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Cash Is Back: CRE Investors Turn Defensive Amid Rate Uncertainty

Cash Is Back: CRE Investors Turn Defensive Amid Rate Uncertainty

Higher-for-longer interest rate fears are pushing CRE investors toward safer bets, with many prioritizing liquidity and defensive sectors over riskier plays.

Nina Dale
May 29, 2026

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Good morning. Cash is suddenly looking more attractive than commercial real estate. A new investor survey shows capital growing more defensive as underwriting tightens and deal activity slows.

🎙️This Week on No Cap: Värde Partners' Tim Mooney and Jim Dunbar break down how the firm manages $17B across the capital stack, and why staying senior is the only way to play this slow-trickle distress cycle. (This season is sponsored by Henry)

CRE Trivia 🧠

Which Federal Reserve chairman pushed interest rates to nearly 20% in 1981, freezing CRE lending and crushing construction activity?

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Market Snapshot

S&P 500

GSPC

7,563.63

Pct Chg:
+0.58%

FTSE NAREIT

FNER

849.39

Pct Chg:
-0.32%

10Y Treasury

TNX

4.453%

Pct Chg:
-0.028

SOFR

30-DAY AVERAGE

3.59%

Pct Chg:
-0.00

*Data as of 5/28/2026 market close.

Cash is King

Cash Is Back: CRE Investors Turn Defensive Amid Rate Uncertainty

CRE investors are turning cautious again, parking more capital in cash as rate uncertainty and muted returns cloud the recovery outlook.

Defensive mode: A new SitusAMC investor survey found cash overtook commercial real estate as the preferred asset class in Q1 2026, with CRE slipping into a tie with bonds for second place. The shift reflects growing expectations that higher interest rates could remain elevated longer than anticipated, pushing investors toward safer, more liquid positions.

By the numbers: Investor appetite to “hold” assets climbed sharply from 63% to 70% quarter-over-quarter, while “buy” sentiment fell from 30% to 26%. The share favoring “sell” dipped slightly to 4%, signaling hesitation more than outright distress. SitusAMC noted that buy sentiment remains near its long-term average despite the pullback.

Capital markets tighten: Investors also reported stricter underwriting standards and declining capital availability, trends that are slowing transaction activity and extending workout timelines across the market.

Apartments regain momentum: Multifamily emerged as the clear favorite among property sectors, with investor favorability jumping from 44% to 60% — the highest level in a year. Investors cited apartments’ relative resilience amid geopolitical volatility and uneven economic conditions.

Office sentiment improves — cautiously: While office sentiment cooled from 22% to 16% after a stronger Q4, the sector remains well above its pandemic-era lows and no longer sits at the bottom of investor rankings. That said, confidence remains fragile as the sector continues its uneven recovery.

Industrial and retail lose steam: Industrial favorability fell to a one-year low of 16% as occupancies softened and absorption turned negative for the first time since the global financial crisis. Retail sentiment also weakened, slipping to 8%, though investors still see stability in necessity-based shopping centers with limited new supply.

Hotels hit hardest: Hospitality sentiment collapsed to 0% in Q1, marking its weakest reading in more than two years as investors grow increasingly uneasy about travel demand amid geopolitical tensions and elevated fuel costs.

➥ THE TAKEAWAY

Capital seeks safety: CRE investors aren’t abandoning the market — they’re becoming far more selective. With capital tightening and rates staying elevated, investors are prioritizing liquidity, patience, and defensive positioning over aggressive dealmaking.

✍️ Editor’s Picks

Audit guarantee: Authentic's Multifamily Audit pinpoints funnel leaks and comp gaps with a prioritized fix plan. Results guaranteed or your money back. Subscribers save 50%. (sponsored)
Luxury levy: New York approved a new tax on NYC second homes worth $5M or more, targeting ultrawealthy nonresidents to help raise revenue for the city’s budget and affordability plans.
Custom ai: Blackstone and Brookfield are backing multibillion-dollar AI ventures that could reshape commercial real estate by replacing traditional proptech platforms with bespoke enterprise AI systems.
Building what renters want: Attached garages, pools, fitness centers, pet-friendly, single-story new construction - BTR Haus builds want renters actually want. The demand is structural, not cyclical. (sponsored)
Material squeeze: Surging prices for copper, lumber, diesel and aluminum are driving up construction costs, worsening housing affordability and putting added pressure on homebuilders and buyers alike.
Credit clash: Banks are reentering CRE lending only to find themselves competing with the private credit firms they helped finance during the sector’s pullback after the 2023 banking crisis.

🏘️ MULTIFAMILY

Rent resilience: U.S. apartment rents rose modestly again in May, with Midwest, Northeast and Pacific markets leading gains as elevated supply continues to keep national pricing growth in check.
Review rollback: HUD is eliminating a final environmental review step for federally backed multifamily projects, aiming to speed up affordable housing development by cutting what it calls duplicative regulation.
Portfolio reset: Harbor Group and The Garrett Companies secured a $351M refinancing for a newly built 1,573-unit multifamily portfolio across Midwest and Sun Belt markets amid shifting apartment market conditions.
Sunbelt surge: S2 Capital launched a new development platform targeting Sun Belt multifamily and industrial projects as construction starts continue to decline.
Supply spiral: Miami’s multifamily market is weakening as oversupply, falling rents and slowing sales force many landlords to refinance instead of sell at steep discounts.

🏭 Industrial

Storage rebound: Self-storage REITs posted their strongest quarter in two years as revenue growth turned positive across the sector, occupancy stabilized and move-in activity rebounded.
Power convergence: DigitalBridge is acquiring ArcLight in a deal worth up to $1.05B to expand its AI-driven power and digital infrastructure platform.
Green servers: Microsoft, Google, Amazon and Meta are backing a new initiative to fund cleaner data center technologies as scrutiny over AI’s environmental impact intensifies.
Chip frenzy: Developers are rushing to secure land near TSMC’s massive Phoenix chipmaking campus as demand surges for industrial, housing and mixed-use projects.

🏬 RETAIL

Fast refresh: Dick’s Sporting Goods is accelerating Foot Locker store remodels after early sales gains helped drive the retailer’s turnaround strategy.
Retail retreat: Brookfield sold Downtown LA retail center FIGat7th to JH Real Estate Partners as it continues shedding Los Angeles assets amid ongoing market struggles.
Retail spree: Bain Capital and 11North Partners acquired five open-air shopping centers across four states for $300M as demand for grocery-anchored retail continues to strengthen.

🏢 OFFICE

Trophy bet: SL Green and Japan’s Mori Building are partnering on a new 850,000 SF luxury office tower near Grand Central as demand for top-tier Manhattan office space continues to surge.
Foreclosure reset: A wave of San Francisco office foreclosures is creating recapitalization and repositioning opportunities as investors acquire distressed assets at steep discounts and bet on a long-term recovery.
Frisco surge: Hall Group is launching a new 200,000 SF office tower at Hall Park as developers continue pouring billions into Frisco’s fast-growing mixed-use and office market.

🏨 HOSPITALITY

Luxury slopes: Sixth Street acquired the Park Hyatt Beaver Creek Resort in Colorado for $176M, betting that rising demand for high-end travel will continue fueling luxury hospitality investments.
Casino conquest: Tilman Fertitta is acquiring Caesars Entertainment in a $5.7B cash deal, expanding his gaming and hospitality empire with 52 casino properties across the US.
Cup pricing: Hotels in World Cup host cities are expected to benefit more from sharply higher room rates than occupancy gains as FIFA-driven travel demand boosts summer performance.
Studio revival: Burbank is reshaping its downtown with immersive entertainment, new restaurants, housing and hotels to create a stronger live-work-play destination.

📈 CHART OF THE DAY

Apartment concessions remained near decade highs in April 2026, with 16.9% of U.S. apartments offering discounts averaging roughly six weeks free rent as landlords continue battling elevated supply.

CRE Trivia (Answer)🧠

Paul Volcker. As Fed chair from 1979–1987, Volcker’s aggressive rate hikes helped tame inflation but triggered a major slowdown across commercial real estate.

Cash Is Back: CRE Investors Turn Defensive Amid Rate Uncertainty

Higher-for-longer interest rate fears are pushing CRE investors toward safer bets, with many prioritizing liquidity and defensive sectors over riskier plays.

CRE Trivia 🧠