Slowdown in Commercial Real Estate Transactions: October 2025 Analysis

The commercial real estate (CRE) market has experienced a challenging recovery trajectory, particularly evident in October 2025. According to data from Moody's, October marked the first instance of negative year-over-year transaction volume growth since the recovery began in early 2024. This downturn is attributed to a stalemate between buyers and sellers, exacerbated by persistently high interest rates and economic uncertainty. Despite these challenges, October recorded $24.4 billion in sales, approximately 70% of the sales volume seen in October 2019.

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The slowdown in transaction volume is notable, as the momentum gained post-pandemic has significantly diminished. While total dollar volume remains higher than in 2024, the growth rate has slowed considerably since 2023. Notably, the industrial and multifamily sectors led the top 50 deals in October, while the hotel sector was the only category to show improvement, achieving a 6% growth compared to the previous year. A significant transaction during this period was the sale of the New York Edition hotel for $231.2 million, purchased by the Kam Sang Company from the Abu Dhabi Investment Authority.

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The ongoing high interest rates have played a critical role in shaping the current state of the CRE market. Kevin Fagan, head of CRE capital market research at Moody's, emphasized that the prolonged period of elevated rates has contributed to the extended bottom of the U-shaped recovery that began after the low volumes of 2023. This environment has created a challenging landscape for both buyers and sellers, leading to a cautious approach in the market.

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Some analysts express concern that the current market conditions may signal deeper issues within the CRE sector. The reluctance of buyers to engage in transactions amid high interest rates could indicate a lack of confidence in the market's future stability. Critics argue that without a significant shift in economic policy or a reduction in interest rates, the CRE market may struggle to regain its previous momentum.

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In light of the recent trends, Fagan remarked, "More than an imminent downturn in the CRE capital markets, the slip to negative growth in October 2025 reflects the stalemate going on between buyers and sellers." This statement underscores the complexities facing the market as stakeholders navigate the interplay of interest rates and economic conditions.

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• “More than an imminent downturn in the CRE capital markets, the slip to negative growth in October 2025 reflects the stalemate going on between buyers and sellers,” — Kevin Fagan, Head of CRE Capital Market Research at Moody's

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• “The New York Edition hotel is 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,” — Kevin Fagan

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The commercial real estate market's current challenges highlight the intricate relationship between interest rates and transaction activity, suggesting that stakeholders must remain vigilant as they navigate this evolving landscape.

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