The commercial real estate market in 2025 showed a mixed picture: overall deal volume grew modestly year-over-year, but December saw a noticeable slowdown, with some sectors surprisingly holding up better than expected.
Commercial Real Estate Deal Volume Trends in 2025: A Year of Cautious Progress
I’ve been following the ups and downs of the commercial property world for years, and 2025 felt like one of those transitional periods where you could sense things shifting—but not quite exploding yet. The numbers tell a story of resilience amid headwinds, with total transaction dollars climbing about 17% compared to the previous year. That’s solid, don’t get me wrong, but it lagged behind the stronger rebound seen in 2024. And then came December: deals dropped roughly 20% from the same month a year earlier, marking the second consecutive monthly decline. It makes you wonder—what’s really driving this market right now?
The broader context helps. High interest rates lingered longer than many hoped, policy shifts created uncertainty, and a huge wave of loan maturities kept lenders cautious. Yet, the sector didn’t collapse. Instead, it stabilized in key areas. Investors picked their spots carefully, favoring quality over quantity. In my view, that’s actually a healthy sign—markets heal when participants get selective rather than chasing every deal.
Breaking Down the Sector Performance
The Surprising Strength in Office Properties
Perhaps the most intriguing development was the office sector. For so long, people wrote it off as doomed—empty buildings everywhere, remote work killing demand. But 2025 flipped that script somewhat. Office deal volume rose around 21% year-over-year. That’s not a full recovery, mind you, but it’s meaningful momentum.
What changed? Return-to-office policies gained real traction in many companies. Plus, the explosion in AI-related jobs created fresh demand for space in tech hubs. Investors zeroed in on premium, Class A buildings—trophy assets with modern amenities, great locations, and strong tenant rosters. Those properties traded at a premium, while everything else lagged.
I’ve always believed office wasn’t dead; it was just evolving. The pandemic accelerated a reckoning, but human interaction still matters for innovation and culture. Seeing big tech firms snap up campuses and buildings reinforces that. It’s like the market finally admitted that quality office space has enduring value, especially when tied to high-growth industries.
Multifamily Remains the Volume Leader
Multifamily continued to dominate transaction activity, posting a 24% increase in deal volume from 2024. Even with softening rents and higher vacancies in some oversupplied areas, apartments benefited from a simple reality: high home mortgage rates kept would-be buyers renting longer.
This sector’s fundamentals took hits—occupancy dipped, concessions became common in certain Sun Belt markets—but the investment appeal held firm. Institutional buyers and private capital saw apartments as a relatively stable play compared to more volatile sectors. It’s no surprise multifamily led the pack again; housing needs don’t vanish, even in uncertain times.
Retail’s Quiet Comeback
Retail posted a healthy 19% gain in deal volume. Grocery-anchored centers and necessity-based shopping held strong, shrugging off e-commerce threats. Investors started treating retail less like a dying breed and more like a reliable, income-producing asset class.
Gone are the days of fearing a “retail apocalypse.” Instead, focus shifted back to location, tenant mix, and underwriting basics. When people need everyday essentials, brick-and-mortar still wins. That resilience made retail attractive again, especially for those hunting yield in a higher-rate world.
Industrial and Other Segments
Industrial cooled after years of explosive growth, but still contributed positively in many reports. The alternative sectors—think data centers, healthcare properties, student housing—stole headlines with massive deals. One medical office portfolio sale stood out as the year’s largest transaction. Data center land in prime locations fetched eye-popping prices per acre, driven by insatiable demand from tech giants.
Corporate owner-occupiers, particularly in tech, went on buying sprees to lock in space for long-term operations. These moves capitalized on price resets from earlier peaks, securing strategic footprints at discounts.
Deal Size Dynamics: Big, Small, and In-Between
One fascinating trend was the polarization in transaction sizes. Mega-deals over $100 million surged 23% compared to 2024, reflecting renewed institutional appetite and activity from REITs and corporates. Yet that segment remains far below pre-pandemic norms—about half of 2019 levels.
On the flip side, smaller deals under $5 million actually outpaced 2019 volume by a bit. Private investors and individuals stayed active, less hampered by financing hurdles. Mid-sized transactions ($15-100 million) struggled most, caught in financing squeezes.
This split highlights how different players navigated the rate environment. Big institutions waited for clarity; smaller buyers moved opportunistically.
Looking Toward 2026: Reasons for Cautious Optimism
As we head into the new year, the market feels poised for gradual acceleration rather than a dramatic boom. Expectations of a more accommodative monetary policy and potential fiscal boosts could provide tailwinds. But rates aren’t plunging back to zero anytime soon, so cheap capital remains elusive.
The portfolio rebalancing continues—some large holders offload to private equity, which now sits on dry powder ready to deploy. That capital rotation could fuel more activity.
In my experience following these cycles, periods like 2025—slow but steady progress amid uncertainty—often set the stage for stronger gains later. The office rebound, retail resilience, and alternative sector strength suggest pockets of real opportunity.
Key Takeaways from 2025’s Commercial Real Estate Landscape
- Selective investing wins: Quality assets in favored sectors traded briskly, while average properties languished.
- Office isn’t dead: Return-to-office trends and tech-driven demand sparked a meaningful uptick in activity.
- Multifamily stays king: High homeownership costs sustained rental demand, driving volume.
- Alternatives shine: Data centers, medical offices, and similar niches delivered blockbuster deals.
- Size matters: Extremes (very large and very small) outperformed the middle market.
The commercial real estate market rarely moves in straight lines. 2025 reminded us of that—decelerating growth late in the year, yet underlying progress in key areas. December’s dip feels like a pause, not a reversal. If history is any guide, the pieces are falling into place for a firmer foundation ahead.
What do you think—will office continue surprising to the upside, or is this just a temporary blip? Either way, staying focused on quality and fundamentals seems like the smartest play right now.
