Retail Investment Market Becomes More Selective

The Retail Investment Market Becomes More Selective

What Six Months of Retail Investment Activity Revealed

A DealGround National Retail Market Report

As 2025 drew to a close, there was a growing belief that the commercial real estate market was finally starting to gain momentum. Inflation appeared to be moving in the right direction, investors expected additional Federal Reserve rate cuts, and many owners assumed lower borrowing costs would bring more buyers into the market. The optimism was understandable after several years of elevated rates, limited transaction activity, and a persistent gap in expectations between buyers and sellers.

Two months into 2026, military conflict with Iran sent shockwaves through global markets, replacing optimism with uncertainty overnight. Treasury yields moved higher, expectations for rate cuts were pushed further out, and the market increasingly accepted that interest rates could remain higher for longer.

The results show a retail investment market that remained active but became considerably more selective. National transaction count declined 13.8%, while total aggregate dollar volume in the disclosure states fell 21.6%. The dollar-weighted discount from asking price to sale price increased from 5.2% to 13.5%. Median cap rates rose from 6.55% to 6.75% as buyers successfully negotiated lower purchase prices.

A 20 basis point increase in median cap rates may not, on its own, signal a market in meaningful pricing decline. In the context of today's market, however, it deserves further contemplation. Transaction volume has contracted to the point where the market is largely clearing only its best assets. If cap rates are moving higher under those conditions, the implications for everything below A-tier assets should not be underestimated. How cap rates behave over the remainder of 2026 may ultimately define this market. If cap rates continue to rise while only A-tier assets are consistently trading, downward pressure on pricing for B-quality and lower assets could accelerate.

These figures do not indicate a market in collapse. They describe a market in which buyers were still willing to transact but had become less willing to compromise. Good properties continued to sell. Private capital remained active. Sellers who priced properties realistically were able to complete transactions. The greatest slowdown appeared in larger deals.

Read the report here.

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The DealGround Team