Intelligent Investment
U.S. Real Estate Market Outlook Midyear Review 2026
August 4, 2026 40 Minute Read
What’s Shaping Commercial Real Estate at Midyear 2026
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Overview
While our original 2026 forecast for moderating GDP growth and greater commercial real estate investment activity has generally proven correct, we did not expect the geopolitical shock that would reshape the macroeconomy by midyear.
The 10-year Treasury yield, which we had expected to fall below 4% by year-end, will now likely remain above 4%. Despite this, the U.S. economy has demonstrated considerable resilience. Supported by an AI investment boom, GDP growth is tracking at 2.1% for the year—on par with 2025.
Against this backdrop, commercial real estate has proven to be resilient. Investment activity remains on track for a 16% year-over-year increase to approximately $605 billion, in line with our January forecast. Capitalization rates, which we originally expected to compress modestly, are now projected to hold largely stable for the remainder of the year. Although incremental compression is expected in 2027, persistently higher benchmark rates will mean that income will be the primary driver of total returns.
Office fundamentals continue to normalize, with demolitions and conversions outpacing new completions for the second consecutive year. Prime vacancy has declined substantially and technology companies, which are most attuned to AI's long-term implications, are doubling down on long-term office commitments. According to CBRE’s 2026 Americas Office Occupier Sentiment Survey, 64% of tech companies plan to grow their footprint over the next three years.
Industrial leasing activity is forecast to reach a record annual total of approximately 1 billion sq. ft., driven by reshoring of manufacturing operations, third-party logistics outsourcing and a flight to quality away from functionally obsolete space. Retail fundamentals remain solid at historically low availability rates. Multifamily is seeing an improved second-half recovery as H1 job growth exceeded expectations, while data center demand continues to reach unprecedented levels, with preleasing rates for under-construction projects now expected to reach 80%.
The near-term outlook is not without risk. Energy markets will take time to normalize, as hostilities in the Middle East remain a threat. Inflation will remain well above target, so the Fed's next move is uncertain. However, the underlying structural drivers of real estate demand—reshoring, AI infrastructure buildout, demographic-driven healthcare needs and barriers to homeownership, among others—remain firmly in place. Investors that stay focused on asset quality, income durability, long Weighted Average Lease Expiry (WALE), credit strategies and market selection will find compelling opportunities even amid uncertainty.
Henry Chin, Ph.D.
Global Head of Research
Contacts
Dennis Schoenmaker, Ph.D.
Global Head of Forecasting and Strategic Insight, Head of Data Centre of Excellence
Regional Market Outlooks
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CBRE’s 2026 Canadian Real Estate Market Outlook for insights into the trends shaping real estate in 13 Canadian cities.
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The Asia Pacific commercial real estate market is poised for another solid year in 2026.
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Our 2026 Outlook highlights the key opportunities, considerations, and areas where value is expected to emerge. Explore sector‑by‑sector insights to help shape your strategy for the year ahead.
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Discover the evolving real estate market cycle for the year. Learn why elevated interest rates, income-driven returns, and proactive asset management are key. Explore growth in the living sector and data centers amidst improving financing conditions.
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