From repricing to opportunity: Understanding commercial real estate today

Commercial real estate markets continue to operate against a backdrop of macro uncertainty, though forward visibility has improved modestly relative to late 2025. Inflation has reaccelerated amid renewed energy pressure: U.S. CPI rose 0.6 percent month over month in April, after a 0.9 percent increase in March, and 3.8 percent year over year, while the Federal Reserve left the federal funds target range unchanged at 3.50 percent to 3.75 percent at its April 29 meeting.¹ Labor markets are slowing but remain stable, with April unemployment unchanged at 4.3 percent and non-farm payrolls increasing by 115,000.²

The escalation of conflict involving Iran continues to introduce volatility, primarily through energy markets. Brent crude began the year near $61 per barrel, moved above $100 during the late-winter disruption, reached late-April highs around $126, and remained volatile in late May, trading roughly in the mid-$90s to near $100 as markets weighed prospects for a negotiated reopening of the Strait of Hormuz.³  Although prices have eased from their peak, the energy shock has remained large enough to keep inflation expectations, operating costs, and rate expectations in focus.

The energy shock continues to reinforce inflationary pressures, with direct implications for operating costs, consumer spending, and interest rate expectations. While the duration and magnitude remain uncertain, the directional impact is clear: upward pressure on input costs and an increased likelihood of a prolonged higher-for-longer rate environment.

Despite these dynamics, the most consequential developments are occurring at the asset level, where fundamentals are increasingly diverging across markets, vintages, and capital structures.

A look at the market backdrop

Economic conditions remain mixed. The labor market is softer but not deteriorating materially, and consumer activity is normalizing. Interest rates remain elevated and more sensitive to inflation and geopolitical headlines, with the 10-year Treasury moving into the mid-4 percent range in late May. Financing costs therefore remain restrictive even as policy direction has become somewhat clearer.

Energy-driven cost pressures are re-emerging. The April CPI release showed energy prices rising 3.8 percent month over month and 17.9 percent year over year, with gasoline up 28.4 percent year over year. Higher fuel costs are flowing through transportation, materials, and operating expenses while compressing household budgets. These dynamics create incremental pressure on operating performance and reduce the margin for error across both assets and capital structures.

Transaction activity remains subdued relative to prior-cycle norms, but the repricing process is more advanced. Capital markets are functioning better than a year ago, with improved price discovery and narrower bid-ask spreads across many segments. At the same time, financing remains selective and structurally disciplined.

The Mortgage Bankers Association estimates that $875 billion of commercial and multifamily mortgage balances will mature in 2026, while also forecasting total commercial mortgage originations to rise 27 percent this year to $805.5 billion, including a 21 percent increase in multifamily originations to $399 billion.⁴  The market is reopening, but it is reopening around refinancing pressure and is focused on basis discipline and sponsorship quality rather than being driven by broad risk appetite.

Multifamily fundamentals are beginning to stabilize⁵

Multifamily fundamentals continue to reflect the lagged effects of the 2024-2025 supply wave. Rent growth reset materially last year, and occupancy softened as new deliveries drove elevated concessions and competitive leasing conditions. That said, the sector is showing signs of transition.

National multifamily vacancy recently reached 9.4 percent, essentially unchanged quarter over quarter and within a narrow 9.2 percent to 9.4 percent range for more than a year, suggesting that stabilization is beginning to take hold. Net absorption totaled 65,200 units, down from nearly 100,000 a year earlier but broadly in line with the long-run historical first-quarter average of roughly 64,000 units.

National asking rent growth remained muted at 0.9 percent year over year, while average advertised rents rose only $4, or 0.2 percent, with year-over-year growth effectively flat, the weakest March reading since 2012.

The supply side, however, is becoming more constructive. Deliveries fell roughly 30 percent year over year, bringing trailing annual completions to just over 380,000 units, the first time below 400,000 since early 2023, and construction activity declined to its lowest level since 2016. Units under construction stood at 472,408 nationally, a sharp reduction from peak pipeline levels.

Performance remains highly uneven across markets and vintages. Sun Belt metros still led national absorption, with Phoenix absorbing roughly 5,800 units, Dallas-Fort Worth 5,300, New York 4,500, Austin 3,700, and Charlotte 2,500. Yet rent growth remained negative in several of the most oversupplied Sun Belt markets, including Austin, Denver, Tampa, and Phoenix.

At the asset level, Class A vacancy improved by roughly 80 basis points over the past year as renters traded up in quality, while Class B and C vacancy rose by a similar magnitude. That bifurcation reinforces what we are seeing on the ground: older assets in oversupplied markets continue to face pressure on rents and concessions, while newer, well-located assets with durable demand drivers and appropriate basis are demonstrating greater stability.

Near-term fundamentals remain competitive, but the forward supply outlook is increasingly favorable. We expect an improving supply-demand balance into late 2026 to support a more stable operating environment.

Industrial markets move toward rebalancing⁶

Industrial fundamentals are following a similar trajectory. The U.S. industrial market recently recorded 40 million square feet of net absorption, up 52 percent year over year and the strongest first quarter since 2023. Over the last 12 months, absorption totaled 198 million square feet, exceeding full-year totals for both 2024 and 2025. Leasing activity remained strong, surpassing 170 million square feet for the fourth consecutive quarter.

At the same time, the sector is still working through the late-cycle effects of the prior development wave. National industrial vacancy ended the period at 7.0 percent, essentially flat from year-end but 10 basis points below the Q3 2025 peak, while new supply slowed to its lowest level since 2017.

That combination of stable vacancy, better absorption, and slower completions supports the view that industrial is moving from digestion toward rebalancing.

Across sectors, dispersion remains the defining feature:

• Performance continues to bifurcate across markets and asset quality.
• High-basis assets and over-levered capital structures remain under pressure.
• Well-capitalized sponsors retain a structural advantage.

Energy-driven cost inflation is an additional headwind, particularly for development and transitional assets where margins are more exposed to labor, materials, and transportation volatility. That matters for new starts and capital expenditure assumptions, lease-up execution, and refinance underwriting.

Our investment approach

Our strategy remains consistent. We underwrite at the asset level, focusing on cash-flow durability, basis relative to replacement cost, sponsor quality, and submarket-specific supply-demand dynamics. Macro factors, including interest rates, inflation, and geopolitical developments, are incorporated explicitly through underwriting assumptions and stress testing. However, they do not drive investment decisions in isolation.

In the current environment, where top-down narratives often obscure underlying fundamentals, this discipline is critical. Outcomes are determined by asset quality, capitalization, and execution, not by broad market direction.

That is especially true in a market where vacancy appears to be stabilizing in multifamily, industrial demand is reaccelerating, and capital is gradually returning, but only where pricing and structure reflect today’s realities.

Where opportunity is emerging

We view the market as transitioning from a repricing phase toward an early-stage opportunity set.

Key drivers include:

• A materially improved forward supply outlook, particularly in multifamily, where deliveries are down roughly 30 percent year over year, and construction activity is at its lowest level since 2016.
• Greater clarity in capital markets, even if full normalization remains ahead, with mortgage originations forecast to rise materially in 2026.
• An expanding opportunity set driven by refinancing needs and capital-structure dislocation, with $875 billion of commercial and multifamily debt maturing this year.

At the same time, geopolitical risk, particularly in energy markets, poses the risk of persistent inflation and delayed rate normalization. We expect opportunity to build through 2026, particularly in situations where capital constraints, rather than asset quality, are the primary driver of dislocation.

Positioning for the next phase of the cycle

The current environment continues to reward discipline. While macro uncertainty remains elevated, the underlying conditions for the next phase of the cycle are forming.

We are focused on deploying capital where we can achieve attractive risk-adjusted returns through basis, structure, and asset-level fundamentals, not through reliance on macro improvement. In an environment where external shocks can quickly translate into real economic costs, this approach is essential.

We believe this approach positions investors to navigate ongoing volatility and capitalize on opportunities as the market continues to evolve. Connect with our experts to learn how today’s market dislocation is creating new opportunities across commercial real estate.

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^{Walker & Dunlop Investment Partners, Inc. (“WDIP”) is an SEC-registered investment adviser. This material is for informational purposes only and does not constitute investment advice, an offer to sell, or a solicitation to buy any security. Any WDIP-sponsored investment opportunities are available only to sophisticated accredited investors and are subject to risks, including loss of capital, illiquidity, leverage, valuation, market, and interest-rate risks. There can be no assurance that any strategy will achieve its objectives. Forward-looking statements, market forecasts, and expectations are inherently uncertain and actual results may differ materially. Views are as of the date hereof and may change without notice. Past performance is not indicative of future results.}

^{1 U.S. Bureau of Labor Statistics (BLS), Consumer Price Index Summary, April 2026; Federal Reserve Board, FOMC Statement, April 29, 2026.}

^{2 U.S. Bureau of Labor Statistics, Employment Situation Summary, April 2026.}

^{3 U.S. Energy Information Administration (EIA); Bloomberg, Brent Crude Historical Pricing Data; The Guardian and The Wall Street Journal market reporting, April-May 2026.}

^{4 Mortgage Bankers Association (MBA), 2026 CREF Forecast.}

^{5 CoStar Market Analytics, U.S. Multifamily National Report, Q1 2026.}

^{6 CoStar Market Analytics, U.S. Industrial National Report, Q1 2026.}