A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. 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. Register to receive future editions, straight to your inbox.
For the second month in a row, heat came out of the commercial real estate market in November.
Transaction volume was 10% lower than November 2024, with just 1,800 transactions total, according to monthly data provided by Moody’s as an exclusive media outlet to CNBC’s Property Play. It tracks the top 50 commercial real estate property sales in the United States, across the major segments of multifamily, office, industrial, retail and hospitality.
October was the first month of negative year-over-year trading volume growth since the Fed’s post-rate hike recovery began in early 2024, but it wasn’t simply a continuation of that trend. Transactions in November were still lower than in November 2020, the first year of the Covid pandemic.
“This stems from a combination of sustained higher interest rates, political uncertainty, a fragile labor market and caution from CRE lenders and investors,” said Kevin Fagan, head of CRE capital markets research at Moody’s. “However, market liquidity is still selectively open, at two-thirds of pre-pandemic volume, with concentration on a larger scale.”
Investors are moving toward larger-scale acquisitions and bigger, better assets. For example, all deal sizes fell significantly during the month, except for sales above $100 million, which increased 51% year over year. This brought the average deal size in November to $14.2 million, compared to an average of $12 million since the start of 2019. Additionally, the majority of assets in the top 50 sales were Class A.
Industry Highlights
“This month’s trading is consistent with end-of-cycle dumbbells, where the focus is on sustainable trends, such as demand for housing, logistics and digital infrastructure,” Fagan said.
The multifamily sector saw the majority of November’s transactions, recording 20 transactions, followed by the office sector with 11 and the industrial sector with eight.
Fagan noted that among office transactions there is an “overall easing” and that the market process for determining the true and fair price has become more efficient, faster and more reliable.
He also said he sees a story emerging around almost all office transactions in the top 50, “in which offices are purchased for critical facilities, because they have a specialized use, are conversion opportunities, or are offered at discounted prices.”
Office continued to see large, discounted deals, like 114 West 41st St. in New York, purchased by Axonic Capital from Clarion Partners at a 53% discount from the previous sale.
Companies are also increasingly focusing on the most essential office buildings. They want more control over where they operate and how much they pay for real estate, especially given today’s discounted prices.
Examples of this include Novartis purchasing a large campus-style facility in Durham, North Carolina, First Citizens purchasing in San Francisco, and Alo Yoga purchasing and occupying in Beverly Hills, California.
Medical practices, which we recently covered in this newsletter, continue to experience excessive activity due to high demand. It is not included in Moody’s main tally but represents November’s best seller.
A $7.2 billion medical office portfolio comprising 296 properties in 34 states has been sold by Welltower to a joint venture of Remedy Medical Properties and Kayne Anderson Real Estate. The acquisition makes the partnership the largest owner of ambulatory medical buildings in the country, with 1,104 properties in 44 states, according to a release from Remedy.
Large portfolio deals like this were a driving force in the November report, accounting for 17 of the top 50 deals, which is a growing trend in recent years compared to before the pandemic, according to Fagan.
Of course, data centers, one of the hottest CRE sectors today, had a big November. The second largest sale of the month, totaling $615 million, was for three industrial properties. SDC Capital Partners has purchased 97 acres of land in Leesburg, Virginia, zoned for data center development.