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Higher Treasury Yields Put CRE’s Recovery on a Shorter Leash

Higher Treasury Yields Put CRE’s Recovery on a Shorter Leash

Higher yields haven't broken CRE pricing, but they're making the road back to a normal transaction market considerably longer.

Nina Dale
August 14, 2026

In partnership with

Good morning. CRE’s recovery is running into a familiar roadblock: the bond market. Cap rates have remained resilient despite higher Treasury yields, but CBRE’s latest survey suggests deal flow could stay subdued until borrowing conditions improve.

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Market Snapshot

S&P 500

GSPC

7,798.99

Pct Chg:
+0.65%

FTSE NAREIT

FNER

861.23

Pct Chg:
+1.13%

10Y Treasury

TNX

4.649%

Pct Chg:
-0.043%

CME Term SOFR

1-Month

3.64%

Pct Chg:
-0.00

*Data as of 08/13/2026 market close.

Cap Check

Higher Treasury Yields Put CRE’s Recovery on a Shorter Leash

Cap rates are holding their ground, but elevated borrowing costs and growing uncertainty are making investors less confident about where pricing — and dealmaking — goes next.

By the numbers: CBRE’s H1 2026 Cap Rate Survey, based on 3,600 estimates across more than 50 U.S. markets, found average cap rates essentially unchanged. That stability came despite Treasury volatility, with the 10-year yield peaking at 4.67% in May and hovering around 4.6% by mid-July.

Under the hood: Flat averages don't mean a flat market. Cap rates generally compressed more in the eastern U.S., while Class B and C and value-add properties saw greater compression than Class A and stabilized assets. Neighborhood retail recorded the strongest average compression, followed by hotels and industrial.

Confidence gets cloudy: Investors entered 2026 expecting cap rates to hold steady or decline, but the outlook has grown more mixed. Roughly 60% of CBRE respondents still expect no change, while more now anticipate increases. Infill multifamily was the most bearish subtype, with Class C properties also facing stronger expectations for cap-rate expansion.

Office remains the wild card: Lower-quality office remains one of CRE’s toughest sectors to price. CBRE found Class B and C cap-rate estimates have bounced between surveys, while the range of office yield estimates widened. Other sectors saw ranges narrow, suggesting price discovery is improving faster outside office.

The dealmaking hurdle: The bigger obstacle may be the bond market. CBRE professionals said the U.S./Iran conflict lowered expectations for 2026 investment activity, while 3.75% was the median 10-year Treasury yield needed to boost sales volume, roughly 85 bps below the 4.6% level cited in the report.

➥ THE TAKEAWAY

Pricing has found its footing, but liquidity hasn't: Stable cap rates despite higher Treasury yields show CRE values remain resilient, but that alone won’t unlock a full recovery. The next leg may depend less on cap-rate compression and more on whether lower yields give buyers and sellers room to make deals pencil.

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✍️ Editor’s Picks

Claim your free CRM: Raising capital is tough. Your CRM costs don’t have to be. (sponsored)
Treasury tension: Despite the Fed holding rates at 3.5%, rising Treasury yields and inflation concerns are keeping CRE borrowing costs elevated, increasing refinancing pressure even as transaction activity rebounds.
Wildfire exposure: More than 2.5M properties across 10 states face wildfire risk, representing $1.4T in reconstruction costs, with California accounting for the largest share.
Campus conversions: As more financially distressed colleges close, their campuses are becoming valuable redevelopment opportunities while location, condition and local opposition shape their fate.
Deal slowdown: CRE sales rose 14% year over year to $136.6B, but weaker-than-expected individual-property activity signals the recovery may be losing momentum.

🏘️ MULTIFAMILY

Manhattan squeeze: Manhattan rents hit a record $5,000 as listings plunged 39% year over year, pushing renters into fierce competition and private-market deals.
Supply reset: Sun Belt apartment markets are showing early signs of recovery as absorption outpaces new deliveries, gradually reducing excess inventory despite continued rent declines.
Class divide: Multifamily recovery is splitting by asset class, with Class A rents gaining while Class C declines and Class B performance hinges on location and operations.
Midwest attractiveness: Young buyers are finding a rare path to homeownership, where strong job growth and affordable prices attract first-time buyers despite rising costs and tight inventory.

🏭 Industrial

Halo expansion: Halo Vista is planning 780K SF of industrial space in North Phoenix to attract TSMC suppliers and support the semiconductor hub’s rapid growth.
Pet perks: Freshpet leased 216K SF in Bethlehem for its first dedicated cold storage facility, supporting growth while staying close to its existing operations.
Data demand: Data center growth is fueling industrial leasing across six major markets, with related tenants accounting for 14.4% of new industrial leases in 2025.

🏬 RETAIL

Flex retail: Small-bay flex retail is surging in Raleigh-Durham as population growth and demand for experiential businesses drive interest in adaptable retail-industrial spaces.
Wendy’s bid: Trian is preparing a potential take-private bid for Wendy’s, putting its 7,000-restaurant footprint and associated net lease real estate under renewed investor scrutiny.
Saks reset: Simon Property Group expects to more than double rents on space vacated by Saks, turning $18M in lost rent into roughly $44M through new leases.

🏢 OFFICE

Chelsea crunch: Vornado and Related’s Google-anchored Chelsea office faces potential default as a $396M mortgage enters special servicing amid weaker cash flow and an upcoming maturity.
Office comeback: Scarce premium office space is reviving development in major U.S. markets, with blue-chip tenants preleasing new towers and accepting record rents.
LA revival: INNOCEAN USA is boosting Los Angeles’ office recovery with a 100K SF HQ lease in El Segundo, signaling continued demand for collaborative workplaces.

🏨 HOSPITALITY

Yield delay: Minor International postponed its $1B Singapore REIT amid concerns that geopolitical tensions will push up investor yield demands, while its debt-reduction strategy remains on track.
New look: LaPour Partners plans to convert Phoenix’s vacant 19-story Arizona Center office tower into a $200M, 340-room JW Marriott, with construction expected to begin in 2027 and opening in 2029.

📈 CHART OF THE DAY

Milwaukee has quietly emerged as a top-five U.S. market for rent growth, with its historically low volatility providing rare stability as rents stagnate across much of the country.

60 guilders' worth of trade goods — often cited as $24. The deal has become real estate lore; Manhattan's assessed value today exceeds $1T, making it history's most dramatic land appreciation story.

Higher Treasury Yields Put CRE’s Recovery on a Shorter Leash

Higher yields haven't broken CRE pricing, but they're making the road back to a normal transaction market considerably longer.

CRE Trivia 🧠