First year‑over‑year drop in nearly two years puts focus back on pricing and rates
Commercial real estate investors hit the brakes in October, as United States deal volume logged its first year‑over‑year decline since early 2024 and exposed how far pricing expectations between buyers and sellers have drifted apart.
The pullback followed a year in which industrial and multifamily assets, in particular, have been closing at or above pre‑pandemic levels, buoyed by cheap debt early in the cycle and a wave of capital targeting hard assets.
“More than an imminent downturn in the CRE capital markets, the slip to negative growth in October 2025 reflected the stalemate going on between buyers and sellers,” said Kevin Fagan, head of CRE capital market research at Moody’s.
“The bottom of the U‑shaped recovery from 2023 low volumes had been lengthened by persistently high interest rates and policy and economic uncertainty of 2025.”
Active month, slower momentum
Despite the slowdown, October still recorded about $24.4 billion in sales. That's roughly 70% of October 2019 volumes, with total dollar volume this year remaining above 2024 levels, according to Moody’s data shared with CNBC.
Transaction growth, however, has “slowed significantly since 2023” as rate movements and credit costs reshaped underwriting and leverage, particularly in the conduit and single‑asset CMBS space.
Multifamily – which research firm Altus Group identified as a leading growth sector earlier in 2025 – saw the sharpest October pullback, with volumes down about 27% from a year earlier even as many assets still traded at premiums to prior sales.
Hotels, conversions and distressed offices
Hospitality stood out as the only sector to post higher deal volume than a year earlier, with roughly 6% growth following a weak third quarter.
Among the most closely watched trades, Abu Dhabi Investment Authority sold the New York Edition hotel at 5 Madison Avenue to Kam Sang Company for about $231.2 million.
“The New York Edition hotel was an interesting one because of both the sales price being so high, a Mideast sovereign wealth fund pulling out of NYC, and the history of the building,” Fagan said, noting its origins as the MetLife Clock Tower, once the tallest building in the world.
“They were nearly worthless as offices, but extremely valuable as a hotel and an apartment building, respectively,” he added, pointing to similar conversions at the Woolworth Building.
For office lenders and borrowers, October’s largest deal – the sale of Sotheby’s headquarters to Weill Cornell – underlines how medical and life‑science users have emerged as key backfills for obsolete space.
New York Life’s purchase of a distressed Manhattan office tower at roughly half its 2015 price further illustrates how institutional capital has circled discounted assets.
“It showed there was institutional interest in offices sold at discounts, reinforcing the long‑term value floor for office buildings in good markets, and the recognized enduring utility of such properties,” Fagan said.
Meanwhile, commercial and multifamily mortgage originations surged in the third quarter of 2025, climbing 36% from a year earlier and 18% from the previous quarter, according to the Mortgage Bankers Association’s (MBA) latest survey. The office sector saw the most dramatic recovery, with the dollar volume of loans for office properties jumping 181% year-over-year.
What it meant for commercial mortgages
For commercial and multifamily mortgage originators, the October figures reinforces a market already described by industry executives as “volatile” and “unpredictable.”
Even in that more optimistic phase, lenders have differentiated sharply between favored sectors such as multifamily and industrial and a structurally challenged office market.
The latest stall in volume growth suggests that 2026 originations would hinge less on fundamentals and more on how fast buyers, sellers and their lenders could agree on a new clearing price for risk in a higher‑cost, slower‑growth world.
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