Due to factors ranging from political to economic, commercial real estate capital availability has been mixed at best over the past several years. As the calendar flips to 2026, will there be enough debt and equity to finance CRE activities?

The answer is: it depends. Experts tell Connect CRE that investors are returning and capital markets are stabilizing. “Investors we’re speaking with are more encouraged about real estate’s prospects than they have been in recent years,” said Tricia Peterson, managing partner and COO with the Accord Group.

On the other hand, there are still numerous macroeconomic risks. “The labor market has shown some signs of softening, and as more government data comes back online, we could see some surprises in inflation or employment that reset expectations,” according to Robert Durand, KBS’s Executive Vice President, Finance. “Any negative surprises there could slow momentum.”

Debt, Equity, and the Rear-View Mirror

So, how did capital markets perform in 2025? As stated above, it depends.

On the one hand, the experts indicated that the flow of liquidity toward real estate transactions improved. “Debt funds were initially active,” explained Cox, Castle & Nicholson Partner Katherine Bissett. “Regional and money center banks came back to the market, as well.”

David Pittman, Bonaventure’s Head of Capital Markets and Northwind Group Founder and Managing Partner Ran Eliasaf added that institutions were more involved with commercial real estate than in the past. Additionally, “investors are gradually re-engaging with real estate after a period of extreme caution,” Pittman said.

As a result, “this past year marked a clear turning point in overall market conditions and sentiment,” said Steig Seaward, Colliers’ Senior National Director of Research.

Still, 2025 was far from an investor free-for-all backed by a wide-open liquidity spigot.

“Investor confidence improved, but stayed selective,” Eliasaf observed. Steven Buchwald agreed, explaining that the 2025 capital markets environment was mostly conservative and risk-averse. The exceptions? Multifamily and industrial. “These two asset classes experienced significant competition for existing assets, while other sectors remained subdued,” said Buchwald, who is senior managing director of capital markets for Institutional Property Advisors.

Meanwhile, Peterson commented that the past year was challenging for real estate capital fund investors, despite the initial optimism in the first quarter. “Limited capital availability proved to be a major constraint,” she said. “Many investors hesitated to commit to new programs or strategies, because they received smaller distributions from existing portfolios, and had little clarity on when future distributions might occur.”

As a result, “the 2025 capital markets environment defined a cohesive narrative,” said Altus Group Senior Director, Research Omar Eltorai. He explained that the robust consumer and corporate data masked the reality that a select few drove growth.

“This disconnect, compounded by growing data skepticism, fractured investor confidence into two sharp perspectives: pessimists seeing bubbles or destructive change ahead, and optimists seeing necessary investment in innovation for the next structural revolution,” Eltorai noted.

Where the Rates Rambled

Following a long-term pause, the Federal Reserve cut its Effective Federal Funds Rate (EFFR) three times in 2025, resulting in a range of 3.5% to 3.75%. Despite this, the interest rate “didn’t hit where the market had expected it to do,” Pittman commented. This meant that some investors came back to the market, “but they didn’t unlock transaction volume to the degree that many had hoped,” Durand added.

Buchwald added that volatility impacted short-term rates versus “the long end of the curve,” while Seward explained that the benchmark mainly benefited borrowers carrying floating-rate debt.

The question is whether—and how—the Fed’s actions might impact capital costs and availability.

According to David Frosh, the consensus is that higher rates will likely continue through the next year, which would impact residential and commercial real estate investments. “Inflation is still an issue and could cause a reversal in Fed policy,” said Frosh, who is CEO of Fidelity Bancorp Funding.

At the same time, it appears that pricing is approaching normalization for the current environment. “No one is expecting a return to 0% rates, but we are entering an environment where the cost of capital finally allows for positive leverage,” said Greysteel’s Director of Debt Placement Ralph Rader.

But the experts cautioned that investors should pay attention to more than EFFR cuts. Buchwald indicated that any outlook concerning the Fed doesn’t “account for broader economic conditions or the accelerating effect of AI.” As such, “persistent inflation, a growth scare, or some surprise event could push yield in either direction,” Eltorai observed. Added Peterson: “I think it is likely that 2026 market performance will be driven more by broader economic and political ‘noise’ rather than rate cuts.”

Then, There is the Bid-Ask Gap

It’s not news that, in the area of pricing, buyer and seller expectations have been far apart. “Since late 2023, sellers have generally sought pricing above what buyers are willing to pay,” Pittman said.

Still, “with increased transaction activity, pricing has become less opaque than during the Fed’s rate hikes,” Seaward said. Additionally, “distressed sellers have become more realistic, and buyers are more confident underwriting future rates,” Frosh commented. “The market is getting closer to speaking the same language, although some assets will still require translation.”

The experts cautiously forecast a full price recovery and a narrowing of the bid-ask divide in 2026. “Sellers have finally accepted that 2021 valuations are the exception, not the rule, and the pressure of loan maturities is forcing assets to market,” Rader explained. “The principals on the front lines have already digested this reality. Now, we’re seeing the institutional equity partners adjust their return hurdles to match the current environment.”

But Eliasaf cautioned against a broad-brush prediction. “Assets exposed to higher political or regulatory uncertainty may continue to see wider gaps, relative to more straightforward, policy-stable markets,” he said.

Investor Behavior: 2026 Style

So, in an environment marked by new pricing discoveries, a (fairly) high EFFR, and a continued uncertain economic and political background, what will investors see as their best bet?

The answer once again? It depends.

“In 2026, investors are leaning into a barbell approach that favors both the safest and the most opportunistic deals,” Fidelity Bancorp Funding’s Frosh said. He explained that core assets will be attractive due to stable income and predictable performance. “At the same time, more investors are pursuing opportunistic deals created by volatility, including distress, recapitalizations and assets that require meaningful repositioning,” he said.

On the opportunistic, value-add side, Buchwald with IPA predicted more money directed toward value-add and opportunistic plays, especially as “investors continue to focus on existing assets acquired below replacement cost, especially as yields compress across the capital stack,” Buchwald said.

Durand agreed, pointing out that value-add and opportunistic strategies generate pricing that better reflects uncertainty, as well as room to create upside. “That’s true in office, and to a lesser extent in multifamily and logistics, where slower rent growth has taken some of the wind out of exit assumptions,” he said.

Additionally, investors could find more control over outcomes with a value-add approach. “There is interest in acquiring high-quality core-plus assets from sellers who are motivated, but the volume of true distress has been limited,” said Pitman, with Bonaventure. “Because of that, the competition is greater and could limit the return potential.”

Still, “predictability is the highest-valued commodity in this shifting market,” Rader commented. “Investors are prioritizing positive leverage and immediate cash-on-cash yields.” He went on to say that a flat-rent environment is making value-add plays riskier and more difficult. As such, “the smart money is moving toward stabilized assets that offer a safer, albeit more modest, return profile,” Rader said.

Eyeing Potential Risks

Even in a somewhat normalizing capital environment, there are risks for the 2026 CRE investor, the main one being uncertainty.

“Investors tend to dislike uncertainty, and unexpected events such as geopolitical conflict, war, health crises, or natural disasters could disrupt real estate markets and the broader economy,” Colliers’ Seaward said.

Other issues that could add difficulty to capital markets in the coming year include:

• Economic. Pittman said that CRE capital’s top market risk in 2026 could be a broader economic slowdown, “especially if rising unemployment starts to put pressure on fundamentals. Seaward added that an inflation resurgence or recession “would weigh heavily on market conditions, particularly lending and liquidity.”

• Geopolitical. Durand pointed out that issues involving Ukraine, the Middle East and Latin America could slow lending and investment momentum. Furthermore, “ongoing uncertainty around trade and tariffs continues to hang over the market,” he said.

• Debt Maturities. Each year seems to bring news of a trillion-plus-dollar load of maturing loans, and 2026 won’t be any different. Said Fidelity’s Frosh: “Many properties still face loans maturing in a higher rate environment, which creates ongoing stress for assets with weak cash flow or inflated 2021 valuations.”

• Policy. Eltorai, with Altus Group, explained that key policy areas to watch include monetary, fiscal, housing, and banking, to name a few. “Policy was a key driver of market volatility in 2025, and yet there was surprisingly little definitive clarity by the end of the year,” he said. While it’s uncertain whether clarity will occur in 2026, “it will almost certainly make a lot of noise,” Eltorai noted.

• Politics. Frosh predicted that a midterm election year could lead to market swings. Eltorai added that legislative uncertainty could exist “due to midterm elections and potential regulatory shifts at both a national and local level.”

• Operations. Cox, Castle’s Bissett said that higher property operations expenses can be added to a pile of risks. “The increased cost of insurance and other operating expenses puts pressure on investors that can’t be compensated with modest rate cuts,” she added.

Still, if there’s any good news, it’s that CRE investors are able to roll with the punches. “They’re less reactive than they were a year ago,” Durand said. “Capital wants to get put to work. While the risks are real, the market is learning to operate through the uncertainty instead of waiting for it to completely clear.”

Advice to the 2026 Investor

Finally, the experts suggested that adaptability, research and information will be the investor’s best friend in obtaining capital and targeting CRE assets. “Investors should emphasize liquidity planning, rigorous underwriting, and smarter use of data to navigate opportunities as the market returns to balance,” Frosh advised.

Rader with Greysteel suggested that discipline and liquidity will be essential for success in the coming year. Opportunities should be analyzed on their merits, and investors should understand the assets’ basis, he added. Northwind Group’s Eliasof agreed, adding that “investors who focus on structure, basis and execution, rather than headline optimism, will be best positioned.”

Durand supported the idea of analyzing each deal individually, rather than applying broad assumptions. “Understanding asset-level fundamentals, being open to less crowded parts of the market, and aligning capital with experienced operators matter,” he said.

Meanwhile, Eltorai said that there could be a potential for federal data to go dark if the federal government shuts down again. “Market participants should prepare by familiarizing and diversifying their data sources to avoid flying blind during potential disruptions,” he commented.

Overall, the consensus was that investors who operate with discipline and agility will be best positioned to succeed in obtaining capital for investment. “Capital markets are steadier but still not fully recovered, and success will come to those who act early with intention,” Frosh explained. “The coming year will reward prepared, patient and brave capital, often in that order.”