The commercial real estate (CRE) market in the United States has once again shown signs of fatigue after entering 2025. According to the latest monthly data provided by Moody’s to the “Property Play” column under CNBC, the transaction volume of the top 50 commercial real estate properties in the United States in October saw a year-on-year decline for the first time. This is the first contraction since the Federal Reserve’s interest rate hike in early 2024.
Industry experts believe that the recovery of commercial real estate is closely tied to interest rate policies. While the market had briefly warmed up after the pandemic, the persistently high interest rates over the past two years have made the path to recovery challenging and bumpy.
Kevin Fagan, Managing Director of Commercial Real Estate Capital Markets Research at Moody’s, pointed out, “The shift to negative growth in transaction volume in October 2025 is more about a stalemate between buyers and sellers, rather than a decline in the commercial real estate capital market.” He stated, “Following the U-shaped recovery after reaching a low in 2023, there was a noticeable rebound in 2024. However, the continued high interest rates and uncertainties in policy and the economy in 2025 have extended this period of sluggishness at the bottom.”
Despite the negative annual growth rate in commercial real estate, the market remained active in October with a transaction volume totaling $24.4 billion, about 70% of the same period in 2019. The cumulative scale for the year still exceeded that of 2024, but the growth momentum since 2023 has significantly weakened.
In terms of various commercial properties, industrial real estate and multi-family residential properties continue to be the main drivers of transaction volume. The only industry to see an increase in transaction volume compared to the same period last year was the hotel sector, which achieved a 6% growth in October after experiencing negative growth in the third quarter.
One of the most notable transactions was the sale of the Edition Hotel on 5 Madison Avenue in New York City for $231.2 million to real estate developer Kam Sang by the sovereign wealth fund, Abu Dhabi Investment Authority.
Fagan noted that this transaction drew attention not only for its high selling price but also because it signifies the start of Middle Eastern sovereign wealth funds withdrawing from core real estate in New York. He mentioned that the building, originally known as the MetLife Clock Tower, was the tallest building in the world between 1910 and 1913 and was transformed into a hotel around 2013.
In recent years, several iconic office buildings in Manhattan, such as the MetLife Clock Tower and the Woolworth Building, have been repurposed due to weak demand for commercial office space. The Woolworth Building, once the tallest building in the world, was converted into a residential building around 2013. Fagan stated, “They have virtually no value as office buildings, but are highly profitable as hotels and apartment buildings.”
The multi-family residential segment experienced the largest decline in October compared to the same period last year, with a 27% drop, the most significant among all commercial real estate segments. The market volume had been consistently higher than pre-pandemic levels in the previous four months, indicating that the decline in October was primarily a natural correction after a period of overheating. Despite the significant decline, most building transaction prices remained higher than previous prices, reflecting the continued strong market demand.
The recovery of the office market remains shaky and uncertain, with discounted sales and conversions to other uses becoming a major trend.
The largest transaction in October was the sale of the Sotheby’s headquarters building in New York to Weill Cornell Medicine. It is speculated that the building will be converted into a healthcare or medical facility.
Additionally, New York Life purchased a distressed office building in Manhattan from the real estate investment and management company BGO for less than half of the 2015 transaction price. Fagan said, “Institutional investors are still keen on buying office buildings at discounted prices, which reinforces the long-term value bottom line of quality office buildings in the market and underscores the enduring practical value of such properties.”
Insiders believe that the U.S. commercial real estate market is currently in a stalemate phase post-recovery: high interest rates are suppressing transaction willingness, but institutional investors will still act if significant price discrepancies occur. The market is not in crisis but in a transitional phase where both buyers and sellers are reevaluating prices and waiting for policy clarity.
(Reference: CNBC report)