Macroeconomic pressures continue to influence commercial real estate, but the story is shifting away from 2025. Inflation has eased, and economic growth remains steady, even though borrowing costs are high and the Federal Reserve is cautious about rate cuts.
As of December 2025, the federal funds rate stands at 3.64%, keeping financing costs high and forcing investors to remain disciplined in underwriting and deal selection. At the same time, clearer visibility is emerging. Capital markets are stabilizing, tech adoption is accelerating and bringing operational efficiency to new highs, and sectors are recovering, albeit unevenly.
Together, these forces are shaping a more constructive environment in 2026, characterized by targeted opportunities rather than widespread disruption.
Key trends shaping the commercial real estate market in 2025
Powerful macroeconomic trends continue to shape the 2026 real estate market, affecting investment, valuations, and strategies across all sectors.
Macroeconomic environment shaping CRE
Interest rates and valuation discipline: Interest rates are still higher than before the pandemic, but the intense fluctuations of previous years have calmed down. Stable assets have borrowing costs significantly above historic lows.
Meanwhile, riskier property types, such as offices and certain retail spaces, encounter wider spreads and more cautious terms. This has strengthened valuation discipline, leading to lower prices and reduced refinancing options.
Inflation trends and economic growth outlook: As of November 2025, inflation has stabilized at 2.7%, lower than experts predicted. These numbers are far from the 8% inflation rate of 2022, after the pandemic, but they still impact operating costs, especially insurance, property taxes, and maintenance. This has led owners and operators to focus on controlling costs, improving operational efficiency, and increasing rent where possible.
Capital availability and lending conditions: Capital will still be accessible in 2026, but lenders are being more selective. Currently, banks are focusing on lower-risk deals with steady cash flows. Meanwhile, private lenders are stepping in to fill financing gaps, usually at higher costs and with more flexible structures.
Ongoing debt maturities are keeping refinancing activity lively, which can be challenging for owners but also offers good opportunities for investors with capital. Borrowers who succeed tend to be transparent, adaptable, and flexible, all of which help them secure better terms.
Global geopolitical and trade dynamics: Geopolitical uncertainties continue to influence the broader economy. When policies and trade deals change, investor sentiment fluctuates. As investors navigate the market in 2026, they must stay alert to international developments affecting major markets, as they have shown the ability to rise and fall quickly under the current administration.
Sector-by-sector CRE market outlook
Each major asset class reacts differently to shifting economic conditions, evolving tenant needs, and changing investor attitudes in the real estate market.
Office: Vacancy rates, RTO trends, and reconfigurations
The office sector continues to face high vacancy rates, near 23% in many markets, indicating a fundamental change in how space is used rather than a short-term disruption. While return-to-office mandates have caused slight increases in attendance, many companies are adopting permanent hybrid models and reducing their real estate footprint.
Flight-to-quality trends remain distinct, with tenants gravitating toward newer, amenity-rich buildings while leaving older properties with higher vacancies. To counter high vacancies, building owners focus on reconfiguring existing office space with premium amenities and custom spaces. Older or underperforming buildings are targeted for renovation into residential or mixed-use properties.
Industrial & logistics: Normalization with durable tailwinds
Industrial and logistics real estate is entering a period of normalization after years of rapid expansion. Industrial vacancy reached 7.3% in Q2 2025 as new supply outpaced demand for the third year in a row. This is expected to continue into 2026, particularly in secondary locations with large-scale speculative projects.
This sector maintains strong fundamentals with solid bases supported by long-term e-commerce growth, which accounts for nearly 16% of retail sales in Q3 2025. Modern, strategically located logistics centers remain attractive, driven by supply chain optimization, automation, and increasing delivery demands.
Multifamily: Rent growth, supply pipelines, and affordability
Multifamily fundamentals stay steady. As of October 2025, new deliveries are 4.5% higher than in 2024, predicting 400,000 new units by 2026. Vacancy is at 4.4%, down from 6.9% in late 2024. Regional variations are noticeable, with oversupply in Sun Belt markets leading to slight declines in rent growth, while the Midwest and urban strongholds maintain stable rent growth patterns.
Affordability challenges persist but are easing. In 2025, renters paid about 24% of their income on housing, and asking prices for 0-2-bedroom rentals declined by 2.1% in the nation’s top 50 metros. As building slows due to higher costs and tighter financing, market equilibrium should return, allowing rent growth to stabilize. Demographic drivers and persistent homeownership barriers continue supporting long-term demand.
Retail: Resilience in experiential and necessity-based formats
Consumer spending has become more selective as we move into 2026. US consumer confidence steadily declined from August to December 2025. Although households haven’t eliminated spending entirely, they are now focusing on essentials and remaining cautious about discretionary items.
Retail real estate remains steady in necessity-based and experiential segments. Grocery-anchored shopping centers boast strong occupancy and tenant retention, and experiential retail focuses on dining, entertainment, and services that can attract good foot traffic.
Alternatives: Data centers, life sciences, and self-storage
Alternative commercial real estate continues to outperform traditional assets, offering resilient growth and resistance to economic swings affecting other sectors.
Soaring demand for AI, cloud computing, and streaming services is spurring a critical need for data centers, essential infrastructure facing significant supply constraints. Growing biotech innovation and healthcare demand reinforce life sciences facility needs, keeping vacancy rates very low. Self-storage assets continue attracting investors, driven by demographic changes, increased urban density, and migration patterns.
Regional and market variations
National commercial real estate market trends set standards, but regional variations offer diverse opportunities for investors in 2026.
Key US metro markets: Top-performing metros include Dallas-Fort Worth, Miami, Nashville, Austin, and Houston, bolstered by strong population growth, job creation, and diversified economies. Smaller cities like Raleigh-Durham, Charlotte, Phoenix, and Tampa attract attention from owners and investors seeking higher returns. It’s important to note that, in 2026, even these key markets are subject to more selective underwriting.
Growth corridors and secondary markets: Secondary markets such as Salt Lake City, Columbus, Boise, and Greenville, SC, gain traction through affordability, infrastructure upgrades, and demographic shifts. These locations see investment inflows in industrial properties, flexible office space, and lifestyle-oriented multifamily projects.
Global hotspots: US commercial real estate remains a top destination for cross-border capital from Canada and Europe due to market stability and liquidity. Investment is also flowing to gateway cities like London, Paris, Berlin, and Sydney, focusing on data centers and life sciences.
Key challenges facing commercial real estate in 2026
The following table summarizes the principal challenges that real estate professionals and investors should anticipate and actively manage in 2026:
| Challenge | Description | Impact |
| Climate Change and ESG Mandates | Growing focus on energy efficiency, climate resilience, and sustainability driven by insurers, lenders, and investors | Higher cost to upgrade buildings and potential impact on financing and insurance availability |
| Aging Building Stock Obsolescence | Older buildings struggle to meet modern tenant expectations and energy standards | Reduced asset value, higher vacancy, and costly renovations or repositioning |
| Cybersecurity Threats and Fraud Risks | Rising frequency of digital attacks, data breaches, and financial fraud in CRE operations | Operational disruptions, reputational damage, and financial losses |
| Rising Insurance Costs and Natural Disaster Exposure | Insurance premiums increase due to climate-induced events; some locations face a higher risk | Increased operating expenses and challenges securing coverage, affecting investment returns |
| Debt Maturity and Refinancing Risk | Large volumes of maturing commercial real estate loans are coming due as lending remains tight | Refinancing gaps, higher equity requirements, and increased pressure on owners to restructure or sell assets |
CRE investment and capital markets outlook
Market fluctuations and new ventures define the commercial real estate market outlook for 2026, presenting challenges and opportunities as markets stabilize and capital reshapes the investment environment.
Refinancing activity returns but remains selective
Lower short-term interest rates are likely to boost refinancing activity in 2026, offering relief to some borrowers amid ongoing market uncertainty. Moody’s ratings indicate that CRE credit conditions will remain neutral, with refinancing opportunities improving despite persistent risks, especially in weaker property types such as office and retail. Although refinancing volumes are expected to rise, capital access will stay uneven, favoring assets with stable cash flows, strong sponsorship, and solid fundamentals.
Securitization favors single-asset deals and data centers
Securitization markets are showing clearer signs of stabilization, with issuance increasingly centered on single-asset, single-borrower (SASB) deals. Office properties remain the main drivers of SASB issuance in 2025, while data centers are a rapidly growing segment, reflecting strong investor interest in specialized, income-producing assets. Moody’s expects this trend to continue into 2026, as rising leverage and property concentration will require stronger credit protections and more cautious deal structures.
Capital returns, but discipline remains
Although private US CRE values bottomed in late 2024, capital re-entry has been cautious. MetLife Investment Management reports improved liquidity and narrower spreads, but many investors cut real estate targets after poor performance. In 2026, investment will stay selective, focusing on sectors and markets where pricing, fundamentals, and demand align.
Emerging opportunities and growth drivers
Despite ongoing reservations, emerging opportunities show how the industry adjusts to market needs, social priorities, and technological advances.
- Affordable and workforce housing initiatives: Government incentives and public-private partnerships expand, driving development to address critical housing shortages in urban and suburban markets
- Adaptive reuse of underutilized office space: Owners convert excess office space into residential units, mixed-use projects, or new workspace concepts responding to shifting demand patterns
- Industrial and logistics hubs: Distribution centers and logistics properties benefit from e-commerce expansion and evolving global supply chains, including nearshoring trends
- AI, automation, and PropTech adoption: Investors increasingly adopt technology, enhancing management, leasing, and tenant services, increasing efficiency, and generating valuable data insights
These trends align with broader CRE trends shaping the industry’s future direction and creating new investment categories.
Expert opinions and analyst commentary
Industry commentary heading into 2026 reflects a shift from defensive positioning to cautious optimism. After several years of uncertainty, analysts point to clearer visibility in both leasing and capital markets.
Industry leader perspectives
In its US Outlook 2026, Cushman & Wakefield notes that the CRE market is entering the year with renewed momentum. While macro risks remain, such as policy volatility and uneven growth across sectors, the firm highlights easing debt costs, improving liquidity, and a pricing reset as powerful tools to bring capital back into the market.
Kevin Thorpe, Chief Economist at Cushman & Wakefield, commented: “As we head into 2026, the tone has shifted meaningfully. There is still risk on both sides of the outlook, but we’ve moved past the peak levels of uncertainty, and confidence in the CRE sector is building. Capital is flowing again, interest rates are moving lower, and leasing fundamentals are generally stabilizing or improving. If 2025 was a test of resilience, 2026 has real potential to reward it.”
Key takeaways from recent reports
- J.P. Morgan’s 2025 Midyear Outlook shows multifamily, retail, and industrial sectors displaying resilience, with stabilization in rents and vacancies, while office sector fundamentals remain challenged
- Macroeconomic headwinds—interest rate volatility, fraud risk, and insurance pressures—persist according to J.P. Morgan, but forward-looking investors find value in alternative sectors and select office and retail bargains
- Deloitte’s 2026 CRE Outlook reports marked improvement in industry sentiment, with the majority expecting revenue and capital conditions to improve, highlighting anticipated recovery in leasing, pricing, and transaction activity
Talent, technology, and future-proofing CRE
Firms turn to next-generation talent, advanced digital solutions, and sustainability strategies to secure long-term competitiveness in a dynamic industry.
Attracting and retaining next-generation talent
CRE companies focus on recruiting and building workplace cultures appealing to digitally skilled talent. Hybrid work arrangements, comprehensive retraining programs, and leadership development are priorities for retaining emerging and experienced talent, adapting to evolving industry requirements.
Digitalization and AI revolution
Organizations implement AI and PropTech solutions, streamlining operations, automating analysis, and enhancing tenant experiences. Advanced analytics enable firms to optimize leasing, benchmark building performance, and inform decision-making while identifying risks earlier and improving portfolio returns.
Using data and analytics for smarter asset management
Firms are using analytics to optimize leasing, benchmark building performance, and inform decision-making, helping them identify risks sooner and improve portfolio returns.
Deep energy retrofits and sustainability-driven value creation
Sustainability has shifted from a priority to a necessity. Owners are investing in deep energy retrofits to meet ESG goals, satisfy tenant expectations, reduce operating costs, and safeguard long-term value.
What to expect for 2026 and beyond
Key themes influencing the commercial real estate market outlook:
| Theme | Description |
| Risk, Resilience, and Agility | Markets are shaped by ongoing risks but also by the resilience and flexibility of owners and investors |
| Structural Shifts in Occupier Demand | Changing tenant preferences and space utilization reshape demand across office, industrial, and retail sectors |
| Pricing Discipline | Instead of acting quickly, investors are concentrating on investing in projects with strong long-term fundamentals and sustainable returns |
The bottom line
Commercial real estate is entering 2026 with a clearer path forward. Pricing has adjusted and capital is re-engaging, while fundamentals are strengthening in several key sectors. Although the recovery remains uneven, the environment is more manageable than it has been in years. This has created space for thoughtful growth rather than reactive decision-making.
The 2026 market will reward discipline and selectivity. Investors and operators who focus on asset quality, steady cash flow, and markets with long-term demand will be positioned to seize the best opportunities as the market continues rebuilding. For those who remain patient and informed, 2026 offers a chance to turn resilient market conditions into real momentum.
Sources:
Effective Federal Funds Rate – Real-Time & Historical Trends
https://www.jpmorgan.com/insights/real-estate/commercial-real-estate/commercial-real-estate-trends
