As commercial real estate transaction volumes climb, a fundamental restructuring in capital sources is forcing operators to rethink decades-old business models.
The commercial real estate sector ended 2025 with a 13% increase in transaction volumes, marking an uneven recovery after several turbulent years. While the headline suggests stabilization, Mor Milo, co-founder of PropTech platform Relli, argues the surface-level recovery masks a deeper structural transformation that will accelerate throughout 2026.
The core issue isn’t transaction volume: it’s where capital originates and what operators must do to access it.
“The sponsors are getting it. They understand they have to go to retail markets, and there’s an opportunity there,” Milo observes. “We’re at a crossroads where maybe 5% of people who qualify to invest in these deals know about them, and 95% don’t even know they exist.”
The Institutional Exodus That Isn’t Temporary
Conventional wisdom suggests institutional investors will return to real estate equity as markets stabilize. Milo challenges this assumption based on simple mathematics. With current interest rates, debt investments deliver 12-15% returns with significantly lower risk profiles than equity positions. Institutions don’t need real estate equity exposure when loan products offer comparable returns with superior protection.
This isn’t a temporary market dislocation – it’s a permanent reallocation based on risk-adjusted returns.
The vacuum created by institutional capital’s debt preference creates space for retail investor participation, but only for operators who build the infrastructure to access that capital source. The traditional model of three or four institutional relationships funding an entire operation no longer functions in the current environment.
“What happens when you run out of that capital? You stagnate,” Milo explains. “You don’t have the ability to keep doing deals.”
Two Operating Models Emerge
The 2025 market separated real estate operators into distinct categories based on how they responded to capital constraints. Some firms pushed deals forward despite unfavorable economics because transaction fees kept operations running. Others waited patiently for opportunities that penciled correctly, even accepting slower growth.
The distinction became critical when floating-rate debt climbed from 2-3% to 7%. Operators with diversified investor bases could inject additional equity to maintain cash flow. Those dependent on limited institutional relationships watched profitable deals turn marginal or worse.
“Good investor relations operations are saving good operators,” Milo notes, “because they have access to the retail investor community to deploy capital into deals that might need more equity.”
The firms that maintained strong investor communication and diversified capital sources weathered rate increases successfully. Those relying on institutional capital or limited high-net-worth relationships found themselves constrained regardless of deal quality.
The Marketing Gap
Milo frequently encounters real estate operators managing substantial asset portfolios – $180 million, $500 million, even $3.5 billion – who operate without websites, logos, or marketing infrastructure. These firms built successful operations entirely through personal relationships and private track records.
That approach worked when institutional capital flowed freely and limited operators competed for dollars. It fails in an environment where retail capital dominates and dozens of operators compete for attention.
“Nobody knows who they are,” Milo says of operators lacking public presence. “They have to build systems for people to not only know who they are but for those people to be consistently engaged.”
The shift from institutional to retail capital sources requires consumer brand development, consistent communication systems, and professional digital presence. Retail investors make decisions differently than institutions—they require public credibility, transparent communication, and accessible information rather than private introductions and personal track records.
Technology as Competitive Advantage
Relli’s platform addresses the infrastructure gap by providing operators with lead generation systems, CRM implementation, video production, and automated communication sequences. The company generates 20-50 qualified leads monthly for clients with under $3,000 in advertising spend, but Milo emphasizes the larger challenge.
“Our customers are not prepared for the leads,” he explains. “When we deliver them, what do they do? Normally they’ll pick up the phone once or twice and fizzle out.”
The solution extends beyond lead generation to foundational sales and marketing systems. Operators need messaging frameworks, automated follow-up sequences, and clear value propositions – standard corporate infrastructure that real estate firms historically avoided because personal relationships drove capital formation.
As retail investors grow more sophisticated and operators recognize infrastructure requirements, platforms providing turnkey solutions gain strategic advantage. The operators who implement systems now will capture disproportionate market share as retail capital flows accelerate.
What 2026 Brings
Multiple trends converge to accelerate the retail investor shift. Institutional capital remains in debt markets based on fundamental economics. Operators exhaust private capital sources and recognize infrastructure needs. Retail investors develop sophistication and seek real estate exposure. Technology platforms provide accessible solutions.
“The longer these sponsors wait to fix this problem, the more desperate they become,” Milo warns.
The psychological shift matters as much as the practical infrastructure. Operators must stop viewing retail investors as a backup option when institutional capital isn’t available and start building retail relationships as primary strategy. Firms making that mental transition now position themselves advantageously. Those waiting for institutional capital to return will find themselves perpetually behind competitors who adapted earlier.
For operators, the choice clarifies: build the marketing and sales infrastructure to access retail capital, or accept constrained growth as competitors capture market share. For retail investors, the opportunity expands as more operators recognize the need to serve this market segment professionally.
The infrastructure exists, the capital is available, and the market dynamics favor change. What remains is execution—operators building the systems that retail capital markets require and investors recognizing newly accessible opportunities.
To learn more about Relli’s platform and services, visit www.relli.co or connect with Mor Milo on LinkedIn.