CRE Market Trends: Smaller Buildings, Bigger Price Tags
Over the past 25 years, the commercial real estate industry has undergone a quiet but significant transformation. According to a recent analysis by Altus Group, the typical property sold today is smaller in size—but commands a higher price per square foot.
This isn’t just inflation at work. Altus attributes the shift to deeper structural changes in the market, driven by evolving tenant preferences, strategic shifts among investors, and how real estate assets are financed and traded.
Deal Sizes Are Up, Even as Buildings Shrink
Across all major CRE sectors—industrial, multifamily, office, and retail—the median transaction size has increased dramatically. Industrial deals are up 254%, multifamily 266%, office 179%, and retail 172%. But while the dollar figures are growing, the physical size of properties has declined: industrial buildings are 11.1% smaller, multifamily 6.7%, office 16.8%, and retail 11.2%.
The reason? Buyers are paying more per square foot. Price-per-square-foot values have jumped more than 250% for industrial properties, 240% for multifamily, and nearly 200% for both office and retail.
Exceptions During Times of Economic Distortion
There were notable exceptions. After the 2007–2008 financial crisis, industrial properties saw simultaneous growth in both asset size and price, while office and retail prices rose with little change in asset size.
Another outlier came in 2021–2022. Fueled by ultra-low interest rates, investors pursued larger deals at higher prices across all sectors. Altus suggests this was more of a temporary surge than a lasting shift toward larger assets.
Recent Trends: A Partial Rebound in Size
From Q1 2024 to Q1 2025, there’s been a modest reversal in the long-term pattern. Median deal and asset sizes rose across industrial, office, and retail sectors, while prices continued their upward trend—rising roughly 15% across the board. The only exception was multifamily, where building size slipped 1.4% despite a 6.3% increase in deal size.
The sharp increase in median office deal size—up 25.2%—likely reflects investor appetite for high-end, trophy properties rather than widespread recovery in the office sector.
What’s Behind the Smaller Buildings?
Altus points to several factors behind the long-term decline in asset size. Office tenants require less space, retailers are shifting to smaller stores that better support omnichannel strategies, and multifamily developers are focusing on compact urban infill projects instead of sprawling garden-style complexes. Meanwhile, industrial real estate has expanded thanks to the rise of e-commerce and changing supply chain demands.
It’s also worth noting that many institutional or custom-built assets—often held long term or traded through portfolio deals—aren’t included in the median figures.
Source: GlobeSt.
