Amid this broad slowdown, Moody’s identifies two sectors that are bucking the trend and still attracting capital.
What’s driving the slowdown
Here are the main factors crimping CRE deal activity:
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Rising interest rates mean higher financing costs and fewer buyers able to underwrite deals comfortably.
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Asset performance uncertainty — especially for older office buildings, retail centres and other property types where demand is under structural pressure.
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Sellers and buyers are far apart on valuations as future cash-flows are harder to predict.
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Lenders are cautious, refinancing is tougher in certain sectors (for example offices) — raising risk for transactions.
Sectors shining through
Despite the overall softness, Moody’s highlights two sectors that remain relatively resilient or attractive:
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Industrial / logistics / Data centres – Underlying demand drivers like e-commerce, cloud/AI infrastructure continue to support these spaces.
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Multifamily or residential-adjacent property types – Housing demand remains strong in many markets, somewhat insulating that segment from the worst pressure in other commercial property types.
These sectors are seen as “bright spots” because their fundamentals (occupancy, usage, growth drivers) remain more favourable compared to legacy office or retail assets.
Implications for investors & market participants
If you’re involved in CRE or thinking about it, here are some takeaways:
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Be selective by sector: Blanket exposure to CRE is riskier now — property‐type matters a lot. Industrial/data-centre and multifamily appear safer; offices/older retail riskier.
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Focus on quality and fundamentals: Location, upgradeability, alternative uses (e.g., converting office to other uses) may become differentiators.
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Mind the financing angle: With tougher refinancing and higher interest rates, debt structure and maturity become critical. Deals with more predictable cash‐flows and lower leverage will fare better.
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Valuation discipline matters: With transaction volumes low, pricing is less transparent. Buyers need to build in margin of safety for weaker scenarios.
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Long-term view: Some of the structural shifts — work‐from‐home, e-commerce, digital infrastructure — are likely to persist, so remaining nimble to adapt will help.
Outlook
While the broader CRE market is under pressure, the identification of resilient segments suggests there are still opportunities. The key will be navigating the “middle ground” where risk is higher, but reward may still exist — especially for strategic investors who can focus on property types with tailwinds (industrial, data centres, multifamily) and avoid the worst‐positioned sectors.
In conclusion
The headline: CRE deals are drying up — but not completely. Two sectors stand out as holding up in the current environment. For investors and stakeholders, it means shifting from broad bets toward targeted, quality plays in CRE. The weak parts of the market aren’t gone — they’re just more exposed now.