Institutional Capital Returning to Net-Lease, Select Office Assets
Commercial real estate investment showed meaningful signs of stabilization in the first quarter of 2026, as institutional capital returned to select sectors, cap rates largely held firm and industrial assets continued commanding the lion’s share of transaction volume, according to new data from Northmarq.
Single-tenant investment sales totaled nearly $12.9 billion in Q1, declining 24.1% from Q4 2025 but edging up 0.9% year-over-year. Cap rates dipped three basis points to 6.81%, remaining consistent with 2025 averages. Industrial dominated single-tenant activity, capturing 59.9% of volume at $7.7 billion, up sharply from 48.6% a year ago, while retail and office contracted to 20.9% and 19.2% respectively.
“We are witnessing a structural shift rather than a temporary peak, driven by the permanent expansion of e-commerce, the reshoring of manufacturing, and the ongoing need for resilient supply chains,” RJ Vara, SVP at Northmarq, told Connect Money. “Industrial assets will persistently dominate investment portfolios because they offer highly predictable cash flows with much less legislative headwind. This overweight is the new baseline for commercial real estate allocations.”
Institutional investors surged to 28% of single-tenant acquisition volume, up 8% year-over-year, while private buyers slipped to 46% from 52% in 2025. In single-tenant office specifically, institutional share jumped to 40%, up 17% from 2025, as REIT activity climbed from 4% to 10%, signaling growing conviction that pricing dislocation is creating selective value opportunities despite overall volume declining 20.1% year-over-year.
“Institutional capital is selectively re-risking due to stabilizing interest rates and a much clearer line of sight into asset pricing following recent market corrections,” Vara said. “They are moving quickly to capitalize on current cap rates and favorable entry points before increased competition compresses yields.”
Multi-tenant investment sales reached $55.95 billion in Q1, down 19.4% sequentially but up 28.2% year-over-year — the third consecutive quarter above $50 billion. Industrial led at 40.7% of volume, while multi-tenant office surged to 32.3%, up from 26.6% a year ago, as sales jumped 55.5% year-over-year to $18.1 billion.
“This surge reflects highly selective, opportunistic buying rather than a broad-based recovery,” Vara said. “Medical office buildings stand out as an incredibly high-performing sub-sector due to massive tenant capital investment and inherent occupant stickiness. Outside of these distinct niches, commodity and secondary office assets continue to face significant headwinds.”
Multi-tenant retail posted $15.1 billion in Q1 sales, up 7.7% year-over-year, with institutional investors surging to 35% of acquisitions from just 7% in 2024 — a dramatic inflection driven by growing appetite for grocery-anchored and experiential formats.
Looking ahead, Vara pointed to a constrained new construction pipeline as the market’s most compelling opportunity. “Investors who can successfully navigate the selective lending environment today will be optimally positioned as new supply drop-offs accelerate through late 2026 and into 2027,” he said, while flagging sticky inflation, elevated insurance premiums and escalating power costs as the primary risks facing the sector.
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