Is CRE Quietly Entering Its Next Transaction Cycle?

Commercial real estate cycles rarely announce themselves with a bell. They tend to reveal their turning points through smaller signals first—changes in listings, underwriting activity or investor behavior that hint at momentum building before prices visibly respond.

Several recent data points suggest the CRE market may be entering that kind of transitional phase.

The most recent reading of the LightBox CRE Activity Index, from January, showed a sharp rebound in market activity following the typical year-end slowdown. The index rose 28% to 110.7, returning to triple-digit territory for the first time since October and marking one of the stronger readings of the past several years.  

Because the index aggregates activity across commercial property listings, appraisals and environmental due diligence work, it captures some of the earliest steps in the transaction process. In that sense, it functions as a leading indicator for deal flow. When those activities rise together, it often signals that investors, lenders and owners are beginning to move again after periods of market hesitation.

The January rebound suggests that may be happening now.

Early Signals of Market Activity

Several of the index’s underlying indicators reinforce that interpretation. Property listings increased significantly as owners began bringing assets back to market, while appraisal activity and environmental due diligence volumes both showed strong year-over-year gains—evidence that lenders and buyers are actively underwriting potential transactions.  

Together, those indicators point to a growing pipeline of deals moving through the early stages of the transaction process.

That shift is notable given the past two years of market disruption. Rising interest rates, widening bid-ask spreads and uncertainty around property valuations sharply reduced transaction activity across much of the CRE landscape. Many investors simply waited on the sidelines for clearer pricing signals before deploying capital.

Now, those signals appear to be gradually emerging.

Additional data from LightBox indicates that bidding pools are becoming deeper and more diverse, suggesting that investor participation is slowly broadening again. At the same time, lending markets are beginning to stabilize as banks cautiously re-engage and refinancing demand increases amid the large wave of maturing commercial real estate loans.  

Those conditions are often precursors to renewed transaction momentum.

Prices Stabilize, But Recovery Remains Uneven

Pricing data, however, shows that the market’s recovery remains incomplete. According to MSCI’s RCA Commercial Property Price Index, the national all-property index rose just 0.3% year over year in January, reflecting a market that appears to be stabilizing but has yet to enter a broad-based recovery.  

Performance continues to vary widely across property types. Industrial assets remain the strongest sector, with prices rising 3.7% over the past year and remaining roughly 50% above pre-pandemic levels. Apartment values have largely stabilized after recent declines, while retail pricing has softened modestly. Office performance remains sharply divided between suburban properties and central business district assets.  

Additional transaction data reinforces the growing divergence within the CRE market. According to CoStar’s Commercial Repeat-Sale Indices, lower-priced assets typically found in secondary and tertiary markets have recently outperformed higher-value institutional properties concentrated in major cities. The equal-weighted index tracking these smaller transactions rose 1.1% year over year, while the value-weighted index for premier assets gained just 0.8% and remains roughly 17% below its 2022 peak.  

This divergence reflects a market that is becoming increasingly selective. Capital is concentrating in sectors supported by durable demand drivers—such as logistics, residential housing and data infrastructure—while other property types continue to adjust to shifting tenant demand and higher financing costs.

Geography is also playing a role. Transaction-based pricing data shows that non-major metropolitan areas have generally outperformed larger gateway cities in recent years, reflecting broader demographic and economic trends favoring more affordable and diversified regional markets.  

A Market Rebuilding from the Ground Up

Taken together, the activity and pricing data suggest the CRE market may be entering a new stage of its cycle. Prices appear to be finding a floor, even if they have not yet begun a sustained rise. At the same time, early indicators of transaction activity show investors and lenders gradually adapting to a higher-rate environment and recalibrated property valuations.

Historically, transaction markets begin to revive when three conditions align: price expectations stabilize, financing becomes more predictable and enough capital is willing to re-enter the market.

Several of those elements are beginning to move in that direction.

That does not necessarily mean the next phase of the CRE cycle will resemble previous recoveries. Rather than a broad rebound that lifts all sectors simultaneously, the market is likely to continue differentiating between property types, locations and asset quality.

In that environment, activity may return first to the sectors and markets supported by the strongest underlying demand fundamentals. The most recent indicators suggest that process may already be underway.