In today’s shifting commercial real estate landscape, a new investment thesis is gaining traction: smaller deals are outperforming their big-ticket counterparts—and investors are paying close attention.

Recent data from CoStar’s Commercial Repeat-Sale Indices (CCRSI) highlights a growing bifurcation in asset performance. In February, prices for smaller U.S. commercial properties rose 1.1%, while larger, high-value assets saw prices decline by 1.3%. The divergence is being driven not just by capital flows, but by fundamental demand—namely, occupancy trends and net absorption.

Occupancy Is Defining Value

For the first time in over 15 years, net absorption has turned negative across the U.S. commercial market. Institutional-grade properties are bearing the brunt, with a projected 4.5 million square feet (MSF) of net negative absorption over the next 12 months. Meanwhile, general commercial assets—often smaller, service-based, or local tenant-driven—are still posting positive numbers, with 3.7 MSF absorbed over the same period.

This performance gap is now showing up clearly in transaction data.

Buyers Are Following Performance

In six of the past 24 months, dollar volume in general commercial repeat sales met or exceeded that of investment-grade transactions—a milestone that hadn’t occurred since the post-recession recovery in 2009. The market is rebalancing toward the middle.

“We’re seeing a clear shift in investor psychology,” said Daniel Kaufman. “The appetite for certainty and cash flow is outweighing the need for prestige or scale. Investors are realizing that well-located, modest assets can deliver better risk-adjusted returns—especially in volatile environments.”

The Long-Term Growth Gap

This isn’t just a short-term trend. Since February 2020, the equal-weighted CCRSI (which tracks smaller, more frequent deals) is up 33%, far outpacing inflation. By contrast, the value-weighted index—heavily influenced by large institutional trades—is up just 8%, lagging the 23% rise in the Consumer Price Index over the same period.

The takeaway? Bigger isn’t better right now.

As top-tier properties grapple with rising vacancies, refinancing challenges, and shifting tenant demand, the lower-middle market is proving resilient. With higher velocity, stronger lease-up trends, and more adaptable tenants, smaller assets offer flexibility—and in this cycle, flexibility may be the most valuable asset of all.

We’re advising our partners to watch the middle of the market closely. These deals might not grab headlines, but they’re increasingly where the real value lives.