For most of 2023 and 2024, commercial real estate capital markets operated under a simple dynamic: capital was available, but not on terms that most deals could support. Transaction volume fell, refinancing stalled, and owners who needed to sell or recapitalize found that the bid-ask spread was too wide to close. That dynamic is changing, and the pace of change heading into the second half of 2026 is meaningful enough that owners and investors who have been waiting for better conditions need to be paying attention.
The data makes the case clearly. CRE investment sales rose 19% year over year through Q3 2025, while debt originations surged 48% over the same period. The Mortgage Bankers Association forecasts a 24% boost in overall commercial real estate lending volume in 2026. Bank lending jumped 85% year over year through Q3 2025, and CMBS issuance is on pace to exceed $100 billion for the third consecutive year. Capital that sat on the sidelines for two years is moving.
What Is Driving the Recovery
The recovery in capital markets is being driven by two things: stabilizing long-term interest rates and improving property-level fundamentals across most asset classes. The 10-year Treasury has stabilized between 4.00% and 4.25% since mid-2025, calming the rate volatility that made underwriting nearly impossible at the peak of the rate cycle. Lenders who paused or sharply constrained lending activity in 2023 are re-engaging, and the terms available on quality assets are meaningfully better than what was available 18 months ago.
On the fundamentals side, the CRE Daily noted that experts attribute the transaction rebound to stronger leasing fundamentals and demand across logistics, data centers, and multifamily — not cap rate compression. That distinction matters. A recovery driven by improving NOI and occupancy is more durable than one driven by rate-driven cap rate compression. The assets that are trading are doing so because they are performing, not because buyers are repricing risk downward.
“Capital is available, investors are actively pursuing new opportunities, and lending conditions are improving. CMBS issuance in 2026 is projected to exceed $100 billion for the third year. The window that owners have been waiting for is open.” – CRE Daily and MBA 2026
Where the Midwest Fits
The return of institutional capital has been concentrated, so far, in gateway markets and the most liquid asset classes. But the BPM Mid-Year Outlook noted in June 2026 that underwriting teams are actively revisiting assumptions on secondary Midwest markets — Columbus, Indianapolis, Milwaukee, and by extension Metro Detroit — where fundamentals are strong and pricing remains accessible relative to coastal alternatives.
That attention is not yet fully reflected in transaction activity, which means the window for Midwest owners and investors to act before competition for quality assets intensifies is real. The conditions that historically precede a more competitive acquisition environment — improving liquidity, stabilizing rates, recovering fundamentals — are in place. The question is timing, and the timing favors the owners who start the process now.
What It Means If You Are Selling or Recapitalizing
For Midwest owners who have been waiting for a better environment to sell, refinance, or bring in a joint venture partner, the second half of 2026 is the window that has been discussed for two years. Lending is more accessible, buyer pools are deepening, and the pricing correction that made transactions difficult has largely played out for quality assets in strong submarkets.
The sellers achieving the best outcomes right now are the ones who came to market with current data, a clear understanding of their asset’s competitive position, and realistic expectations about pricing relative to today’s capital costs. The sellers who are struggling are still anchored to peak cycle valuations or are marketing assets with operational issues that have not been addressed before going to market.
What It Means If You Are Buying
For investors with available capital evaluating Midwest commercial real estate, the current moment is the entry point that the past two years of dislocation was supposed to create. Well-located assets at a new basis, with improving fundamentals and a recovering capital market behind them, represent the combination that long-term value creation requires. The window narrows as transaction activity increases and competition for quality assets grows.
How Friedman Can Help
Friedman Real Estate has been active in the Midwest commercial real estate market through the full cycle — the peak, the correction, and the recovery that is now underway. We work with owners evaluating their options, investors looking for acquisition opportunities, and capital partners seeking experienced operators in the Midwest market. If you want to talk through what the current environment means for your specific situation, reach out at friedmanrealestate.com.
