🚨The capital divide across U.S. CRE markets is now structural, not cyclical. Investors are concentrating capital in top-quartile assets — notably Class A multifamily, industrial, and life science — while avoiding transitional, high-CapEx, or low-credit deals. Green Street CPPI shows prime industrial and multifamily only 3–5% below peak, while non-core office and retail assets remain down 30–50%. Bid-ask spreads are narrowing exclusively at the top of the market. This segmentation is reshaping deal liquidity, valuation norms, and investor posture.
Class A Multifamily: –3% from peak pricing (Q3 2025) — [Source: Green Street CPPI].
B/C Office & Retail: –30% to –50% from peak — [Source: Green Street CPPI].
CRE Capital Raised in Q3: –17% YoY, 70% of funds allocated to top 15% of assets — [Source: JLL].
Cap Rate Spread: 320 bps between top-tier and tertiary assets (2025) — [Source: CBRE].
Loan Performance. DSCRs remain stable for prime income assets. Transitional deals face capital stack stress as exit assumptions reset. Lenders are discounting pro forma and repricing cap risk.
Demand Dynamics. Leasing demand favors stabilized, credit-tenanted assets. Vacant, high-TI properties struggle to backfill. Sunbelt Class C multifamily underperforms despite population growth.
Asset Strategies. Operators are delaying TI-heavy repositioning plans. Transitional deals require re-underwriting at 40–50% of peak basis. Fast-turn flips only pencil in trophy corridors.
Capital Markets. CMBS buyers and private credit funds price aggressively for low-risk product. B/C deals face haircuts, stricter terms, or no bids. Family offices targeting redemption-driven sales.
Capital is not flowing evenly — bifurcation is deepening.
Flight-to-quality drives compressed spreads for Class A income deals.
Investors want yield now — not growth later.
Re-underwriting required for all non-core assets.
🛠 Operator’s Lens
Refi. Strong income deals can still refi sub-6% with 55–60% LTV. Others face reappraisal gaps and higher cap assumptions.
Value-Add. Must underwrite long-term hold, >20% IRR, and assume 24-month backfill. No shortcuts.
Development. Only prime-located builds with pre-leased anchors or high NOI yield justify current costs.
Lender POV. Underwriting has shifted from pro forma to current income. Credit committees require real yield, not future upside.
Q4 appraisal season may trigger markdowns in funds still holding transitional assets at 2022 values.
REIT M&A activity expected to rise as smaller platforms face NAV pressure.
Capital flow to consolidate further — top 10 managers will capture most fundraising by Q1 2026.
CMBS and private debt markets will diverge in pricing risk — watch conduit spreads for liquidity signals.
Bisnow — “Capital Divide Widens: Top-Tier CRE Assets Leave Distressed Segments Behind” (Oct 4, 2025). https://www.bisnow.com/national/news/capital-markets/cre-investment-gap-widens-2025 Green Street — CPPI Index Report (Sept 2025). https://www.greenstreet.com/ CBRE — U.S. Cap Rate Survey (2025). https://www.cbre.com JLL — U.S. Capital Markets Mid-Year Update (Q3 2025). https://www.us.jll.com
