What happened

CRE Daily reported on Friday that the recovery in commercial property values has stopped climbing. Green Street’s Commercial Property Price Index slipped 0.1% in September. Values are still up 4.7% from a year ago, but the all-property index sits 12.8% below its 2022 peak, and Green Street’s Peter Rothemund warned that sustained increases in yields could put more downward pressure on valuations.

The yield he is worried about is not abstract. The 10-year Treasury closed at 5.227% on October 8, according to the same CRE Daily issue, and Realtor.com reported this weekend that the Mortgage Bankers Association expects it to average 5.1% this quarter and stay near 5% through 2027.

The headline number hides a split. By Green Street’s sector math, as reported by CRE Daily, malls are 6% above their 2022 peak and up 15% in the past year, strip centers are back at peak, and industrial is 8% below. On the other side, office is 33% below peak, apartments 22%, self-storage 21%, and net lease 18%. Student housing fell 4.7% in September alone.

Where we see opportunity

The retail rebound is real, but it is mostly priced. The more interesting ground is where values still sit well below peak and fundamentals are quietly improving.

Office is the clearest example of a split recovery. Green Street has office values up 5% year over year even while sitting a third below peak. In Houston, CRE Daily reported JLL data showing positive office absorption for a second straight quarter, with all newly leased space in the third quarter in Class A buildings, mostly built after 2015. In Atlanta, CRE Daily noted that no new office is under construction for the first time since 2011. When the pipeline goes to zero, the best existing buildings get pricing power.

Industrial outside the Sun Belt also stands out. Colliers data cited by CRE Daily shows Midwest industrial delivered since 2022 is 88% occupied, against 73% in the Southeast. That gap fits what we keep seeing: overbuilt growth corridors and underpriced turnaround markets are not the same trade.

For apartments, a 22% discount to peak will draw buyers with patient capital and low leverage. Those are the buyers positioned to win in this tape, because they do not need the refinance market to cooperate.

Where we see the downfalls

The biggest risk is the spread. RealPage data cited by CRE Daily put apartment cap rates only 0.7 point above the 10-year Treasury when federal debt passed $40 trillion, the thinnest spread at any $10 trillion milestone since 2008. With yields above 5%, a lot of deals are running on negative leverage, where the debt costs more than the property yields. That math does not fix itself without rent growth or lower rates.

Operating costs are not helping. Yardi Matrix data in the same CRE Daily issue shows property taxes at 20.9% of apartment operating expenses, second only to payroll.

Then there is the debt already on the books. CRE Daily reported $8.7 billion of mall loans in special servicing, Chicago carrying the highest CMBS distress rate of any major market, and Bank OZK shares falling more than 5% after Citi flagged a six-week extension on a $915 million San Diego life sciences construction loan. Extensions buy time. They do not buy value.

What we are watching

Three things. First, Green Street’s October print, to see whether a flat September turns into a decline. Second, extension and modification activity on construction and bridge loans as maturities meet a 5% Treasury. Third, whether office absorption in markets like Houston broadens beyond the newest Class A buildings. JLL expects Houston to finish the year with positive absorption. If it does, that is a sign the flight to quality has a floor.

If you are holding an asset or a construction loan that was underwritten for a lower rate world, this is the moment to pressure test it. Kaufman Real Estate & Consulting offers capital structure and feasibility reviews built for exactly this at https://www.kaufmanrealestateandconsulting.com.

About the Author

I’m the founder and CEO of Kaufman & Company, a private investment and holding firm working across real estate development, venture investment, and infrastructure. My focus is workforce housing and employer-anchored development, including mountain resort communities through Oldivai.

Reach me at Daniel@kaufmanredev.com or find more at danielkaufmanre.com.

Sources

CRE Price Recovery Stalls as Higher Yields Threaten Further Declines, CRE Daily, October 9, 2026, https://www.credaily.com/newsletters/national/issue/cre-price-recovery-stalls-as-higher-yields-threaten-further-declines/

Houston Office Absorption Turns Positive for Second Quarter, CRE Daily, October 9, 2026, https://www.credaily.com/briefs/houston-office-absorption-turns-positive-for-second-quarter/

Mortgage Rates Will Remain Above 7% Through 2027, Top Economist Forecasts, Realtor.com, October 11, 2026, https://www.realtor.com/news/trends/mortgage-rate-forecast-mba-fratantoni-2027/