CRE Slowdown Signals Continued Market Uncertainty In 2025

CRE slowdown deepened in Q4 2025, with transaction volumes falling below 2024 levels and uncertainty clouding 2026 forecasts.
Macroeconomic concerns and rising capital costs have stalled deals, pressured valuations, and delayed recapitalizations.
Multifamily and office sectors face ongoing headwinds, including weak income growth, hybrid work shifts, and lender caution.
Large-scale investments and data center demand are propping up select segments, masking broader softness in the market.

Key Takeaways

A Year That Started Strong, Ended With Doubts

The commercial real estate (CRE) sector entered 2025 with renewed optimism, but as December arrives, the mood has soured. Despite some high-profile wins in select markets, overall transaction volumes are down from 2024, reports Bisnow. Many deals have been delayed or restructured as economic uncertainty sets in.

Moody’s Matt Reidy notes that while CRE is in better shape than it was 18 months ago, conditions have cooled since midyear. “We’re probably not in as good of a spot as we thought we were six months ago,” he said.

Recovery For Some, Caution For Most

Demand for Class A office in Midtown Manhattan and San Francisco shows improvement, yet the broader office sector remains split. Devalued assets, unclear space needs, and capital pressure are slowing activity and keeping lenders wary.

A Deloitte report found declining sentiment among CRE leaders heading into 2026. Concerns over employment and income growth are also stalling momentum in the multifamily sector.

“The market is moving from a rent-growth optimism approach to a cash flow-realism approach,” said David Hada, CFO at Ascent Developer Solutions.

Valuation And Capitalization Pressures Persist

Many buildings are facing steep valuation cuts, complicating refinancing and potential sales. Even stabilized assets with strong occupancy are being reappraised downward, due to higher borrowing costs and investor caution.

Trepp data shows office CMBS delinquencies hit a new high of 11.8% in October, reflecting the broader strain in capital markets. Joe Learner of Savills notes a growing number of transactions are being delayed, with some involving bankruptcy courts.

Data Centers, Debt Markets, And Large-Scale Investment

Despite headwinds, pockets of strength remain. Data centers and infrastructure megaprojects continue to attract capital, while companies like Apple are making strategic office purchases. According to MSCI, institutional investors became net buyers of office for the first time since 2022.

Meanwhile, CBRE reported a 112% year-over-year increase in loan closings for Q3. It was the firm’s strongest quarter since 2018, driven by growth in permanent and private lending.

Still, much of this activity is top-heavy. Moody’s found that third-quarter deals over $100M were up 35% from last year, while smaller transactions continue to lag.

2026 Will Be “Choppy”

Construction spending data echoes the trend: headline numbers are buoyed by megaprojects, while total starts are down 5.4% year-to-date, per Dodge Construction Network.

With many assets facing capital distress and leasing uncertainty, leaders are bracing for more turbulence. “If I had to put a general view on it, 2026 is going to be a choppy market,” said Hada. “We’re going to proceed with caution.”