Source: CBRE
Read the full report here: U.S. Real Estate Market Outlook 2026 | CBRE
CBRE forecasts that annual U.S. GDP growth will slow to 2.0% in 2026 with softening labor market conditions and marginally lower inflation averaging 2.5%.
Despite these challenges, commercial real estate investment activity is expected to increase by 16% in 2026 to $562 billion, nearly matching the pre-pandemic (2015-2019) annual average. Total returns will be income driven. Asset selection and management will be key drivers for returns. Cap rates for most property types are expected to compress by 5 to 15 basis points (bps).
Commercial real estate leasing activity will continue to recover in 2026 from its 2024 low. The underlying performance and timing of recovery varies across sectors, asset types and markets.
Performance of the office market will vary greatly between newer prime and older secondary space. We expect even more scarcity of available prime space by year-end 2026. Spillover demand to the next tier of space will likely increase in early-recovery office markets. Leasing activity will continue to improve in 2026, surpassing 2019 levels. CBRE expects large users to continue returning to the market.
The industrial sector will continue to see a flight to quality by occupiers at the expense of older assets. Annual leasing volume is expected to improve slightly in 2026, driven by reshoring of manufacturing operations and outsourcing of distribution to third-party logistics (3PL) providers.
In the retail sector, demand is expected to be driven by expanding grocery, discount and services retailers that rely on physical locations to reach consumers. Retailer success will require precise strategies that align selective growth with evolving consumer behaviors.
The multifamily sector is expected to see positive net demand throughout 2026. However, there are still substantial newly delivered apartment units that remain unleased in many markets, particularly in the Sun Belt and Midwest regions. As a result, keeping existing tenants in place will be a top priority for multifamily landlords.
Demand for data centers remains strong, with 2026 leasing activity expected to reach an all-time high. Supply growth is increasingly constrained by longer power delivery timelines. We expect continued greenfield development in emerging U.S. markets, particularly along Interstate 20 across the Sun Belt and in markets with less regulation of electricity production.
In the healthcare sector, construction completions are expected to drop sharply in 2026, less new supply will support vacancy rate stabilization and continued rent growth for medical outpatient buildings. Occupiers will continue to focus on real estate for cost savings and efficiencies, as higher costs persist and new federal healthcare policies take effect.
In the life sciences sector, the remaining construction pipeline of speculative lab/R&D space is expected to be delivered by year-end. Demand for lab/R&D space will be driven by rising industry employment and a capital markets revival. Some properties will benefit from growing alternative sources of demand, such as robotics and other advanced manufacturers that require specialized lab space.
CBRE also provides detailed local market outlooks.
Bottom Line
Occupiers
- Act Early to Secure Superior Space
Constraints on new supply across many asset types mean quality space will be more difficult to find, especially in prime locations. Early renewals and preleasing of new construction are essential to procuring the right space when it is needed. - Situational Awareness is Key in Negotiations
Prime assets will command premium pricing, while non-prime options offer room for creative deal structures and adaptive reuse strategies. Renewals—especially for office and industrial space—will often have more tenant-favorable terms, including higher tenant-improvement allowances and more free rent. - Design for Flexibility and Future Needs
Shifts in consumer behavior, workplace trends and technology—including AI—will require occupiers to prioritize adaptable layouts and infrastructure readiness. Convenience, value and flexibility will influence location decisions, building design and investment priorities. - Consider External Pressures Beyond Real Estate
Labor availability, power constraints and regulatory hurdles will increasingly shape location decisions. Proactive planning and local market knowledge will be critical to secure the right space and resources in a timely manner, especially for infrastructure-heavy facilities.
Investors
- Prepare for Competitive Markets
Be ready to act with conviction in 2026. We expect increased investment activity, with investors aggressively pursuing high-quality opportunities. - Pricing Presents Unique Opportunities
It’s an opportune time to realize gains from existing investments and redeploy capital into a market offering pricing opportunities. The highest returns of this cycle will likely be realized over the next several quarters. - Wider Opportunities Across Risk-Return Spectrum
While we expect returns will be largely driven by rental income, there are opportunities in both debt and public equity. Look across the capital markets spectrum for the best risk-adjusted returns. - Uncertainty Remains Constant
We expect that financial markets will remain volatile due to government and economic policy, particularly with regard to trade. Our baseline forecast anticipates an environment that will support real estate investment, making it important to look beyond the headlines.