Robust Capital Chasing Too Few Deals: 2Q 2026 Field Notes

Commercial real estate (CRE) markets are awash with capital but with few opportunities to place it. While investor mandates are piling up, the high-quality, less risky deals that investors are often seeking in this uncertain economic and geopolitical environment are difficult to find. As a result, deal activity has stalled, with transaction volume plummeting in April to its lowest level in two years.

That’s according to SitusAMC’s Field Notes, which leverages our firm’s extensive touchpoints across the CRE landscape to provide a boots-on-the-ground perspective from professionals across the organization. It offers investors real-time market insights ahead of many traditional CRE data sources.

SitusAMC Insights’ proprietary data supports this view of an increasingly gummed-up CRE market. After showing potential signs of a market thaw at the end of 2025, investor preference to hold increased from 63% to 70% in the first quarter. The preference for buying dipped from 30% to 26% and the preference to sell decreased from 7% to 4%. Despite the quarterly decline, the buy rating is near its 10-year average.

Yet capital remains disciplined. Investors in SitusAMC Insights’ quarterly survey state that equity capital is focused on high-quality assets in desirable locations within top-performing markets. Debt investors are focusing on high-performing assets with strong historical performance. Lending standards have tightened considerably, with more rigorous and disciplined underwriting to ensure capital is allocated to the most resilient and fundamentally sound assets in the current market environment.  

Servicing, Asset Management & Advisory: Navigating Market Complexity

• Institutional investors are pressured to deploy capital and chase yield, but limited attractive opportunities and competitive pricing are making origination difficult.
• Real estate private credit is actively raising capital, with repeat commitments signaling a maturing market, even as broader private credit faces distress.
• Investors are exploring higher-yield niches, while borrowers favor flexible, shorter-duration collateralized loan obligations (CLOs) over CMBS amid rate uncertainty.
• Inflation and supply chain issues are increasing construction costs, slowing development activity and dampening new deal flow.

Real estate private credit is intensely raising capital despite the recent distress in corporate and commercial and industrial (C&I) private credit. Many debt funds are expanding into follow-on capital raises, often with investors in the previous fund re-upping into the next fund, as indicative of a maturing market. Institutional investors are under pressure to place capital and are chasing yield, but there is a lack of attractive deals. The new capital flowing into the markets is aggressive, leading some investors to sit on the sidelines.  

SitusAMC advisory clients are seeing a similar trend, with most having large mandates, but trouble originating due to a combination of fewer available opportunities and highly competitive pricing for desirable assets. Investors are beginning to explore alternative and higher-yielding asset classes, particularly data centers and skilled nursing facilities. Borrowers are favoring the floating-rate, shorter duration CLOs over CMBS, which allow for greater flexibility amid uncertainty over the direction of interest rates.

Several concerns are plaguing in the market. Most notably, inflation and global supply chain disruptions are leading to increased construction costs, contributing to reduced development activity, and slowing approval for new deals.  

CRE Debt & Securities Valuation: Intensifying Competition

• Debt markets are flush with capital, with tight spreads and strong lender demand driving highly competitive pricing across senior and mezzanine debt.
• Significant financing activity—especially in sectors like data centers—reflects growing deal sizes and investor appetite.
• Ongoing inflation and elevated interest rates pose potential challenges, particularly for fixed-rate financing.
• Investors remain optimistic overall, but the surge of capital chasing limited deals raises the risk of future market disruption.

Amid a robust capital raising environment, the debt capital markets are currently characterized by strong liquidity and tightening spreads, reflecting robust lender appetite across both senior and mezzanine positions, similar to the trend seen in SitusAMC’s Servicing, Asset Management & Advisory groups. Market participants are actively seeking lending opportunities, contributing to increasingly competitive pricing. Large-scale financing activity, particularly in sectors such as data centers, highlights the growing size and ambition of capital deployment.  

There are macroeconomic risks, including persistent inflation and elevated interest rates, which could create headwinds, particularly in the fixed-rate market. As capital chases deals, the potential for some sort of disruption is high. But for now, investors remain relatively bullish.

Special Servicing: Rising Distress and Recovery Opportunities

• Special servicing sentiment is optimistic despite increasing delinquencies driven by both expanding loan bases and weakening asset performance, with the maturity wall seen partly as a refinancing opportunity.
• Multifamily remains favored (despite cost pressures), while office assets continue to face significant risk and vulnerability.
• Hope notes are gaining traction, but advancing issues (lack of funds from servicers) are limiting the ability to execute recovery efforts, especially for large office properties.
• Outlooks are improving in some major markets like San Francisco and New York, while others such as Los Angeles continue to lag.

Delinquency rates are rising due to both an expanding loan base and declining asset performance. There is some concern about the maturity wall from bondholders and other money-placers, but this can be viewed as a refinancing opportunity. While investors remain bullish for multifamily, despite some concerns about operating costs, certain asset classes, particularly office, remain vulnerable.  

One strategy gaining attraction is hope notes (B notes for which lenders hope for substantial price appreciation to recover anything). Another hot topic is the advancing issue, in which the master servicer does not advance funds to the special servicer due to cash flow issues. Without these advance funds available, capital-intensive tenant improvements and leasing commissions will hinder recovery efforts, especially for large office buildings in receivership. Market performance varies, with improving outlooks in cities like San Francisco and New York contrasting with continued weakness in others such as Los Angeles.  

Valuation Trends: Alternative Assets Drive Returns  

• Values for the four main property types remain largely flat quarter-over-quarter, with asset-level volatility not significantly impacting overall portfolios.
• Certain pockets, like oversupplied Sunbelt multifamily and Inland Empire industrial, are showing softness.
• Sectors such as senior housing, student housing and data centers are leading returns, driven by stronger appreciation relative to traditional assets.

Valuations remain largely stable quarter-over-quarter, especially for the four core property types. While there is some asset-level noise—such as multifamily softness in oversupplied Sunbelt markets and continued pressure in Inland Empire industrial—these have not meaningfully shifted portfolio-level values.  

The more notable movement is occurring within alternative sectors, which are beginning to outperform on a relative basis, similar to what SitusAMC is seeing in the Servicing, Asset Management and Advisory groups. Senior housing, student housing and data centers are posting some of the highest returns due to the appreciation components, compared to flat performance in traditional sectors.  

Multifamily: Steady Investor Demand and Consistent Deal Flow

• Multifamily values are flat to slightly up, supported by steady investor demand and consistent transaction activity.
• Rent growth is flat nationally, with value creation coming more from asset-level performance, adjustment to cash flows, and stabilizing operating expenses (including easing insurance costs).
• Strong rent growth persists in supply-constrained coastal markets, while many Sunbelt markets continue to face oversupply pressures.
• Cap rates are increasingly bifurcated by asset quality, and legislative risks (e.g., rent caps) are creating uncertainty for investors.

Multifamily valuations are flat to slightly up, with continued investor interest. SitusAMC Insights’ quarterly survey of institutional investors showed growing optimism about multifamily in the first quarter, with 60% of investors selecting the segment as most favored, up from 44% in the previous quarter. Similar to recent quarters, investment rates have remained relatively stagnant, suggesting the latest price discovery continues to support the current investment rates.

Overall rent growth is roughly flat at the national level, with property performance and adjustments to cash flows driving value creation more than pricing. According to clients, operating expenses have largely stabilized, with insurance costs leveling off (or even retreating for some assets and markets). SitusAMC Insights’ most recent proprietary expense growth data support this, with rates unchanged for multifamily in the first quarter.

It is a story of the haves and have-nots for fundamentals. Supply-constrained markets such as major coastal cities, including San Francisco, Chicago, New York, South Florida and Orange County, are experiencing stronger rent growth. Many Sunbelt markets, including Phoenix, Austin, North Carolina, South Carolina, Nashville, Atlanta and Central Florida, continue to face pressure from recent oversupply.  

However, legislative risks, including caps on rent growth, are driving some investors to the sidelines, putting a damper on near-term transaction volume.  An emerging trend is the increasing bifurcation in cap rates based on asset quality, with 1990s and older vintage properties in the mid- to upper 5% range, and newer assets in the 5% or sub-5% range.  

Industrial: Solid Demand, Evolving Tenant Preferences

• Industrial demand remains solid, but elevated vacancy from recent supply additions is keeping rent growth muted.
• New development has slowed significantly, with mostly build-to-suit projects remaining, likely leading to declining vacancy over the next one to two years.
• Performance varies by region (strength in Dallas, softness in Inland Empire East), with a clear tenant preference for newer, high-spec buildings.
• Transaction volume is improving modestly, driven by core buyers targeting long-term, high-credit assets, while valuations remain largely flat and tied to rent growth.

Industrial sector fundamentals remain steady, with demand holding firm despite elevated vacancy levels, caused by recent supply additions. New development has slowed considerably, with much of the remaining pipeline consisting of build-to-suit projects, suggesting an eventual tightening of vacancy rates. SitusAMC Insights forecasts rent growth to remain muted in the near term, but accelerate in 2027 as excess supply is absorbed. Performance varies by market, with Dallas leading in leasing and rent growth, but softness persisting in Southern California, especially Inland Empire East.  

A flight to quality is evident, with tenants favoring newer buildings that offer enhanced features such as higher clear heights and greater power capacity. Transaction activity has picked up modestly, particularly among core buyers favoring assets with long-term leases and high-credit quality tenants. Overall, valuations are expected to remain relatively flat, with any changes driven primarily by rent growth rather than capital market shifts.

Retail: Strong Fundamentals and Limited Supply

• Retail is benefiting from limited new supply, rising occupancy and solid tenant sales, with investor demand rebounding after post-COVID caution.
• Leasing activity is robust, particularly in grocery-anchored and lifestyle centers, which continue to outperform.
• Valuations vary significantly by asset quality, with large cap rate spreads (up to ~400 bps) between top-tier and lower-tier malls, for example.

Retail fundamentals remain strong, supported by limited new supply, rising occupancy and solid tenant sales performance. Investor demand for most property subtypes is growing, following years of post-COVID hesitation, with some feeling they might be under-allocated to retail. Leasing activity is healthy across most retail formats, with grocery-anchored and lifestyle centers continuing to outperform. Renewal probabilities have been relatively steady in the last three years in the 65% to 67% range, slightly above their long-term average, according to SitusAMC Insights. However, retail pricing is highly dependent on asset quality. For example, cap rates on malls could range as much as 400 basis points (bps) between top-tier and lower-tier assets.  

Office: A Bifurcated Recovery  

• Office values are largely unchanged, with any upside coming from leasing activity and reduced capital expenditures and leasing costs.
• Top-tier Class A/A+ assets in major markets (e.g., New York, Boston) are performing well, while Class B offices continue to struggle.
• Demand from AI and tech tenants is supporting leasing in markets like San Francisco, Silicon Valley, and parts of Seattle.
• The once-booming life science segment remains under pressure, with rising vacancies and declines in market rents.

Office valuations remain largely unchanged, with pricing steady and supported by recent transactions. Any value creation comes from leasing activity and some burn-off in capital expenditures (CapEx) and leasing costs. Luckily, SitusAMC Insights’ proprietary data show slowing expense growth for the office segment, down 10 bps in the first quarter.  

Leasing assumptions have largely stabilized, reflecting market corrections over recent years. Performance continues to diverge sharply between the highest-quality assets and the broader market, with strong leasing activity concentrated in top-tier buildings in major markets such as New York and the Bay Area. Demand from AI and technology tenants is supporting leasing momentum in San Francisco and Silicon Valley and some submarkets in Seattle, like Bellevue.  

Class A/A+ office in primary markets like New York and Boston is performing well due to strong leasing, market rent growth, renewal probabilities and lowered downtime assumptions, but Class B office is underperforming.  

Life science, once a high-growth segment, remains under pressure, even in the top-tier markets of Boston, Cambridge and San Diego. In some cases, offices that were converted to life science over the past few years, which are experiencing substantial vacancy issues and declines in market rents, are being reconverted into traditional offices to claw back some cash flow.

Senior & Student Housing: Heightened Investor Interest  

• Limited new development and a growing aging population are driving high occupancy and strong rent growth in senior housing, fueling investor competition and tighter cap rates.
• Senior housing demand is strongest in the Sunbelt and more affordable care markets in the Midwest and Mountain West.
• Student housing occupancy and pre-leasing remain solid, but rent growth is cooling as operators use concessions to maintain retention amid rising online education trends.
• Student housing cap rates remain compressed at about 5% to 5.25%, especially for major state university assets.

Senior housing continues to exhibit strong fundamentals, driven by a widening supply-demand imbalance, as development activity remains significantly constrained. This is largely driven by high construction costs, land scarcity and tighter lending, with new completions about 70% below prior peaks. As the aging population grows rapidly, occupancy levels are strong, around 90%, with asking rent growth of approximately 5% year-over-year.  

This favorable operating environment has translated into increased investor competition, with tightening cap rates of about 25 bps and aggressive underwriting trends. Key geographic strength remains concentrated in the Sunbelt, due to the influx of retirees, and Midwest and Mountain West regions where care is more affordable.

Student housing fundamentals also remain stable, with healthy pre-leasing activity and strong occupancy levels. But rent growth is beginning to moderate as operators balance pricing with retention. Increased concessions are emerging as a tool to maintain occupancy amid rising demand for online education schooling. Cap rates remain relatively tight for major state university assets, in the 5% to 5.25% range.

Self-Storage: Regional Supply Imbalances

• Self-storage is working through excess supply, especially in Sunbelt markets, while supply-constrained regions like the Northeast are performing better.
• Investor appetite remains solid, highlighted by new fund launches and major transactions like Public Storage’s acquisition of National Storage Affiliates.
• Fundamentals are expected to improve as excess supply is absorbed, with seasonal demand (e.g., summer leasing) providing near-term support to rent growth.

The self-storage sector is currently working through a post-pandemic supply overhang, particularly in high-growth Sunbelt markets, where new deliveries have dampened revenue growth. In contrast, supply-constrained regions such as those in the Northeast are performing more favorably, benefiting from limited new development.  

Despite near-term operational pressures, institutional investor appetite remains strong, evidenced by market participants launching new funds, and the acquisition of National Storage Affiliates, one of the four largest storage REITs, by Public Storage. As the sector moves past peak supply, fundamentals are expected to gradually stabilize, with potential upside driven by seasonal demand patterns. The upcoming summer leasing season, historically a strong period for storage demand, may provide incremental support to rental growth.  

Manufactured Housing & Single-Family Rentals (SFR): Durable Demand Drivers

• Manufactured housing continues to deliver exceptional performance, strong occupancy and net operating income (NOI) growth driven by reliable tenant retention and consistent rent increases.
• Single-family rentals and build-to-rent communities benefit from a persistent rent-versus-own affordability gap, driving stable demand, high occupancy and steady net operating income and rent growth (largely from renewals).
• Proposed regulations (e.g., Road to Housing Act) targeting institutional ownership are creating uncertainty, particularly for scattered-site strategies, and may force future asset sales.
• Transaction volume is lower, but investors remain interested, underwriting aggressive cap rates, with regional shifts favoring the Midwest as some Sunbelt markets face oversupply.

Manufactured housing remains one of the strongest performing segments, characterized by consistently high occupancy levels and strong, durable rent growth. The sticky tenant base enables operators to maintain occupancy of around 98%, while expanding net operating income (NOI) growth through mark-to-market rent increases. While it is common to have in-place rents of 30% to 50% below market, operators are able to institute 5% to 8% rent bumps year over year.

SFR and build-to-rent (BTR) communities also maintain strong fundamentals, supported by favorable rent-versus-own affordability dynamics and stable tenant demand. Most assets are seeing contractual rent increases reaching market rates.

However, the sector faces increasing legislative scrutiny, particularly through the proposed “Road to Housing Act,” which targets institutional ownership of single-family homes. While potential changes to the bill may mitigate its impact, especially for BTR strategies, ongoing uncertainty is weighing on investors as it would force them to sell assets within seven years of completed construction.  

Scattered-site strategies, in which investors buy existing single-family housing stock in bulk, have been targeted by the proposed legislation, as investors can box out individual homebuyers from the market by paying higher prices with cash offers. While there is still a slight weight of institutional ownership to scattered-site acquisitions, many institutions are moving away from this strategy. Some of the largest players in the space, like AMH, were net sellers in 2025, off loading about 1,800 homes to individual buyers. Additionally, many major players have shifted in recent years to only built-to-rent properties.  

Transaction volume is down compared to the last couple of years, but there have been some SFR trades over the last few months. Even in the uncertain environment, investors are showing a willingness to underwrite relatively aggressive yields to gain exposure to the segment, with pricing on many deals falling to a cap rate range of 4% to mid-5%.

Fundamentals remain strong, with positive trends in NOI, occupancy and revenue growth. Revenue gains are primarily driven by renewal rent increases, reflecting the stickiness of SFR tenants, who are less likely to move frequently than apartment dwellers. Demand continues to be supported by a persistent affordability gap, with homeownership typically costing about $1,000 more per month than renting.  

The Sunbelt is performing well overall, but some oversupply in these markets has led to a shift toward the Midwest in terms of rental growth.  

Data Centers: Capitalizing on AI-Driven Demand

• Data centers are experiencing rapid growth driven by AI and GPU-intensive computing demand, but power availability is a major limiting factor and source of risk.
• While fundamentals are very strong, the pace and scale of expansion create uncertainty around future rent growth and long-term pricing assumptions.
• Significant variation across facility types makes standardized valuation difficult, requiring highly tailored analysis.

Data centers remain a high-demand, high-growth segment, driven primarily by accelerating demand from AI and GPU-intensive computing. Power availability has become the critical constraint, introducing both operational risk and valuation complexity as concerns around outages and infrastructure capacity increase.  

From an appraisal perspective, the sector presents challenges due to its heterogeneity, with significant variation across hyperscale, colocation and enterprise facilities. This limits the ability to apply uniform assumptions for rent growth, cap rates and discount rates. As a result, valuation analysis requires a highly asset-specific approach, with a strong emphasis on understanding underlying operational drivers. While demand fundamentals remain exceptionally strong, the tremendous pace and scale of growth introduce uncertainty around how and when to build in additional market rent growth.

Explore more of SitusAMC’s resources and insights on our website. Learn more about SitusAMC research, analytical tools, and data products here. 

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