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The 2025 economy fell short of expectations, slowing growth, raising unemployment, and stalling construction across most sectors. Tariffs and immigration limits added cost pressure for builders, while falling interest rates have begun to unlock capital, albeit cautiously. Here’s what 2026 looks like.
**Overall Investment Outlook**
Commercial‑real‑estate (CRE) firms now speak of a “new equilibrium” (Colliers), “firmer fundamentals” (Cushman & Wakefield), and “ongoing recovery” (KBW). A Deloitte survey of 850 global CEOs in 13 countries shows a modest dip in optimism: 83 % expect revenue growth by 2026 versus 88 % last year, fewer plan to increase spending, and 68 % foresee higher expenses. Most still anticipate improved capital costs and growth across asset classes, though sentiment is lower than 2023 but higher than last year.
**U.S. Market Dynamics**
Cushman & Wakefield forecast renewed momentum for 2026, noting that despite tariff uncertainty, policy volatility, tighter immigration, and market stress, the economy proved resilient—largely due to AI. Kevin Thorpe, chief economist, says confidence is building: capital flows again, rates fall, and leasing fundamentals stabilize or improve. Colliers sees the sector entering a new equilibrium, with office demand bottoming out and industrial growth spurred by AI. PwC highlights selective capital re‑engagement in the second half of 2025, rewarding data‑driven insight and strategic conviction.
Investor sentiment from John Burns Research shows a decline in plans to increase CRE exposure over the next six months across all sectors except retail. Multifamily sentiment weakened for the fourth straight quarter. Nearly half of investors plan to hold current exposure, citing high rates, economic uncertainty, and regulatory burdens.
**Capital Markets Reawakening**
Colliers reports pricing floors and rising deal velocity, forecasting a 15‑20 % increase in sales volume in 2026 as institutional and cross‑border capital returns. CoStar predicts cap rates will decline next year, with multifamily and industrial sectors already showing vacancy peaks and rent growth. Deal activity is up 40 % YoY in Q3, banks are easing back into lending, and bond spreads between government and corporate yields have narrowed to about 1 %, a typical precursor to stronger real‑estate investment and price firming.
Cushman & Wakefield notes debt costs eased in 2025, lenders re‑entered, and institutional capital returned, supporting a broad revival in deal activity. Lending rose 35 % YoY, institutional sales up 17 % through October, and pricing has largely reset, offering yield and income opportunities.
**Sector‑Specific Outlook**
*Office*: Vacancy rates are expected to fall below 18 % as tenants return, leases expire, and hybrid work models gain traction. Class A buildings are near full occupancy, and construction is at its lowest in over 30 years. Growth is projected in San Francisco, San Jose, Austin, New York, Atlanta, Dallas, and Nashville, driven by AI expansion and diversified job growth. High‑quality space remains scarce; decisive action is advised for large users.
*Industrial*: Construction has dropped 63 % since 2022. Vacancy is peaking, and net absorption is set to jump to 220 million sq ft, fueled by reshoring, manufacturing, and data‑center demand.
*Retail*: The sector is shifting to smaller, mixed‑use footprints. Nearly 26 million sq ft of ground‑floor retail was leased in non‑traditional properties in 2025’s first three quarters. Average lease size fell below 3,500 sq ft for the first time since 2016, driven by brands like Starbucks, Chipotle, and McDonald’s. Tariff uncertainty could strain consumer budgets and dampen discretionary spending.
*Multifamily*: Rents are easing as record new supply enters the market. Investment sales volume remains high, but its share of total volume may decline as capital shifts to office, data centers, and retail.
*Data Centers*: A bright spot in 2025, with demand outpacing supply. Deloitte notes 100 % of new construction in nine major markets is pre‑leased. However, financing, grid capacity, zoning, and local politics pose headwinds; community opposition has already halted some projects, and more may be shelved in 2026.
**REITs and M&A**
Public‑to‑private REIT transactions and portfolio mergers are expected to dominate 2026, as listed valuations lag private‑market pricing. PwC attributes this to scale, governance, and capital cost considerations, predicting accelerated M&A driven by AI‑exposed inefficiencies and platform convergence. Nareit forecasts that the divergence between public and private valuations will narrow, potentially boosting REIT performance in 2026 due to strong operational metrics and balance sheets.
In sum, 2026 presents a cautiously optimistic CRE landscape: capital is re‑engaging, leasing fundamentals are stabilizing, and certain sectors—especially office, industrial, and data centers—offer growth opportunities, while retail and multifamily face headwinds. Investors should focus on data‑driven insights, strategic conviction, and timely execution to capitalize on the evolving market.
