Key Takeaways
- • CBRE expects commercial real estate investment activity to rise approximately 16% in 2026, according to the article, signaling renewed institutional reengagement after a post-2022 valuation slump.
- • Acore Capital CIO Kyle Jeffers argues the market is only in the early years of a new cycle, describing the prior run-up as roughly 14 years from 2008 to 2022.
- • Data centers are the standout sector, with developers reportedly achieving yields on cost of 9% to 12%, per Partners Capital managing director Jeff McDonnell, and power availability now the primary growth constraint.
- • Institutional capital is shifting toward CRE credit and net lease investments that offer contractual cash flows and downside protection, per LNL Capital's Todd Stender and Jeffers.
- • Industrial and multifamily assets in core markets are viewed as lower-correlation portfolio diversifiers, though real estate has not served as an inflation hedge over the past five years, per McDonnell.
Summary
Institutional real estate has struggled since the COVID-19 pandemic. Following a decade-long bull market fueled by low interest rates, property values have fallen significantly from their highs since 2022. Transaction activity is now recovering, and a growing number of managers argue the asset class is entering a new investment cycle. According to CBRE, commercial real estate investment activity is expected to have increased by approximately 16% in 2026.
Kyle Jeffers, CIO of real estate credit manager Acore Capital, characterizes the current period as early in a cycle. He notes that the market bottomed in 2023 and 2024 amid uncertainty over values and the rate environment, with transaction activity returning in 2025 and 2026. Comparing the roughly 14-year run-up from 2008 to 2022, he argues the sector is in only its second or third year of recovery, citing solid demand fundamentals and limited new supply as reasons to favor CRE credit.
Todd Stender, managing director at LNL Capital, says the 2022-23 rate spike reset valuations and that institutional capital is moving toward contractual cash flows. He reports increased capital deployment into net lease opportunities, which he attributes to attractive yields, tenant credit and long-duration leases. Investors, he says, are prioritizing income over expectations of cap rate compression.
Data centers have emerged as a prominent segment, driven by demand for infrastructure supporting the artificial intelligence boom. According to the article, CBRE expects data-center leasing to keep growing, with power availability rather than tenant demand now the primary constraint. Delivery timelines for large industrial gas turbines are five to seven years, and 18 to 36 months for smaller power generation equipment, according to news reports cited in the article. Jeff McDonnell, managing director at Partners Capital, said developers have achieved yields on cost of 9% to 12%, with stabilized assets trading at roughly 5% to 6% and development margins often exceeding 50%. Jared Gross, head of institutional portfolio strategy at JPMorgan Asset Management, said he sees no force diverting capital from the sector despite political debate over data centers ahead of the 2026 midterm elections.
Beyond data centers, investors are looking at industrial, commercial and multifamily assets in core markets where construction has slowed and supply is limited. McDonnell described real estate as a diversifying asset within multi-asset portfolios, acknowledging that it has not performed well during the past five years of higher inflation and has not functioned as an inflation hedge, though he expects industrial and multifamily to show relatively low correlation to other portfolio drivers.
Jeffers said investors who previously bought commercial real estate equities for attractive returns lost money through the downcycle, and that institutional capital is now favoring CRE debt. He cited a structure at 65% loan-to-cost with 35% subordination on a reset value as offering risk-adjusted returns with downside protection. He said asset owners have increased allocations accordingly.
Kyle Jeffers, CIO of real estate credit manager Acore Capital, characterizes the current period as early in a cycle. He notes that the market bottomed in 2023 and 2024 amid uncertainty over values and the rate environment, with transaction activity returning in 2025 and 2026. Comparing the roughly 14-year run-up from 2008 to 2022, he argues the sector is in only its second or third year of recovery, citing solid demand fundamentals and limited new supply as reasons to favor CRE credit.
Todd Stender, managing director at LNL Capital, says the 2022-23 rate spike reset valuations and that institutional capital is moving toward contractual cash flows. He reports increased capital deployment into net lease opportunities, which he attributes to attractive yields, tenant credit and long-duration leases. Investors, he says, are prioritizing income over expectations of cap rate compression.
Data centers have emerged as a prominent segment, driven by demand for infrastructure supporting the artificial intelligence boom. According to the article, CBRE expects data-center leasing to keep growing, with power availability rather than tenant demand now the primary constraint. Delivery timelines for large industrial gas turbines are five to seven years, and 18 to 36 months for smaller power generation equipment, according to news reports cited in the article. Jeff McDonnell, managing director at Partners Capital, said developers have achieved yields on cost of 9% to 12%, with stabilized assets trading at roughly 5% to 6% and development margins often exceeding 50%. Jared Gross, head of institutional portfolio strategy at JPMorgan Asset Management, said he sees no force diverting capital from the sector despite political debate over data centers ahead of the 2026 midterm elections.
Beyond data centers, investors are looking at industrial, commercial and multifamily assets in core markets where construction has slowed and supply is limited. McDonnell described real estate as a diversifying asset within multi-asset portfolios, acknowledging that it has not performed well during the past five years of higher inflation and has not functioned as an inflation hedge, though he expects industrial and multifamily to show relatively low correlation to other portfolio drivers.
Jeffers said investors who previously bought commercial real estate equities for attractive returns lost money through the downcycle, and that institutional capital is now favoring CRE debt. He cited a structure at 65% loan-to-cost with 35% subordination on a reset value as offering risk-adjusted returns with downside protection. He said asset owners have increased allocations accordingly.
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