Remember when everyone said commercial real estate was finally turning the corner? Yeah, about that.
Something quietly shifted in October 2025. For the first time in nearly two years, the dollar volume of major property deals across the United States actually shrank compared to the same month a year earlier. It’s the kind of data point that makes even seasoned investors pause mid-sentence and reach for another cup of coffee.
I’ve been watching these numbers for longer than I care to admit, and this feels different. It’s not a collapse; far from it. But the momentum we all got used to? That steady climb that had us believing the worst was behind us? It just hit a wall.
The Recovery Just Hit Its First Speed Bump in Ages
Let’s be crystal clear about what happened. The top 50 commercial property sales in October totaled roughly $24.4 billion. That’s still a respectable number, about 70% of what we saw in a “normal” October 2019 before everything went sideways. Year-to-date volume is actually higher than 2024. So why the long faces?
Because the growth turned negative. After twenty-plus months of positive year-over-year comparisons, the streak broke. In plain English: we sold less, dollar-wise, than we did in October of last year.
Think of it like a runner who’s been picking up speed for almost two years and suddenly feels the legs get heavy. Not falling over yet, but definitely breathing harder.
Buyers and Sellers Playing the Longest Game of Chicken Ever
The simplest explanation I’ve heard, and honestly the one I believe, is that we’re stuck in the mother of all bid-ask spreads.
“More than an imminent downturn, the slip to negative growth reflects the stalemate going on between buyers and sellers.”
– Head of CRE research at a major rating agency
Sellers still remember the glory days of 2021-2022 pricing. Buyers know what borrowing costs look like today and aren’t in the mood to overpay. High interest rates, election-year weirdness, recession chatter; everything is keeping both sides glued to the sidelines.
The result? The bottom of the U-shaped recovery that started in 2023 just got stretched out longer than anyone expected.
Which Sectors Are Holding Up (and Which Are Wobbling)
Not everything is moving in lockstep, and that’s actually where the story gets interesting.
- Industrial and multifamily still dominated the largest deals, just like they have for years.
- Hotels were the only sector to actually show year-over-year growth, up about 6% after a rough third quarter.
- Multifamily took the biggest step back, down 27% from October 2024. That’s notable because the four months prior had been running ahead of pre-pandemic levels.
- Office continues its roller-coaster ride, plenty of trades, but almost always at discounts or with a conversion angle attached.
Hotels quietly becoming the comeback kid of 2025 is, in my view, one of the most under-reported stories in real estate right now. Travel demand never really went away, and a lot of the distress from 2020-2021 has already been cleared out.
Two New York Deals That Tell the Whole Story
Sometimes one or two transactions crystallize everything that’s going on in the market. October gave us two perfect examples, both in Manhattan.
First, the New York Edition hotel at 5 Madison Avenue, the old MetLife Clock Tower, sold for $231.2 million. A Middle Eastern sovereign wealth fund exited, and an Asian family office stepped in. That building was the tallest in the world for a hot minute back in 1910-1913. Today it’s basically unrentable as pure office space but priceless as a luxury hotel.
Second, a distressed office tower traded hands at roughly half its 2015 price. A major insurance company scooped it up. Translation: even in the teeth of the office downturn, high-quality buildings in prime locations still have a floor.
These aren’t random sales. They’re textbook examples of capital rotating out of yesterday’s winners (or losers) and into assets that actually make sense in 2025 and beyond.
What the Office Sector Is Teaching Us Right Now
Let me be blunt: anyone who tells you “office is dead” hasn’t been paying attention.
Yes, plenty of buildings are trading at 40-60% discounts. Yes, conversions to residential, hotel, or medical use are happening everywhere. But the top-tier stuff? The trophy buildings in gateway cities? They’re still moving, just at more realistic prices.
The Sotheby’s headquarters sale to a major university medical system is another data point. That’s not an office play anymore; it’s a healthcare real estate play. Adaptive reuse is no longer a niche strategy; it’s becoming the main event in many downtowns.
So Is This the Beginning of the Next Leg Down?
Honestly? Probably not.
We’re not seeing the forced selling or lender panic that defined 2023. Cap rates have largely stabilized. Debt markets are functioning again. Most of the maturity wall drama has either been extended or refinanced.
What we’re watching instead is a slow, grinding re-pricing and a rotation of capital toward sectors and strategies that actually pencil in a higher-rate world.
In my experience, these kinds of pauses often precede the next wave of activity once pricing finally aligns. We might be six months away from that moment, maybe twelve. But the ingredients are there.
What Smart Money Should Probably Be Doing Right Now
- Stay very selective on office, but don’t ignore the sector completely; distressed opportunities with strong sponsors are appearing.
- Watch hotel deals closely; the risk/reward is starting to look compelling again.
- Multifamily isn’t broken, just taking a breather after running too hot.
- Industrial remains the steady-Eddie allocation, though cap rate compression has largely played out.
- Keep plenty of dry powder; the bid-ask gap will close eventually, and when it does, the best assets will move fast.
The October dip isn’t the end of the CRE recovery. If anything, it’s the market clearing its throat before the next verse.
Or, to borrow a line I heard from an old mentor years ago: “Markets don’t move in straight lines; they move in dirty, jagged, frustrating scribbles, until one day you look up and you’re somewhere completely different.”
We might just be in the middle of one of those scribbles right now.
