The national debt crossed $40 trillion on August 19. First time ever, years ahead of CBO’s own projection, and roughly everyone I know posted about it.
Here’s the thing. That number never shows up in anybody’s underwriting. The ones that do are the 10-year Treasury, which started the year around 4.2%, sits at about 4.8% today, and the 30-year, is over 5.3% and the highest since 2007. Interest on the debt is running about $1 trillion a year, the third-largest line in the federal budget behind Social Security and Medicare, and bigger than defense.
So what does that actually do to deals?
Capital isn’t gone. It’s picky.
Deals still clear when the buyer doesn’t much care what money costs. When the end user has to be in that building, period, the math survives a repricing. Healthcare, mission-critical logistics, special use, owner-user. None of those rest on a cap rate assumption three years out.
The Sacramento office buyer list makes the point better than I can. Top buyers of the last twelve months, in order: Seavest, a medical office investor, $25.3 million. California Housing Finance Agency, $22.3 million. A private trust. Sutter Health. Cornerstone Companies. EMCOR, as an owner-user. Welbe Health. Gurnick Academy of Medical Arts.
Healthcare, government, healthcare, healthcare, owner-user, healthcare, education. Not a merchant builder or a value-add fund in the bunch.
80 Iron Point Circle
The biggest office trade in the market was 64,000 square feet of medical office in Folsom. $25.3 million, $395 a foot, 100% leased, anchored by an ambulatory surgery center in a UC Davis joint venture on a fifteen-year lease. It traded at a 6.9% cap against a 9.2% market cap rate.
Industrial says the same thing from the user side. Life-Assist, Telstar Instruments, Nivagen Pharmaceuticals, all owner-user or purchase-by-tenant. CoStar puts it plainly: slowing rent growth and higher vacancy give users room to buy their own buildings for long-term cost control. The tenants are becoming the buyers because nobody else is showing up.
Housing tells it too. Multifamily cap rates went from 4.2% in 2021 to 5.5%, and second-quarter volume ran near half the year-ago level. CoStar notes sellers had been worried there was nothing to 1031 into. Now there’s more to buy and fewer buyers. That’s the bid-ask gap, from the seller’s side.
Mixed-use infill is the hardest case, because it needs cheap capital, a residential exit, and retail demand all at the same time. Downtown Sacramento multifamily ran 33 transactions over twelve months averaging eleven units each. That’s small private buyers picking up small buildings.
What the repricing actually did
Cap rates expanded everywhere off the 2021 trough. Office 7.4% to 9.2%. Industrial 6.1% to 7.4%. Multifamily 4.2% to 5.5%. Retail 6.5% to 7.2%. Plenty of assets in each segment did better or worse, same as some submarkets are healthier than others.
The value hit wasn’t even, and that’s the part most people skip past. Per CoStar, office pricing is down about 15% from 2021. Multifamily down about 13%. Retail flat, and the only sector where price per foot actually fell year over year, by 1.1%. Industrial went up about 13%. It ate 130 basis points of cap rate expansion and still gained, because rents grew enough to cover it.
Rate expansion only kills value where NOI can’t run to meet it.
So what do you do?
Be realistic and recalibrate. Recut the underwriting with today’s assumptions, not 2021’s.
Owner-user and build-to-suit look better against spec than they have in a decade, and the data shows users already doing it.
Seller expectations are a bigger bottleneck than capital right now. If a deal only works on a 2021 exit, there’s probably no deal.
If you own a building in Sacramento and want to know who the realistic buyer is, or you have a lease rolling and want to know whether buying beats renewing, that’s a short conversation. I’m at tom@baconcre.com.
Sacramento market data: CoStar Capital Markets Reports (Office, Industrial, Retail, Multi-Family), pulled 8/20/2026. © 2026 CoStar Group.
Tom Bacon, CCIM, is a commercial real estate broker in Sacramento specializing in tenant representation and complex transactions.