A version of this article first appeared in the CNBC Property Play newsletter with Diana Orrick. Property Play covers new and evolving opportunities for real estate investors, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large publicly traded companies. Sign up to receive future editions directly to your inbox.
November was the second month in a row that the commercial real estate market heated up.
According to monthly data provided by Moody’s exclusively for CNBC’s Property Play, transaction volume was down 10% compared to November 2024, with just 1,800 transactions overall. It tracks the nation’s top 50 commercial real estate sales in core segments: multifamily, office, industrial, retail, and hotels.
October was the first month of negative year-over-year volume growth since the post-Fed rate hike recovery began in early 2024, but this was not just a continuation of that trend. Transactions in November were even lower than in November 2020, the first year of the coronavirus pandemic.
“This is the result of a combination of persistently high interest rates, policy uncertainty, weak labor markets, and caution among CRE lenders and investors,” said Kevin Fagan, head of CRE capital markets research at Moody’s. “However, market liquidity remains selectively released at two-thirds the amount it was pre-pandemic and is concentrated to a greater extent.”
Investors are looking at big acquisitions and larger, higher-quality assets. For example, all deal sizes for the month were down significantly, except for sales over $100 million, which was up 51% year-over-year. This raised the average deal size in November to $14.2 million (versus the average since early 2019 of $12 million). Additionally, the majority of assets in the top 50 by sales were Class A.
Sector highlights
“This month’s trading is consistent with a late-cycle barbell, with a focus on durable trends such as housing, logistics and digital infrastructure demand,” Fagan said.
Most of the transactions in November were multifamily, with 20 transactions, followed by office with 11 and industrial with 8.
Fagan noted that there has been a “general relaxation” in some office transactions, and that market processes for determining true and fair prices are becoming more efficient, faster and more reliable.
He also said he sees a story emerging in nearly every office transaction in the top 50: “Either the office is being purchased as a mission-critical facility, or has some kind of specialized use, so it’s a conversion opportunity, or it’s being offered at a discount.”
Office continued to see some deep discount deals, including 114 West 41st St. in New York City, which was purchased by Axonic Capital from Clarion Partners at a 53% discount over the previous sale.
Companies are also increasingly focusing on their most important office properties. They want more control over where they do business and how much they pay for real estate, especially given today’s discount prices.
Examples include Novartis’ purchase of a sprawling campus-style facility in Durham, North Carolina, First Citizen’s purchase in San Francisco, and Alo Yoga’s purchase and occupation of Beverly Hills, California.
The medical offices we recently reported on in this newsletter continue to see significant activity due to strong demand. Although not included in Moody’s core account, it was the top seller in November.
A $7.2 billion medical office portfolio of 296 properties in 34 states was sold by Welltower to a joint venture between Remedy Medical Properties and Cain Anderson Real Estate. The acquisition makes the partnership the nation’s largest owner of ambulatory medical buildings with 1,104 facilities in 44 states, according to a Remedy release.
Fagan said such large portfolio deals were a feature of the November report, accounting for 17 of the top 50 deals, and have been on the rise in recent years compared to pre-pandemic times.
Of course, data centers, one of the hottest CRE sectors today, had a big day in November. The second largest sale of the month totaled $615 million and involved three industrial properties. SDC Capital Partners has purchased 97 acres of land in Leesburg, Virginia, zoned for data center development.
