In a Topsy-Turvy World, Capital Flows to CRE

In a changing and uncertain economy, hard assets are seeing an influx of capital. Commercial real estate is seen as a particularly safe haven.

Real assets have entered a “super cycle” of investment for a number of reasons, including the digitization of the economy and advances in technology, according to Tim Bodner, global real estate deals leader & partner at PwC. Owning hard assets supported by those trends is beneficial and a hedge against some of the risks embedded in areas like software.

“So we continue to see capital invested in areas like data centers, manufacturing supply-chain assets and renewable power assets—areas in the past considered infrastructure—that are now being looked at as real asset investments,” Bodner said. “We are certainly seeing that at scale across the globe.”

In other areas of real estate, such as office and retail, prices have adjusted over the last 18 to 24 months, which is driving a surge in capital investment in those areas, too. Both public and private capital are gravitating toward popular sectors with the ability to scale, including data centers, health care and senior housing, Bodner noted.

A boost for CMBS and REIT Recovery

Trepp’s Anonymized Loan-Level Repository data, which provides loan-level insights based on a consortium of banks, shows that a new commercial real estate cycle is evident with growing origination volume at tighter spreads. Origination volume increased roughly 30 percent on a year-over-year basis in the fourth quarter of 2025.

That 30 percent, however, should be taken with a grain of salt, noted Lisa Knee, managing partner & national leader of EisnerAmper’s real estate practice.

“We’re coming off low origination volumes,” Knee said, “so there is a base effect at play. Across the entire banking industry in aggregate, if you look at the (Federal Reserve) H.8 lending data, origination volume has increased 3 percent on an annualized basis.”

The CMBS and REIT sectors, however, have been very active over the last year. According to a Trepp report, CMBS experienced a strong rebound in 2025 to reach its highest volume since the 2008 Global Financial Crisis. Domestic, private-label CMBS issuance increased by approximately 21 percent to 35 percent in 2025 compared to 2024, driven by a surge in single-asset single-borrower deals. 

The REIT sector has recently undergone an increase in publicly traded REITs going private and/or consolidating. REIT investment is also making a comeback, surging 10.4 percent year-to-date through mid-February after ending 2025 down 0.68 percent, according to a report from ETF Db.

For many investors, these vehicles offer predictable income and reduced volatility relative to other private credit or equity strategies, said Knee. She noted that capital flows favor private REITs with lower leverage, limited exposure to challenged sectors like office, and a focus on income durability rather than asset appreciation.

Data center REITs’ AI capex cycle position makes them a clear winner in capturing the lion’s share of the capital pie, said Seth Laughlin, senior vice president & head of real estate strategy and research at Cohen & Steers. Meanwhile, stable and healthy rent growth in open-air shopping centers has increased the appeal for capital sourcing to the sector, making it a likely winner this cycle.

“In an uncertain rate environment, investors appear willing to trade liquidity for income stability, particularly when the underlying portfolios have already been de‑risked,” Knee said. She cited BREIT, Blackstone’s flagship real estate fund, as an example. It took in more money than it paid out in 2025, attracting $7.2 billion in new capital—$1 billion more than its outflows.

The benefits of CRE investment

Volatality in the private credit market is also driving the switch to real assets. 

“Investors see real estate debt and equity as a diversifier away from the fundamentals driving private credit,” Laughlin said. Real assets offer diversification and predictability of cash flows and provide collateral managed by operators.

But capital recycling in the private market will be much slower than in public markets, according to Laughlin, who suggested it will involve an evolution that’s more pronounced over time. The more immediate impact: Capital that might have been allocated to private credit in prior years will end up in private real estate.

“The shift in capital deployment from private credit to real estate would benefit debt availability for new construction and acquisitions,” Laughlin said. “We have already seen a healthy rebound in CRE credit originations, so additional debt capital availability would only further support that trend.”

The narrative of a clean rotation from private credit to real estate is a bit of an “oversimplification,” noted Knee. “What is really happening,” she said, “is a repricing of risk across alternatives.” CRE debt is a beneficiary of that diversification, not a wholesale replacement, she added.

The real winners will be managers with strong sourcing capabilities, disciplined underwriting and the operational infrastructure to manage complex transitional assets—“not just anyone who hangs out a CRE debt fund shingle,” Knee said.

Capital is flowing mostly to real estate debt

Commercial real estate CLO issuance offers a glimpse into how capital flows have rotated toward real estate. Over the first four months of 2026, CLO issuance was up nearly 16 percent year-over-year compared to the same period in 2025, with 16 deals totaling $14.5 billion announced and set to close, noted Knee.

That acceleration in securitized, transitional lending activity reflects growing lender and investor appetite for CRE debt exposure and suggests that much of the private capital entering the real estate space is arriving through the debt markets rather than through traditional equity vehicles.

Knee stressed, however, that capital allocation remains highly selective, with certain sectors capturing the bulk of investor interest, such as industrial and logistics, multifamily, data centers, self-storage and senior housing. Office, on the other hand, remains capital‑constrained, with debt capital flowing to well‑located, Class A assets with high-end amenities and strong tenancy.

CLO issuance data reflects just how sector-selective capital deployment has become on the debt side. Multifamily has dominated CLO collateral pools with 65 percent of all issuance since 2019 and 73 percent since 2022, making it by far the preferred asset class for transitional lenders, she noted.

A helping hand for maturing loans

A significant amount of this capital investment is focused on the scale of upcoming loan maturities and refinancing needs across the market, said Knee. According to Trepp data, roughly $2.1 trillion in U.S. commercial real estate debt was slated to mature between 2025 and 2027.

“A significant portion of that debt was originated at materially lower rates and higher property valuations, creating refinancing challenges at today’s pricing and underwriting standards,” she said. With traditional banks remaining cautious, especially at higher leverage points, private and non‑bank capital has stepped in to provide refinancing, transitional and structured lending solutions. 

“This dynamic has materially expanded the availability of private capital for real estate borrowers who can demonstrate durable cash flow and a realistic path forward,” Knee added.

Many investors view senior real estate debt as comparatively low risk, particularly when originated at today’s reset valuations, said Knee. Property values have already corrected in many sectors, underwriting standards have tightened and cash flows, while under pressure in some areas, remain resilient in others.

While there are still plenty of ways to lose money in real estate, she noted that the risk is different, more manageable than with private credit, as real estate assets are observable. “You can inspect the building, analyze the rent roll and track the market, while corporate credit risk is tied to cash-flow generation by a business, which can deteriorate rapidly and opaquely,” she pointed out.

“CRE also benefits from a more advanced price correction cycle, since values have already repriced meaningfully, which means new capital is entering at a more realistic basis.”