Moody's Corp. headquarters in New York, USA, on Tuesday, August 27, 2024. Moody's Corporation is a credit rating, research and risk analysis firm.
Jeenah Luna | Bloomberg | fake images
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Commercial real estate transaction volume fell in December for the second straight month, but full-year numbers reveal some progress, which could provide a much-needed boost this year.
Total dollar transaction volume fell 20% in December year-over-year, according to monthly data provided by Moody's as exclusive media to CNBC's Property Play. Tracks the top 50 commercial real estate sales in the U.S., across the primary segments of multifamily, office, industrial, retail and hospitality.
For all of 2025, transaction volume was 17% higher compared to 2024, a healthy expansion but less than the 24% annual growth seen the previous year and still 30% below the pre-pandemic 2019 benchmark.
“The U.S. commercial real estate (CRE) market in 2025 was defined by a steady, albeit slowing, climb toward stabilization,” said Kevin Fagan, head of CRE capital markets research at Moody's. “The recovery proved resilient in the face of a major economic slowdown, political uncertainty, a massive loan maturity wall and persistently high interest rates compared to three years ago.”
The multifamily and office sectors led the way. The recovery in office has been on the rise, as return-to-office orders and a boom in AI employment counter the pandemic-driven narrative that office is over.
Total office transaction volume increased by 21% in 2025 compared to the previous year. Investors, however, continue to favor Class A or trophy assets, while the rest of the market struggles.
Multifamily, which has seen declining fundamentals such as occupancy and rentals, still led the deal in 2025, with a 24% increase in transaction volume over 2024. It benefited from higher mortgage rates in the single-family home sales market, preventing more renters from becoming buyers.
Retail also saw a healthy 19% gain. The fundamentals of the sector, especially the needs-based and supermarket-anchored centers, were strong, defending the continued pressure of e-commerce.
“Retail has officially re-entered the conversation as an investment-grade durable asset class, with investors more focused on the usual underwriting nuances than potential functional obsolescence and a 'retail apocalypse,'” Fagan said.
Last year also saw a comeback of sorts for the much-beleaguered larger dollar CRE deals. Sales volume of more than $100 million was 23% higher than in 2024, Moody's found. These arrangements reflect institutional players, corporate owner-occupiers, and some REITs. However, that segment remains the furthest from recovery, at just half of 2019 levels.
Smaller-scale deals, those under $5 million, are actually advancing 4% faster than their 2019 pace. They tend to be favored by private equity and individual investors who have been more active and liquid during this rate cycle. Offers priced between $5 million and $15 million are only 12% below 2019 volume.
Mid-sized deals, those between $15 million and $100 million, are still struggling as they are the most vulnerable to financing difficulties.
Another major trend in 2025 was alternative play: sectors outside the top five, such as healthcare-related properties, data centers and student housing. The largest sale of 2025 was a 296-property medical office portfolio, purchased by Welltower's Remedy Medical Properties. It was also the largest sale ever made in the sector.
The seemingly desperate need for data was also highlighted among the top 50 transactions of 2025. Amazon and Googlein particular, they were active. The ninth largest sale of the year was land worth $615 million in Northern Virginia. SDC Capital Partners purchased 97 acres of licensed data center land in Leesburg from Chuck Kuhn's JK Land Holdings, a record deal exceeding $6.3 million per acre.
The data also fueled an increase in the number of corporate owner-occupiers, particularly tech giants like Apple and Amazon. In fact, Apple went on a shopping spree, according to Fagan, deploying more than $1.1 billion in California's Santa Clara County alone, including several office buildings and an office and R&D campus.
“By purchasing these assets, Apple is securing its long-term operational footprint while capitalizing on a 20-30% price reset in the Silicon Valley office market compared to 2022 peaks,” Fagan said, adding microsoft made similar moves last year.
The 2025 earnings bode well for the commercial real estate sector, which is undergoing a portfolio rebalancing of sorts. While institutional investors have definitely returned to the sector, some large public REITs sold large multi-tenant portfolios to private equity firms. The latter are now proving to be big players, looking to deploy significant capital that was on the sidelines in the recent higher rate environment.
“Market participants are largely optimistic, anticipating tailwinds from a more dovish Federal Reserve under an incoming president and fiscal improvements from potential tax cuts,” Fagan said. “However, with interest rates unlikely to fall precipitously, 2026 is expected to see a moderate acceleration of the current momentum rather than a return to the era of ultra-cheap capital.”
