The commercial real estate transaction market in Charleston and across the nation is experiencing a stall, despite a narrowing gap between buyer and seller price expectations. High borrowing costs and selective lending practices continue to restrict deal volume, according to a recent report from SitusAMC.
As of Q2 2026, investor recommendations for buying commercial real estate fell to 15%, a significant drop from 26% in Q1 and the lowest level in over two years. Conversely, sell recommendations increased to 14% from 4%, reaching a nearly three-year high. Almost three-quarters of survey respondents indicated a preference for holding commercial real estate assets, contributing to transaction volume hitting a one-year low.
While commercial and multifamily borrowing saw increases of 12% quarter-over-quarter and 16% year-over-year, underwriting standards remain historically tight. Lenders are prioritizing interest rates, debt-service coverage, cash-flow stability, and refinancing exposure. Among 16 property types, only medical office and self-storage received outright buy recommendations, with most other sectors remaining in a hold position.
Cap rates continue to exceed long-term averages across major property types. Retail cap rates are 30 basis points above their average, industrial and apartments are 20 basis points above, and office properties are 80 basis points above their long-term average. The 10-year Treasury yield also rose by 20 basis points during Q2, compressing the spread between real estate yields and Treasurys to 3.7%, which is approximately 130 basis points below the long-term average.
Financing activity is showing selective improvement. Mortgage Bankers Association data cited by SitusAMC indicated that industrial originations increased by 38%, and office originations rose by 23%. CMBS lending climbed 55% quarter-over-quarter and 68% year-over-year, while bank originations increased by 61% from a year earlier.
The strong preference among investors to hold assets suggests that transaction growth will largely depend on deals where pricing, cash flow, and financing are clearly aligned. This trend impacts the broader Charleston economy, which relies on sectors like aerospace manufacturing, healthcare, and port logistics, all of which utilize commercial real estate for their operations.
