CRE 2026 Outlook
January 13, 2026
At Summer Street Advisors’ most recent CRE Leaders Circle at the Cornell Club in New York City, we saw a mood of cautious optimism for 2026. We don’t expect rates to move dramatically, and affordability remains a major issue. But with activity picking up, CBRE predicts double-digit transaction volume growth. 2026 will reward smart, strategic moves (but may not be the year for big bets).
Here are the top trends we’re seeing for 2026:
1. The market’s slowly stabilizing, but the distress rate is still rising.
Interest rates are likely to stay relatively flat. Investors will still have to be thoughtful about leverage, pricing, and timing. Capital is available, but it’s being deployed carefully, and buyers are scrutinizing every deal.
Kroll Bond Rating Agency (KBRA) expects 2026 CMBS issuance to reach a post-2008 high of $183 billion, up 18% from 2025, but the rating agency also expects distress to continue rising. “We expect the distress rate to continue to rise into 2026 before flattening out later in the year, with higher issuance volumes helping to moderate the overall rate,” KBRA reported.
2. Multifamily is staying strong.
Multifamily continues to be one of the most reliable sectors heading into 2026 and one of the safest places to put capital (and private investors make up almost two thirds of this market share). Demand for rentals will stay high, since buying a home is still out of reach for many. But because new supply is slowing down, we’ll probably see rents stabilize.
Multifamily demand remains robust, projected to exceed the 10-year average by 30% this year. Rent growth is expected to accelerate toward 5% by 2027.
3. Office isn’t bouncing back evenly.
People are slowly returning to offices, but the recovery is uneven. The strongest demand is for Class A, well-located, amenity-rich buildings. Older, lower-quality offices still face high vacancy and uncertain long-term use. Many companies are deciding to lease less space but upgrading the quality. Top-quality office space will be the sector to trust in 2026. A recent Deloitte survey found that industry leaders rank office as one of the sectors with the greatest opportunity (below logistics/warehousing and multifamily).
According to Cushman & Wakefield, after two years of stagnant growth, office-using employment is forecast to increase by 625,000 over the next two years, led by finance and legal services. Leasing activity in New York and the Bay Area especially reflects optimism around AI investment as a potential driver of demand.
5. Data centers are booming.
Data centers remain one of the fastest-growing parts of commercial real estate, driven by the boom in AI. Vacancy remains extremely low, and demand keeps rising. This sector is a strategic play for long-term investors, since global electricity demand from data centers is set to more than double over the next five years.
Conclusion
2026 won’t be a boom year, but it is a year where disciplined investors can make smart, strategic moves. According to Cushman & Wakefield’s 2026 CRE Outlook report, the CRE industry is moving from resilience in 2025 to optimism for 2026.
With rates settling, we expect more deals to move as distressed sellers bring assets to market, and buyers who have been on the sidelines finally re-enter. This should be a meaningful uptick from the slowdown of the last few years.
Key takeaways include:
- Economic Stability: GDP growth is expected to hold steady, supported by AI investments and consumer spending, with a more favorable interest-rate environment anticipated by late 2026.
- Capital Markets: Easing Fed policy and pricing stabilization are set to restore investor confidence and encourage capital deployment.
- Office: Demand for high-quality office space is strengthening, with leasing and absorption for Class A properties trending higher.
- Industrial & Multifamily: Industrial demand is picking up as policy uncertainty eases, while multifamily is experiencing above-trend demand driven by housing affordability pressures.
- Retail & Alternatives: Retail fundamentals remain firm with strong leasing and limited new construction. Alternative sectors like senior housing and data centers continue to thrive on demographic and technological trends.
About Jack Mullen of Summer Street Advisors:
As Founder & Managing Director of Summer Street Advisors, Jack Mullen leverages decades of experience in valuation, underwriting, and risk management to lead multi-million and multi-billion dollar CRE transactions.
Previously with GE Capital and large institutional banks, he has shaped investment strategies for some of the industry’s largest deals. A recognized leader, his insights are featured in GlobeSt.com and CREFC Finance World, and he is a sought-after speaker at industry conferences and top universities.
For strategic advice on your portfolio or transaction, contact:
4. Retail will continue to perform.
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