Commercial real estate deals are slowing, but two sectors are shining: Moody’s

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.

Commercial real estate dealmaking faces around 2025, having gained significant momentum following the pandemic. Transactions are still taking place, but have stopped at levels well below pre-Covid levels.

The total dollar value of deals was up just 5% from a year ago as of the third quarter, according to new monthly data provided by Moody’s as a media exclusive to CNBC’s Property Play. It tracks the top 50 real estate sales across the United States

The trends in September reveal several themes: a drive toward quality, economic uncertainty hitting the hotel sector hard, and growing interest in two beleaguered sectors – offices and retail.

The flight to quality can be seen in the average dollar volume of sales in September, which reached $12.7 million, compared to an average of $11.2 million over the previous two years.

Of the top 50 deals closed, 29 were worth more than $100 million. The volume of deals worth more than $100 million in the third quarter increased 35% compared to a year ago, while the volume of smaller deals remained flat or contracted.

“We’ve seen a lot of growth in volume, recovery, after the first Fed rate hike in 2022-23. 2024 was a very good year,” said Kevin Fagan, head of capital market research at Moody’s. “We have seen a significant expansion in volume, and that has paused given all the uncertainty in 2025, albeit for larger transactions, which tend to be higher quality properties.”

Fagan noted that there is much more certainty among investors in high-quality real estate, which is why they are seeing money flowing from several sources, including sovereign debt funds.

One glaring weakness is the hotel sector, where deal values ​​fell by 30% in September compared to the same month in 2024. This was the only asset class to record a significant decline last month, likely due to a decline in international and business travel.

“A lot of companies are cutting profit margins, and one of the ways they’re doing that is by reducing certain types of travel,” Fagan said. “So, I really feel the avoidance of hotel assets among lenders and investors, and that shows in the volume data this month.”

While hospitality took a hit, offices won.

In September, Apple spent $365 million on an office property portfolio in Sunnyvale, California. Nvidia spent $83 million on one office building in Santa Clara, California. Meanwhile, Metlife secured a roughly 39% discount deal on an office property in Newport Beach, California.

“This was a very typical number for offices, where you see vendors finally giving up,” Fagan said. “Given that kind of discount, some of these companies, especially big tech companies that have a lot of money, can acquire their own campuses relatively cheaply. So that’s been a bit of a trend. We’ve seen Microsoft do that in Seattle recently as well.”

Another big winner in September was outdoor retail. The buyers, including Nuveen, Tanger, InvenTrust Properties and MCB Real Estate, poured just under half a billion dollars into retail properties during the month, most of it in open-air malls with restaurants. This is a big bet on the consumer at a time when confidence is waning.

Chad Phillips, global head of real estate at Nuveen, told Property Play last week that he had been leaning heavily into open-air centers over the past two years.

“The total returns are good. You’re buying at a cost well below replacement cost. So, you put it all together, and it’s a very basic, flexible real estate need where we can generate strong, risk-adjusted returns,” Phillips said.