Washington D.C. 2026 U.S. Real Estate Market Outlook Midyear Review

Executive Summary

The Washington D.C. commercial real estate market is exhibiting signs of stabilization in mid-2026. Federal workforce reductions have slowed significantly, and private sector growth is strengthening demand. This shift is fostering a more balanced environment across office, retail and multifamily sectors.

Office

Washington’s office market has stabilized in 2026, with vacancy dropping by 40 basis points (bps) to 22.2% in H1. This is in line with CBRE’s forecast at the beginning of the year. Conditions for commodity buildings are expected to improve through yearend as federal lease contractions slow, private sector tenant activity remains strong and supply shrinks. Prime and Class A+ properties will benefit the most.

Multifamily

Private sector employment growth and slowing federal job cuts in H2 are expected to stabilize multifamily demand and market fundamentals through year end. The significant gap between monthly mortgage and rental payments will also continue to boost demand.

Retail

Washington’s retail market will continue to deal with a limited pipeline of retail space amid a national trend of subdued office and multifamily construction activity. New storefront completions will remain scarce, as fewer mixed-use projects break ground. This will drive occupancy levels and favor owners of space in premier trade areas.