December 2025 marked a chilling finale for the U.S. commercial real estate market, with deal activity tumbling 20% from the same month a year earlier, according to data from Moody's reported by CNBC. The drop capped a year that Moody's described as a slow but stubborn climb toward market stabilization.
Despite the late-year slump, 2025 overall delivered modest relief compared to the turbulence of prior years. Total deal volume rose 17% over 2024, though that growth followed a 24% gain the previous year—both still short of the 30% annual surge common before the pandemic.
"The U.S. commercial real estate market in 2025 was defined by a steady, albeit decelerating, climb toward stabilization," said Kevin Fagan, head of CRE capital market research at Moody's, in comments to CNBC.
He noted that the sector's recovery "proved resilient in the face of significant economic slowing, policy uncertainty, a massive loan maturity wall, and persistently high interest rates compared to three years ago."
Patterns across sectors echoed those seen in the post-pandemic rebound, with multifamily and office transactions leading activity. Office investment climbed 21% year-over-year, concentrated in high-end Class A and trophy assets as companies expanded return-to-office mandates and AI-related employment spurred demand. Multifamily outpaced even that, with deal volume up 24% despite softening rents and occupancy.
Retail followed close behind with a 19% increase from 2024, powered by grocery-anchored and necessity-based centers. Fagan said retail "has officially re-entered the conversation as a durable, investment-grade asset class," as investors' focus shifted back to property fundamentals rather than fears of functional obsolescence or another "retail apocalypse."
E-commerce pressure persisted, but its expansion has slowed to a more sustainable trajectory after the pandemic-era surge.
Larger transactions dominated 2025 deal activity, with sales exceeding $100 million, up 23% from the prior year, driven by institutional investors, REITs and corporate owner-occupiers. Yet, even that volume remains only about half of 2019's levels. Smaller deals under $5 million rose 4% over their pre-pandemic pace, while mid-sized deals suffered the most, hampered by tighter financing conditions and reduced liquidity.
If 2025 was a year of cautious optimism, December served as a reminder that the CRE recovery—while durable—is still far from complete.
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