United States: Outlook 2026
Commercial real estate markets are poised to enter 2026 with strong momentum.
A recent survey of more than 270 Avison Young real estate professionals across the United States shows an outlook signaling both confidence and opportunity across sectors. Overall, positive sentiments were up more than 17% compared to our Mid-Year Outlook 2025.
Source: Avison Young Professionals
Close to 70% of the Avison Young professionals surveyed were bullish on the market heading into 2026 with the Central region being the most optimistic.
Roughly a quarter felt that real estate activity would remain flat in 2026 with the West being the most cautiously optimistic.
Less than 5% of felt that real estate activity would be down in 2026 with a larger percentage of brokers in the Southeast less bullish.
Factors signaling positive potential
Buoyed by recent interest rate cuts, strengthening market fundamentals, and improved access to capital, commercial real estate is on upswing. “Uncertainty” is still often referenced amongst pundits, most specifically around the long-term implications of federal immigration and trade policies, yet optimism prevails across major industry sectors.
The industrial market continues to demonstrate resilience, despite localized periods of oversupply, particularly in speculative development. Demand for traditional distribution space has remained strong, and a surge in manufacturing is being fueled by One Big Beautiful Bill Act (OBBBA) incentives.
The office sector remains highly bifurcated heading into 2026, with performance varying sharply by market and asset quality. The San Francisco office market exemplifies this current bifurcation: strong activity in high-quality, amenity-rich buildings catering to technology and AI tenants has surged, while older or less competitive assets face elevated distress, including special servicing and foreclosure risks. For occupiers, topics like workforce optimization, investment allocation, and technology adoption are all taking center stage.
Retail is poised for an upturn in transaction volume as pent-up capital, realistic pricing, and strong tenant fundamentals push investors back into the market. Consumer behavior is emerging as a risk factor with rising delinquencies in auto and utility payments suggesting potential stress on household budgets, raising concerns about discretionary spending. If consumer pullbacks materialize, retail and industrial sectors could experience slower absorption rates and pricing pressure.
And within capital markets? REIT valuations, forecasts and dividend performance have shown broad improvement and, overall, national sales transaction volume rose 19% during the first three quarters of 2025 compared to the same period the previous year, continuing a pattern of steady quarter-over-quarter growth.
Several metropolitan areas stand out as particularly dynamic heading into 2026. Dallas continues to attract substantial institutional and international investment, supported by a strong ownership base and a growing need for infrastructure to accommodate ongoing expansion. San Francisco remains a focal point for AI-driven growth and renewed multifamily activity, though valuation concerns persist in parts of the technology sector. New York is witnessing the return of large-scale institutional capital to the office market, with significant transactions reemerging in Manhattan. Meanwhile, South Florida remains one of the nation’s most active regions, with broad-based growth across asset classes and a resurgence of international capital, particularly from Latin American investors. Collectively, these trends indicate a new phase of optimism and opportunity in the U.S. capital markets as the industry transitions into 2026.
Source: Avison Young Market Professionals
Note: Gauge charts represent the overall sentiment of the Avison Young real estate professionals who were surveyed. Brighter green represents positive outlook, darker green represents negative outlook.
Marion Jones
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- Principal, Executive Managing Director of U.S. Capital Markets
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- Capital Markets Group
- Debt & Equity Finance
- Investment Sales
Factors driving growth
The U.S. office sector remains markedly bifurcated as it moves into 2026, with performance varying widely by market and asset quality.
Major coastal markets such as Manhattan, San Francisco, and Boston have demonstrated measurable improvement in office fundamentals, underscoring early signs of recovery.
Manhattan, notably, has achieved steady growth over the past three years and is now approaching pre-pandemic performance levels. San Francisco and Boston have also rebounded, recording approximately 50% and 10% year-over-year increases in leasing activity, respectively. Across the broader U.S. landscape, however, market conditions remain uneven. Trophy assets continue to outperform, with leasing volumes approximately 13% above pre-pandemic averages, though limited availability may constrain further growth in certain locations. Overall, the trajectory of recovery remains closely tied to both geographic dynamics and asset quality.
Looking ahead to 2026, market drivers are expected to vary by region: technology and artificial intelligence are poised to lead demand in San Francisco, while traditional sectors such as banking, finance, and law will continue to anchor leasing activity in gateway markets like Manhattan and Chicago.
The impact of rates and capital investment across markets
On the capital markets front, declining interest rates are expected to support increased transaction volume, with loan originations already up an estimated 25–30% year over year — predominantly concentrated among institutional owners of trophy and class A properties. Broader market stabilization, however, will depend on greater refinancing activity among B and B+ assets, which remain constrained.
Modest improvements in the new year
As top-tier supply tightens following five consecutive quarters of national inventory decline, competition for high-quality space is intensifying. We anticipate modest improvements in leasing fundamentals throughout 2026, led by premier assets and well-capitalized landlords, while secondary markets and lower-tier buildings experience a slower recovery. Investment activity will hinge on fourth-quarter performance, as Q4 2024 accounted for more than 30% of annual transaction volume. Should this momentum persist, 2026 could mark a pivotal year of gradual stabilization, characterized by selective growth and continued divergence across markets and asset classes.
Which amenities are in highest demand with tenants?
Source: Avison Young Market Professionals
Office Busyness Index
Busy places can create vibrant, lively and enriched experiences. Build connectivity and spark energy. And, fuel financial performance.
Factors driving growth
The U.S. industrial sector is positioned for renewed growth heading into 2026 following a period of prolonged uncertainty and limited development activity. Elevated interest rates beginning in late 2022 halted much of the rapid expansion, constraining both user decision-making and new construction.
Developers faced difficulty securing financing, leading to a near standstill in groundbreaking activity through 2024. Political and trade-related uncertainty further tempered momentum, as the federal election and subsequent policy shifts — particularly those surrounding tariffs and reshoring — caused many occupiers and investors to delay commitments.
However, by late 2025, market sentiment improved as trade policies stabilized and inflation fears eased, sparking a resurgence in pre-leasing activity and renewed planning for 2026 expansions. A major tailwind for the sector stems from the One Big Beautiful Bill Act (OBBBA), which introduces 100% bonus depreciation and full tax write-offs for qualifying manufacturing and production facilities.
Rising manufacturing demand
Manufacturing is emerging as the next major demand catalyst for industrial real estate, following the e-commerce boom that defined the post–Great Recession era. The combination of the Infrastructure Renewal Act, the CHIPS Act, and now OBBBA has already prompted multi-billion-dollar investments across sectors such as semiconductors, electric vehicles, batteries, pharmaceuticals, and food and beverage production.
Those seeking to capitalize on the OBBBA incentives should act swiftly in the first half of 2026 to avoid escalating costs and capacity constraints later in the cycle.
How will manufacturing demand (and manufacturing supplier demand) change in your market in 2026?
Due to recent interest rate cuts, does your market stand to gain or lose demand in 2026?
How will manufacturing demand (and manufacturing supplier demand) change in your market in 2026
Strong investor interest
From a capital markets perspective, substantial dry powder remains on the sidelines, poised for deployment once pricing expectations between buyers and sellers align. As interest rates decline and financing conditions improve, we expect to see a revival in both leasing and speculative development activity beginning in early 2026.
Stabilized and value-add industrial assets are likely to draw strong investor interest, supported by improving fundamentals and renewed confidence in long-term demand. While short-term construction costs and material lead times may rise due to increased activity, overall conditions point to a tightening market and stronger rent growth through 2026 and 2027.
Peter Kroner
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- Director, National Industrial, Market Intelligence
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- Industrial
- Strategic Business Advisory
- Market Intelligence
Factors driving growth
While macroeconomic headwinds are intensifying — marked by slower job growth, lingering inflation pressures, and signs that consumer spending may moderate into 2026 — retail real estate transaction activity is poised to accelerate. Capital can’t remain sidelined indefinitely. Institutional and private investors alike have effectively “kicked the can” for nearly five years, first amid pandemic uncertainty and then during a prolonged period of high interest rates and valuation paralysis.
Many portfolios are now overaged, overweighted in non-core assets, or underexposed to retail altogether. With pent-up capital, improving financing conditions, and more realistic pricing, the market is primed for a decisive rebound.
The next phase of retail investment will not be fueled by economic exuberance but by necessity with fundamentals and transaction activity remain highly varied across U.S. markets.
The role of consumer spending and investment
Even if consumer spending cools modestly, transaction volume will rise, driven by repositioning strategies, fund life cycles, and renewed confidence in the sector’s fundamentals. Investors now recognize that the retail landscape emerging from the pandemic is leaner, better tenanted, and more operationally disciplined than it has been in decades. Liquidity is returning because investors can no longer afford to wait, and in these environments, the smartest capital typically moves first, identifying opportunities before momentum returns more broadly.
As interest rates stabilize and borrowing costs decline, investor confidence will strengthen, leading to increased acquisition activity and potential cap rate compression.
Strength in the urban core
Urban core markets such as San Francisco, Seattle, and Chicago are recovering but at a slower pace than gateway peers like New York City, where investor and tenant confidence remains strong. Los Angeles and Atlanta are seeing increased deal flow, driven by pricing discounts that are drawing opportunistic buyers back into the fold. Meanwhile, markets like Phoenix are entering a moderation phase following overexpansion, while Dallas and Miami remain highly competitive, supported by strong tenant demand and resilient property values. For investors, this creates a two-speed opportunity set: discounted markets such as Los Angeles and Atlanta offer attractive entry points and upside potential, while premium markets like Miami and New York deliver stability, liquidity, and prestige — but at higher pricing and with longer hold horizons.
Retail’s fundamentals — tight supply, limited new construction, and consistent tenant demand — continue to support low vacancy rates and steady rent growth, further underpinning the sector’s resilience.
A foundation for sustained growth in the years ahead
Following a transitional 2025, market conditions in 2026 and 2027 are expected to establish a strong foundation for sustained growth. Investor sentiment toward commercial real estate is becoming increasingly optimistic, particularly in the retail sector, as assets that were once “marked down” begin trading again, unlocking opportunities for capital deployment and strategic repositioning.
Retail may lead the recovery narrative, but strength across other commercial real estate sectors remains strong. Industrial and logistics assets, data centers, and healthcare real estate continue to attract institutional capital thanks to their operational resilience and long-term demand drivers. The multifamily sector, including senior housing, continues to see solid demand though cost pressures and regulatory challenges could temper near-term growth. Within retail, the most promising strategies are centered on stabilized grocery-anchored centers, value-add and adaptive reuse projects, and mixed-use redevelopments that align with evolving consumer preferences and community needs.
Looking ahead, 2026 is poised to usher a high-velocity trading cycle in retail real estate — not because the broader economy is booming, but because investors can no longer afford to wait. Liquidity is returning out of necessity, and historically, that’s when the most strategic capital moves first.
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Meghann Martindale, CLS
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- Principal, Director Market Intelligence, Retail
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- Retail
- Market Intelligence
Factors driving growth
The data center sector is maintaining strong momentum heading into 2026, fueled primarily by the escalating power requirements of artificial intelligence (AI) and advanced computing applications. One of the primary constraints on growth remains the limited availability of power; however, operators are increasingly exploring alternative energy sources and self-generation solutions to mitigate this challenge.
Natural gas, once considered unconventional for hyperscale operators, has gained traction as a reliable bridge solution, while interest in small-scale nuclear generation is also rising, signaling a long-term shift in how data centers source and manage energy.
While concerns have surfaced around potential overvaluation in the AI sector — given the complex web of cross-investment among major players such as OpenAI and AMD — these fears are overstated.
The role of AI
AI’s influence now extends well beyond traditional tech industries, with adoption spreading across sectors and sparking new demand for robotics, automation, and high-performance computing infrastructure.
Within the industry, the strongest demand for 2026 is projected in facilities supporting AI inferencing and training workloads, particularly large-scale “neo-cloud” data centers serving single-user, high-power computing needs. Additionally, edge data centers — smaller, localized facilities situated within or near major metropolitan areas — are poised for significant expansion. These sites enhance connectivity and minimize latency for applications such as autonomous vehicles and real-time AI inferencing, complementing the large hyperscale campuses typically located in more rural regions.
The outlook for 2026 is extremely positive, with sustained momentum across both traditional and emerging segments of the data center market as this asset class stands apart for its global significance, as governments worldwide increasingly recognize the strategic importance of digital infrastructure.
The convergence of energy innovation, AI adoption, and international investment underscores the data center sector as a driving force in shaping the digital economy for the decade ahead.
Howard Huang
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- Market Intelligence Analyst
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- Data Centers
- Life Sciences
- Office
- Market Intelligence
Factors driving growth
The U.S. healthcare sector is poised for continued transformation into 2026, shaped by both structural and financial dynamics. Key drivers of growth include shifting demographics marked by an aging population and the accelerating integration of technology across virtually every facet of healthcare delivery. These forces have intensified in recent years, particularly in 2025, as health systems increasingly leverage technological advancements to enhance efficiency, competitiveness, and patient care. However, expansion has been constrained by elevated interest rates and limited access to capital, challenges that have been especially acute for smaller physician groups and regional health systems.
Rising operating expenses — most notably in physician staffing — have further compressed margins, resulting in reduced profitability despite strong revenue performance and this has created softened demand for real estate expansion.
The role of technology, demographics and rate cuts
Technological adoption is most pronounced in competitive markets such as Philadelphia, New York, and select metros across Texas, where health systems are utilizing innovation to differentiate their services. Nationwide demographic shifts are also reshaping demand patterns across a broad range of care settings. Although forthcoming federal interest rate cuts are expected to have a modest overall impact, easier access to capital and lower borrowing costs should provide marginal support for growth.
Looking ahead, the wellness subsector is anticipated to be a significant driver of demand in 2026 with traditional medical providers such as dermatology and infusion therapy clinics expanding into wellness-related services to meet rising consumer demand.
Steady progress in the new year
While 2026 is not expected to deliver dramatic year-over-year growth, the healthcare sector is positioned for steady progress, supported by expanding investment activity, operational adaptation, and a sustained focus on innovation and efficiency. In the broader real estate context, capital markets activity will also strengthen as owners and investors adjust to the current rate environment, contributing to renewed transaction volume and gradual improvement in leasing fundamentals.
Factors driving growth
Housing affordability remains a critical issue nationwide as the gap between renting and owning continues to widen. The cost gap between owning and renting in the U.S. has widened significantly, with homeownership now averaging more than $800 more than renting. This disparity is driving strong rental demand and delaying homeownership for many households. A recent survey found that 41% of renters are postponing home purchases due to current economic conditions. Additionally, the median age of first-time homebuyers has increased from 35 to 40, reflecting the financial strain of rising home prices and mortgage costs.
As a result, multifamily assets have experienced historic absorption level, comparable to the peak demand seen in 2022. Urban coastal markets such as San Francisco and New York— where barriers to new supply remain high — are seeing elevated pricing and rent growth. Pricing remains a critical issue in major markets. If costs continue to rise, secondary and emerging neighborhoods — such as Brooklyn in New York — could attract millennial renters looking for urban amenities at relatively lower price points.
Challenges ahead
Conversely, Sunbelt markets — after years of significant expansion — are facing a downward pressure on rents due to oversupply, creating a bifurcated performance across the U.S. The biggest challenge in the next 12 months will be rent growth, particularly in these high-supply Sunbelt markets. This will directly impact transaction activity in the capital markets sector. Well-located assets with modern amenities and larger unit sizes appealing to older renters and growing families are expected to outperform. In contrast, older properties with smaller floor plans, such as studios and one-bedrooms, may struggle as renter demographics shift toward households seeking more space and family-friendly environments.
Predictions for 2026
Housing affordability has become a key topic on the national policy agenda, with discussions at the federal level. However, meaningful solutions will take time to materialize. In the near term, rental demand is expected to remain strong, sustaining absorption levels and supporting multifamily performance. Assets that cater to the evolving renter profile including older or smaller (no child or one child) households, will be best positioned for success. Urban environments with proximity to employment hubs will remain highly attractive. Overall, the multifamily sector continues to demonstrate resilience, but performance will vary significantly by market and asset type.
Grant Hayes
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- U.S. Multifamily & Client Data Solutions Lead
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- Capital Markets Group
- Multifamily
- Market Intelligence
Factors driving growth
The outlook for the AI and technology sectors remains strong heading into 2026. While market conditions could pose some challenges — particularly if anticipated interest rate cuts fail to materialize — overall growth prospects remain positive. AI continues to be deeply integrated across the broader technology ecosystem, driving sustained real estate demand and investment activity.
Projections indicate that 2025 will represent a record year for venture capital funding in AI, with approximately 38% of all U.S. venture capital–backed firms receiving seed funding.
This sector will continue to see diversification and new market entrants with the persistence of innovation, rather than concentration among established technology firms. This bodes well for commercial real estate as a whole particularly in the office sector.
What office industry will be the most active in 2026
The impact of adjacent sectors
Looking ahead to 2026, companies operating in sectors adjacent to AI — such as semiconductor manufacturers NVIDIA and AMD — are expected to experience continued expansion as they deliver critical tools and infrastructure to support AI development. Financial technology and cybersecurity are also poised for increased activity as enterprises accelerate adoption of AI-driven solutions.
Positive outlook for 2026
From a real estate perspective, the market appears to have reached its cyclical trough, with recovery now evident across major U.S. metropolitan areas. Markets that were slower to rebound, including San Francisco, are showing measurable improvement due to expansion in tech.
Overall, the AI/technology sector outlook for 2026 remains positive, supported by stable macroeconomic conditions and continued investment in emerging technologies.
Factors driving growth
The U.S. life sciences sector is entering 2026 with a complex mix of headwinds and growth catalysts that will continue to shape investment and occupancy trends across major clusters. Artificial intelligence (AI) is poised to be the single most influential factor driving both expansion and disruption within the industry.
Beyond its role in research and data analysis, AI is increasingly being applied to the creation of autonomous laboratories, an innovation that could significantly reduce reliance on traditional research labor and reshape spatial requirements across key markets.
Renewed capital formation driven by venture capital, private equity investment, and IPO activity is gaining momentum as economic uncertainty eases and borrowing costs decline following recent and anticipated Federal Reserve rate cuts. Lower capital costs are expected to benefit investors first, enabling more aggressive deployment of funds into high-specification laboratories and biomanufacturing assets.
There is anticipation that mid-sized life sciences tenants — those requiring approximately 20,000 to 50,000 square feet — will drive much of the new leasing activity in 2026, reflecting a wave of companies graduating from incubators and into traditional lab space.
AI's impact for mid-size life science companies
Many of the mid-sized life sciences companies were funded during the 2021–2023 investment surge and are now demonstrating proof of concept that warrants expansion. Contract Research Organizations (CROs) are also expected to play an increasingly vital role in 2026, leveraging AI to deliver more efficient research, small-batch manufacturing, and clinical trial support on behalf of multiple life sciences clients, thereby improving overall industry productivity.
The role of oversupply
From a real estate perspective, oversupply remains a defining challenge in key life sciences hubs such as Boston, the Bay Area, and San Diego. Elevated vacancy levels are placing downward pressure on rents, with some landlords resorting to aggressive deal-making — effectively “buying” occupancy in select developments — to maintain momentum. Tenant improvement (TI) allowances are rising in response to both tenant demand and persistently high construction and materials costs, making well-capitalized landlords particularly competitive in this environment.
Optimism in the second half
Despite near-term softness, the second half of 2026 will bring renewed activity, as increased venture funding, abundant skilled labor from recent layoffs, and accelerating company formation drive higher occupancy in incubators and shared lab environments. Established life sciences clusters are likely to see waitlists return for premier incubation facilities, signaling a gradual rebalancing of supply and demand and setting the stage for a more stable growth trajectory heading into 2026 and 2027.
Tucker White
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- U.S. Life Science Lead, Market Intelligence | U.S. Office Agency Lead, Market Intelligence
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- Research
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Market Intelligence