US commercial real estate (CRE) markets are witnessing a pronounced divergence as distress-driven sales volumes climb and institutional bid-ask spreads persist at elevated levels. According to MSCI Real Assets data for Q3 2025, distressed asset transactions are up 20% year-over-year, underscoring continued uncertainty in property valuation and cash flow prospects. This two-speed market is bifurcating capital behaviors, with liquidity gravitating toward stabilized or core assets and opportunistic trades dominating the distressed segment. Persistent pricing gaps are shaping capital flows, lending posture, and transaction timing across all major US markets.

Distress-related sales have increased sharply in 2025, particularly in major US gateway cities. MSCI Real Assets data show a 20% YoY rise in aggregate distressed transaction volume, reflecting mounting pressure on over-leveraged owners and challenged debt maturities. Office and retail assets account for the largest share of these sales, with New York, San Francisco, and Chicago featuring prominently. “Sellers are facing little choice as debt costs mount,” notes a managing director at a national brokerage. As a result, the visible crane lines at dawn in city centers now often signal repositioning, not expansion.

Value-weighted indices reveal that the gap between what sellers seek and what opportunistic buyers offer has not materially narrowed. Institutional bid-ask spreads remain well above pre-2023 averages, particularly for assets with uncertain leasing or future cash flow. The office sector illustrates this best: while distress transactions are clearing at discounts, stabilized properties see fewer forced trades, and deals are slow to close. By contrast, multifamily and logistics assets with stable income face less pressure, with spreads compressing only slightly. The consequence is a slow, uneven market where only the most urgent sellers transact.

Lenders have responded to elevated risk by focusing on core, stabilized assets, tightening credit for value-add or distressed plays. Credit spreads remain above 2022 levels, and local operators face higher hurdles in both pricing power and execution. Smaller investors, especially in secondary markets or higher-risk segments, report tougher financing terms and reduced leverage. Meanwhile, institutional capital remains risk-averse, preferring prime locations and lower-leverage structures. Ultimately, this dynamic reinforces the two-speed market: capital chases stability, while distress trades test new pricing floors.

If credit markets remain cautious and refinancing costs elevated, the division between distressed and stabilized asset pricing could persist well into 2026. The volume of forced sales may rise further if debt maturities outpace capital inflows. Should policy rates ease and liquidity return to riskier segments, distressed pricing could stabilize. On balance, the market’s ability to absorb continued distress without broad contagion will depend on lender discipline and the depth of opportunistic capital. For now, discipline—not optimism—defines the capital landscape.