As 2026 approaches its second quarter, commercial real estate is entering a period of recalibration, with capital markets offering early but measured signals of renewed momentum. After several years of disruption and repricing, the market is showing signs of stabilization, though activity remains selective and disciplined. Kidder Mathews, the largest fully independent commercial real estate firm in the Western U.S., shared insight with GlobeSt.com on how these shifts are shaping the broader commercial real estate landscape.
Industry experts at Kidder Mathews describe the current environment as a “reset,” a cautiously optimistic reopening characterized by returning capital and heightened scrutiny around asset quality, execution, and fundamentals.
“Price discovery has largely occurred, but liquidity remains disciplined and highly asset-specific, particularly on the West Coast,” says Fred Aframian, Kidder Mathews SVP and Managing Director in Sherman Oaks. With interest rates showing stability, investors are targeting “assets that can defend their fundamentals.”
“CRE capital markets are no longer in free fall, but they are also far from a broad-based rebound,” adds SVP Paula Danker, CCIM in Kidder Mathews’ San Diego office. “The reset phase has largely played out. Asset values have repriced, and market participants now share a more realistic view of where true pricing sits. That clarity, more than rate cuts alone, is what is unlocking activity.”
The Fed vs. The Spread
While the Federal Reserve’s actions prior to September 2024 were intended to cool rising inflation, more recent interest rate cuts have helped restore a degree of predictability for investors. With rates now more stable, Jim Henderson, SVP and debt and equity finance expert in San Francisco, cautions against basing decisions on interest rate expectations in 2026, noting that current rates are near their 60-plus year historical average.
“The more important takeaway is that lenders are competing for fewer deals,” says Brad Kraus, EVP, debt and equity finance expert in Century City. “That competition is tightening spreads and making rates and terms more attractive to the borrowers seeking capitalization.”
Volume and the ‘Bullseye’
Transaction volume is beginning to show signs of life as the expectation gap between buyers and sellers continues to narrow. Maturing debt must be addressed, and the abundance of available capital is eager to be deployed.
“Transactions are happening where sellers are realistic, debt is executable, and the business plan is clear,” says Aframian. “West Coast markets are prioritizing certainty over volume.”
Cap rates are rising for office assets as sellers become increasingly motivated, while remaining relatively stable across most other property types amid ongoing interest rate uncertainty and slow economic growth, according to David Hill, SVP in Portland. Aframian adds that infill industrial, necessity-based retail, and well-located multifamily properties continue to attract steady interest, leading in some cases to modest cap rate compression.
“There is an inflection point in every deal where the anticipated return on investment hits the bullseye,” notes Kraus. “More sellers are starting to meet the market there.”
The Refinancing Wall and the Rise of Private Credit
As the widely discussed refinancing wall approaches, pressure is mounting from both sides of the table. Lenders are increasingly focused on loan repayment or right-sizing, often requiring borrowers to inject additional equity. At the same time, investors are eager to see capital returned.
This dynamic has created fertile ground for private credit and alternative lending solutions. Preferred equity, in particular, has gained significant momentum, as traditional lenders remain unable, or unwilling, to underwrite projects that are likely candidates for refinancing.
“For the most part, this is opportunistic capital seeking higher returns in exchange for higher risk,” says Kraus. “Without it, commercial real estate defaults would be on the nightly news and in everyone’s social media feeds.”
Looking Ahead
As the industry moves further into 2026, attention remains squarely on the Federal Reserve. The impact future decisions will have on short- and long-term borrowing rates, the Treasury market, and lender spreads will remain critical. Investors are also closely monitoring refinancing volume and geopolitical factors.
For now, capital is ready and waiting. The pace of recovery will depend less on availability and more on how quickly the rest of the market can align to meet it.
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