Why Smaller Investments Are Drawing a Crowd

The commercial real estate investment market entered 2026 with renewed momentum. First-quarter investment sales volume rose 20 percent year-over-year to $134.9 billion, according to MSCI Real Capital Analytics. While much of the attention has centered on a resurgence of mega-deals, with transactions over $250 million increasing 56 percent, a more telling and instructive shift is emerging beneath the surface, particularly within transactions under $25 million.

Activity in the sub-$25 million segment increased 8 percent year-over-year across the broader market. At JLL, that momentum is significantly more pronounced, with transaction volume rising 32 percent year-over-year to $2.01 billion, up from $1.52 billion in Q1 2025. This segment is increasingly shaping overall transaction velocity, liquidity and price discovery, and in many respects provides a clearer lens into investor sentiment than headline-driven trophy transactions.

The appeal of sub-$25 million transactions is rooted in execution. Compared with larger deals, these transactions typically involve simpler ownership structures, shorter due diligence timelines and more straightforward financing dynamics. In an environment where investors remain disciplined around risk, that predictability has become a meaningful competitive advantage.

For private investors, this segment offers a highly efficient capital deployment channel. Without the complexity that often accompanies larger institutional transactions, investors are able to act with greater precision. The limited presence of large-scale institutional capital further enhances this dynamic, creating opportunities where competition is more fragmented and pricing is driven by underlying asset fundamentals.

Portfolio construction is another key driver. Rather than concentrating capital in a single large asset, investors can allocate capital across multiple transactions, achieving diversification by geography, property type and tenant profile. This approach allows experienced investors to scale portfolios methodically while preserving flexibility, and provides newer investors with a disciplined pathway into the asset class.

Market conditions are reinforcing this trend. Interest rate stability has reduced uncertainty following a volatile period for commercial real estate but has not yet triggered a broad return of capital to larger transactions. As a result, investors are able to evaluate opportunities with greater selectivity, complete thorough underwriting, and transact without the pressure of crowded processes. Historically, these conditions tend to represent a transitional window rather than a permanent state.

Importantly, deal quality within the sub-$25 million segment has improved. Sellers increasingly include institutional owners rebalancing portfolios, family offices reallocating capital and developers seeking liquidity for future projects. These transactions are less frequently driven by distress and more often by strategic repositioning, resulting in higher-quality deal flow, clearer business plans and more balanced negotiations.

The financing environment has followed a similar trajectory. Lenders that pulled back in 2023 and 2024 are selectively re-engaging, often viewing smaller transactions as more manageable from a risk perspective. Borrowers presenting conservative leverage and strong fundamentals are finding improved access to capital, reducing one of the primary constraints that limited transaction activity in recent years.

What this means for first-time CRE investors

For investors entering commercial real estate, the sub-$25 million segment represents a compelling and accessible entry point. Deal sizes are more approachable, timelines are more efficient, and risks are more transparent. Investors can focus on core fundamentals, including location, tenancy, cash flow and operations, without the added complexity of layered capital structures.

At the same time, the market remains active but measured. Price discovery is improving, competition is present but not excessive, and investors are able to build conviction without relying on aggressive assumptions.

From a capital markets perspective, what we are seeing is not simply a shift in deal size, but a broader reallocation of capital toward segments where execution risk can be underwritten with greater clarity. Investors are prioritizing liquidity, visibility and repeatability of outcomes. This creates a more actionable environment for both investors and advisors, one where capital can be deployed with discipline and scaled over time.

As 2026 progresses, sub-$25 million transactions are not just participating in the recovery, they are helping define it.

David Gaines is managing director & private capital group leader, JLL Capital Markets.