The war in Iran has had a negative impact on how commercial real estate professionals view investment activity for 2026, according to CBRE’s capitalization rate survey for the first half of 2026.
The cap rate survey, which was conducted in late June, found growing uncertainty and mixed investor sentiment concerning the CRE market. Most respondents said the ongoing U.S.-Iran conflict has reduced their expectations for sales volume in the next six months. They also don’t expect much change in the 10-year Treasury yield for the rest of the year, hurting the chances for the commercial sector to continue expanding.
Cap rates are a crucial metric used to assess the potential yield of a commercial property over one year. The rates are calculated by dividing a property’s net operating income by its asset value. Lower interest rates would reduce the cost of capital, resulting in lower cap rates.
Roughly 60% of respondents expect there to be “no change” in cap rates, and a growing number of respondents believe cap rates will expand during the next six months. Only about 10% to 20% of respondents expect cap rates to compress this year.
Get these articles in your inbox
Sign up for our daily newsletter
Get these articles in your inbox
Sign up for our daily newsletter
The survey found that 3.75% was the median number for where the 10-year Treasury yield rate needs to be to increase sales volume. The current Treasury yield is about 4.7%. If yields remain elevated, cap rates will also remain high, negatively impacting commercial real estate deals.
Expectations for cap rate movement varied greatly among sectors, with Class AA properties, both in central business districts and suburban areas, having the highest potential for cap rate compression during the rest of the year. Class C properties in all CRE sectors had the greatest chance for cap rate expansion.
The survey revealed uncertainty in the pricing of lower-quality office assets, with Class B and C office cap rate estimates varying greatly. Compared to last year’s cap rate survey, the gap between lower and upper office yield estimates has widened, while other property types have seen yield estimates narrow. On average, neighborhood retail compressed the most, followed by hotel and industrial properties.
