The commercial real estate (CRE) landscape is experiencing a pronounced bifurcation, as indicated by the latest data from Moody’s Analytics. With a staggering 54% year-over-year drop in transaction volume for Q3 2025, the market faces significant headwinds. However, industrial and data center sectors have shown relative resilience, reflecting ongoing institutional demand despite broader market challenges. As pricing dynamics shift and access to capital becomes uneven, investors must adapt to this two-speed market.

Moody’s Analytics reveals a significant contraction in U.S. CRE transaction volumes, plunging by 54% YoY in Q3 2025. This decline is indicative of a general risk aversion among lenders and investors, particularly outside of the industrial and data center sectors. Sharp decreases in deal activity, particularly in office and retail markets which faced drops exceeding 50%, underscore a turbulent market. The divergence in sector performance signals a need for a nuanced understanding of current market dynamics.

While most asset classes have seen cap rates widen, industrial and data center sectors are bucking this trend, with some stabilization or even slight narrowing of spreads. This reflects persistent demand from institutional investors who are increasingly selective in their acquisitions. In contrast, multifamily and office sectors are grappling with pricing uncertainty and high financing costs, causing a significant liquidity contraction. The stark differences in performance between these sectors indicate a growing divide in investor sentiment and market health.

Regional and private buyers have been notably less active, with large institutional capital dominating the remaining transactions. This shift has predominantly favored “core” logistics and digital infrastructure assets, where demand remains robust. Local brokers have reported limited activity in smaller deals outside major metropolitan markets, emphasizing the pronounced bifurcation in buyer profiles and asset types. Investors are advised to navigate this landscape with caution as traditional metrics may no longer apply uniformly across sectors.

For those involved in underwriting and capital markets tracking, the current bifurcation highlights the need for differentiated risk assessments. The diverging liquidity and financing terms across sectors necessitate adjustments in assumptions regarding exit pricing and overall risk. While macro-level credit tightening may signal stress in the broader market, it does not uniformly apply to all asset classes, particularly those with strong fundamentals like industrial and data centers. Conversely, office and retail sectors present elevated challenges for regional operators and smaller investors.

The ongoing two-speed market underscores the need for adaptive investment strategies. If current trends persist, investors should anticipate further segmentation in market performance, with institutional capital continuing to flow toward sectors exhibiting strong fundamentals. The resulting impact on liquidity, pricing power, and access to capital will likely force a reevaluation of strategies across the board.