Higher borrowing costs continue to challenge commercial real estate investors, but interest rates alone are not determining the pace of transactions in 2026. New research shows that private investors, smaller transactions and longer-term investment considerations are helping sustain commercial property activity even as financing remains comparatively expensive.

Treasury yields declined earlier this year, initially improving investor sentiment and raising expectations that monetary policy could become more accommodative. That outlook later changed as yields increased by roughly 70 basis points and expectations shifted toward the possibility of higher rates later in the year. While those changes have put additional pressure on borrowing costs, Marcus & Millichap notes that commercial real estate transaction activity has historically not moved in lockstep with interest rates.

Instead, investor motivation, property fundamentals, local market conditions and long-term objectives can play equally important roles in determining whether a transaction moves forward.

Private investors have become an increasingly significant part of that equation. They have represented approximately 55% to 60% of commercial property acquisitions during the past five years, compared with an average share of about 50% during the five years before the pandemic.

Activity has been particularly strong at the smaller end of the investment market. During the first half of 2026, transaction volume exceeded pre-pandemic averages across all major price categories. Properties selling for between $1 million and $10 million recorded the largest increase, with deal activity nearly 39% above the average first-half pace recorded from 2015 through 2019.

Assets priced above $20 million also saw transaction counts approximately 22% above the earlier average, while properties in the $10 million to $20 million range were about 15% higher.

Single-tenant retail properties, smaller office buildings and industrial assets have experienced some of the strongest increases in private-investor participation, while apartment investment has seen more modest growth.

One reason private investors can remain active during periods of higher financing costs is that their investment decisions are often driven by more than near-term pricing. Estate planning, tax considerations, preservation of long-term wealth and familiarity with individual markets can all influence acquisition and disposition decisions.

That longer investment horizon may become increasingly important during the second half of the year.

At the same time, construction is slowing across the major commercial real estate sectors, reducing the amount of new supply entering the market. Demand growth remains moderate, but a stronger economic environment could eventually allow absorption to outpace new construction, helping improve property fundamentals.

For commercial real estate investors, the takeaway is that the current market cannot be evaluated through interest rates alone. Financing conditions remain important, but capital continues to move where investors see durable fundamentals, favorable supply dynamics and opportunities that align with longer-term investment objectives.

Source: Marcus & Millichap Research, Transaction Market Trends, September 2026