Understanding the Current Slowdown in Commercial Real Estate Transactions
November brought another month of tempered enthusiasm to the commercial property world. Overall deal numbers dropped roughly 10% from the same period a year earlier, resulting in far fewer closings than many had anticipated after the gradual rebound that started in 2024. This marks the second consecutive month of year-over-year declines, something we hadn’t really seen since the early recovery days following major rate adjustments.
What stands out most is how this pullback feels different from previous cycles. It’s not a full freeze; activity hasn’t ground to a halt. Instead, it’s become highly concentrated. Market participants appear to be waiting for clearer signals before committing capital on a broad scale. In my view, this selective approach actually makes a lot of sense given the mixed economic backdrop we’re navigating right now.
The combination of rates that remained elevated longer than many expected, together with ongoing questions about future policy directions and a somewhat shaky employment picture, has made lenders and buyers alike more deliberate. Liquidity exists, but it’s picky—favoring certain asset classes and deal sizes over others.
The Shift Toward Larger, Higher-Quality Deals
One of the most telling trends right now is the clear preference for scale. While smaller transactions took a noticeable hit, deals exceeding significant thresholds actually posted strong gains compared to the prior year. This pushed the average transaction value noticeably higher than historical norms.
Investors seem to be gravitating toward premium assets—those Class A properties with strong fundamentals, desirable locations, and resilient income streams. There’s a “flight to quality” happening here, and honestly, it’s hard to blame anyone for playing it safe in uncertain times.
- Smaller deals (under major thresholds) saw sharp volume reductions
- Large-scale acquisitions surged, sometimes by over 50% year-over-year
- Buyers prioritized trophy assets with proven tenant bases and long-term potential
This barbell strategy—focusing on either very large opportunities or nothing at all—reflects late-cycle thinking. People aren’t spreading bets thinly; they’re concentrating capital where they perceive the best risk-adjusted returns.
Sector Performance: Multifamily Still Leading the Pack
When you look at the breakdown by property type, multifamily housing continued to dominate activity. It accounted for the largest share of transactions, driven by persistent demand for rental units across many markets. People need places to live, and that fundamental need doesn’t disappear even when broader sentiment cools.
Industrial properties held their own too, though with fewer deals overall. The sector benefits from ongoing e-commerce growth and supply-chain reshoring trends that aren’t going away anytime soon. Meanwhile, retail showed some resilience in select formats, particularly those tied to experiential or necessity-based shopping.
Investors continue to chase durable demand drivers like housing needs and logistics requirements.
— Commercial real estate analyst observation
Office space remains the most complicated story. Volume was modest, but what deals did occur often carried interesting narratives. Many involved either deeply discounted pricing, adaptive reuse potential, or mission-critical facilities that users simply couldn’t replace easily.
Office Deals: Discounts, Conversions, and Strategic Buys
The office sector has been under pressure for years now, but recent months have shown signs of a more efficient price-discovery process. Discounts are still common—sometimes substantial—but buyers seem more comfortable stepping in when the numbers make sense.
I’ve noticed a pattern: transactions frequently involve properties that serve specialized purposes, offer conversion opportunities into residential or mixed-use, or come with pricing that reflects years of market adjustment. Corporate users are also getting more active, purchasing spaces they already occupy to gain control and lock in favorable economics.
Is this the bottom? Hard to say definitively. But the fact that motivated buyers are emerging at current levels suggests that, at least for select assets, valuations may be finding a floor.
Medical Offices and Data Centers: Bright Spots Amid Caution
Outside the traditional core sectors, two areas continue to generate outsized interest: medical office buildings and digital infrastructure like data centers. Healthcare-related real estate benefits from demographic tailwinds and inelastic demand, making it relatively recession-resistant.
Portfolio transactions in this space have been particularly notable, with large-scale acquisitions reshaping ownership landscapes. Similarly, data center development land and facilities attract capital because of the explosive growth in cloud computing, AI workloads, and digital transformation across industries.
These sectors feel almost counter-cyclical at times. While broader markets hesitate, money flows toward properties tied to long-term structural changes in how society functions.
- Strong underlying demand drivers persist regardless of macro conditions
- Institutional capital continues targeting these resilient categories
- Large portfolio deals highlight confidence in future cash flows
What This Means for Investors Moving Forward
So where does all this leave us? The market isn’t broken—far from it. But it has entered a phase of greater discernment. Participants are being more thoughtful about risk, more focused on quality, and more patient in timing their moves.
In my experience following these cycles, periods like this often precede meaningful opportunities. When broad caution reigns, the best deals tend to go to those willing to do the homework and act decisively on high-conviction ideas.
Looking ahead, several factors could help reignite broader activity: clearer policy direction, more sustained downward pressure on borrowing costs, or simply time for the market to digest recent adjustments. Until then, the name of the game remains selectivity.
The commercial real estate landscape in late 2025 reflects a market in transition—cooler on the surface, but with pockets of strength and strategic repositioning happening underneath. Multifamily continues to anchor activity, while specialized sectors like medical offices and data centers draw serious interest. Office deals, though fewer, reveal interesting stories of adaptation and value discovery.
Investors who thrive in environments like this tend to share a few common traits: discipline, focus on fundamentals, and the willingness to wait for the right setup. The slowdown may feel frustrating in the moment, but it could very well be laying the groundwork for the next meaningful upcycle.
What do you think—have you noticed similar trends in your local market? The coming months should reveal whether this pause is temporary or signals something more structural. Either way, staying informed and selective seems like the smartest play right now.
