Real Estate Is Splitting Into Two Markets
The real estate market is starting to improve, but not every building is seeing the same result.
Some properties are getting more attention from buyers. Some are easier to finance. Some have strong tenants that continue to need the space.
Other properties are still facing problems.
Older buildings, weaker locations, and places with fewer users are taking longer to recover. Owners of these properties may need to lower prices, make repairs, or find a new use for the space.
This is the biggest change happening in real estate right now.
The market is no longer moving together.
The best properties are moving first.
Why This Is Happening
A few years ago, borrowing money was much cheaper.
That allowed many buyers to take bigger risks. A building did not always need strong income right away because lower loan costs helped support the deal.
That has changed.
Today, buyers are asking simpler questions.
Do people want this space?
Will tenants stay?
Can the building make money after all costs are paid?
These questions matter because owning a building has become more expensive.
In Manhattan, trophy office availability has fallen to 10.7%, down from 17% in early 2023. Class B and C buildings in the same borough sit above 25% (CBRE). Same city. Two completely different markets.
A warehouse near roads and customers may stay valuable. A warehouse far away from important areas may struggle.
The building itself matters, but the reason people need it matters more.
What Many People Miss
A real estate recovery does not mean every building rises at the same time.
This has happened many times before.
The best properties usually recover first because buyers understand why they work. They know why people want them and why another buyer may want them later.
The weaker properties need more help.
Sometimes they need a lower price.
Sometimes they need repairs.
Sometimes they need a completely different plan.
A cheap building is not always a good deal.
Sometimes the low price is there because the problems are bigger than they appear.
For the last 78 years, one thing has predicted a bull market…
With 100% accuracy…
The midterm election.
It doesn't matter which party wins.
Or what the economic conditions are.
In war and in peace…
The 12 months following a midterm election are the most profitable.
This midterm will be no different.
What This Means for Buyers
The next few years may reward people who take their time.
The easiest mistake is buying a building just because the price looks lower.
A better question is whether the building still has a reason to exist.
A good apartment building in a growing area can stay strong.
A useful warehouse can stay important.
A popular shopping area can keep attracting customers.
The strongest properties solve a real need.
That is what separates them from buildings that may continue struggling.
By the Numbers
Class A office space captured 87% of total U.S. office net absorption in H1 2026, according to Colliers. Prime office vacancy stands at 12.7%, compared with 18.6% overall (CBRE).
Industrial vacancy fell to 6.5% in Q2, the first decline since Q2 2022, with leasing up 49% year-over-year (CBRE, JLL).
On the other side, the Trepp CMBS delinquency rate jumped 51 basis points to 7.86% in July, driven by $6 billion in newly delinquent loans, most tied to office and mixed-use properties that could not refinance.
Bottom Line
Real estate is improving.
But the market is choosing winners.
The buildings that help people and businesses will likely recover faster than buildings that no longer fit what the market needs.
