**CRE Yields Expected to Decline in 2026 as Deal Activity Expands**
Commercial real estate yields across property types in the U.S. are projected to decline in 2026, according to a recent forecast by CoStar. The drop in yields is being driven by an increase in transaction volumes and strengthening property prices. In Q3 of 2025, sales volume rose 43% year-over-year, indicating a broad resurgence in deal activity across all major asset sectors.
“The industrial and multifamily sectors have already seen cap rate compression since the latter half of 2024—especially for high-quality assets where vacancy rates have peaked and rent growth is beginning to accelerate,” said Chad Littell, National Director of U.S. Capital Markets Analytics at CoStar Group. “Office and retail cap rates, on the other hand, have remained relatively flat. However, the pressure that caused yields to rise is beginning to ease, suggesting that these sectors may also experience stable or declining cap rates in the months ahead.”
Additional indicators such as improved market liquidity and tightening corporate bond spreads are also contributing to the outlook for lower cap rates heading into 2026.
