3 Economic Trends to Watch in 2026

Inflation Again

2026 is the year when some central banks will have to start raising interest rates again to ward off a resurgence in inflation. The Australian central bank has already signaled a more hawkish stance. And in Japan, policy rate increases will continue at a more rapid pace than previously expected to counter the new government’s more expansionary fiscal policy.

The big question is: What happens in the U.S., where food price inflation has proved sticky and lower-income consumers are still feeling cost pressures? The Federal Reserve may continue to cut its policy rate, given its dual mandate to also maintain full employment, but more cuts could complicate the fight against inflation. This is one reason why the long end of the bond yield curve has remained elevated, even as the short end has fallen.

In a world of sustained and elevated macro-political volatility, it’s a fool’s errand to try to predict where the next exogenous shock will come from.

Corporate Ozempic Shrinks the Labor Market

Corporate Ozempic is a term coined by NYU professor Scott Galloway referring to artificial intelligence. 2026 is the year when we’ll start seeing corporate adoption of generative AI slim down not just recruitment of college graduates into lower-value white-collar jobs but also the white-collar workforce more generally.

As we move from productivity gains driven by AI adoption to actual agentic AI—that can automate whole decision-making processes—the labor market shake-out could be as far-reaching for white collar jobs as China’s entry into the global labor market was for blue-collar workers in the 1990s and 2000s. This will have a profound impact on both macroeconomic demand and real estate demand.

Higher structural white-collar unemployment will change the decision-tree for teenagers deciding whether or not to go to college and will dampen the consumer, leisure and housing spending power of the generational cohort particularly impacted by weaker graduate recruitment. In the real estate sector, some of the long-term demand for office space is likely to be displaced by demand for digital infrastructure.

Macro Governance in the Spotlight

In a world of sustained and elevated macro-political volatility, it’s a fool’s errand to try to predict where the next exogenous shock will come from. Will the AI equity bubble burst? Is it even a bubble? Will the Fed cut rates further than required under a new Chair? Will there be another armed conflict that upends world trade? Underwriting any of those outcomes is tricky.

So, I believe that 2026 is the year when real estate investors will favor markets that have good macro shock absorbers—markets where we have confidence that monetary and fiscal policymakers will act quickly and competently to mitigate the impact of any unforeseen shocks.

There’s more comfort investing in a market with a central bank that can balance any upward pressure on inflation with labor market weakness, and where the central bank has a clear communication policy. Greater comfort lies in investing in a market where policymakers have put their countries’ public borrowing on a sustainable path and where there’s room to loosen fiscal policy to mitigate a shock.

Greater comfort lies in investing in a market where policymakers have put their countries’ public borrowing on a sustainable path and where there’s room to loosen fiscal policy to mitigate a shock.

2026 will be the year when these facets of macro governance are under the spotlight. The U.K., France and Japan look particularly vulnerable to bond market volatility engendered by expansionary fiscal policy. If the Fed’s independence is perceived to be under threat when Jerome Powell’s term ends next spring, we could also see the testing of the U.S.—the ability to borrow beyond the fiscal capacity of other nations. In practical terms, real estate investors should not rely on the long end of the bond yield curve to provide much relief.

In the words of our co-CEO & CIO, Adam Gallistel, “Hope is not a strategy.” Real estate investors should acknowledge the heightened macro-political uncertainty. This places a greater value on flexibility in all aspects of a portfolio—whether lease and finance terms, asset management plans or macro policy flexibility.

Sabina Reeves is chief economist & head of insights and intelligence at CBRE Investment Management, associate fellow at the University of Oxford and council member of Marlborough College. Follow Reeves on Threads: @sabinareevesconomist or on Linkedin.

Read the January 2026 issue of CPE.