2026 U.S. Commercial Real Estate Outlook: Navigating Recovery and Repricing
Macroeconomic Backdrop – Easing Inflation and Shifting Rates
The U.S. economy heads into 2026 on a cautiously optimistic note. Inflation is moderating toward the Federal Reserve’s target after the post-pandemic surge, aided by tighter monetary policy and easing supply pressures jll.com. The Fed has begun to pivot from “higher for longer” interest rates – in fact, a small rate cut in late 2025 marked the first step in monetary easing, with further cuts signaled into 2026 deloitte.com. This gradual shift should alleviate financing costs for commercial real estate (CRE) borrowers over the next year. However, fiscal dynamics remain a watch item: large U.S. budget deficits and heavy Treasury issuance could keep long-term yields relatively elevated cbre.com. Elevated government debt levels may temper the downward movement in cap rates and financing costs even as the Fed eases cbre.com. On balance, baseline forecasts anticipate modest GDP growth (a “soft landing” scenario) alongside contained inflation and gently lower interest rates in 2026, creating a more stable macro foundation for CRE. Yet, market sentiment is tempered by uncertainty – industry surveys show that CRE leaders still view capital availability and financing costs as top concerns in the next 12–18 months deloitte.com. Overall, a resilient consumer sector and robust job market have underpinned demand, but prudent risk management is warranted as policy and fiscal cross-currents continue to influence the economic climate into 2026.
Capital Markets, Debt Refinancing and Asset Repricing
Capital flows into real estate are poised to rebound as monetary conditions gradually loosen. After a prolonged transaction slump in 2022–2024, investment activity began to recover in late 2025 msci.com deloitte.com, and analysts project this momentum to build further in 2026. CBRE forecasts U.S. commercial property investment volumes to rise in the mid-teens percent range as buyers re-engage in a more certain rate environment cbre.com. Crucially, the bid-ask spread on property pricing is starting to narrow. Asset values have undergone a significant “reset” over the past two years in response to higher rates, and this repricing phase may be reaching its inflection point. Public REIT markets, for example, adjusted quickly – REIT total returns in 2024 surged ~14%, outperforming private real estate indices by 17 percentage points as private asset valuations slowly caught up to the new interest rate reality reit.com reit.com. Looking ahead, industry strategists expect that cap rates, which peaked in 2023, will stabilize and even begin mild compression for prime assets in 2026 cbre.com cbre.com. In fact, investors who deploy capital just after the cap rate peak historically achieve strong returns, and many are eyeing 2026 as an opportunity to acquire quality assets at cycle-high yields cbre.com.
A dominant theme for 2026 will be managing the wall of maturing CRE debt. Hundreds of billions in loans are coming due through 2025–2026, including roughly $600 billion on bank balance sheets (about one-third of outstanding bank CRE loans) and $169 billion in securitized (CMBS) debt – nearly 40% of the CMBS universe trepp.com. Refinancing these maturities poses a challenge in today’s environment. Higher interest rates and lower valuations mean many legacy loans underwritten at ultra-low rates face shortfalls in proceeds. According to Trepp, even if borrowing rates fall below 6%, about 15% of maturing conduit loans through 2026 could fail to qualify for full refinancing due to debt-service coverage constraints trepp.com trepp.com. The office sector is particularly vulnerable – a significant share of office-backed loans may struggle to refinance, even under more optimistic rate scenarios trepp.com trepp.com. Lenders and borrowers are responding with creative strategies: extend-and-pretend loan modifications, additional equity infusions, or sales of assets at discounted prices. Distress asset sales and loan workouts are likely to tick up in 2026 as loans hit maturity and can no longer be kicked down the road. On the upside, debt capital is adapting. Private credit funds and other non-bank “investor-driven lenders” are increasingly filling the gap left by tighter banks, growing their market share of new CRE loan originations in 2025 msci.com. In fact, real estate private credit has exploded – by early 2025, private lending strategies accounted for roughly one-third of all new real estate fundraising deloitte.com. These debt funds, mortgage REITs, and other alternative lenders are stepping in with bridge loans, mezzanine financing, and preferred equity, providing liquidity (albeit at higher spreads) to keep deals moving. This influx of private capital is a double-edged sword: it offers flexibility to borrowers, but the sector remains largely untested through a full credit cycle. Analysts caution that rising write-downs on some private debt portfolios could foreshadow the first major test of this $3+ trillion private credit market in a downturn msci.com msci.com. Overall, 2026 will see a dynamic financing landscape – well-capitalized borrowers will capitalize on improved rates and “dry powder” targeting real estate debt, while weaker sponsors and obsolete assets may face refinancing pains that drive price discovery and recapitalizations.
Sector Outlooks for 2026 – National Trends with Local Nuance
Office: Bifurcation, Flight to Quality, and Repositioning
The U.S. office sector remains the most challenged major property type, but its story in 2026 is far from monolithic. Fundamentals continue to diverge sharply between modern, high-quality offices and older commodity buildings cbre.com. Tenant demand is heavily concentrated in well-located, amenity-rich properties that align with evolving workplace strategies. Occupiers are using this period to “flight to quality,” often trading up to better space while reducing overall footprint. As a result, vacancy in prime office assets is materially lower than in secondary assets – by mid-2025, Class A vacancy was nearly 5 percentage points below lower-tier offices, and this gap is expected to widen further cbre.com cbre.com. Looking into 2026, leasing activity should gradually improve. JLL forecasts that office leasing volumes will increase in 2026 after a sluggish period, as many tenants who deferred decisions in 2024–25 re-enter the market jll.com. Indeed, global office take-up is projected to rise in 2026, including in the U.S., fueled by more clarity on hybrid work patterns and very limited new supply jll.com. Importantly, new construction of offices is grinding to a halt. U.S. office development has dropped to an all-time low – 2026 completions are projected to be 75% below recent peaks, and much of that future space is already pre-leased jll.com. This development freeze, driven by high construction and financing costs, will help tighten the market over time. In supply-constrained cities like New York, a dearth of new high-end offices means tenants seeking large modern floorplates have few options and may face higher rents for top-tier space jll.com jll.com.
Despite the headwinds, signs of life are emerging in major office markets. In New York City, one of the nation’s bellwethers, leasing demand is showing resilience. Manhattan is expected to lead U.S. office demand recovery, with finance and tech firms driving vacancy lower into 2026 amid scant new supply cbre.com. Similarly, San Francisco’s top-tier office segment has gained positive momentum – even as overall SF vacancy remains high, the best assets are seeing renewed leasing interest, and the city is forecast to see vacancies decline modestly as major space users cautiously expand cbre.com cbre.com. Markets like Dallas and Charlotte, buoyed by growth industries and in-migration, are also projected to post vacancy improvements going into 2026 cbre.com. It’s clear that quality and location are paramount. As one leading portfolio strategist noted, “quality matters more than ever” – top-performing, well-operated buildings in vibrant submarkets should outperform, whereas aging assets in secondary locations will struggle cbre.com cbre.com. Indeed, many older offices face an existential question of reuse. Nationwide, tens of millions of square feet of older office stock risk functional obsolescence in the hybrid-work era. Rather than write them off, 2026 will likely see accelerated repositioning and redevelopment efforts. Owners and investors are identifying candidates for conversion to residential, life science labs, or creative mixed-use facilities. According to JLL, cities like New York, Boston, and Chicago – which have vast inventories of vintage office buildings – present some of the most compelling opportunities for office-to-residential conversions and adaptive reuse initiatives jll.com. Such projects are complex, but successful retrofits can alleviate oversupply while creating value (and even yield higher returns when energy efficiency and modernization are done early in an asset’s lifecycle) jll.com. In sum, the 2026 outlook for offices is cautiously improving at the top end and brutally Darwinian for the rest. Expect a continued bifurcation: thriving, high-amenity offices in prime districts versus persistently weak performance in outdated buildings. Market participants – from landlords to lenders – will be laser-focused on this divide, pricing assets and credit risk accordingly.
Industrial: Resilience in Logistics with a Focus on Efficiency
The industrial and logistics sector enters 2026 as a relative stalwart, albeit with growth normalizing from its frenetic pace of recent years. Demand for warehouse/distribution space remains structurally strong, underpinned by e-commerce, third-party logistics (3PL) expansion, and manufacturers’ need for modern supply chain facilities. U.S. industrial leasing volumes in 2025 held around record levels and are expected to at least match those levels in 2026 cbre.com cbre.com. Many tenants are in consolidation mode – optimizing supply chains by upgrading to fewer, larger facilities with state-of-the-art specs – which is driving a continued flight to quality within industrial real estate cbre.com. Occupiers prioritize high ceilings, ample truck courts, and energy-efficient designs, often at the expense of older, functionally obsolete warehouses. This trend has kept vacancy rates for Class A logistics space extremely low, even as slightly more secondary space has loosened.
On the supply side, the industrial pipeline is finally moderating. Developers pulled back on speculative projects as financing costs rose, and new deliveries are decelerating. Globally, 2026 industrial completions are projected to be about 42% below the 2023 peak output jll.com. In the U.S., this cooldown is evident in key distribution hubs. For instance, after a multi-year construction boom, markets like Dallas, Chicago, and Southern California are seeing fewer groundbreakings, which should allow demand to catch up with the surge of space that came online in 2023–24. The vacancy rate may have peaked in late 2025 in many markets jll.com. As 2026 progresses, a combination of steady leasing and limited new supply is expected to nudge vacancies down or at least keep them in check. Rent growth is likely to continue, though at a more measured mid-single-digit pace nationally, as tenants compete for the best facilities and landlords face less impact from new competition. Furthermore, industrial investors remain bullish on the long-term fundamentals. Modern logistics assets are consistently ranked among the top targets for capital deployment. Indeed, in a recent industry outlook survey, “logistics/warehousing” and tech-oriented “digital economy” properties were ranked as investors’ favorite sectors for the next 12–18 months deloitte.com deloitte.com.
That said, 2026 is not without challenges for industrial real estate. Elevated costs – from financing to construction materials – are sharpening the sector’s focus on efficiency and operations. Many distribution landlords are pushing initiatives to streamline costs and enhance property performance amid a higher-cost environment jll.com jll.com. This includes implementing energy-saving measures, automation for building management, and creative strategies to optimize space usage (e.g. higher racking systems or robotics to increase throughput). Another watchpoint is tenant financial health; sectors like retail and 3PL are sensitive to consumer spending and trade volumes. But on the whole, industrial real estate in 2026 is positioned for continued resilience. Core logistics hubs (Atlanta, Dallas, Southern California, Chicago) should enjoy solid occupancy and rent growth, while emerging secondary markets may see opportunities as supply tightens in the primary nodes. Barring a severe economic downturn, the industrial sector is set to remain a favored asset class, offering stable income and inflation-hedged growth for investors. As one major brokerage succinctly stated, “the industrial sector’s fundamentals remain sound, with any near-term softness likely limited and outweighed by enduring e-commerce and supply chain trends.”
Multifamily: Stabilization Today, Upside Tomorrow
The multifamily apartment sector enters 2026 after navigating a period of transition. In 2023–2024, record levels of new apartment construction in many cities led to a temporary softening of rent growth and occupancy – a needed cooldown after the double-digit rent spikes of 2021. By mid-2025, however, the national multifamily market showed signs of recovery and stabilization cbre.com. Effective rents began rising again modestly in the first half of 2025, the first year-over-year increase since the construction surge started cbre.com. Heading into 2026, the outlook is for further improvement in multifamily fundamentals, albeit with variation by metro.
A critical factor is that the new supply wave has crested. Developers responded to higher financing costs and tighter economics by sharply pulling back on apartment starts. In the U.S., multifamily development volume in 2025–2026 is dropping off steeply – current pipeline activity is down more than 75% from its recent peak jll.com. This steep fall in new deliveries means that after a final batch of projects complete in 2025, 2026 will bring relatively few new units to market, especially in comparison to demographic-driven demand. Many Sun Belt metros (such as Austin, Phoenix, and Miami) that saw aggressive building will experience a supply breather just as in-migration and household formation continue. This supply-demand rebalancing sets the stage for a re-acceleration of rent growth in late 2026 and beyond. Already, markets with persistent housing shortages – from coastal gateways like New York to high-growth cities like Miami – are seeing low vacancy rates and landlords regaining pricing power. Nationally, apartment vacancies are expected to remain in a healthy mid-5% range on average, and rent growth is projected to run in the 3–5% range in 2026 (higher in undersupplied locales, more subdued in a few overbuilt pockets) according to industry forecasts. Affordability of rentals will remain a social concern, but the flip side for investors is robust demand: high mortgage rates and low home affordability keep many would-be buyers in the renter pool, supporting apartment occupancy.
Investment sentiment toward multifamily stays positive for 2026, though tempered by interest rate realities. Apartments have long been viewed as one of the most defensive property types – offering stable cash flows and quick mark-to-market of leases. Institutional investors and lenders alike generally prefer multifamily exposure, and this has not changed. However, the rapid rise in financing costs did pressure apartment values in 2022–2023, and some owners who overpaid or over-levered in that period hit difficulties. Notably, signs of distress have emerged in the multifamily debt space. Trepp and MSCI reported a spike in apartment loan defaults/foreclosures in 2025, especially for loans originated at 2021’s low rates that now face much higher refinancing rates msci.com. This indicates that high leverage deals are vulnerable, and some assets may change hands through 2026 as a result. Yet these dislocations also present buying opportunities: well-capitalized investors are actively looking to acquire quality apartment properties (or non-performing loans) at a discount, betting on the sector’s strong long-term fundamentals kslaw.com multifamilydive.com. The multifamily sector also benefits from government-sponsored enterprise (GSE) support (Fannie Mae, Freddie Mac lending) which remains a stable source of debt capital, albeit with more conservative underwriting. On the operational side, owners in 2026 will focus on expense control – rising insurance, taxes, and payroll costs are squeezing margins, so efficient management and tech adoption are key themes. All told, the multifamily outlook for 2026 is one of cautious optimism: the short-term challenges of absorption and refinancing are real, but the medium-term drivers of demand (jobs, population, limited housing supply) point to a renewed growth cycle. Expect apartments in desirable, high-growth metros to continue commanding investor attention, even as the market sorts through some near-term adjustments.
Retail: Renewed Investor Interest as Fundamentals Strengthen
In a surprising turn from a few years ago, the retail real estate sector has staged a quiet comeback and enters 2026 on solid footing. Retail fundamentals have materially improved, thanks to limited new construction, post-pandemic consumer resurgence, and retailers’ omnichannel adaptations. U.S. retail space availability is near historic lows in many markets – hardly any new shopping centers are being built, which has kept supply in check jll.com jll.com. Meanwhile, a string of retailer bankruptcies in early 2023 did lead to some store closures, but the vacant spaces were often in weaker locations (e.g. aging suburban malls) that have minimal impact on prime retail corridors cbre.com. In contrast, high-performing retail formats are thriving. Open-air neighborhood and community centers, especially those anchored by grocery stores, continue to enjoy high occupancy and rising rents. Landlords of well-located power centers (large format centers with big-box anchors) report intense competition from tenants to backfill any available anchor boxes – bidding wars for anchor spaces have actually emerged in some core markets cbre.com. Additionally, experiential retail – from restaurants to entertainment venues – has rebounded as consumers seek physical experiences after years of online isolation.
Perhaps most telling is the shift in investor sentiment. After being shunned for the better part of a decade, retail has returned to institutional portfolios’ buy lists. One veteran industry CEO observed that in the last 24 months, “retail has been the best-performing sector in the core property index (ODCE)” cbre.com, outperforming even apartments and industrial. This performance is driven by robust income growth: top retail landlords are seeing double-digit rent spreads on new leases (mid-teens percentage increases over expiring rents at grocery-anchored centers and high-end malls) cbre.com. Such NOI growth, combined with still-depressed valuations for some retail assets, has led opportunistic investors to pounce. Core funds that once avoided retail are cautiously coming back, recognizing that cap rates in retail often price in more risk than the current reality warrants cbre.com cbre.com. There is a sense that the “retail apocalypse” narrative has turned a corner – many brick-and-mortar retailers have right-sized and integrated e-commerce, and the survivors are expanding again. Additionally, the retrenchment of e-commerce pure-plays (with some opening physical stores themselves) underscores that physical retail retains an essential role. The key in 2026 will be differentiation. Investors and lenders are highly selective: they favor necessity-based retail (grocery, home improvement centers), Class A malls in affluent trade areas, and shopping centers in growing Sun Belt markets cbre.com cbre.com. In contrast, distressed malls or unanchored strip centers in stagnant regions still face an uphill battle. Geographically, Sun Belt and Southeast markets like Miami, Atlanta, Dallas, and Phoenix are seeing the strongest retail demand, buoyed by population and income growth cbre.com. In these areas, tenant expansions are driving down vacancy and driving up rents at the fastest clip. Coastal gateway cities are also recovering – for instance, New York City’s retail, particularly in prime Manhattan corridors, has begun to attract international retail flags and post double-digit rent gains after a deep pandemic slump (anecdotal evidence suggests a burst of leasing in Soho and Fifth Avenue in 2025).
Overall, the retail outlook for 2026 is markedly positive for the first time in years. Sector specialists expect continued improvement in occupancy and rents, given virtually no new supply and the tailwind of consumer spending that, while moderating, remains healthy. Retailers are actively seeking space in the best locations, and new concepts are emerging to fill vacated big-box stores (think grocery delivery hubs, medical clinics, and even pick-up warehouses occupying former retail spots). Investors are allocating more capital to retail than at any time since the mid-2010s cbre.com, albeit with a disciplined eye on asset quality. As one portfolio manager noted, retail is back not because it’s “easy,” but because other sectors (like office) have faltered, and retail’s cash flows now look comparatively attractive cbre.com cbre.com. For 2026, expect selective cap rate compression in retail as competition heats up for strong assets, and further cap rate stability or increases for weak centers. It truly has become a market of haves and have-nots, but the narrative is far more encouraging than in years past: Main Street real estate is regaining its footing.
Regional Spotlights – Key Metro Trends in a National Context
While this outlook takes a national view, real estate is always local. Certain metropolitan areas deserve special attention for 2026 due to their scale or unique dynamics. Below we highlight five major markets – New York City, Miami, San Francisco, Chicago, and Dallas – each illustrating broader themes in the U.S. commercial real estate landscape:
New York City: The nation’s largest CRE market is at once challenged and dynamic. In NYC’s office sector, the bifurcation is extreme – trophy Manhattan towers are capturing demand (Midtown South and prime Midtown submarkets report improving leasing and even some rent upticks), whereas older Class B/C offices in the Financial District and Midtown East languish with record-high vacancies. Still, high-quality office is seeing positive momentum in New York cbre.com, as top tenants recommit to the city in renovated, amenity-rich buildings. Multifamily fundamentals in NYC are robust; chronic housing undersupply and solid employment have kept apartment vacancies around 3% in Manhattan and below 2% in the outer boroughs, enabling landlords to push rents to new highs in 2025. On the retail front, NYC is benefiting from a tourism rebound and a “return to office” boost – foot traffic in key shopping districts is up, and retail rents are rising for the first time in years. However, New York’s sheer scale means it also faces outsized refinancing risk: a large volume of 2015–2017-vintage loans on Manhattan offices and hotels will come due by 2026, many currently underwater. This is forcing recapitalizations and, in some cases, distressed sales or handed-back keys. The bright side is that NYC’s depth of capital often finds creative solutions (note the recent surge of interest in converting older Lower Manhattan offices to apartments, aided by city tax incentives). Investors remain cautiously bullish on New York, cherry-picking prime assets at adjusted prices. As JLL notes, New York is among cities with the most potential for property repositioning – a likely theme as obsolete buildings seek new life jll.com. Overall, expect NYC in 2026 to continue as a barometer for high-density urban real estate: if current trends hold, its top-tier assets will flourish while secondary stock is revalued and repurposed.
Miami: Few U.S. markets have as much momentum as Miami heading into 2026. South Florida’s economy is booming, fueled by strong population growth, corporate in-migration, and international capital inflows. The metro’s multifamily sector is one of the hottest in the country – occupancy remains very high (mid-90s percent range) even after a wave of new deliveries, and rent growth, while cooler than the 20%+ annual gains seen in 2022, is still outpacing the national average. Miami’s office market is also defying national pessimism. Demand for premium office space has surged as global companies (finance, tech, law firms) establish offices in Miami to tap into its growing talent base and favorable tax climate. New Class A office buildings in Brickell and Wynwood are reporting strong pre-leasing, and construction activity in Miami has been among the highest (by percentage of inventory) in the nation cbre.com. This new supply – over 1% inventory growth in 2025, versus ~0.3% nationally – could lead to short-term vacancy blips, but given the inbound tenant pipeline, any softness should be temporary cbre.com. Retail and hospitality in Miami are another bright spot: tourism has roared back, and the upscale retail districts (Design District, Miami Beach’s Lincoln Road, Brickell City Centre) are achieving record sales. Investors have taken notice – Miami has leaped into the top tier of target markets for institutional capital. From private equity funds buying warehouses in Miami-Dade, to foreign investors snapping up beachfront hotels, capital allocation to Miami CRE is at an all-time high. The main concern for Miami’s outlook revolves around climate and insurance – rising insurance premiums and longer-term climate risks are a factor for underwriting, but in the 2026 horizon, they are more than offset by the market’s explosive growth. Expect Miami to remain a standout “Sun Belt superstar” with all property sectors outperforming the national average, albeit with the typical higher volatility that comes with rapid growth.
San Francisco: The Bay Area presents a more complex picture. San Francisco’s commercial real estate has been under pressure, primarily due to its tech-heavy economy’s embrace of remote work and some high-profile corporate downsizings. Office vacancy in the City hit unprecedented levels (above 25%) in 2024 as large tech tenants shrank footprints. The valuation reset for SF office assets has been severe, with some buildings trading at fractions of their pre-pandemic value. That said, 2026 could see the beginnings of a fragile recovery. High-quality office space in San Francisco is starting to see glimmers of demand cbre.com – for instance, well-located, top-grade offices in submarkets like SoMa and Mission Bay have recently inked new leases to AI and life science firms. Tech companies that are hiring again (especially in AI, biotech, and gaming) are cautiously expanding their physical presence, focusing on premier collaborative space to lure workers back. J.P. Morgan’s strategists even highlight San Francisco as a market where quality office is showing positive momentum as we head into 2026 cbre.com. Apart from offices, San Francisco’s apartment market remains solid. The city’s high housing costs did ease slightly with out-migration, but San Francisco and Silicon Valley rental demand has stabilized; vacancy rates are low (~5%), and rent growth resumed in late 2025. The undersupplied for-sale housing market also funnels more people into renting, benefiting multi-family landlords. In retail, San Francisco is working through challenges in the downtown Union Square area (some retail vacancies due to lower foot traffic and safety perceptions), but neighborhood retail and suburban shopping centers in the Bay Area are healthy, supported by wealthy resident demographics. Industrial and R&D real estate (warehouse, life science lab space) in the broader Bay Area continues to be tight – the life sciences sector in particular keeps demand high for lab space on the Peninsula and in Oakland, even as some speculative lab projects pause due to funding slowdowns. For investors, San Francisco represents a higher-risk, higher-reward proposition in 2026: pessimism is already priced in, so those betting on an urban tech rebound could find attractive entry points. Public policy and urban recovery efforts will be key variables – the city is aggressively pursuing incentives for office conversions and measures to improve downtown vibrancy. In summary, expect continued headwinds in SF (especially for commodity office assets) but also spotlights of resilience in tech-driven real estate segments. The worst may be behind for the Bay Area, but the path to full recovery will extend beyond 2026.
Chicago: The Chicago metro is a study in stability amid transition. As the economic capital of the Midwest, Chicago’s diversified economy (finance, healthcare, transportation, manufacturing) provides a steady underpinning for its real estate. The industrial sector is the crown jewel – Chicago remains one of North America’s largest distribution hubs and a key logistics crossroads. Even with a sizable amount of new warehouse development in recent years, Chicago’s industrial market has been resilient: vacancy ticked up slightly to the mid-5% range as of 2025 cushmanwakefield.com, but appears to be leveling off, and rent growth continues at a moderate pace. Investors are still acquiring Chicago-area logistics assets for income yield, confident in the region’s long-term role in supply chains. The office sector in Chicago, however, faces similar bifurcation as coastal markets. Downtown Chicago has seen vacancy climb above 20%, with older offices particularly struggling to retain tenants in the face of high crime perceptions and competition from newer buildings. Yet, top-tier office towers in the West Loop and Fulton Market are performing relatively well, thanks to tenants like Google, Caterpillar, and big law firms committing to modern spaces. Notably, developers delivered high-end projects in Fulton Market that opened largely pre-leased, indicating there is demand for quality even as the overall market softens. Chicago also stands out as a candidate for significant office repositioning – its inventory of historic buildings in the Central Loop are prime targets for conversions to residential or mixed-use jll.com. Indeed, the city and state have launched programs (e.g. LaSalle Street Reimagined initiative) to incentivize turning aging offices into apartments to help rejuvenate downtown. In multifamily, Chicago is generally stable: downtown apartment occupancy is healthy (~94%) and suburban multifamily is very tight (often 98%+ occupied), reflecting a shortage of housing. Rent growth in Chicago is not as explosive as Sun Belt markets but is expected to be steady in the 3-4% range for 2026. The retail scene in Chicago is mixed – suburban retail centers and prime city neighborhoods (e.g. Gold Coast, Lincoln Park) have low vacancy, while the downtown Magnificent Mile is still grappling with elevated vacancies after losing several flagship stores. Nonetheless, retail investment in Chicago has picked up, focusing on necessity retail and urban retail with redevelopment potential. Investor sentiment towards Chicago in 2026 is cautious but not disengaged; many institutions maintain allocations to Chicago for its liquidity and stable yields, though some are underweight due to the city’s fiscal issues and population stagnation. We expect Chicago to demonstrate gradual improvement – it may not have the growth sizzle of Sun Belt markets, but its core strengths (central location, big talent pool, infrastructure) keep it firmly on the map. Initiatives to modernize older properties and address city challenges will be critical to watch.
Dallas – Fort Worth: The Dallas Metroplex exemplifies the booming Sun Belt metro story and is forecast to remain a top-performing market in 2026. DFW continues to lead the country in both population and job growth, adding corporate relocations and expansions across diverse sectors (technology, finance, defense, and more). Industrial real estate is a cornerstone of Dallas’s success – the metro boasts one of the nation’s largest industrial markets, and despite millions of square feet of new supply, demand has kept vacancy remarkably low (around 5%). As 2026 begins, Dallas’s industrial vacancy is expected to start tightening again as construction eases, and rent growth in logistics space should outpace the national average. The office outlook in Dallas is relatively brighter than coastal peers. Gross leasing volumes have been robust, and Dallas is one of the few major markets projected to see office vacancy decline heading into 2026 cbre.com. This is fueled by inbound companies (particularly from California and the Midwest) and a business-friendly environment. Markets like Plano/Frisco and Uptown Dallas are attracting high-profile tenants into new builds, while even Downtown Dallas has seen notable renovations draw interest. Dallas’s prime office submarkets (e.g. Preston Center) have extremely low vacancies (on the order of 4% or less) cbre.com, underlining the strength of demand for quality in the area cbre.com. Retail and multifamily in DFW also mirror the strong growth narrative. Retailers are expanding aggressively in growing suburbs; retail vacancy is low and rents are climbing. Multifamily absorption in Dallas remains high – even though developers have added tens of thousands of units, the occupancy rate is holding firm around 94-95%. Rent growth slowed from double digits to more sustainable levels, but with population inflows, DFW is expected to see solid apartment rent increases in 2026, especially in suburbs with excellent schools. Investor appetite for Dallas is very high across all property types – it consistently ranks among the top target markets in surveys, given its liquidity, growth, and relatively affordable pricing. One caveat is that construction costs and land prices have risen, which could pressure development yields. But overall, Dallas is positioned to outperform: it offers a template of diverse economic expansion, pro-growth policy, and ample land for development that investors find compelling. We anticipate Dallas-Fort Worth to continue its ascent as a national investment magnet in 2026, with transaction volumes and new ventures reflecting that enthusiasm.
Closing Thoughts – Positioning for 2026
As we look across the U.S. commercial real estate landscape for 2026, a few unifying themes emerge. First, quality and operational excellence are paramount. In an environment where capital is selective, the best assets with the strongest sponsorship will attract outsized interest – whether that’s the trophy office in a prime CBD or the modern logistics facility in a tier-one distribution market. As one large asset manager put it, even in recovery mode “you’ve got to choose the right sectors, the right operators, and the right assets” to outperform cbre.com cbre.com. Second, market conditions are improving but not uniformly. The macro outlook is better (with inflation cooling and rates likely past their peak), yet risks remain, including policy uncertainty and the overhang of debt refinancing. This calls for careful portfolio strategy: diversification and risk management will be key, as will creative financing solutions. Third, change equals opportunity in 2026. The repricing we’ve witnessed means many properties will trade at adjusted values – investors with dry powder who can underwrite wisely stand to benefit from this market reset. Additionally, trends like office conversions, the rise of private credit, and sector rotation (e.g. renewed interest in retail) offer avenues for savvy players to find alpha in a shifting landscape.
For landlords, tenants, and lenders alike, 2026 is a year to stay proactive. Landlords should continue to invest in amenities, sustainability, and “experiential value” in their properties to meet rising occupier expectations jll.com jll.com. Tenants, on the other hand, have a window to secure favorable lease terms in certain sectors before conditions tighten – early 2026 may be the last of the tenant-favorable market in sectors like office, as the tide could slowly turn. Lenders and debt investors will be navigating the choppy waters of maturities; those who can structure flexible solutions will build lasting relationships (and potentially equity upside in workouts). Across the board, disciplined execution and due diligence are essential. With the market at an inflection point, small missteps can have outsized impacts, but prudent decisions can set the stage for strong performance over the next cycle.
In conclusion, the 2026 outlook for U.S. commercial real estate is one of guarded optimism. The industry has endured a challenging period of valuation correction and uncertainty, but there are clear signs of momentum building – capital markets are thawing, leasing is gradually firming, and investors remain fundamentally committed to the asset class (nearly 75% of global CRE investors plan to increase real estate allocations in the next 18 months deloitte.com). As always, not every market or sector will experience the upswing equally, but the overall trajectory points toward recovery and recalibration. For limited partners, fund managers, and borrowers, now is the time to position strategically: double down on strengths, mitigate exposures to known risks, and remain agile to seize opportunities as they arise. With careful navigation, 2026 can be the year where patience and preparation pay off in the form of renewed growth and value creation in commercial real estate.
Is your portfolio positioned to capitalize on the 2026 real estate rebound? Our team at Sterling Asset Group is here to help institutional investors and borrowers navigate these evolving market dynamics. Contact us to discuss tailored strategies for portfolio allocation, refinancing, or acquisitions in the year ahead. Whether you seek guidance on asset re-pricing, sourcing private credit, or identifying high-potential markets, our seasoned experts can provide data-driven insights and actionable solutions. Don’t miss the opportunities emerging in this new phase of the cycle – reach out today to prepare your real estate strategy for 2026 and beyond.
Disclaimer: This report is provided for informational purposes only and does not constitute investment, financial, or legal advice. Forecasts and opinions are based on current market conditions and reputable sources cbre.com cbre.com, but are subject to change. All investments in commercial real estate carry risk. Readers should conduct their own due diligence and consult with professional advisors before making any investment or financing decisions. The author and [Your Advisory Firm] make no warranties or representations as to the accuracy or completeness of third-party data cited, and we assume no liability for any actions taken based on the information contained herein.