A year ago, economists projected that 2025 would maintain its economic resilience through steady consumer spending and easing inflation. However, as the year progressed, this “soft landing” scenario shifted; momentum slowed as real GDP growth dropped to approximately 2.1% and the labor market softened significantly after April. Two major policy changes defined this period: the jump in effective tariff rates to double digits, which pressured margins and added to inflation, and stricter immigration policies that reduced the foreign-born workforce by an estimated two million people. While the Federal Reserve initiated a cautious easing cycle late in the year, the economy remains at a crossroads, balancing these restrictive trade and labor policies against modest monetary relief and emerging productivity gains from Artificial Intelligence.
Key Takeaways
- Market Rebalancing: After several years of volatility, fundamentals are rebalancing as financing stabilizes and occupier demand strengthens.
- Office: Nearing its bottom; vacancy rates are approaching a cyclical peak with more balanced work-life routines emerging.
- Industrial & Multifamily: Both are moving toward equilibrium as new construction moderates.
- Retail: Described as one of the most stable performers due to selective expansion and limited new supply.
- Emerging Drivers: Growth in data centers (fueled by AI) and a shift toward outpatient healthcare are creating new pressures and opportunities.
- Macro Headwinds: Persistent inflation, labor shortages, and tighter immigration policies remain key constraints for 2026.
Trends to Watch in 2026
- Cap Rate Segmentation Will Widen: With rates easing and capital abundant, industrial and multifamily cap rates have converged. As investors prioritize risk-adjusted returns and local fundamentals, cap rate spreads between markets will widen.
- Reemergence of Cross-Border Capital: International investment in U.S. real estate is at record lows, dominated by private capital. In 2026, reset pricing is expected to attract global buyers, creating opportunities for portfolio deals and trophy office assets.
- CMBS Continues Its Run: CMBS issuance hit a post-GFC record in 2025 as investor demand fueled strong liquidity for cash-flowing assets. SASB deals dominate, often exceeding $1 billion, with volume expected to top $100 billion for a third straight year.
- Loan Maturities Set a Record: As distress unfolds, reluctant lenders are extending loans. A dovish Fed could lower rates in 2026, offering some relief, even as loan maturities exceed $1 trillion, with extensions playing a major role.
Source: Colliers
