Chapter 2
Capital Markets
U.S. Real Estate Market Outlook Midyear Review 2026
5 Minute Read
5 Minute Read
Midyear Outlook
- The outlook for real estate investors is considerably more uncertain than at the start of the year as effects of the U.S./Iran conflict—most notably in energy markets—continue to reverberate. Consequently, risks to the outlook have increased. Like many other geopolitical events, the hostilities have not materially impacted commercial real estate investment activity. We expect that geopolitical risks will likely remain relatively manageable for the balance of this year.
- Commercial real estate supply growth remains in check, with solid economic growth and a stable labor market underpinning demand. This outlook indicates that improving fundamentals will support investment activity and values even amid heightened uncertainty.
- CBRE continues to forecast a 16% increase in investment activity this year, largely based on expectations that the U.S./Iran conflict will not lead to widespread energy shortages.
- Given current benchmark rates and broader uncertainty, cap rates are expected to hold relatively steady for the rest of the year. CBRE expects that lower bond yields and improving fundamentals will allow cap rates to resume incremental compression across property types in 2027. Investment activity has powered through volatile interest rates, as more investors opt for debt products that are benchmarked off shorter-term Treasury yields or the Secured Overnight Financing Rate (SOFR).
Figure 2: U.S. Cap Rate by Sector
Key Updates to Forecast
- CBRE maintains its forecast for a 16% increase in commercial real estate investment volume this year. We expect healthy annual investment volume growth across all of the main property types, with multifamily up by 20%, retail 17%, office 16% and industrial 16%. The biggest variable in this forecast is the potential for energy market disruptions.
- Cap rates, which were originally forecast to compress throughout 2026, are now expected to remain largely stable due to higher-than-expected benchmark interest rates. We expect that cap rates will resume incremental compression in 2027. As a result, income will be even more important for total returns in 2026 and beyond.
- Downside risks remain prominent if energy flows through the Strait of Hormuz are disrupted for an extended period. Should this materialize, a likely increase in inflation would drive up benchmark interest rates and lower investment activity. On the other hand, the hostilities have thus far had little discernible impact on real estate investment activity, setting up the potential for upside to our current forecast should a resolution of the conflict provide relief to energy markets.
Contacts
Capital Markets
Related Insights
-
U.S. cap rates show signs of stabilization, with improving liquidity, firmer pricing and growing confidence that yields are past their peak.
-
Article | Intelligent Investment
Business Insights | Hong Kong Hospitality: Momentum, Structural Shift & the New Lifestyle Era
August 6, 2026
The city's hotel market enters H2 2026 backed by record visitor volumes and a shrinking transient supply — a compelling story for investors and operators who can read the structural signals.
Insights in Your Inbox
Stay up to date on relevant trends and the latest research.