRE) market in was defined by a steady, albeit decelerating, climb toward stabilization,” said Kevin Fagan, head of CRE capital market research at Moody’s. The annual growth rate also trailed behind the 24% increase observed in , and remains 30% below pre-pandemic levels of .
The office sector proved to be a surprising bright spot, with deal volume up 21% year-over-year. This rebound is attributed to a combination of factors, including return-to-office mandates and increased employment in the artificial intelligence industry. However, investment continues to concentrate on Class A, or “trophy,” assets, while the broader office market continues to struggle.
Multifamily properties also contributed to the overall growth, experiencing a 24% increase in deal volume compared to . This was partially driven by higher mortgage rates in the single-family housing market, which kept potential homebuyers in the rental market. Retail also saw a healthy gain of 19%, bolstered by the strength of grocery-anchored and necessity-based retail centers.
“Retail has officially re-entered the conversation as a durable, investment-grade asset class, with investors more focused on the usual underwriting nuances than potential functional obsolescence and a ‘retail apocalypse,'” Fagan noted.
A notable trend in was the resurgence of larger CRE deals – those exceeding $100 million – which increased by 23% compared to the previous year. These transactions were largely driven by institutional investors, corporate owner-occupiers, and Real Estate Investment Trusts (REITs). However, this segment remains significantly below levels, at just half of its previous volume.
Conversely, the smallest-scale deals, those under $5 million, outperformed, exceeding volume by 4%. These transactions are primarily fueled by private capital and individual investors. Deals priced between $5 million and $15 million were only 12% below levels, while those between $15 million and $100 million continue to face financing challenges.
Beyond the core sectors of multifamily, office, industrial, retail, and hotel, alternative investments – including healthcare properties, data centers, and student housing – gained traction in . The largest transaction of the year involved a 296-property medical office portfolio acquired by Remedy Medical Properties from Welltower.
Demand for data centers also surged, with significant activity from major technology companies like Amazon and Google. A 97-acre land deal in northern Virginia, purchased by SDC Capital Partners for $615 million – exceeding $6.3 million per acre – exemplified this trend.
Corporate owner-occupiers, particularly tech giants like Apple and Amazon, were also active buyers. Apple, in particular, deployed over $1.1 billion in California’s Santa Clara County, acquiring office buildings and R&D campuses. According to Fagan, Apple’s strategy involves securing its long-term operational footprint while capitalizing on a 20-30% pricing reset in the Silicon Valley office market compared to peaks. Microsoft also engaged in similar acquisition activity.
The gains observed in suggest a cautious optimism for the commercial real estate sector, which is undergoing a portfolio rebalancing. While institutional investors have returned to the market, some major public REITs have been selling large, multi-tenant portfolios to private equity firms, who are now actively deploying capital that was previously sidelined due to higher interest rates.
Looking ahead, Fagan anticipates a moderate acceleration of the current momentum in , rather than a return to the era of ultracheap capital. “Market participants are largely optimistic, anticipating tail winds from a more dovish Federal Reserve under an incoming chair and fiscal lifts from potential tax cuts,” he said. “However, with interest rates unlikely to drop precipitously, is expected to see a moderate acceleration of current momentum rather than a return to the era of ultracheap capital.”
