Modern Urban Condos in Chattanooga, Tennessee
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July marked a turning point in competition for commercial real estate, with offers increasing for the first time in more than a year. This trend continued in October.
Bidder momentum during the month saw the second highest monthly gain over the past year, according to JLL’s Global Bidding Intensity Index. Competitiveness continues to improve, in part thanks to interest rate reductions decided by the US Federal Reserve in September and October.
The index measures auction activity to provide a real-time view of liquidity and competitiveness in private real estate capital markets. This in turn is an indicator of future capital flows in investment sales transactions.
“As capital deployment accelerated during the third quarter, institutional investors are reporting increased confidence in the market, even as uncertainty persists,” said Richard Bloxam, CEO of capital markets at JLL. “We expect business confidence to continue to improve and pave the way for continued growth in capital flows through 2026.”
Of all the commercial real estate sectors, multifamily housing competed with the highest bidding activity. This situation is due to the shortage of housing in most major markets. Rental vacancy rates are still high, but more tenants are expected to re-rent in the coming year due to the high cost of the for-sale housing market.
JLL estimates there is a 3.5 million housing shortage in the United States. That, coupled with near-record high housing prices, is keeping renters in place longer and will likely drive down multifamily vacancy rates once all the new supply comes through the pipeline. All of this creates strong conviction among multifamily investors.
The competitiveness of tenders in the industrial and logistics sector has also improved significantly, with trade policy uncertainties having eased slightly.
Competition for commercial properties eased somewhat simply because there were more for sale, so buyers had more choices. However, there were more transactions in the market. Investor demand is driven by an increase in consumer and retail spending, at least for now.
The office sector is also well on its way to recovery, with bidding momentum increasing since its all-time low in late 2023. Investor confidence is improving thanks to expanded bidder pools and increased lender participation.
Short-term interest rate cuts remain questionable, particularly in view of the higher-than-expected employment figures for September, published late due to the government paralysis. Investors, however, seem less sensitive to the timing, as they still expect another rate cut next year.
“Although market uncertainty will continue to impact decision-making, the growth picture looks more positive for 2026. After going through various periods of uncertainty over the past year, more investors are demonstrating greater risk tolerance,” Bloxam said. “Coupled with exceptional strength in debt markets, we believe this will catalyze continued liquidity improvement.”