Commercial real estate deal-making slows again in November

A version of this article first appeared in the CNBC Property Play newsletter with Diana Olek. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. subscription To receive future issues, directly to your inbox.

For the second month in a row, the commercial real estate market is hot in November.

Transaction volume was 10% lower than in November 2024, with just 1,800 deals overall, according to monthly data provided by Moody’s exclusively for CNBC’s Property Play. It tracks the top 50 commercial real estate sales across the United States, in the core sectors of multi-residential, office, industrial, retail and hotel.

October was the first month of negative year-over-year growth in transaction volume since the recovery began after the Federal Reserve raised interest rates in early 2024, but this was not just a continuation of the trend. November’s transactions were even lower than November 2020, the first year of the Covid pandemic.

“This stems from a combination of higher interest rates for a longer period, policy uncertainty, a fragile labor market, and caution on the part of CRE lenders and investors,” said Kevin Fagan, head of capital market research at Moody’s. “However, market liquidity remains selectively open at two-thirds of pre-pandemic volume, with a broader focus.”

Investors tend toward large-scale acquisitions and larger, higher-quality assets. For example, all transaction volumes were down significantly during the month, except for those sales over $100 million, which were 51% higher year over year. This brought the average deal size in November to $14.2 million, compared to an average of $12 million since the start of 2019. Additionally, the majority of assets in the top 50 were Class A sales.

“Trading this month is consistent with late-cycle volatility, as there is a focus on enduring trends, such as demand for housing, logistics and digital infrastructure,” Fagan said.

Multifamily deals witnessed the majority of November deals, recording 20 deals, followed by offices with 11 and industrial with eight.

Among office trades, there is a “general dilution,” Fagan noted, and the market process for determining a true, fair price has become more efficient, faster and more reliable.

He also said he sees a story emerging around almost all of the office deals in the top 50, “where offices are either being bought for mission-critical facilities, because they have some specialized use, they provide conversion opportunities, or they come at discounted prices.”

Office continued to see some great discount deals, like 114 West 41st St. in New York City, which Axonic Capital purchased from Clarion Partners at a 53% discount on the previous sale.

Companies are also increasingly focusing on more important office real estate. They want more control over where they work and how much they pay for properties, especially in light of today’s reduced prices.

Examples include Novartis’s purchase of a large campus-style facility in Durham, North Carolina, the purchase of First Citizens in San Francisco, and the purchase and occupation of Alo Yoga in Beverly Hills, California.

The medical office, which we recently reported on in this newsletter, continues to see significant activity due to strong demand. It is not included in Moody’s core count but represents the highest sales in November.

Welltower sold a $7.2 billion medical office portfolio consisting of 296 properties in 34 states to a joint venture between Remedy Medical Properties and Kyne Anderson Real Estate. The acquisition makes the partnership the largest owner of outpatient medical buildings in the country, with 1,104 properties in 44 states, according to a Remedy release.

Large portfolio trades like these were a hallmark of the November report, accounting for 17 of the top 50 deals, an increasing trend in recent years compared to before the pandemic, according to Fagan.

Of course, data centers, one of the hottest CRE sectors today, had a big November. The second-largest sale of the month, totaling $615 million, involved three industrial properties. SDC Capital Partners has purchased 97 acres of land in Leesburg, Virginia, designated for data center development.