CRE Surges Back as Top Investor Pick Despite Deal Hesitation

CRE Climbs Back Into Favor

Commercial real estate has reclaimed its standing as the preferred asset class among investors, outpacing stocks, bonds, and cash, according to SitusAMC’s latest Q2 2026 investor preference survey reported by Globe St. CRE’s favorability rating climbed beyond its long-term average, marking a notable return to the optimism seen in 2025. Despite the renewed enthusiasm, the overall investment strategy remains conservative, as most market participants stick to ‘hold’ recommendations in light of ongoing financing and pricing uncertainties.

This shift comes after years of slow deal activity and lingering questions about CRE valuations. SitusAMC’s findings suggest investors are again drawn to the tangible advantages of real estate, even as actual transaction activity has yet to see a decisive rebound. Both cash and bond allocations have edged downward as a result, underscoring CRE’s renewed appeal but also the cautious stance toward deploying fresh capital into the sector.

Transaction Hesitancy Lingers

Lingering caution still defines the current CRE investment landscape. SitusAMC’s data show that most institutional investors continue holding their positions. Elevated borrowing costs and persistent valuation gaps remain major barriers to stronger dealmaking.

Meanwhile, economic uncertainty has lingered following the government shutdown, further complicating investment decisions across commercial real estate.

Buy and sell recommendations are also moving closer together. SitusAMC has not seen this convergence in several years. The shift could signal improving price discovery and a healthier deal market.

Broader Asset Preferences Emerge

SitusAMC reported a diversification in investor preferences across major CRE sectors. While apartments once dominated, capturing 60% of interest in Q1, by Q2 appetite had evened out. Industrial and office sectors each accounted for 16%, while retail, though still below the others, saw modest increases in investor allocation. That’s a significant shift from mid-2025, when apartments and industrial made up nearly 85% of preferences combined, relegating office and retail to single-digit shares. The broadening spread indicates a willingness to identify opportunity in property types that have previously underperformed—an especially notable development for office, which is showing tentative price stability after several challenging quarters.

According to MSCI Real Assets, the Commercial Property Price Index for office assets has finally climbed above its trough, with prices ticking up 0.6% in the latest monthly data.

Improved Sentiment Versus Harder Capital

CRE’s improved standing in investor surveys is not yet translating to a dramatic increase in available capital. Equity remains highly selective, with capital sources favoring strong sponsors, established markets, and stabilized assets. Debt availability is roughly matching its historical average—but lender underwriting is notably tougher than in previous cycles. SitusAMC notes that properties meeting core criteria can attract both debt and equity, but transitional assets, challenged locations, and those with near-term leasing risk face significant hurdles.

The gap between the availability of capital for high-quality assets and the rest of the market remains wide, even as overall sentiment warms. Transaction data echo this divide: CRE deal volume hit $42B in May (up 33% from April per SitusAMC), in line with average monthly trading levels since July 2022. Investors remain on the lookout for inflection points, but pricing standoffs and financing costs curb the path to meaningful volume recovery.

What’s Next

Looking ahead, the slow but steady narrowing between buyers’ and sellers’ expectations could lay the groundwork for higher deal flow in the second half of 2026—should interest rates stabilize or decline. Investors are likely to keep scrutinizing fundamentals and capital stack risks, especially as debt maturities start to pick up. With sentiment less concentrated on apartments and a more even spread across property types, new opportunities may emerge in underweighted sectors like office and retail. For now, expect selective capital deployment and incremental increases in transaction activity as the sector awaits a broader inflection point.