As 2025 comes to a close, the U.S. commercial real estate market is showing clear signs of renewed strength and momentum after a prolonged period of uncertainty. New data from the third quarter indicates that commercial property investment activity is firmly on the upswing, signaling a shift in investor sentiment and market dynamics across key sectors of the industry.
According to the latest quarterly report from Altus Group, total transaction volume in U.S. commercial real estate reached over $150 billion in the third quarter of 2025. This figure represents a 24% increase from the previous quarter and a 25% rise year-over-year, underscoring a resurgence in deal activity after a subdued 2024. The turnaround reflects improving macroeconomic conditions, a more stable interest rate environment, and a narrowing gap between buyer and seller expectations, which had previously stalled many deals.
Market analysts suggest that this uptick in activity is being driven by a combination of factors. Institutional and private investors are returning to the market with renewed confidence, encouraged by better financing conditions, improving asset performance, and a clearer sense of property valuations. After a prolonged period of elevated borrowing costs and caution due to economic volatility, investors are once again finding opportunities that meet their risk-return criteria. The Federal Reserve’s gradual easing of interest rates in the second half of 2025 has played a role in this shift, making capital more accessible and supporting valuations across the board.
Increased activity has been observed across multiple asset classes, with multifamily housing emerging as a particularly strong performer. Investment volume in multifamily properties surged more than 50% compared to the same quarter in 2024, making it the most active sector in terms of transaction count and value. Strong rental demand, relatively low vacancy rates, and resilient income streams have continued to make multifamily properties attractive, especially in high-growth regions. Investors are also placing greater emphasis on quality and location, with Class A buildings in urban and well-connected suburban areas commanding strong interest.
Industrial real estate remains another bright spot, buoyed by the continued expansion of e-commerce and logistics networks. Demand for distribution centers, warehouse facilities, and last-mile delivery hubs has remained strong, particularly near major ports and transportation corridors. Despite concerns about potential overbuilding in some markets, industrial assets continue to see steady investor interest due to their long-term growth potential.
Office space, long viewed with skepticism due to the rise of remote work and shifting workplace trends, has shown signs of selective recovery. While broad challenges remain, especially in older or less efficient buildings, certain segments—such as medical office, life sciences facilities, and high-end Class A properties—have seen renewed interest. Tenants seeking premium amenities and environmentally sustainable spaces have helped support pricing and absorption in top-tier buildings, even as lower-grade properties continue to struggle with high vacancy rates.
Retail real estate has presented a mixed picture. Traditional enclosed malls continue to face structural headwinds, including changing consumer habits and store closures, but necessity-based retail formats such as grocery-anchored centers, pharmacies, and discount retailers have performed relatively well. Medical retail and services-based tenants have also contributed to stronger leasing activity in neighborhood and community shopping centers. Investors are increasingly distinguishing between these subtypes, with capital flowing toward formats with stable cash flow and community-based demand.
Across all sectors, pricing has shown upward movement. The median price per square foot for commercial properties rose nearly 3% from the prior quarter and over 14% from Q3 2024. This increase, coupled with higher transaction volume, reflects a growing consensus around valuations and a narrowing of the bid-ask spread that had plagued the market for much of the past two years. More transactions are closing at prices that both buyers and sellers view as fair, enabling deal volume to rebound.
A key indicator of market health—individual property sales—also posted gains. Nearly 46,000 commercial properties changed hands in Q3, representing a 13% increase from the second quarter and a 7% rise from the previous year. This broad-based recovery in transaction activity extends beyond high-profile deals, encompassing a wide range of asset sizes and types, suggesting deeper market participation.
Investors are showing renewed interest in larger transactions as well. Deals valued above $10 million increased in both number and dollar value during the third quarter. Although these large deal sizes remain below pre-pandemic peaks, their resurgence indicates that institutional capital is once again active in the market, reflecting increased risk tolerance and confidence in asset performance.
Geographically, activity has been strongest in growth-oriented markets, particularly in the Sun Belt. States like Texas, Florida, and the Carolinas have seen robust investment flows, supported by population growth, business migration, and pro-development policies. In contrast, some major metropolitan areas in the Northeast and West Coast continue to face slower recovery due to regulatory hurdles, higher taxes, and concerns about long-term demand in office and retail sectors.
Despite this overall optimism, risks remain. Certain segments of the office and hospitality markets still face high vacancy and uncertain demand. Broader economic risks, including inflation volatility and geopolitical tensions, could impact investor sentiment in 2026. However, the trends observed in the third quarter of 2025 suggest that commercial real estate is moving toward a more normalized, sustainable cycle after years of disruption.
The rebound in transactions, rising valuations, and increased investor participation collectively point to a market that is regaining its footing. With capital markets stabilizing and clearer pricing expectations on both sides of the table, the commercial real estate industry is poised for continued recovery in the coming year. The momentum seen in late 2025 may serve as a foundation for broader growth in 2026, assuming macroeconomic conditions remain supportive and property fundamentals continue to improve.
