As seen in GlobeSt.
Commercial real estate investors seeking clarity at year’s end will find nuanced but encouraging signals in the latest benchmarks from MSCI and CoStar. MSCI’s October data reveal a sustained recovery in commercial property prices, which posted their most substantial annual increase in three years. Yet deal volume has retreated as investors recalibrate amid policy uncertainty.
CoStar, meanwhile, foresees 2026 bringing lower yields across property types, fueled by rising transaction volumes and an upbeat pricing outlook. Together, these findings depict a market marked by renewed momentum and measured optimism, as sector performance and capital conditions continue to evolve.
Sector Price Trends and Volume
MSCI’s RCA CPPI National All-Property Index advanced 4.2% year-over-year in October, its largest jump since 2022, while monthly growth quickened to an annualized rate of 10.7%.
Despite a 22% decline in deal volume from the prior year as investors navigated fresh uncertainty following the government shutdown and resulting data delays, buyers remained willing to pay higher prices for assets.
Industrial property prices led sector gains, rising 4.9% year-over-year and extending a string of monthly improvements since May 2023, though the pace moderated slightly from 2024 levels.
CBD and suburban office prices rose 4.6% and 4.2% annually, with recent monthly gains—7.9% and 10% annualized, respectively—outpacing headline rates.
Retail prices climbed for the 17th straight month, up 4.7% from October 2024; monthly growth slowed to a 1.7% annualized rate.
Apartment prices, having endured a multi-year slump, logged a third consecutive month of annual gains, advancing 0.5% year-over-year and 3.6% annualized. Non-major metro areas notably outperformed major ones, with non-major composite prices rising 5.3% over the past year, compared with a -0.8% decline in major metros.
Outlook for 2026 and Capital Markets
CoStar’s latest capital markets forecast projects yields to ease further across all CRE sectors in 2026, building on a more bullish outlook than previously issued. It found that transaction volume surged 43% year-over-year in Q3 2025, underscoring broad-based deal activity across size, geography, and property type.
Cap rate compression has already unfolded in multifamily and industrial, especially for high-quality assets where vacancies have peaked and rent growth is once again accelerating, according to National Director Chad Littell.
Office and retail cap rates have mainly held steady, though “upward pressure on yields is easing and the outlook suggests similar movement or potentially lower levels ahead.” Improved liquidity and tighter corporate bond spreads further point to an environment conducive to lower cap rates as capital flows stabilize.
Taken together, these data suggest that while investor caution persists at the close of 2025, price growth, increased deal activity, and sector-specific tailwinds are setting the stage for a more competitive, dynamic CRE landscape heading into 2026. MSCI’s indexes offer reassurance that demand fundamentals remain intact, even as capital markets—per CoStar—appear poised for further yield compression and deal momentum in the coming year.
