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.
Commercial real estate operations are facing a difficult year in 2025 after gaining significant momentum due to the pandemic. Transactions are still taking place, but they are well below pre-coronavirus levels.
Total deal value rose just 5% in the third quarter compared to a year ago, according to new monthly data provided by Moody's as an exclusive medium for CNBC's Property Play. It tracks the 50 largest CRE real estate sales in the US
September's trends reveal several themes: a flight to quality, economic uncertainty hitting the hotel sector hard, and a growing interest in two struggling sectors – office and retail.
The flight to quality can be seen in the average sales volume of $12.7 million in September, compared to an average of $11.2 million in the previous two years.
Of the top 50 deals, 29 were worth over $100 million. The volume of deals over $100 million increased 35% year over year in the third quarter, while the volume of smaller deals stagnated or shrank.
“We saw strong volume growth and recovery following the Fed's first rate hikes in 2022-23. 2024 was a pretty good year,” said Kevin Fagan, head of commercial real estate capital markets research at Moody's. “We have seen significant volume expansion and this has actually paused given the uncertainty in 2025, albeit in large transactions which tend to be higher quality properties.”
Fagan pointed out that investors' security is significantly greater in higher-value properties and that is why they are seeing cash inflows from various sources, including government debt funds.
A glaring weakness is seen in the hotel sector, whose deal value fell by 30% in September compared to the same month in 2024. This was the only asset class to see a significant decline last month, likely due to a decline in international and business travel.
“A lot of companies are cutting margins, and one of the ways they're doing that is by limiting certain types of travel,” Fagan said. “So we clearly sense that lenders and investors are avoiding hotel assets and that is reflected in this month’s volume data.”
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While the hospitality industry suffered a setback, the office won a victory.
In September, Apple spent $365 million on an office property portfolio in Sunnyvale, California. Nvidia spent $83 million on a single office building in Santa Clara, California. Meanwhile, Metlife received a roughly 39% discount on an office property in Newport Beach, California.
“That was a pretty typical number for the office, where you see the salespeople finally throwing in the towel,” Fagan said. “Given these kinds of discounts, some of these companies, particularly big tech companies with a lot of money, can build their own campus relatively cheaply. So that's kind of a trend. We've seen Microsoft do that recently in Seattle as well.”
Another big winner in September was open-air retail. Buyers including Nuveen, Tanger, InvenTrust Properties and MCB Real Estate collectively invested nearly half a billion dollars in retail properties, mostly open-air shopping centers with restaurants, during the month. That's a big bet on the consumer at a time when trust is waning.
Chad Phillips, Nuveen's global head of real estate, told Property Play last week that he has been heavily focused on open-air shopping centers for two years.
“The overall return is good. You're buying at far less than replacement cost, so when you add it all up, it's a very resilient, essential real estate need where we can generate strong, risk-adjusted returns,” Phillips said.