A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for real estate investors, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Sign up to receive future issues straight to your inbox.
For the second month in a row, there was excitement in the commercial real estate market in November.
Transaction volume was 10% lower than November 2024, with just 1,800 deals total, according to monthly data provided by Moody’s as an exclusive medium to CNBC’s Property Play. It tracks the 50 largest commercial real estate sales in the U.S. across the core segments of multifamily, office, industrial, retail and hotels.
October was the first month of negative year-over-year transaction volume growth since the recovery following the Fed’s rate hike began in early 2024, but this was not just a continuation of that trend. November transactions were even lower than November 2020, the first year of the Covid pandemic.
“This is due to the combination of longer-term higher interest rates, policy uncertainty, a tight labor market and caution on the part of CRE lenders and investors,” said Kevin Fagan, head of CRE capital markets research at Moody’s. “However, market liquidity is still selectively open and is two-thirds of pre-pandemic volume, with greater concentration.”
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Investors are gravitating toward larger acquisitions and larger, higher quality assets. For example, all transaction sizes declined significantly during the month, except for sales over $100 million, which increased 51% year-over-year. This pushed the average deal size to $14.2 million in November, compared to an average of $12 million since the start of 2019. Additionally, most of the assets in the top 50 sales were Class A.
Industry highlights
“This month’s trading is consistent with the late stage of the cycle, with a focus on enduring trends such as demand for housing, logistics and digital infrastructure,” Fagan said.
In November, multifamily properties recorded the most deals with 20 transactions, followed by office properties with 11 and industrial transactions with eight.
Fagan noted that there is a “general easing” in office deals and the market process for determining the true, fair price has become more efficient, faster and more reliable.
He also said he sees a story surrounding nearly all of the office deals in the top 50 “where the offices are being purchased either for mission-critical facilities, because they are dedicated uses, they are conversion opportunities, or they are being offered at discounted rates.”
Office continued to see some big discount deals, such as 114 West 41st St. in New York City, which Axonic Capital purchased from Clarion Partners at a 53% discount from the previous sale.
Companies are also increasingly focusing on the most necessary office properties. They want more control over where they operate and how much they pay for the property, especially given today’s price reductions.
Examples include Novartis’ purchase of a large campus-style facility in Durham, North Carolina, the purchase of First Citizens in San Francisco, and the purchase and occupancy of Alo Yoga in Beverly Hills, California.
The medical practice we recently featured in this newsletter continues to see outsized activity due to strong demand. It is not included in Moody’s core count but was responsible for the top selling in November.
Welltower sold a $7.2 billion medical office portfolio of 296 properties in 34 states to a joint venture of Remedy Medical Properties and Kayne Anderson Real Estate. This acquisition makes the partnership the nation’s largest owner of outpatient medical buildings with 1,104 properties in 44 states, according to a release from Remedy.
Large portfolio deals like these were a defining feature of the November report, accounting for 17 of the top 50 deals, which Fagan said is an increasing trend in recent years compared to before the pandemic.
Of course, data centers, one of the hottest CRE sectors today, had a big November. The month’s second-largest sale, totaling $615 million, involved three industrial properties. SDC Capital Partners has acquired 97 acres of land in Leesburg, Virginia, earmarked for data center development.