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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 deals overall, according to monthly data provided by Moody’s as a media exclusive to CNBC’s Property Play. It tracks the top 50 commercial real estate property sales across the U.S., in core segments of multifamily, office, industrial, retail and hotel.
October was the first month of negative year-over-year transaction volume growth since the post-Fed rate hike recovery began in early 2024, but this was not just a continuation of that trend. November transactions were even lower than November 2020, the first year of the Covid pandemic.
“This stems from the combination of higher-for-longer interest rates, policy uncertainty, a tenuous labor market, and caution on the part of CRE lenders and investors,” said Kevin Fagan, head of CRE capital market research at Moody’s. “However, market liquidity is still selectively open at two-thirds the volume of pre-pandemic, with a concentration in greater scale.”
Investors are leaning toward larger-scale acquisitions and bigger, higher-quality assets. For example, all transaction sizes dropped markedly, during the month, except those sales greater than $100 million, which were 51% higher year over year. That pushed the average deal size in November to $14.2 million, compared with an average of $12 million since the start of 2019. In addition, the majority of assets in the top 50 sales were Class A.
Sector highlights
“The trading this month is consistent with late-cycle barbelling, where there is a focus on durable trends, like demand for housing, logistics, and digital infrastructure,” said Fagan.
Multifamily saw the majority of November deals, recording 20 transactions, followed by office with 11 and industrial with eight.
Fagan noted that among the office deals, there is an “overall loosening,” and the market process for determining the true, fair price has become more efficient, faster and more reliable.
He also said he sees a story emerging around nearly all of the office deals in the top 50, “where the offices are either purchased for mission critical facilities, because they have some specialty use, they are conversion opportunities, or they came with discounted prices.”
Office continued to see some big discount deals, like 114 West 41st St. in New York City, bought by Axonic Capital from Clarion Partners at a 53% discount to the prior sale.
Companies are also increasingly focusing on the most essential office properties. They want more control over where they operate and how much they pay for the real estate, especially given today’s discounted prices.
Examples of that include Novartis buying a large Durham, North Carolina, campus-style facility, First Citizens buying in San Francisco, and Alo Yoga buying and occupying in Beverly Hills, California.
Medical office, which we recently reported on in this newsletter, continues to see outsized activity because of strong demand. It is not included in Moody’s core count but accounted for the top sale of November.
A $7.2 billion medical office portfolio of 296 properties in 34 states was sold by Welltower to a joint venture of Remedy Medical Properties and Kayne Anderson Real Estate. This acquisition makes the partnership the nation’s largest owner of outpatient medical buildings, with 1,104 properties in 44 states, according to a Remedy release.
Big portfolio deals like that were a defining feature of November’s report, accounting for 17 of the top 50 deals, which is an increasing trend in recent years as compared with pre-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, involved three industrial properties. SDC Capital Partners purchased 97 acres of land in Leesburg, Virginia, zoned for data center development.
