Exclusive: What’s in CBRE’s Forecast for 2026

In its 2026 U.S. Real Estate Market Outlook, CBRE is projecting a strong year for the commercial real estate industry despite economic uncertainty. The report being released today forecasts a continuing recovery for the industry across all major sectors.

Commercial Property Executive spoke with Henry Chin, CBRE’s global head of research, to break down the report’s major findings, including the trends he expects to see in the office, retail, industrial, medical office and data center spaces.

CBRE forecasts a softening U.S. economy in 2026, yet you expect a meaningful rebound in commercial real estate investment. Why do real estate fundamentals remain resilient in this environment?

Chin: Number one, we are forecasting GDP growth of around 2 percent, so it’s aligned with the consensus and, second, inflation is trending down to around 2.4 percent to 2.5 percent. That’s our current forecast, which is good. And the third component is that we are forecasting an interest rate cut twice through the course of 2026. So those three components will translate into occupiers continuing to lease offices, lease retail and lease industrial.

Also, the capital markets have been relatively cautious because of the cost of finance and the high 10-year Treasury in 2025. So that’s why we’re expecting to see the investment activities recover, and our forecast is not aggressive but realistic.

We are forecasting investment volume to increase by 16 percent in 2026, which is quite substantial compared to what we know normally, say, like lower double digits or high single digits. But this year we’re pretty confident that across all the segments, we’re going to see some double-digit growth in terms of investment sales.

The report notes that total returns in 2026 will be largely income-driven rather than appreciation-driven. How should investors rethink underwriting and asset management in this cycle?

Chin: It’s quite interesting dynamics. I think this is something everyone is thinking about. Most of the total return is coming from so-called rental growth because the fundamentals are recovering. I think that’s become a consensus. (Traditionally) you pick that prime market, you pick up the best asset classes, you get your returns.

However, I think the smart investors now should be thinking about asset enhancements because, when we are looking at the U.S. commercial real estate market, there’s not much supply. The occupiers always want the best quality buildings, but we only have limited stock of the best quality buildings.

When the best buildings are running out of space or charging superior rent, occupiers have to move into the next tier of a product. But in the next tier of the product, the quality is not as good. So, we are thinking that smart investors are going to the next-tier properties and then doing those asset enhancements and value-adds, such as better utilities, better workplaces, better sustainability, so that they can command a higher rent.

Office real estate trends remain some of the most polarized. What are you forecasting for the sector in 2026?

Chin: We are expecting to see the demand pretty much remain relatively resilient. It’s a similar level to what we saw in 2025, so leasing activity for 2026 as a whole is going to increase around 4 percent to 5 percent, so that is a good sign. And last year was the first year we saw less new supply than demolitions (and conversions), and that is going to continue to be a feature of 2026.

This year we are expecting to see a few markets bottom out. Last year we saw that New York is booming, and San Francisco is bottoming out. This year we are expecting to see a few more gateway markets bottom out, such as Chicago and Los Angeles.

We also see some pockets of markets in Boston and in D.C. showing resilience as well. Therefore, don’t be surprised to see more positive news coming from the offices and particularly those in the traditional Tier 1 gateway markets.

Turning to industrial, what is causing industrial rent growth to remain subdued in 2026, and how do you see that evolving over the course of the year?

Chin: For the industrial market, I have to tell you we were wrong in 2025. We were very conservative in terms of our leasing (forecast for the market), and we were surprised by the demand from the occupiers. Fourth-quarter leasing was historically high (for all U.S. industrial activity), to our surprise.

Given the dynamics, the reshoring activities and what occupiers are looking for, we are expecting to see industrial leasing increase by another 5 percent. That puts the total leasing volume at 1 billion square feet, which is surprising.

Historically, only around a quarter of total leasing is renewals, but we are expecting to see around 35 percent of leasing coming from renewals.

---

READ ALSO: Industrial Real Estate Trends

---

The second component is flight to quality continues. We are talking to the occupiers, and it’s a tenant-favoring market for now, because we do see the wave of supply coming to the market over the past two years and the renewals coming through over the next two years. Therefore, it’s the best time for occupiers to secure assets on better terms.

Similar to 2025, most of the demand—about a third—is coming from 3PL because a lot of retailers and wholesalers are outsourcing to 3PLs.

We are also seeing some manufacturing reshoring activities given the tariff impact. The proportion was very small, but now we are seeing incremental increases in leasing shares from reshoring activity.

The report states that retail fundamentals remain relatively strong, yet consumer spending is becoming more selective. Which retail formats or locations do you see as most insulated if the consumer spending weakens further?

Chin: We expect the higher population growth and higher-income suburbs across the U.S. will outperform because they support the demand for retail spaces. For assets, grocery-anchored centers and neighborhood strip malls continue to outperform.

Again, flight to quality is what retailers are looking for. I also want to point out that when the office market recovers, such as in New York City, retail in those locations will continue to grow. If you’re thinking about Boston, L.A. or Chicago, where their core office is going to recover or bottom out, don’t be surprised if there is stronger retail demand as well.

Data center trends continue to set records, but power availability has become the primary constraint. How will power and infrastructure challenges reshape where data centers get built in 2026?

Chin: What we are seeing now is the developers and the occupiers are focusing on two things. Number one is the power cost, and number two is speed to delivery. Because of those two things, we are seeing states like Alabama, Mississippi, Louisiana, Georgia and Florida becoming a primary focus for greenfield development.

It’s an interesting market, and I think there are definitely structural tailwinds happening there. Getting the right underwriting on the deal side and the right site selection could be a challenge.

You’re projecting that average medical outpatient building rent growth will reach a record high this year. What’s driving this?

Chin: Number one—lack of supply. MOB construction completion is at a historic low. Number two—in health care, AI adoption is very low, so there’s no efficiencies there.

And third is federal health-care policy risk. The One Big Beautiful Bill has a $1 trillion reduction in health-care spending. As a result, you can see outpatient spaces will increase, and, therefore, outpatient space demand will increase to provide for patients who seek affordable spaces.

If investors take away just one strategic lesson from CBRE’s 2026 outlook, what should it be?

Chin: Total return is going to be driven largely (by) income growth and NOI growth.