Technically this should not be the case with a yield spread that is among the widest it has ever been in the past decade.

With the 10-year Treasury hovering between 1.5 to 1.8% in recent months, investors have been favored by strong levered yields, Marcus & Millichap notes. Meanwhile, the average combined commercial real estate cap rate remains in the low-6% range, delivering a 400- to 450-basis-point premium above the 10-year Treasury.

But buyers remain spooked by the prospect of a recession, even as the spread bolsters levered return prospects. Certainly there is plenty of evidence to support their concerns; also yesterday the Commerce Department reported that third quarter GDP dropped to 1.9% and ADP said that there had been 125,000 private sector jobs created for the month.

This is why buyers' underwriting models continue to deliver more cautious valuations, Marcus & Millichap says. "Sellers, meanwhile, continue to cite strong performance metrics that support aggressive asking prices."

There are good reasons to think that the Fed will continue to pause interest rate cuts.

In September, core retail sales rose by 4.5% year over year for the second consecutive month while consumer spending remains elevated, following the sluggish growth pace of 2.5% in February. "This points to a positive growth outlook for the holiday season," Marcus & Millichap says. Also, "inflation will play a pivotal role for future rate policy as Chairman Powell noted the Fed's preferred inflationary measure—core PCE—remained below the Fed's 2 percent target in recent months."

While these metrics bode well for the US economy, it is debatable whether they are enough to sway buyers if interest rates pause.