Looking back on 25 years of CRE transactions during a more than ordinarily tumultuous time, Altus Group has discovered a somewhat surprising trend. The median size of an asset sold has gotten smaller, but its value has grown, as judged by price per square foot.
And that change is not just a matter of chance. It is a matter of structural transformation of the industry, as Altus stated in its analysis of the past quarter-century in CRE. “This evolution reflects more than inflation or rising construction costs. It also reflects broader changes in tenant demand, investor strategy, and how real estate is capitalized and traded,” the report commented.
It further noted that in this period, median deal size roughly tripled across all major property types. The average industrial deal size grew 254%, multifamily 266%, office 179% and retail 172%. However, in the same period, building sizes shrank 11.1% for industrial, 6.7% for multifamily, 16.8% for office, and 11.2% for retail.
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The report said the apparent contradiction between these two phenomena was due to price growth that more than offset reduced asset sizes. “Across the board, investors now pay significantly more per square foot, with increases of over 250% for industrial, 240% for multifamily, and nearly 200% for office and retail,” it stated.
An exception occurred after the Global Financial Crisis of 2007-2008 came to an end. Both industrial asset prices and building size increased by 152% and 1%, respectively. Office and retail experienced increases in both price per square foot and deal size, with asset size virtually unchanged.
Another exception took place during 2021 and 2022, following the Covid outbreak. Historically low borrowing costs “in which nearly any deal could pencil out,” led to increases in both building and deal size, transaction volume and pricing. However, the report contended that this was “a temporary acceleration within a broader shift” rather than a preference for larger assets.
Over the past year, there has been a shift in the general deal/building size pattern. In the period 1Q 2024 to 1Q 2025, median industrial deal and asset size rose 14.1% and 5.1%, respectively. The pattern was the same for office, up 25.2% and 0.9% respectively, and for retail, up 8.8% and 0.8% respectively. The exception was multifamily, where median deal size rose 6.3% but asset size slipped 1.4%.
In all four sectors, the price per square foot increased about 15%.
The surprising finding that the size of the median office deal has risen by 25.2% was likely due to investors targeting trophy assets, rather than a broad recovery, the report said.
According to the report, various factors may contribute to the longer-term trend of decreasing asset size. Office users occupy less space and retailers now prefer smaller footprints that better fit omnichannel strategies. Multifamily has shifted from expansive garden-style developments to infill urban development. Industrial, however, has benefited from e-commerce and supply chain shifts that require more space.
Other factors may also account for the declines in median asset size. Institutionally held, operationally intensive assets traded through entity-level or portfolio deals were not included. Many facilities purpose-built for specific clients seldom change hands.
“Together, these trends push the ‘typical’ single CRE transaction toward smaller, more liquid, and more easily financed assets that better align with today’s tighter capital conditions and increasingly selective investor strategies,” the report commented.
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