In October 2025, the commercial real estate (CRE) market in USA saw its first decline in transaction volume in nearly two years[1]. The value of sold CRE assets fell year-on-year, breaking a streak of growth and revealing a growing deadlock between buyers and sellers. Sales reached $24.4 billion[2], about 70% of the level from October 2019. Overall, in the first nine months of 2025, the volume hit $265 billion, surpassing 2023 and 2024 results, but growth momentum sharply weakened.
CRE Volume Decline and Transaction Dynamics in the USA
The transaction impulse slowdown primarily stems from higher interest rates, rising economic uncertainty, and trade policy tensions in 2025. Moody’s capital markets leader, Kevin Fagan, emphasized that the slowdown does not yet indicate an outright market collapse but reveals a stalemate where sellers resist accepting lower valuations and buyers seek greater discount cushions. This situation is compounded by weaker credit activity – mortgage banks have cut financing and are estimated to be issuing up to 58% fewer loans than pre-pandemic levels.
Meanwhile, the third quarter of 2025 in the CRE segment in USA simultaneously brought a spectacular return of large transactions. After a quieter start to the year, the number of deals worth at least $10 million[3] surged to 1,826 in Q3 2025, marking the highest level since Q3 2022. The total value of these deals exceeded $76 billion, increasing by 48% quarter-on-quarter and 46% year-on-year – the strongest growth since Q2 2015.
Large deals accounted for 68% of total CRE investment value in USA, signaling that private equity funds, REITs, and institutional investors are re-entering the market. Conversion of existing owners to sellers accelerated following the spring rate cuts in USA and repricing in the capital markets. However, median transaction size remains below pre-pandemic levels, indicating the market is still seeking new balance, and the revival may be more of a year-end “activity burst” than lasting change.
Financing costs also affect the CRE market’s outlook. In the second week of December 2025, mortgage rates for commercial real estate loans in USA rose again. CMBS loans for multifamily properties over $6 million[4] are priced at approximately 5.24% for 10-year fixed-rate loans, while office and warehouse rates hover around 6.15%. The 5-year Treasury yield stands near 3.723%[5], and the 10-year yield at 4.168%. 10-year CMBS issuance rates range between 6.19%-6.99%, and 30-year CMBS between 6.64%-7.15%. Typical bank financing for multifamily sector with 5–10 year terms is within 5.75%-6.50%.
The market assumes that after two consecutive Federal Reserve rate cuts in Q3 and Q4 2025 (target range 3.75%-4.00%), the central bank will pause further cuts through year-end. This expectation keeps capital costs relatively high. Coupled with a massive wave of maturing loans between 2025–2028 – approximately $600 billion annually[7], and even $950 billion in 2025 alone – this creates refinancing pressure, especially in the office and warehouse segments, where spreads compared to multifamily continue widening.
In the US office sector, the first clear signal of improvement in five years appeared. In Q3 2025, office vacancy rates fell to 18.8%[8], the first year-on-year decline since early 2020. This marked the sixth consecutive quarter of positive net absorption, which in Q3 2025 totaled 16 million square feet. Vacancy rates dropped about 20 basis points quarter-on-quarter.
Office recovery is supported by employees returning to hybrid work models with significant on-site presence, alongside a sharp slowdown in new supply. The pipeline for new office projects amounts to just 16 million square feet[9], the lowest level in a decade. Leasing activity peaks in finance and technology sectors. Total leased space in Q3 2025 reached 59.8 million square feet, exceeding five-year averages. Blocks of 10,000 to 20,000 square feet make up about 50% of newly leased space, indicating demand shift toward medium-sized, flexible units.
The market increasingly differentiates between prime and secondary assets. Vacancy in modern, well-connected prime buildings dropped to roughly 14.2%, while older, less well-located secondary stock sees vacancies near 19.1%. In large cities like Manhattan, Austin, Nashville, and Miami, owners of modern office towers are starting to set terms and raise rents. Conversely, owners of older secondary offices often consider conversions to residential, hotel, or mixed-use purposes, or major renovations.
The US warehouse and logistics market is entering a balancing phase after the pandemic boom. At 2023 peak, around 330 million square feet[11] of large big-box facilities were commissioned. Vacancy rates in many markets have hit local cycle highs – in top 20 markets, they rose about 19 basis points year-on-year.
E-commerce demand normalized sharply after pandemic surges, while major players, led by Amazon, scaled back expansion. In 2025, Amazon acquired or opened around 61 own warehouse properties[12], compared to over 100 in 2021 and about 300 in 2022. Nearshoring from China and rising capital costs also deter investors from new projects. Rents stabilized in most locations, with slight downward pressure in oversupplied markets.
Experts note that reshoring production to USA and neighboring countries could increase warehouse space demand by up to 35%[13] over five years. Logistics companies increasingly focus on power infrastructure – data centers and AI computing facilities – as new portfolio pillars. Locations near main seaports and on the USA-Mexico border gain premium status. AI and IoT technology advances allow deeper supply chain analysis and space optimization.
The multifamily real estate segment in USA shows one of the strongest rebounds in CRE. In Q3 2025, multifamily transaction volume rose 51.1% year-on-year. This segment now accounts for about 30% of all transactions and 34% of total investment value. Investors shift capital from office properties burdened by high vacancies towards rental housing, benefiting from repricing and rate cuts.
The median purchase price for multifamily properties in USA climbed to $144 per square foot in Q3 2025, up 17.3% year-on-year and 3.5% quarter-on-quarter. Median transaction size grew 27.3% year-on-year, the strongest growth among all CRE sectors. From the start of the year to Q3 end, investors acquired about 93,000 multifamily units, matching 2013–2015 levels. The market currently favors a shift from safe Core strategies to Value-Add, with large, modern portfolios attracting renewed interest. Historical data shows that in 72% of cases, Q4 activity matches or exceeds Q3, suggesting potential further rally through year-end 2025.
Meanwhile, the UK faces deep regulatory changes in the private rental sector (PRS). The government announced the timetable for the Renters’ Rights Act 2025. The first reform phase will come into effect on May 1, 2026, introducing, among other things, the abolition of the famous Section 21, which allowed no-fault evictions. The legislature will introduce the new Assured Periodic Tenancies contract standard, limit rent hikes to once per year, ban tenant rent bidding, and mandate landlords to consider pet consent.
The PRS reform fulfills campaign promises, enhancing tenant housing security and raising standards, symbolized by the high-profile Awaab’s Law case. The law also mandates creation of a centralized landlord and property database in the second phase by late 2026. Violations of the new rules may incur fines from £35,000 to £40,000. Reduced flexibility in terminating leases and raising rents might prompt some landlords to exit the market and force others to bear additional compliance costs, including registry fees.
An exemption is granted to the purpose-built student accommodation (PBSA) sector managed by registered operators, potentially attracting extra capital to this niche. Regulations around traditional multi-occupancy houses (HMOs) are tightening, decreasing their investment appeal. Landlord organizations and property managers warn that some smaller operators might leave PRS, reducing rental supply and potentially driving up rents mid-term.
UK PRS Regulatory Reforms and Energy Standards
Concurrently, the UK government pushes its climate agenda in rental housing, proposing in 2025 consultations to raise minimum energy efficiency standards (MEES) for PRS properties from current EPC E to C, or even B, by 2030. The new system will adopt broader efficiency metrics – including fabric thermal performance, heating system type and efficiency, and smart readiness for integrating intelligent energy management.
Previously, investment caps in energy upgrades were £3,500 per property to reach EPC E. Raising the requirement to C demands considerably higher expenditures, intensifying financial pressure on landlords. Many may try passing costs onto tenants through higher rents or selling properties if upgrades prove uneconomical. This creates significant opportunities for investors specializing in green retrofits, energy audits, and retrofit financing. Over the long term, the MEES standard will align with Decent Homes Standard requirements by 2035-2037.
The UK PBSA market in 2025 faces a temporary investment dip but maintains strong fundamentals. In Q1 2025, transaction value was about £488 million, versus £575 million in Q4 2024. Market leader Unite Students reported 97.5% occupancy in Q3 2024, confirming structural shortages in cities like London, Bristol, Birmingham, and Manchester. PBSA remains a defensive asset class compared to the more volatile PRS market.
Demand for PBSA increasingly comes from international students, including a growing group from USA. In 2025, applications from USA to UK universities rose by about 13.9%-14% year-on-year, reaching 7,930 submissions, well above previous averages. This is influenced by US immigration and education policies encouraging some young Americans to choose British institutions. Estimates suggest up to 64% of foreign students prefer PBSA accommodations over traditional rented apartments or HMOs.
In USA, the housing market is normalizing after a pandemic boom. In October 2025, average home prices rose just 1.1% year-on-year, down from about 6% earlier in the year. The number of metropolitan areas with falling prices rose from 6 in January to 32 by October, marking the broadest price correction spread since the early 2010s. Markets like Austin, Miami, Las Vegas, Seattle, and Dallas bear the highest downward pressure.
Simultaneously, new home sale listings in October 2025 decreased by 7.4% year-on-year, but total active listings rose 12.6%, surpassing 1 million active listings for the first time since late 2019. Median days on market increased by 4 days year-on-year. Median home sale price in USA was around $415,000 in October 2025. By comparison, Canada’s average annual price that month was about $690,000.
Greater listing availability and stabilizing interest rates may boost market activity even through typically quieter winter months. At the same time, more buyers are withdrawing or postponing purchases awaiting further price drops, increasing long-term rental demand. Consequently, the housing market shifts from rapid value gains to a balanced market between buyers and sellers.
Beyond main themes, investors monitor weaker but relevant signals across other regions. Europe’s office markets show strong segmentation. London’s modern Grade A offices in prime locations are in deficit, indicating rent growth post-2026. In Germany, cities like Berlin and Frankfurt face challenges for older office stock competing on price and quality amid widespread hybrid work. Paris central business districts remain strong, while La Défense faces greater vacancy pressure.
Modular and prefabricated construction remains a growing global trend. This market is forecast to grow at about 7% CAGR from 2024 to 2029, rising from approximately $137.67 billion to about $191 billion. These solutions reduce costs and shorten construction time, potentially improving housing availability. However, new trade tariffs introduced by USA in 2025 may impact prefab supply chains, especially components imported from China, raising material costs.
The housing crisis continues in China. Projections for 2025 anticipate a further 3.7% year-on-year drop in home prices. Meanwhile, the secondary market leads tentative recovery. Sales of secondhand homes in the five largest Chinese cities rose about 30% year-on-year, while new constructions started fell approximately 24.27% year-on-year in Q1 2025. Developers focus on completing existing projects to stem further buyer confidence erosion.
Canadian forecasts for 2025 indicate renewed residential real estate demand. Transactions may rise about 8.6%, and prices average 4.7% year-on-year growth. Rate cuts by the central bank and new household formation drive improvement, though uncertainties around USA tariff policies and construction cost impacts remain risks.
Asia-Pacific also shows mixed signals. CRE in this region experienced a marked rebound in Q2 2025. Notably, Japan’s multifamily segment surged transaction values by about 350% year-on-year. Australian office markets in Sydney and Brisbane rank among global leaders in demand and rent growth. In over 50% of regional markets, the difference between property yield and 10-year bond yields (yield gap) exceeds the decade average, maintaining attractiveness for long-term investors.
The global CRE market is seeing a clear rise in data center prominence, dominating big transactions. Cities like Boston, Charlotte, Chicago, Houston, and Los Angeles report very high demand for data centers, driven by AI, streaming, and cloud services growth. However, comprehensive hard data on transaction volumes and cap rates remain limited, with mainly qualitative broker and fund reports available.
European mortgage markets are gradually normalizing. The European Central Bank slows down rate cuts but signals that the main tightening cycle is over. In the UK, the average 5-year fixed mortgage rate fell from about 6.04% a year earlier to about 4.39%, improving credit capacity and supporting housing transaction growth. In Germany, new mortgage rates stabilize near 4%, and Euribor trends back toward more typical, lower levels, easing investment valuation and refinancing.
In ESG and green building segments, the trend remains durable. More premium tenants, especially publicly listed companies with non-financial reporting duties, prefer offices with environmental certifications like BREEAM or LEED. In USA, about 22% of new commercial space is green-certified. Buildings with high energy efficiency, low carbon footprints, and modern energy management systems attract higher rents and longer leases, enhancing investment value.
Cap rate repricing continues. Industrial, retail, and multifamily sectors show signs of valuation stabilization – cap rates start firming as buyers and sellers reach consensus amid strong rental demand fundamentals. The office segment lags, especially older stock, where investors require higher risk premiums and face costly modernization or repurposing. Globally, a clear pivot toward prime assets and Grade A buildings emerges, while lower-quality properties increasingly face redevelopment or divestment.
Outlook for 2025 and beyond depicts a market shaped by slowdown in traditional CRE sectors in USA, dynamic multifamily rebound, deep UK PRS and energy standard reforms, and long-term restructuring of office and warehouse markets. Student housing and data centers stand out as defensive niches with growth potential. Yet, data gaps remain in office conversions, data center transaction volumes, latest commercial loan default stats, and CMBS securitization outcomes in late 2025. Investors must navigate incomplete information environments, relying on segment selection skills and risk assessment for regulatory and credit exposures.