**Putting Capital Markets Under the 2026 Microscope**
Commercial real estate (CRE) capital availability has seen volatility over the past few years due to both political and economic factors. As 2026 begins, the key question on the minds of industry stakeholders is: Will there be enough debt and equity to finance CRE activities?
According to industry experts, the answer largely depends on a confluence of variables. Tricia Peterson, Managing Partner and COO of the Accord Group, notes that market sentiment has improved. “Investors we’re speaking with are more encouraged about real estate’s prospects than they have been in recent years,” she said.
However, economic uncertainty remains a potential risk. Robert Durand, Executive Vice President of Finance at KBS, warned that “the labor market has shown some signs of softening,” and incoming data could reset inflation and employment expectations, potentially slowing momentum.
### 2025 in Review: Debt, Equity, and Opportunity
Capital markets in 2025 presented a mixed picture. There was a noticeable uptick in liquidity, with debt funds becoming more active and both regional and money center banks re-entering the scene. Katherine Bissett, Partner at Cox, Castle & Nicholson, confirmed, “Debt funds were initially active… and money center banks came back to the market.”
David Pittman, Head of Capital Markets at Bonaventure, and Ran Eliasaf, Founder and Managing Partner of Northwind Group, noticed increased institutional activity. “Investors are gradually re-engaging with real estate after a period of extreme caution,” Pittman observed.
This cautious optimism marked a turning point in sentiment. “The past year marked a clear turning point in overall market conditions,” said Steig Seaward, Colliers’ Senior National Director of Research.
Yet, this wasn’t a free-flowing market. Eliasaf clarified that investor confidence was still selective. Steven Buchwald, Senior Managing Director of Capital Markets at Institutional Property Advisors, added that capital deployment remained conservative. Multifamily and industrial sectors stood out, however, as they garnered increased competition.
Despite early optimism, limited capital availability constrained many investors. “Many investors hesitated to commit to new programs or strategies,” Peterson said, underscoring ongoing uncertainty over portfolio distributions and returns.
Omar Eltorai, Senior Director of Research at Altus Group, pointed out the disconnect between robust data and actual market fundamentals. “This created two camps: pessimists concerned about bubbles and optimists focused on long-term innovation,” he remarked.
### Interest Rates and Capital Costs
In 2025, the Federal Reserve cut its Effective Federal Funds Rate (EFFR) three times, landing it in a range of 3.5% to 3.75%. While these rate cuts encouraged some investor returns, they didn’t trigger the anticipated surge in transaction volume.
Pittman noted that rates failed to meet bullish market expectations. Durand added, “They didn’t unlock transaction volume to the degree that many hoped.” Buchwald highlighted continued volatility in short-term rates, while Seaward noted the rate cuts largely benefited borrowers with floating-rate debt.
David Frosh, CEO of Fidelity Bancorp Funding, warned that inflation remains a concern and could prompt a reversal in the Fed’s policy. Still, pricing seems to be stabilizing. “We’re entering an environment where the cost of capital allows for positive leverage,” said Ralph Rader, Director of Debt Placement at Greysteel.
Peterson suggested that broader issues—not just interest rates—could drive 2026 market behavior. “Economic and political ‘noise’ may ultimately overshadow rate policy,” she said.
### Navigating the Bid-Ask Gap
Disparities between buyers and sellers persisted into 2026. “Since late 2023, sellers have generally sought pricing above what buyers are willing to pay,” explained Pittman.
However, increased transaction activity has helped clarify pricing. “Distressed sellers are more realistic, and buyers are more confident in underwriting future rates,” noted Frosh. Rader emphasized that sellers are now accepting that 2021 valuations were exceptional cases. “Loan maturities are placing pressure on assets, helping to close the gap,” he said.
Even so, asset risk can impact price alignment. “Assets exposed to political or regulatory uncertainty may continue to see wider gaps,” Eliasaf cautioned.
### Forecasting Investor Behavior in 2026
Investor strategy in 2026 appears to be bifurcated. “Investors are leaning into a barbell approach, focusing on both the safest and most opportunistic deals,” Frosh explained. Core assets offer income stability, while market volatility is creating value-add opportunities.
Buchwald predicted greater capital flows into value-add and opportunistic plays, particularly driven by assets trading below replacement cost. Durand noted these strategies create opportunities in sectors like office, logistics, and multifamily.
But with limited distress, Pittman observed that competition for core-plus assets may restrict return potential. Rader emphasized that investors are prioritizing predictable yields. “Flat rent environments make value-add deals trickier,” he said. As a result, a shift toward more stabilized, lower-risk assets is likely.
### Risks to Watch in 2026
Uncertainty remains the key risk across CRE capital markets. “Geopolitical conflict, health crises, or natural disasters could disrupt markets,” warned Seaward.
Key risk categories include:
– **Economic:** Pittman cited a slowing economy and rising unemployment as significant threats. Seaward added that inflation or recession could further restrict liquidity.
– **Geopolitical:** Durand pointed to matters in Ukraine, the Middle East, and Latin America, adding that lingering trade and tariff issues also challenge investor confidence.
– **Debt Maturities:** Frosh noted many properties face expirations in a higher-rate environment, elevating pressure on assets with weak cash flow.
– **Policy Uncertainty:** Eltorai emphasized the role of fiscal, monetary, housing, and banking policy in market direction, noting that “policy turbulence” from 2025 may extend into the new year.
– **Political Factors:** Frosh stressed potential market volatility tied to midterm elections. Eltorai warned of legislative uncertainties at local and federal levels.
– **Operational Costs:** Bissett said rising property operation expenses, including insurance, could dampen investor returns.
The good news? Investors are becoming more resilient. “They’re less reactive than a year ago,” said Durand. “Capital wants to be deployed. Investors are adapting to uncertainty rather than waiting it out.”
### Expert Advice for Investors in 2026
In a complex and evolving landscape, experts agree that knowledge, liquidity, and flexibility are critical to success. Frosh recommends emphasis on liquidity planning, rigorous underwriting, and smart data use.
Rader underscored the importance of discipline, stating that assets should be analyzed on their own merits. Eliasaf added that “a focus on structure, basis, and execution will outperform headline optimism.”
Durand called for a practical approach: “Understand asset-level fundamentals, look beyond crowded markets, and invest with experienced operators.”
Eltorai stressed preparation, particularly in light of potential data disruptions. “Familiarize and diversify your data sources now to avoid flying blind later,” he advised.
In conclusion, while capital markets may not be back to full strength, there is opportunity for those willing to do their homework. “The coming year will reward capital that is prepared, patient, and brave,” Frosh said. “Success will belong to those who act early—and with intention.”
