The Commercial Real Estate Alpha Site

CRE heads into 2026 with tempered optimism as capital flows return, office demand stabilizes, and industrial rebounds.

After a bumpy 2025 marked by higher costs, a soft economy, and muted activity, commercial real estate is poised for a more stable—if not spectacular—year ahead.

Stabilizing fundamentals: The economy slowed in 2025, but falling interest rates are starting to unlock capital. CRE leaders expect modest revenue growth in 2026, despite rising costs. Analysts see the market entering a “new equilibrium” with firmer fundamentals.

Capital markets reawakening: Capital is returning to CRE as rates fall and investor confidence improves. Sales volumes are rising, cap rates are softening, and lenders are easing back in. With pricing largely reset, conditions are ripening for renewed deal activity in 2026.

Office signs of life: Office demand is ticking up, with vacancies expected to fall below 18% as tenants seek quality space. Construction is at a 30-year low, and top-tier buildings in major markets are nearly full. Cushman warns: premium space is limited—move quickly.

Industrial tightens up: Construction is down 63% since 2022, but demand is surging from reshoring, manufacturing, and data centers. Absorption could reach 220 million square feet in 2026 as vacancies peak, tightening the market.

Retail rethinks space: Retail is shifting into mixed-use settings, with smaller footprints and 26M SF leased in nontraditional spaces in 2025. Tariffs remain a threat, as rising costs could force price hikes and strain consumer spending.

Multifamily cools: Rent growth is slowing amid a flood of new supply. Multifamily remains a top asset, but may lose share in 2026 as capital shifts to other sectors.

Growth meets resistance: Data centers were the breakout star of 2025. Pre-leasing hit 100% in many markets in 2025, but community resistance and infrastructure hurdles are starting to stall future growth. Some projects are already being scrapped.

REITs set to rebound: After lagging in 2025, REITs may outperform in 2026 amid M&A activity and narrowing valuation gaps. AI-driven efficiencies and scale could boost momentum.

➥ THE TAKEAWAY

Navigating what’s next: CRE enters 2026 with clearer expectations and fresh capital momentum. Investors who stay agile and focus on data, quality, and AI-driven assets will be best positioned to benefit.