The availability and deployment of equity capital are set to improve in the commercial real estate market this year, offering investors opportunities to capitalize on positive leverage amid lower borrowing costs and higher yields, according to a Marcus & Millichap analysis.
Private investors continue to dominate the space, accounting for an average of 47% of buy-side activity in deals over $2.5 million since 2010. Their share has grown steadily, reaching roughly 55% of deployed capital and hitting 59% through the first nine months of 2025. Institutional capital, by contrast, has been more restrained, representing about 26% of dollar volume since 2010 and just 21% of acquisitions in the first three quarters of 2025.
Both private and institutional investors have faced headwinds since 2022, constraining capital availability. During the low-interest-rate environment of 2021 and much of 2022, institutions raised more than $160 billion annually and actively acquired properties.
As interest rates rose in 2022, fundraising slowed to roughly $110 billion in 2023 and $91 billion in 2024. At the same time, the NCREIF Total Returns Index fell into negative territory, only beginning to recover in 2024, slowing institutional deployment. Private investors, including syndicators and equity funds, also scaled back acquisition activity from the 2021 peak to the 2023 trough.
Trading activity began to recover in 2024 and accelerated further in 2025. Transaction velocity for properties above $2.5 million rose 17% in the first three quarters of 2025 compared with the same period the year before.
Looking ahead, private investors are expected to remain active, particularly high-net-worth individuals and family offices seeking to leverage favorable market conditions, although syndicators and equity funds may still face capital-raising challenges. On the institutional side, more than $121 billion in capital was raised last year, up roughly 33% from 2024 and with the NCREIF Total Returns Index back in positive territory, institutions may regain confidence and begin reentering the market.
Across property sectors, office demand has gradually recovered over the past six quarters. Net absorption reached 85 million square feet in 2025 but is projected to moderate to about 65 million square feet in 2026, with demand rising in nearly every major market.
Retail net absorption is expected to strengthen, potentially surpassing 10 million square feet, following soft demand in 2025 that pushed vacancy to roughly 5%. With new development projected at 30 million square feet, primarily single-tenant projects, the overall retail vacancy rate could edge slightly higher to 5.2%. Industrial and multifamily sectors are expected to maintain steady demand despite a sluggish employment market.
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