Commercial Real Estate Deal Growth Stalls: What Professionals Need to Know for 2026

Commercial real estate investors tapped the brakes in October, delivering the first year‑over‑year slowdown in nearly two years and raising new questions about pricing expectations, interest rates, and what 2026 might hold for dealmakers. According to a recent report from Mortgage Professional America, the drop reflects a deepening disconnect between buyers and sellers — one shaped by persistent rate pressure and policy uncertainty.

A Market Caught in a Stalemate

Kevin Fagan, head of CRE capital market research at Moody’s, described the shift as less of a downturn and more of a “stalemate.” After a year of strength — especially across industrial and multifamily sectors — October marked the moment when the U‑shaped recovery from 2023’s lows began dragging.

Despite the slowdown, the month still brought in approximately $24.4 billion in sales, roughly 70% of October 2019 levels and above 2024 volumes. Yet transaction momentum has cooled sharply since 2023 as the cost of capital reshapes underwriting standards and reduces leverage across CMBS structures.

Multifamily Pulls Back While Hotels Push Forward

Multifamily — the darling of early‑2025 dealmaking — saw volumes fall 27% year‑over‑year in October. Many properties still trade above historical pricing, showing that investors value stable, income‑producing assets but want clearer rate direction before making aggressive offers.

Hotels, however, are telling a different story. Hospitality was the only sector to post higher year‑over‑year growth, up roughly 6%. A standout example: the New York Edition hotel at 5 Madison Avenue, purchased by Kam Sang Company for $231.2 million — a striking case of adaptive reuse and revitalized demand.

Similar wins at properties like the Woolworth Building highlight how conversions continue breathing life into once struggling office assets.

Office Sector: Discounts, Distress, and New Demand Drivers

Office investors are navigating both tough realities and fresh opportunities. The sale of Sotheby’s headquarters to Weill Cornell shows how medical and life‑science tenants are becoming essential in filling outdated space. Meanwhile, New York Life’s acquisition of a distressed Manhattan tower at nearly half its 2015 pricing reveals institutional appetite for discounted yet promising assets.

These shifts hint at a potential floor forming for office valuations — not a rapid rebound, but a healthier stabilization as we approach 2026.

Commercial Mortgage Originations Surge

Even as deal flow cools, mortgage activity is heating up. The Mortgage Bankers Association reported a 36% year‑over‑year jump in commercial and multifamily mortgage originations during Q3 2025, driven by a remarkable 181% surge in office lending.

Still, today’s lending climate is “volatile” and “unpredictable,” with strong preferences for industrial and multifamily over troubled office space.

Why This Matters for Professionals — and How Education Helps

For real estate, mortgage, finance, and insurance professionals, this shifting environment demands sharper analysis, stronger financial literacy, and a deep understanding of capital and market cycles.

As the market awaits clarity on rates, pricing, and risk, informed professionals will be first to identify — and capitalize on — emerging opportunities in 2026.