Commercial real estate is closing out 2025 on weaker footing than expected. Early-year optimism has faded as economic uncertainty, stalled deal activity and valuation pressure drag down momentum, according to BisNow.
Deal Volume Falls Short Of Expectations
Moody’s data shows U.S. CRE transactions are on track to finish below 2024 totals and still well under prepandemic levels. The firm also notes widening regional disparities: while the U.S. may narrowly avoid recession, several markets are expected to feel recession-like conditions.
A recent Deloitte survey also indicates this, showing a decline in confidence for 2026 performance even in segments that saw modest growth in 2025.
Office: Slow Deals, Distress And Hybrid Ambiguity
The office market remains deeply uneven. Some higher-quality buildings in cities like Manhattan and San Francisco are seeing renewed demand, but many properties face capitalization issues and falling appraisals.
Transaction timelines are stretching, and distressed situations are increasingly common. Trepp reports CMBS office delinquencies hit 11.8% in October — the highest point of the cycle.
Hybrid work uncertainty continues to stall long-term commitments, and broader business concerns — from policy volatility to uneven economic growth outside AI — are slowing decision-making.
Market Strength Concentrated In Megaprojects
The most visible growth is coming from large-scale projects. Dodge Construction Network reports that October construction spending surged largely because of megaprojects in natural gas and data centers. Total starts, however, are down 5.4% year-to-date.
Moody’s also highlights a “flight to quality” in deal size: transactions above $100M rose 35% in Q3 compared to 2024, masking weaker activity in smaller deals.
Select Buyers Reenter, Lending Rebounds
Some major buyers are stepping back into office, betting values have bottomed. MSCI data shows large institutional investors became net purchasers of office assets in 2025 for the first time since 2022.
Financing activity is also improving. CBRE reports Q3 loan closings jumped 112% year-over-year, with overall CRE lending momentum at its highest level since 2018.
Outlook: A Choppy 2026 Ahead
The industry is finishing 2025 with cautious optimism concentrated in specific asset types, not the general market. With deal activity polarized and valuations still recalibrating, most signals point to a volatile, uneven 2026.
