CRE Investors Find Common Ground: ValTrends Report 2Q 2026

Commercial real estate (CRE) investors may be moving closer to common ground despite persistent economic and geopolitical uncertainty, according to “Meeting of the Minds,” the latest ValTrends report from SitusAMC. This quarterly analysis from SitusAMC Insights examines key developments in the economy, CRE property sectors, capital markets and the investment environment. 

Investors continue to navigate volatility stemming from the ongoing conflict in Iran and energy prices, stubbornly high inflation and uncertainty surrounding the midterm elections. Yet CRE’s tangible nature and relatively steady cash flows continue to offer investors a measure of stability. After slipping in the first quarter, CRE returned to the top-rated investment alternative in SitusAMC’s proprietary quarterly survey, reclaiming the position it held during the second half of 2025. 

“While uncertainty remains elevated, there are signs that CRE investors are finding more common ground on pricing and expectations,” said Peter Muoio, PhD, Head of SitusAMC Insights. “That convergence could help set the stage for greater transaction activity as capital markets continue to stabilize.” 

Buyers and Sellers Move Closer Together 

SitusAMC Insights’ latest buy-sell-hold data show a potential meeting of the minds among CRE investors. The preference to buy fell from 26% to 15% in the second quarter, its lowest level in more than two years, while the preference to sell climbed from 4% to 14%, its highest in almost three years. The narrowing gap could signal that buyer and seller expectations are beginning to converge, potentially laying the groundwork for more transaction activity. 

For now, however, most investors remain on the sidelines. The recommendation to hold was essentially unchanged at 71%, underscoring continued caution around interest rates, liquidity and the broader economic environment. Among the 16 property types covered by SitusAMC Insights, only medical office and self-storage received outright buy recommendations. 

CRE Regains Its Position as Investors’ Preferred Asset Class 

After falling from the top spot in the first quarter, CRE once again ranked as investors’ preferred investment alternative. Investors cited attractive valuations, income generation and inflation protection as reasons for optimism, while CRE’s tangible nature provides a sense of safety during periods of economic and geopolitical volatility. 

Stocks ranked second as strong earnings, liquidity and enthusiasm surrounding technology and artificial intelligence supported investor sentiment. Cash edged out bonds for third place, with both viewed as below-average investment alternatives in the second quarter. 

Despite renewed preference for CRE, the economic backdrop remains challenging. Real GDP growth slowed to an annualized 1.5% in the second quarter from 2.1% in the first, while inflation remained well above the Federal Reserve’s target. Energy prices tied to the Iran conflict have added to inflation volatility and put upward pressure on Treasury rates. 

Capital Availability Improves as Borrowing Picks Up 

Capital markets showed modest signs of improvement during the quarter. Investors reported that both equity and debt capital became slightly more available, while underwriting discipline loosened marginally. Equity remains selective and concentrated on high-quality assets, strong sponsors and growth markets. Debt availability is near its long-term average, although underwriting standards remain historically tight amid higher interest rates, stricter debt-service coverage requirements and increased scrutiny of property cash flows and refinancing risk. 

CRE and multifamily borrowing increased 12% during the second quarter and 16% year-over-year, according to the Mortgage Bankers Association. All four major property sectors experienced quarterly increases in originations, led by industrial, up 38%, and office, up 23%. CMBS activity rose 55% quarter-over-quarter and 68% from a year earlier. 

Still, stronger borrowing has yet to translate into greater overall transaction volume. Second-quarter deal activity declined 4% to $136 billion, its lowest level in a year. The decline was driven primarily by office, where transaction volume fell 14%. Apartment remained the most active of the major property types, with volume rising 4% to $36 billion. 

Property Preferences Become More Evenly Split 

Investor preferences across CRE property types became considerably more balanced in the second quarter. Apartment retained the top position for more than a year, but its favorability rating dropped sharply from 60% to 36%, its lowest since the beginning of 2025. Investors continue to value multifamily’s steady cash flows, but elevated supply and moderating rent growth remain concerns. 

Industrial gained significant ground, with preference rising 16 percentage points to 32%, its highest level in a year. Investors pointed to stabilizing supply and long-term demand drivers such as logistics, e-commerce, manufacturing expansion and supply chain investment. 

Retail also gained favor, rising 13 percentage points to 21%. Investors are particularly positive about well-located, grocery-anchored retail and power centers with strong occupancy and operating performance. 

Office ranked fourth, with preference declining from 16% to 11%. While demand remains challenged, especially for outdated Class B and C properties, office sentiment remains significantly stronger than during the pandemic and subsequent high-interest-rate environment. Repricing, elevated cap rates and growing optimism around office conversions are creating selective opportunities for long-term investors. 

Supply and Demand Dynamics Reshape Sector Fundamentals 

Property fundamentals painted a mixed picture during the quarter. Multifamily occupancy was unchanged and remained at its lowest level since the Global Financial Crisis, but a sharp slowdown in new construction helped support rent growth. New supply fell to roughly half its long-term average and its lowest level since early 2015, while effective rents increased 0.9% during the quarter. 

Industrial also benefited from easing construction, with completions falling to their lowest level since early 2014. However, net absorption turned negative for the first time since the aftermath of the Global Financial Crisis, and occupancy declined 20 basis points. Industrial rents grew 0.5%. 

Retail experienced negative absorption for the first time since late 2020, but limited new supply continued to support rent growth. Effective rents increased 0.3%, slightly above the sector’s long-term quarterly average. 

Office fundamentals remained the most challenged. Occupancy declined for a fifth consecutive quarter to its lowest level on record, with the rate remaining below 80% for more than two years. Even with new construction at record lows, weak demand continued to add to vacant inventory. 

CRE Returns Remain Steady as Pricing Inches Higher 

Overall CRE returns were relatively stable in the second quarter, increasing 6 basis points to 1.3%. Capital returns reached their highest level since the Federal Reserve began aggressively raising interest rates in mid-2022, while one-year trailing CRE returns reached 5%, among their highest levels since late 2022. 

Retail generated the strongest quarterly return among the major property types at 1.8%, while industrial returns increased to 1.5%, their highest level in four years. Hotel returns rebounded sharply to 1.4% after turning negative in the first quarter. Apartment returned 1%, while office posted the lowest return at 0.7% and was the only major sector to experience a quarterly decline. 

Cap rates, meanwhile, continued to show little movement. Retail and industrial cap rates were unchanged, office cap rates tightened by 10 basis points and apartment and hotel cap rates each increased by 10 basis points. National all-property prices rose 0.7% to their highest level in more than three years, driven by gains in retail and office. 

“Meeting of the Minds” features an extensive analysis of investor sentiment, performance metrics, capital market dynamics and sector-specific trends. For a full look at second-quarter performance, download the free, 25-page ValTrends report here. Learn more about SitusAMC Insights’ research, analytical tools or RERC data products on our website.