Why buying commercial real estate now beats buying at the last decade’s peak
The 2022–2024 reset did something markets rarely do: it cleared the field. Institutions paused. Bridge lenders tightened. Retail investors froze. What’s left is the best entry point for private capital in the $1M–$20M CRE market in over a decade — and it’s open right now.
This isn’t a bet that rates drop tomorrow. It’s a math problem. Investors buying today, at cap rates 80–150 basis points wider than 2021 peaks, are positioned to outperform investors who bought at the top — not because they’re smarter, but because they’re buying lower and facing less competition doing it.
The competition didn’t just thin. It left.
Institutional capital was never really built for this deal size — REITs and pension funds chase scale, not $5M industrial buildings. But the private-equity-adjacent buyers who did compete here in 2019–2022 are gone too, tied up managing overleveraged 2021 acquisitions and starved of cheap debt. Bridge lenders, syndicators, and foreign capital have pulled back for the same reasons. Days on market have gone from 15–30 to 60–120. That’s not a soft market — that’s leverage for the buyers still standing.
The repricing was cap rates, not fundamentals.
NOI held up through the reset. What moved was the discount rate — a 500bp swing in the risk-free rate over 24 months reprices every yield-based asset. That repricing has already happened. Buyers today are acquiring at the new floor, not chasing the old ceiling. If rates normalize toward 3–4% by 2027, industrial cap rates compressing back to 5–5.5% alone would produce 15–25% value appreciation before a dollar of rent growth. 2021 buyers don’t get that tailwind — they bought with nowhere left to compress.
The numbers, unlevered, 10-year:
- Industrial: 8–11% IRR — rent growth plus compression
- NNN retail: 7–9% IRR — yield certainty, low management
- Multifamily: 7–10% IRR — supply pipeline collapses post-2026
- Necessity retail: 6–9% IRR — grocery-anchored holds up best
- Levered (60–65% LTV): 12–18%
- 1031 exchange, after-tax equivalent: 14–22%
Construction costs built a moat.
Hard costs are up 40–55% since 2019. Industrial now costs $280–$380/sf to build against existing product trading well below replacement cost. That gap kills new supply math — construction starts fell 38% in 2024. In high-barrier markets like coastal California, land-to-occupancy still runs 4–7 years even if costs normalized tomorrow. Owners of existing stabilized assets own something developers simply can’t underwrite right now.
Demographics don’t care about the Fed.
Three slow-moving, high-confidence forces are already locked in for the next decade: 72 million Millennials hitting peak household formation, an $84 trillion generational wealth transfer driving 1031 and NNN demand as Boomers exit active ownership, and continued Sun Belt migration pulling population and spending into markets that didn’t have this kind of private capital depth before. None of that reverses on a rate cut.
Why the 1031 chain matters
The private market’s real advantage isn’t a single trade — it’s the chain. A growing business owner buys a retiring owner’s building. That owner 1031s into passive NNN income. An 8-unit multifamily family exchanges up into a 16-unit. That family later exchanges into a 40-unit. Every step defers tax, keeps capital compounding, and happens without an institutional bidder crashing the price. That ecosystem existed before easy money crowded it out. It’s back — for now.
The catch: it won’t stay open
Sidelined buyers always come back — when the Fed signals durable relief, when headlines turn, when LP capital unlocks. When they do, prices move with them. The investors on the other side of that trade will be the ones who bought while the field was still empty. Want to learn more? Subscribe to our newsletter or YouTube Channel @CentennialEdge , @CentennialAdvisers
Prepared based on market analysis by Centennial Advisers. For informational purposes only — not investment, tax, or legal advice.