Despite predictions of a 16% jump in commercial real estate investment in 2026, the disconnect between buyer and seller expectations remains wide. Mor Milo explains why operators can’t afford to wait.
Commercial real estate investment is expected to reach $562 billion in 2026, up 16% from 2025. Cap rates are compressing. More motivated sellers are entering the market. On paper, conditions look promising. On the ground, the reality is more complicated.
“Expectations between sellers and buyers are still very, very far apart,” says Mor Milo, co-founder of Relli. “The market is still very constrained, and things are still very hard to move.”
Why the Disconnect Persists
The gap isn’t just about price. It’s about mathematics and tax implications creating a vicious cycle. Property owners who want to sell face taxable events requiring 1031 exchanges. To execute those exchanges, they need suitable replacement properties at the right basis. With current interest rates and property values, finding deals that pencil correctly is nearly impossible.
“They’re sitting on property because they don’t know what to buy,” Milo explains. “You have a vicious cycle between sellers and buyers not knowing what to do to unlock this capital without the tax implications.”
Many operators assume the problem stems from recent market volatility or political uncertainty. Milo sees it differently. Interest rates currently sit around 6 to 7%, right at the 30-year historical average. The real issue is that operators made decisions based on abnormally low rates and now face consequences.
“We saw interest rates that were significantly below average for a very long period of time,” Milo notes. “A lot of operators made decisions based on expectations those numbers would stay the same. Right now, we’re right about average.”
Deals structured with floating-rate debt and optimistic refinancing assumptions are now underwater. Rates that started at 2 to 3% jumped to 7%. Properties that should have refinanced can’t. The operators with strong investor relationships survived by injecting more equity to maintain cash flow. Those without such relationships watched their deals deteriorate.
The Aggressive Shift to Retail Capital
While some operators wait for markets to improve, others are adapting aggressively. The shift isn’t optional anymore. Institutional investors aren’t coming back to equity deals when debt investments offer 12 to 15% returns with better security.
“Sponsors are very aggressive to raise capital because they’ve been struggling to raise capital,” Milo observes. “I see that consistently, day in and day out, operators looking to figure out how to improve their capital raising processes.”
The operators who built proper systems are seeing results. Relli’s platform data shows what’s possible. In the last quarter of 2025, the platform recorded $700,000 in investment reservations compared to $1,700 total in the previous two years combined. One investor returned after six months to reserve $250,000, fully digitally.
“It takes time for people to make decisions,” Milo reflects. “People need to build relationships with you.”
What 2026 Actually Requires
Predictions of increased investment volume might prove accurate, but that doesn’t solve the fundamental problem: operators need capital now, not when market conditions theoretically improve. Building systems to access retail investors takes months. Results take longer. Waiting means competitors who started earlier capture disproportionate opportunities.
“The longer these sponsors wait to fix this problem, the more desperate they become,” Milo warns.
Concessions will eventually happen on both sides. Sellers will lower prices. Buyers will adjust expectations. But relying on that resolution ignores available solutions today. Operators who diversify capital sources, build marketing infrastructure, and create consistent investor pipelines don’t need to wait for market shifts.
The gap between buyers and sellers might not close in 2026. For operators building the right systems, that gap becomes irrelevant. They’re competing in a different game entirely.
To explore investment opportunities or learn about operator services, visit www.relli.coor connect with Mor Milo on LinkedIn.
Disclosure: Individuals or companies mentioned may have a commercial relationship with KeyCrew.
