US commercial real estate transaction analysis – Q2 2025

Second quarter disruptions and mid-year outlooks

• Tariff policy drove both uncertainty and opportunity for CRE

• Fed independence questioned, dollar weakened, capital flows shifted

• Equity and credit markets swung wildly but stabilized by quarter-end

• CRE still struggled with price vs. value gaps, though narrowing

The second quarter of 2025 unfolded against a backdrop of policy-driven uncertainty, shifting capital markets, and an economy that continues to balance resilience with headwinds. Tariff developments remained a defining storyline, with the recently enacted “One Big Beautiful Bill” (OBBB) shaping investor expectations. While the bill carried both positives (i.e., favorable tax carveouts for owners and developers) and negatives for commercial real estate (CRE) (i.e., removal of certain energy tax credits), it reinforced fiscal concerns and heightened longer-term cost of capital considerations.

Monetary policy added further complexity. The Federal Reserve (Fed) held rates steady, diverging further from global central bank peers, even as its independence came under scrutiny from the White House administration. The dollar weakened against other major currencies, reflecting both fiscal worries and questions over the Fed’s trajectory. This softer dollar environment altered global capital flows, pushing some global investors to look closer to home rather than to US assets.

Across markets, outlooks swung from fear at the start of “Liberation Day” to moderated optimism at the halfway mark of the year. Equity investors saw volatility jump to the highest level since the start of the pandemic, before broad market indices were pushed to all-time highs on the tech-driven optimism. Through the quarter, credit spreads steadily tightened after being blown out at the start of the trade-talk and tariff turmoil, ending the second quarter tighter than the end of first quarter. And while economists initially interpreted the tariffs to add to recessionary risk, by the 2025 mid-way point, even this group had moderated their views and seemingly “shook off” much of the negativity surrounding the trade complications. Mid-year outlooks published by many of the large banks and asset managers acknowledged the second quarter disruptions from policy and trade shifts, but mostly struck an optimistic “growth” tone.

Within US CRE, the mismatch between price and value lingered as a challenge, contributing to lower levels and lumpier transaction activity, though the gap narrowed. As the quarter closed, it became clear that operational leverage, more than financial engineering, remained the critical driver of CRE performance.

Q2 2025 transaction activity

• National CRE transactions totaled $115B, up 3.8% YoY

• Multifamily and office drove gains; industrial, retail, and hospitality declined

• Property counts fell across sectors despite stronger dollar volumes

• Larger, higher-quality assets captured most investor attention

National CRE transaction activity showed signs of stabilization in Q2 2025, with aggregate volume reaching $115.0 billion, up 3.8% year-over-year. The rebound was driven primarily by multifamily and office, which together accounted for over 44% of transaction dollar volume. Multifamily alone totaled $34.1 billion, a 39.5% increase compared to the same quarter in 2024, underscoring investor confidence in the sector’s resilience. Office also advanced, with $16.7 billion transacted, up 11.8% year-over-year.

Still, not all property types moved in tandem. Industrial transaction volume dipped 6.3% year-over-year to $18.8 billion, while retail activity contracted 14.2% to $17.6 billion. Hospitality posted the sharpest decline, falling 20.9% to $4.4 billion, as investor caution around cyclical assets persisted. However, the commercial general and mixed-use category bucked the trend, growing 11.3% year-over-year to $8.2 billion.

Measured by property count, activity remained subdued. The total number of properties transacted fell 7.4% from Q2 2024, with declines across every major sector. Multifamily and retail saw the largest drops in transaction counts, down 9.2% and 8.3%, respectively. While the absolute pace of transactions improved relative to Q1, volumes still trailed pre-pandemic averages.

Overall, the quarter reflected a market finding its footing after a difficult start to the year. Investor activity is gravitating toward larger, higher-quality deals, particularly in multifamily and office, even as volume by count remains depressed.

Transaction pacing and pricing trends

• Median CRE prices rose 5.0% QoQ and 13.9% YoY (current highs for the post-COVID era)

• Multifamily and retail led annual gains; hospitality lagged

• Subsector strength: restaurants, auto retail, storage; weakness: manufacturing

• Transaction pacing improved, with larger property sizes re-emerging

Pricing momentum accelerated in Q2 2025, with the median price per square foot for single-property transactions rising 5.0% quarter-over-quarter and 13.9% year-over-year. The quarterly gain pushed sector-level medians to post-COVID highs across traditional property types.

In terms of median price per square foot ($/SF), retail led quarterly growth, with pricing up 10.0% compared to Q1. Multifamily and industrial followed with increases of 4.3% and 6.8%, respectively, while office values rose 3.5%. Hospitality median price ($/SF) climbed 6.6%, helped by a strong limited-service subsector. The commercial general sector was the lone outlier, slipping 2.2% quarter-over-quarter despite solid annual growth.

On an annual basis (median $/SF compared to Q2 2024), multifamily remained the standout performer, posting an 18.8% year-over-year increase in median pricing. Retail was close behind at 18.5%, while commercial general (+17.1%), office (+15.3%), and industrial (+10.4%) also notched strong median price gains. Hospitality registered the weakest growth among major sectors, at 6.3% annually.

Subsector trends highlighted where investor demand was most pronounced. Within retail, bars and restaurants saw a 42.2% annual jump in median pricing, while automotive assets gained 36.6%. Storage, within the industrial sector, also posted a notable 27.3% increase. Conversely, manufacturing assets struggled, with median prices falling 3.3% quarter-over-quarter and 14.6% year-over-year.

Pacing indicators also improved modestly through Q2, potentially a positive sign for future transaction activity. The average number of properties transacted per day rose across all sectors versus Q1, though activity still lagged longer-term historical averages. Larger property sizes also re-emerged as a theme, with the median size of properties traded increasing in every sector except hospitality.

Transaction performance across regions and metros

• Coastal markets outperformed, except New York and San Francisco

• Sun Belt and Midwest metros saw stronger multifamily and retail activity

• Gateway markets with heavy office/hospitality exposure lagged

• Investor appetite is increasingly selective by geography and asset type

Geographic trends in Q2 2025 reflected a divergence between coastal markets and the rest of the country. Nearly all major coastal metros outperformed national trends on an annual basis (YoY % change), highlighting their continued draw for capital despite ongoing capital market volatility. Notable exceptions were New York and San Francisco, which underperformed relative to the national aggregate.

Elsewhere, secondary markets showed resilience. Several Sun Belt and Midwestern metros posted transaction growth ahead of national averages, particularly in multifamily and retail. Conversely, certain gateway markets with higher exposure to office and hospitality saw below-average activity.

This dispersion underscores the selective nature of investor appetite in the current environment. While aggregate national metrics suggest modest recovery, localized performance varied considerably depending on sector exposure and economic fundamentals.

Transaction activity across property sectors

Industrial

• Volume fell 6.3% YoY, but pricing rose 10.4% YoY

• Warehouse and storage assets performed well; manufacturing struggled

• Daily trading averaged $209M, ~73 properties/day

• Fundamentals remain supportive despite softer transaction activity

Industrial activity softened in Q2 2025, with total dollar volume falling 6.3% year-over-year to $18.8 billion. Transaction counts also declined, down 6.7% compared to the prior year. However, pricing trends told a more nuanced story.

The median price per square foot for industrial properties rose 6.8% quarter-over-quarter and 10.4% year-over-year, reaching $108/SF. This divergence between falling activity and rising values suggests that investors remain selective, gravitating toward high-quality storage and warehouse assets while avoiding weaker subsectors.

Subsector dynamics were mixed. Warehouse and distribution facilities posted steady gains (+5.7% QoQ, +10.2% YoY), as did storage (+6.7% QoQ, +27.3% YoY). By contrast, manufacturing continued to struggle, with prices declining -3.3% on the quarter and -14.6% annually. The average daily dollar volume transacted was about $209 million, with roughly 73 properties trading per day. Median property sizes increased by +1.3% both on a quarterly and annual basis, to 15,129 square feet. While industrial no longer dominates transaction growth as it did in the early post-pandemic years, its underlying fundamentals remain supportive.

Multifamily

• Strongest sector: $34.1B, up 39.5% YoY

• Pricing up 18.8% YoY, median size and deal value increased

• Daily trading averaged $379M, ~127 properties/day

• Demand fueled by affordability challenges and rental housing needs

Multifamily was the clear leader in Q2 2025, with transaction volume surging 39.5% year-over-year to $34.1 billion. This strong rebound lifted the sector to the top spot nationally, accounting for nearly a third of aggregate CRE dollar volume.

Pricing momentum was equally strong. The median price per square foot increased 4.3% from Q1 and 18.8% compared to the same quarter in 2024, reaching $148/SF. The median transaction size stood at about $1.7 million (up 25% from Q2 2024), while property sizes averaged just over 9,000 SF. Daily trading averaged $379 million, with roughly 127 properties changing hands per day.

The strong pricing and volume gains through Q2 suggest robust investor demand, particularly as housing affordability challenges continue to drive interest in rental housing. While transaction counts were down 9.2% year-over-year, investors focused on larger, higher-value assets, boosting overall volumes. Multifamily remains a top allocation target, supported by demographic tailwinds and steady operational performance.

Office

• Volumes rose 11.8% YoY to $16.7B despite fewer properties trading

• Pricing up 15.3% YoY, led by medical office at $197/SF

• Daily trading ~$185M, ~77 properties/day

• Selective recovery, with larger assets driving momentum

Office transactions totaled $16.7 billion in Q2 2025, up 11.8% year-over-year. This marked a somewhat rare bright spot for a sector that has faced persistent challenges since the pandemic. Though the number of properties transacted fell 5.2%, larger deal sizes pushed aggregate volumes higher.

Pricing trends improved, with median pricing ($/SF) rising 3.5% quarter-over-quarter and 15.3% annually, reaching $137/SF.

Medical office led the way, climbing 15.1% QoQ and 18.1% YoY to $197/SF, underscoring sustained demand for healthcare-related assets. General office pricing also increased modestly, up 1.5% QoQ and 13.0% YoY. Average daily dollar volume reached $185 million, with approximately 77 properties transacting per day. Median building sizes increased 6.8% versus Q1, reflecting investor preference for larger properties.

Although office sector fundamentals and outlook remain mixed, the sector’s pricing rebound highlights selective investor appetite. Transaction volumes suggest that while challenges persist, office is no longer entirely sidelined from capital flows.

Retail

• Volume down 14.2% YoY, property counts also declined

• Pricing surged 18.5% YoY, led by auto, restaurants, and strip centers

• Daily trading ~$196M, ~105 properties/day

• Investor focus shifting to necessity-driven and experiential formats

Retail performance was mixed in Q2 2025. Aggregate dollar volume fell 14.2% year-over-year to $17.6 billion, and the number of properties transacted declined 8.3%.

Yet pricing strength stood out, with the median price per square foot up 10.0% quarter-over-quarter and 18.5% annually, reaching $141/SF.

Subsector pricing was especially strong in automotive assets (+25.4% QoQ, +36.6% YoY) and bars and restaurants (+7.8% QoQ, +42.2% YoY). Street and strip centers also posted steady growth, up 5.0% QoQ and 10.6% YoY. Anchor and big-box centers gained 10.5% QoQ and 16.5% annually. The median transaction size for retail properties in Q2 was $1.4 million, with an average daily transaction volume of $195.7 million. On average, through the second quarter, 105 retail properties traded per day. Median building size increased modestly, up 1.1% over the first quarter to 9,100 SF.

Retail’s divergence between falling transaction counts and rising prices illustrates investor caution on volume but conviction in specific formats. Experience-oriented and necessity-driven assets continue to attract capital, even as broader retail activity cools.

Hospitality

• Sharpest decline: volumes down 20.9% YoY, counts down 6.6%

• Pricing modestly improved: +6.3% YoY, led by limited-service hotels

• Daily trading ~$49M, ~9 properties/day

• Remains highly cyclical, weighed by travel and cost uncertainties

Hospitality struggled in Q2 2025, with dollar volumes declining 20.9% year-over-year to $4.4 billion. Transaction counts also fell, down 6.6% compared to Q2 2024.

Despite subdued transaction activity, pricing trends showed improvement, with the median price per square foot up 6.6% quarter-over-quarter and 6.3% year-over-year, reaching $

Limited-service hotels outperformed, with median pricing surging 17.2% QoQ and 8.1% YoY, while full-service hotels posted much more modest gains (+2.4% QoQ, +4.9% YoY). The average daily dollar volume transacted was about $49 million, with just 9 properties changing hands on a typical day through the quarter. The median size of hospitality properties transacted in the quarter declined by 9.3% compared to Q1 2025, to 31,733 SF.

Hospitality remains one of the most cyclical CRE sectors, and the current environment of elevated costs and uncertain travel demand is a headwind for future demand drivers. Still, the pricing gains suggest that investors are willing to pay premiums for certain well-located or operationally efficient assets.

Commercial general and mixed use

• Volume up 11.3% YoY to $8.2B, counts down 5.6%

• Pricing mixed: -2.2% QoQ but +17.1% YoY

• Daily trading ~$90M, ~69 properties/day

• Larger property sizes and steady mixed-use demand supported growth

Commercial general and mixed-use assets gained momentum in Q2 2025, with transaction volume climbing 11.3% year-over-year to $8.2 billion. Similar to other sectors, the commercial general and mixed-use sector saw these increased dollar volumes coupled with a decline in transaction counts, as the 6,171 transactions in Q2 were 5.6% lower than in Q2 2024.

Pricing for the sector was mixed. The median price per square foot declined -2.2% quarter-over-quarter but was 17.1% higher than in the same quarter in 2024, at $98/SF.

Within the subsectors, median pricing for mixed-use assets held steady (-0.4% QoQ), while pricing for commercial general properties fell 4.8% QoQ despite being +15.5% higher than in Q2 2024.

The sector’s transaction profile featured an average daily dollar volume of $90 million, with roughly 69 properties trading per day. Median property sizes rose sharply, up +8.9% compared to Q1, to 8,670 SF.

A market regaining balance

The second quarter closed with a CRE market that appears to have re-found its footing, despite policy-driven market volatility. US CRE transaction volumes edged higher and pricing firmed broadly, even as activity by count remained restrained. Transaction markets are showing some positive signs of growing momentum, reinforcing that “selective risk-on” is the mode of the moment.

Subsector outperformance (automotive, limited-service hotels, medical office) further underscores a market that rewards operationally resilient, needs-based formats. Regionally, most coastal metros outpaced national trends, with New York and San Francisco the notable exceptions; secondary Sun Belt and Midwest markets showed durable interest, particularly in multifamily and retail.

Against a backdrop of trade and policy noise, tighter credit spreads, and a softer dollar, investors leaned into scale, location, and operational leverage rather than financial leverage. Looking ahead, given the current outlook on overall economic conditions and heightened expectations for interest rate cuts, the recent momentum seen in Q2 may be the start of a much larger and long-awaited recovery in US CRE investment.