Commercial Real Estate 2026: What to Expect

A version of this article first appeared in the CNBC Property Play newsletter with Diana Olek. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. subscription To receive future issues, directly to your inbox.

The 2025 economy was not as strong as expected – and that’s shaping the commercial real estate outlook for 2026. The economy has slowed, unemployment rates have risen, and construction has stalled a bit in most sectors.

This year saw increases in both tariffs and immigration restrictions. Together, this has increased costs for builders and developers. But interest rates also fell, which began to unlock more capital, albeit slowly and cautiously.

Here’s what you can expect for next year.

The many and varied forecast reports issued by almost every commercial real estate firm, as well as related consulting and financial services firms, use words such as “new equilibrium” (Colliers), “sturdier fundamentals” (Cushman & Wakefield), “sustained recovery” (KBW) and “signs of price stability” (CoStar).

Looking at the details of next year, real estate leaders are a bit less optimistic than they were before 2025, according to a Deloitte survey of 850 global CEOs and their direct reports at major property owner and investor organizations in 13 countries. 83% of respondents said they expect their revenues to improve by the end of 2026, compared to 88% last year. Fewer respondents said they plan to increase spending, while a larger number expected to keep spending steady. However, 68% said they expect expenses to rise in 2026.

Most respondents said they expect the cost of capital to improve, and growth is expected in most asset classes. Overall sentiment is down from last year but much higher than in 2023, according to a Deloitte survey.

Looking specifically at the United States, the commercial real estate sector enters 2026 with renewed momentum, clearer visibility and increased optimism across the leasing landscape and capital markets, according to Cushman & Wakefield forecasts. The report notes that despite uncertainty surrounding tariffs, a volatile policy backdrop, tightening immigration and bouts of stress in financial markets this year, the economy has been more resilient than expected, largely driven by artificial intelligence.

“As we get closer to 2026, the tone has changed materially,” said Kevin Thorpe, chief economist at Cushman & Wakefield. “There are still risks on both sides of the outlook, but we are well past peak levels of uncertainty, and confidence in the commercial property sector is growing. Capital is flowing back, interest rates are falling, and leasing fundamentals are generally stabilizing or improving. If 2025 was a test of resilience, 2026 has real potential to reward it.”

Capital is returning to participation, according to Colliers, which expects the industry to “enter a new equilibrium.” Forecasters there point to office demand bottoming out and new growth in industry, thanks once again to artificial intelligence.

PwC also confirms that capital began flowing again in the second half of this year, “but selectively.”

“The deal environment rewards those who can combine data-driven insight with strategic conviction. For clients, the challenge – and opportunity – is navigating a landscape where liquidity, technology and consolidation are redefining what it means to create value in real assets,” according to a PwC report.

The share of investors who say they expect to increase their investments in commercial real estate over the next six months decreased in the fourth quarter of this year compared to the previous quarter in every sector except the retail sector, according to a survey conducted by John Burns Research and Consulting. Multifamily investor sentiment declined for the fourth straight quarter.

“Investors cited headwinds that included rising interest rates, economic uncertainty, and domestic regulatory burdens. 49% of investors expect to keep their CRE exposure at the current level over the next six months, in line with the past two quarters,” according to the report.

“Capital markets renaissance” – this is the headline from Colliers, which says that pricing has found a floor and the speed of deals is on the rise. Colliers expects a 15% to 20% increase in sales volume in 2026 as institutional and cross-border capital returns to the market.

Capitalization rates look set to decline next year, according to CoStar forecasts. Its data is already showing signs of this in the multifamily and industrial sectors, where vacancies have peaked and rent growth has begun to rise.

CoStar also notes that deal activity is on the rise, with third-quarter sales volume up more than 40% year-over-year, and that banks are “moving back into commercial real estate lending,” according to the report.

Bond markets are following suit, showing a new appetite for risk. Kostar points out that the spread between government and corporate bond yields has narrowed to approximately one percentage point (well below the historical average), “and this is usually a precursor to increased real estate investment and higher prices.”

This is consistent with Cushman & Wakefield forecasts, which also point to lower debt costs in 2025, lenders returning to the market and institutional capital returning, “supporting a broad-based recovery in deal activity.”

Lending was up 35% year-over-year, institutional sales activity increased 17% during October, and rates have largely reset, presenting the market with compelling yield and income generation opportunities, Cushman & Wakefield found.

The office market is now widely believed to have bottomed out, and assets are showing early signs of price stabilization.

Vacancy rates are expected to fall below 18% as more tenants return to the market, take advantage of expiring leases, and prioritize hospitality-driven workplaces that support hybrid working, according to Colliers.

The trend toward quality in offices will continue, as Class A buildings in many markets are now almost fully occupied. Office construction is also at its lowest level in more than three decades, according to Yardi.

Cushman & Wakefield expects continued growth in San Francisco; San Jose, California; Austin, Texas; New York; atlanta; Dallas. and Nashville, Tennessee, which recorded strong positive absorption in 2025, supported by AI expansion and diversified job growth.

“For large office users looking to secure high-quality space, the message is clear: If you find the right space, act decisively,” said James Bonaker, chief economist at Cushman & Wakefield. “There’s strong demand for new, high-quality space and there’s not enough of it. With limited building pipelines, it’s only going to get tighter.”

The industry has also seen a significant decline in the construction sector, down 63% since 2022, according to the Colliers report. Vacancies have peaked and net absorption is set to jump to 220 million square feet, as remanufacturing, manufacturing and data centers drive demand.

The retail industry is already seeing a major shift in how and where companies lease space, according to Brandon Svec, national director of U.S. retail analytics at CoStar.

He points to nearly 26 million square feet of ground-floor retail leased in non-traditional properties in the first three quarters of 2025, including multifamily properties, student housing, hospitality and offices.

Retailers are embracing smaller footprints, with the average location retail lease over the past four quarters falling below 3,500 square feet for the first time since CoStar began tracking it in 2016. This is largely due to restaurant and service operators like Starbucks, Chipotle, Chick-fil-A, Jersey Mike’s, Dunkin’ and McDonald’s, according to Svec, who has noted the growing appeal of walkable mixed-use retail environments over traditional ones. Large box formats. Although he has a warning.

“There remains significant uncertainty about the impact of tariffs on an already vulnerable consumer. While suppliers and retailers have largely absorbed these costs so far, many have indicated that price increases are imminent. With some signs of consumer spending fatigue showing, higher prices associated with tariffs could further strain household budgets and reduce discretionary spending,” Svec wrote in a report.

Multifamily rentals are beginning to decline, as a record level of new supply continues to come into the pipeline.

“Multifamily has led investment sales volume since 2015, and there are no signs of this changing. However, its share of overall volume is expected to decline somewhat as investors allocate more capital to offices, data centers and retail,” according to the Colliers report.

Data centers are becoming the darling of 2025, with demand dramatically outpacing supply. Deloitte described this sector as “a clear bright spot in the US commercial real estate landscape.” He pointed to nine key global markets where 100% of new construction projects are already fully pre-leased.

However, data centers face headwinds in financing, network capacity, zoning, and local politics.

“Frictions are increasing as communities back away from data center development. A few projects have already been abandoned, and more are expected to be postponed in 2026,” Colliers forecasts.

Public-to-private REIT transactions and portfolio mergers are likely to dominate next year, as listed valuations lag behind private market prices, according to a report by PricewaterhouseCoopers. This will be driven by considerations of scale, credibility of management and cost of capital.

“Expect mergers and acquisitions to accelerate as capital concentrates, AI exposes inefficiencies, and platforms converge – real assets are entering a new phase defined by intelligence, integration, and scale-driven opportunities,” wrote Tim Bodner, global real estate deals leader at PwC.

As for REIT stocks, they were the real laggards in 2025, but they could outperform in 2026, according to forecasts by Nareit, the REIT industry association. He points out that there is a difference between stock market valuations and REIT valuations and a continuing difference between public and private real estate valuations.

“They will close, and either or both could happen in 2026. If that happens, we expect the REITs to outperform based on our historical analysis and their continued strong operating performance and balance sheets,” the report said.