Why tightening fundamentals and improving capital markets are setting the stage for CRE’s next cycle
Early signs from leasing activity and capital markets suggest the worst may be behind us. The...
Investor optimism is fading, distress is building, and capital is easing just enough to change how decisions get made in 2026.
The latest Q4 2025 Burns + CRE Daily Fear & Greed Index offers a clear snapshot of where commercial real estate stands heading into 2026: moving forward, but with less confidence than before .
The index rose modestly to 58, a level that still signals expansion. At the same time, optimism is thinning. Only 39% of investors expect to increase exposure in the next six months, the lowest reading since the survey began. That combination tells an important story. Capital conditions are improving, but conviction is harder to find.
What the numbers are really saying
Across sectors, sentiment is uneven but revealing:
- Retail leads investor confidence with a score of 61, supported by tight supply and steady tenant demand.
- Industrial remains strong at 60, continuing its multi-year run of stability.
- Office climbed to 53, exiting contraction territory for the first time in several quarters.
- Multifamily rose to 59, yet investor confidence in the sector has declined for four straight quarters.
Valuations reflect the same push and pull. Multifamily values fell 6% year over year and are expected to slip further in early 2026. Office values dropped 5%, though declines are beginning to level out. Retail and industrial posted modest gains and are projected to continue improving next year.
Distress is coming into focus
One of the most telling signals in the report is how investors view distress. Nearly three-quarters of multifamily investors expect more distressed sales ahead, followed by 54% of office investors. Multifamily also leads in the use of rescue capital, with a growing share of owners pursuing preferred equity to stabilize assets.
This does not point to a sudden collapse. It points to a longer period where pressure accumulates quietly and decisions become more consequential.
Capital is loosening, but not freely
For the first time in the survey’s history, investors report improved access to capital across all sectors. Falling interest rates are helping. Still, 64% of respondents kept exposure flat in Q4, citing borrowing costs and economic uncertainty.
In other words, capital is available, but only to deals that can support the math. That shift places more weight on underwriting discipline, operating assumptions, and timing.
Why this matters for 2026 planning
The market is not stalled, but it is selective. Investors are waiting. Lenders are cautious. Owners are facing more scrutiny around cash flow durability, rollover risk, and expense control.
This is where planning practices start to matter more than forecasts alone.
Teams that rely on static budgets are finding it harder to adjust as conditions evolve. Those that treat budgeting as an ongoing process are better positioned to respond as sentiment, capital costs, and fundamentals continue to shift.
At Kardin, we see this moment as a call for clarity. Not reactionary moves, and not blind optimism, but consistent reforecasting that reflects real performance and realistic assumptions.
Bottom line
The CRE market is inching forward, not racing ahead. In an environment like this, discipline is what separates prepared teams from exposed ones.
This article references third-party research and market commentary for informational purposes only. Kardin does not endorse or promote any specific investment strategies or external products mentioned. Kardin may use widely adopted third-party technologies on its website and internal operations, such as analytics and productivity tools, in the normal course of business.
