348. Commercial Real Estate Outlook 2026 | Office Hours

Key Takeaways:

Market Sentiment & Outlook:

Commercial real estate is facing uncertainty into 2026, primarily due to macroeconomic volatility, interest rates, and capital availability.

While capital was readily available previously, concern about raising funds or qualifying for loans is now considered the top risk by industry leaders.

Most investors still expect to increase real estate holdings to hedge against inflation and diversify portfolios.

Sector Performance & Trends:

Some sectors like digital economy properties (i.e., data centers), logistics, warehousing, and industrial are performing well and attracting attention.

Office investments are regaining traction, contrary to recent trends suggesting office decline.

The hotel sector has struggled, with deal value down significantly year-over-year.

Retail, especially malls, continues to be challenged, with shifting consumer behavior and design shortcomings cited as reasons.

Development Climate:

Rising construction costs, interest rates, and property taxes are obstacles for developers.

Flex space development continues where supply is low.

Affordable, "missing middle" housing and zoning reform are needed to address shortages and promote multi-use developments.

Investment Strategy:

Investors are more cautious, screening deals more carefully and not as aggressive as previous years.

Preference for acquiring properties to hedge against inflation and for portfolio diversification.

U.S. remains a preferred market, but interest in other countries (India, Germany, UK, Singapore) is rising, especially among larger firms.

Audience/Participant Concerns:

Questions targeted real estate taxes, staffing, capital raising, and partnership selection.

Equity/capital raising remains a perennial challenge, given market dynamics and investor situations.

Mixed-Use Development Advocacy:

Strong views were expressed favoring conversion of single-use malls into mixed-use, live-work-play communities to revitalize retail real estate.