Investing.com -- Morgan Stanley has increased its 2026 forecast for commercial real estate transaction volumes to $635 billion, representing a 12% year-over-year increase, according to a research note released Tuesday.

The investment bank's revised outlook follows stronger-than-expected first-half performance, with CRE transaction volumes reaching $279 billion in the first six months of 2026, up 23% from the same period last year.

Commercial and multifamily loan originations grew 16% year-over-year and 12% quarter-over-quarter in the second quarter. Outstanding mortgage debt in the sector reached $5.02 trillion, marking a 4.5% increase from the previous year.

Bank lending standards for commercial real estate have eased, contributing to improved capital market conditions in the second quarter of 2026.

Price growth in the sector remained limited, with values rising just 0.9% year-over-year in June. Distressed property sales accounted for 3.3% of all transactions, while net distress increased by $5.8 billion.

The composition of distressed sales has shifted, with apartment properties representing 38% of total distressed transactions in the second quarter, compared to 37% for office properties. This marks a change from earlier quarters when office properties dominated distressed sales.

Morgan Stanley noted that while CRE capital markets continue to improve, price increases remain modest and distress levels are rising.