In last year’s commercial real estate outlook, we expected 2025 to mark the start of a global CRE recovery—supported by stronger deal flow, improving lending conditions, deeper collaboration across the industry, and continued progress in advanced technologies. One year later, that recovery looks delayed. A more unpredictable macroeconomic backdrop has complicated financing and investment decisions, and it may influence both the timing and the strength of a broader rebound over the next 12 to 18 months.
Trade dynamics, regulatory developments, and ongoing legal challenges have added friction to planning and execution. We do not expect that uncertainty to dissipate quickly. Even so, meaningful growth opportunities likely remain for organizations that can read the nuances across geographies and asset types, adjust quickly as conditions shift, and maintain a forward-looking posture rather than waiting for a “clear” signal that may never arrive.
Deloitte’s 2026 commercial real estate outlook survey provides a window into what global owners and investors view as the most pressing macro risks—and how they expect those risks to shape strategy, cost structures, and technology priorities. The survey reflects input from more than 850 senior leaders at major owner and investor organizations across 13 countries.
Compared with last year, respondents’ near-term outlook shows a modest decline in optimism. While most still expect improvement, fewer anticipate revenue gains: 83% expect revenues to improve by year-end, down from 88% in the prior survey. On the cost side, many leaders are preparing for continued pressure, with 68% expecting expenses to rise. Spending intentions also appear more cautious across operations, office space, and technology. Fewer respondents plan to increase spending, and more expect to keep budgets flat—suggesting a shift from expansion mode to a more selective, defensive posture.
Expectations for underlying CRE fundamentals follow a similar pattern. Many respondents still anticipate improvement through 2026 in indicators such as rental rates, leasing activity, vacancies, and cost of capital—though the share expecting improvement softened slightly versus last year (65% compared with 68%). The overall message is not that fundamentals have reversed, but that uncertainty has slowed momentum. CRE fundamentals typically do not move overnight, and many leaders still expect growth across most geographies and asset classes; however, they appear less willing to assume a smooth path back to “normal.”
That measured optimism shows up in this year’s sentiment index score of 65. It remains well above the 2023 low point, but it sits just below last year’s higher reading—indicating that confidence is still present, though tempered.
Responses cluster around a few linked themes: capital availability, elevated interest rates, and the cost of capital. Together, these point to a central pressure point—accessing debt markets at terms that support underwriting and transactions—especially in an environment where “higher for longer” has remained a dominant narrative. Even with the Federal Reserve’s quarter-point rate cut in September, and expectations of additional cuts by the end of 2025, many participants appear to be budgeting for continued financing constraints rather than rapid relief.
Tax policy also re-emerged as a top concern for the second year in a row. That concern likely reflects the lingering uncertainty that surrounded recent US tax proposals during the survey period, as well as questions about how global tax regimes could evolve and how cross-border capital may respond. International trade policy entered the list as a new response option and ranked lower overall, though it registered more strongly in Asia-Pacific. This may suggest a regional sensitivity to trade-related volatility, even as many global CRE leaders have begun to treat trade uncertainty as a persistent feature of the environment.
Commercial real estate markets appear to be stabilizing after a prolonged downturn, with several indicators suggesting conditions have begun to improve. Globally, the decline in investment volumes has eased for six consecutive quarters. In the first quarter of 2025, the market posted its first year-over-year increase in investment volumes since mid-2022. Public market performance also strengthened: through late June, the S&P Global Property Index delivered a one-year total return of 14.1%, outpacing both the S&P 500 (11.7%) and the S&P World equities index (13.8%). Private real estate, after two years of negative results, has recorded positive total returns for three consecutive quarters.
Survey results suggest many leaders still view CRE as a relatively resilient allocation, particularly given how real estate has performed through prior periods of uncertainty. Nearly three-quarters of global respondents expect to increase their investment in real estate assets over the next 12 to 18 months. The rationale is not singular; respondents point to real estate as a potential inflation hedge, a diversification tool relative to other financial assets, a source of stability, and, for some, a pathway to tax advantages.
Market recovery signals are not uniform across regions. Through the end of June 2025, property sales activity in the Americas continued the rebound that began late last year, rising 12% year over year. Europe moved in the opposite direction, with annual sales declining 15%, likely reflecting sensitivity to bond-rate shifts and trade policy dynamics. Asia-Pacific has experienced the sharpest pullback so far, down 27% year to date, with the pipeline of prospective deal closings also contracting amid heightened trade uncertainty.
Even with this uneven performance, cross-border interest remains active. When respondents look beyond their home regions, they cite India, Germany, the United Kingdom, and Singapore as top target markets. At the same time, the United States is gaining share as a preferred near-term destination, selected by 16% of respondents—up from 11% last year.
The United States also remains a major source of outbound investment capital globally. While inbound flows have softened in recent quarters, outbound activity in the first quarter of 2025 was slightly ahead of the five-year average. Several factors could reinforce US-led investment activity into 2025 and 2026, including significant “dry powder” held by US asset managers, improving property sales volumes, and the possibility that policy changes could expand the ability of individual retirement accounts to invest in private markets—potentially opening a materially larger pool of capital.
Across other regions, intent to invest remains high. Three-quarters of European and Asia-Pacific respondents expect to increase real estate investment over the next 18 months, with especially strong intent in India, Canada, and France. Fundraising conditions also appear to be improving: early 2025 fundraising is tracking to exceed totals from the prior two years, with private credit strategies attracting a meaningful share of new capital. With interest rates still relatively elevated and a large volume of debt maturing over the coming years, many investors and managers may increasingly focus on opportunities in real estate debt markets.
Respondents broadly expect improvement in leasing, transactions, and debt-market conditions, but those expectations vary materially by geography and specialty. European respondents are the most optimistic, with roughly seven in ten expecting improvement across leasing, capital markets, and lending conditions. North American sentiment is more neutral, with a meaningful share anticipating flat year-over-year conditions in rent growth, vacancy levels, and the cost of capital. Asia-Pacific leaders appear more cautious overall: while most still expect fundamentals to improve in 2026, a notable minority anticipate deterioration in the cost of capital and in capital availability.
Asset-class preferences have been comparatively stable year over year. No property type moved more than a few ranks, suggesting that investors are adjusting at the margins rather than executing a wholesale reallocation. Digital economy assets—such as data centers and cell towers—regained the top position after being overtaken last year by logistics and warehousing. Office also appears to be recovering some relative interest. Both suburban and downtown office assets moved up from the low positions they held two years ago, indicating that some investors are beginning to reassess office risk and opportunity with more nuance than during the peak of the repricing cycle.
The window for “early mover” positioning may be narrowing as market participants begin to re-engage. Commercial real estate leaders should monitor signs of improving capital markets conditions and be prepared to move decisively before broader sentiment fully resets. After a subdued 2024, there are indications that activity is starting to return. As late 2025 approaches, high-quality assets with stabilized cash flows may draw meaningfully more interest than in recent years, particularly if financing conditions continue to gradually improve and buyers regain confidence in pricing.
At the same time, capital allocation discipline matters more than speed. Leaders should prioritize agility, flexibility, and selectivity rather than reacting to short-term noise. A practical way to do this is to establish a cadence of portfolio reviews grounded in data—tracking sector performance, tenant-credit and lease-roll profiles, capex exposure, refinancing risk, and geographic sensitivity to macro headwinds. With that fact base, firms can rebalance into property types or markets that appear more insulated in the near term, while still positioning to capture upside where fundamentals are strengthening. The goal is to act from medium- to long-term conviction, while maintaining enough optionality to respond if conditions deteriorate again.
Finally, many firms may benefit from widening their aperture beyond the “core four” sectors of office, retail, industrial, and multifamily. In a lower-growth environment, certain alternative sectors and sub-asset types can remain comparatively durable because they serve needs that persist even in downturns. Health care real estate, grocery-anchored retail, and select housing segments often continue to see baseline demand, though that resilience can also create intense competition for the best assets. More broadly, the market appears to be continuing a longer-term shift into nontraditional property types, including telecommunications infrastructure, specialized health care formats, and data center-related assets. For investors, the implication is not to chase alternatives indiscriminately, but to evaluate where structural demand and operating resilience can justify allocations—even when growth is muted—while ensuring the platform and expertise exist to underwrite and manage these assets effectively.
Looking ahead, commercial real estate lending is shaping up as a tale of two markets. Legacy loans are still under strain from refinancing pressure, valuation resets, and rising defaults. At the same time, new originations are increasingly being structured on more conservative assumptions—with pricing, leverage, and covenants that better reflect today’s rate environment. For CRE leaders, the challenge is dual: reduce downside within the existing portfolio while positioning to capitalize on improving terms for new debt.
The industry likely has not yet cleared the “loan-maturity mountain.” More than half of survey respondents report upcoming loan maturities within the next year, and a meaningful share of the market has already leaned on “extend-and-pretend” structures that pushed due dates outward without fully resolving underlying valuation or cash-flow issues. Whether these situations end in orderly recapitalizations or lender takebacks remains uncertain, particularly because many lenders have been motivated to pursue negotiated resolutions rather than force outcomes in thin markets.
The core issue is that many maturing loans were originated when borrowing costs were dramatically lower. Loans underwritten in 2022 often assumed rates and cap-rate environments that no longer apply. With today’s higher debt costs—especially for floating-rate structures or loans approaching resets—debt-service coverage is coming under pressure, and refinancing requires more equity, lower proceeds, or both.
Refinancing risk also appears concentrated rather than universal. Some markets face more pronounced value corrections and refinancing gaps than others, and local rate regimes matter. Several European countries show meaningful refinancing exposure, while parts of Asia-Pacific have been somewhat insulated due to different leverage dynamics and uneven interest-rate trajectories across countries.
Even with distress in the background, the conditions for new CRE debt origination are improving. Property values in many segments appear to be stabilizing, and lenders are insisting on stronger deal structures—more realistic cash-flow assumptions, tighter underwriting, and clearer downside protections. That discipline is creating an environment where new loans can be more financeable and, in some cases, more durable than the vintages now rolling into maturity walls.
Momentum has also returned to new issuance and refinancing activity. Loan volume has increased from late-2024 levels and is materially higher than the same period last year, signaling that borrowers and lenders are re-engaging. As spreads tighten and price discovery improves, sponsors may have greater flexibility to refinance select assets earlier than planned or to pursue acquisitions where the basis and capital stack are sound.
Debt capital availability has improved, supported in part by “fresh” pools of capital that are not weighed down by legacy exposures. Alternative lenders—such as private credit funds and other nonbank sources—have been a major driver of activity, particularly where they can price for risk and move quickly. This trend is also being reinforced by large amounts of available dry powder waiting for attractive entry points.
Even so, this is not a return to “easy money.” Across lender types, selectivity is higher than in prior cycles. Capital is flowing most readily to assets with stable income, credible net operating income growth, and defensible fundamentals. As a result, high-quality properties are seeing more competition, while challenged assets are often facing tougher terms, higher spreads, and heavier sponsor support requirements.
Banks and CMBS lenders are beginning to re-enter the CRE lending market after several years of retrenchment, but they are doing so carefully and on evolved terms. CMBS activity has shown signs of a rebound, particularly in single-borrower structures. Banks, meanwhile, appear to be balancing caution on legacy exposure with the opportunity to deploy capital into better-structured new loans—especially as underwriting standards show early signs of easing relative to the peak of tightness.
Outside the United States, lender appetite also appears to be improving. In Europe, many lenders are signaling intent to grow originations into 2026, and in some markets, nonbank balance-sheet lenders (including insurance companies and investment banks) may be positioned to grow faster than traditional banks. In Asia-Pacific, some investors increasing allocation are doing so partly to reduce debt costs or restructure balance sheets by replacing weaker loans with lower-leverage, better-structured opportunities.
CRE leaders can improve outcomes by treating refinancing and new origination as one integrated capital strategy—tight on risk, but opportunistic where the market is offering better structures.
Many owners and investors expect to increase use of private debt and selectively re-engage banks, while relying less on certain public-market channels. This calls for early lender engagement, clear business plans, and disciplined capital-stack design so financing options remain available even if volatility returns.
The market’s “new normal” may require higher financing costs, higher exit cap rates, and more conservative growth assumptions. For some assets, selling, recapitalizing, or repurposing may be superior to holding through prolonged uncertainty—particularly where the capital required to refinance meaningfully dilutes returns.
Leaders should stress-test portfolios for adverse scenarios (rates, values, cash flow), identify the loans and assets most at risk, and establish contingency plans. Where assets are trending toward distress, focus on fundamentals—leasing, operating efficiency, tenant quality, and capex discipline—and communicate a credible recovery plan to lenders and investors to preserve optionality and reduce the probability of forced outcomes.
Alliances are increasingly attractive because they let CRE investors and managers expand capabilities and move faster without the cost, complexity, and balance-sheet commitment of full M&A. They can also help firms pivot across strategies as client demands shift around liquidity, returns, and risk.
With elevated interest rates and tougher deal economics, partnerships and joint ventures can be a more agile path than acquisitions. They allow firms to test new markets, launch products, or broaden distribution while preserving flexibility if conditions change. The direction of travel is toward integrated offerings that combine public and private markets and blend active and index approaches.
Some managers and lenders are building broader, end-to-end capabilities—spanning senior and subordinated debt, preferred equity, and other structured solutions—so they can deliver a more complete “capital stack” toolkit. This matters more when sponsors need creative structures and investors want tighter underwriting-to-execution alignment.
As capital flows into operationally complex sectors—such as specialized housing and data centers—execution expertise becomes a differentiator. Larger platforms often partner to gain access to specialized property types, while smaller firms use partners to access new geographies and local market know-how. In many cases, investors are taking equity stakes in operating partners to strengthen execution and capture more value at the asset level.
Digital infrastructure highlights why cross-industry partnerships are becoming essential. Data center operators and REITs are partnering with energy suppliers and technology firms to secure power, manage costs, and improve resilience, including interest in microgrids and alternative energy solutions.
Alliances are also enabling funds to diversify their limited partner base by tapping wealth platforms, insurance balance sheets, and high-net-worth capital. This is reinforced by demographic shifts and long-term wealth transfer dynamics that are changing how private-market allocations are formed.
The manager–insurer relationship continues to deepen through strategic partnerships, stakes, and separately managed account structures. This can expand distribution and increase the durability of capital sources, potentially supporting more consistent deployment across cycles.
Some publicly traded REITs are increasingly partnering with private capital providers—pension funds, sovereign wealth funds, and other large institutions—to grow faster, diversify income streams, and stay flexible in a market shaped by tighter competition and shifting investor expectations. These partnerships commonly show up as joint ventures or co-investment vehicles, with the REIT often serving as the general partner and operating platform while institutions provide long-duration capital.
A typical structure pairs the REIT’s sourcing, operating, and asset-management capabilities with the partner’s balance sheet and return objectives. The result can be a more scalable investment engine: the REIT expands its addressable capital base and fee opportunities while maintaining strategic influence over asset selection, operations, and reporting cadence.
Example: institutional capital platforms and sector-focused funds
A common model is the “third-party capital” platform, where a REIT creates a dedicated institutional investment arm to manage external capital alongside its own. For example, Ventas Investment Management (VIM) functions as a third-party institutional capital management platform and includes vehicles such as an open-ended life science and health care real estate fund, as well as a development partnership with a sovereign wealth fund. The stated focus is typically core and core-plus assets within targeted sectors—such as life science, outpatient medical, and senior housing—often across North America, where scale, operational expertise, and pipeline access can be decisive differentiators.
Partnership structures increase complexity, and that complexity becomes risk when reporting is inconsistent or incomparable across entities. CRE organizations should establish shared data definitions, cadence, and governance so performance, valuation, and risk metrics are timely, accurate, and aligned across all ventures. This also supports cleaner portfolio visibility for both internal decision-making and investor communications.
Joint ventures and cross-border capital relationships can introduce overlapping regulatory obligations. Organizations should develop unified compliance frameworks and reporting standards that work across domestic and international requirements, including core financial controls and investor onboarding disciplines (for example, anti-money laundering and know-your-customer requirements). The objective is to prevent compliance from becoming fragmented by vehicle, geography, or partner type.
Partnerships work best when they are built around a clear “why.” Organizations should evaluate where alliances materially expand market share, operating capabilities, access to new geographies, or entry into specialized property types. That decision should be benchmarked against other paths—acquisitions, standalone growth, or alternative partnership structures—while factoring in interest-rate expectations, financing conditions, and the likely direction of central bank policy.
Institutional investors can expand opportunity sets by partnering with states and municipalities on public-private structures, particularly where projects require patient capital and specialized expertise. This is often most relevant in specialized or policy-sensitive uses such as media and entertainment districts, health care-related facilities, energy-transition infrastructure, and affordability-oriented housing segments (including affordable and student housing), where permitting, incentives, and community outcomes can materially shape project feasibility and returns.
The 2026 CRE outlook survey suggests many organizations are still working through the fundamentals of AI adoption. Roughly one in five respondents (19%) describe their organization as being in the early stages, while more than a quarter (27%) report implementation challenges—ranging from technical constraints and capability gaps to resistance to change.
This shift likely reflects a recalibration of expectations. “Transformative” AI is not synonymous with document summaries or automated email drafting. Last year’s sentiment may have been influenced by hype, which can inflate near-term expectations. In practice, realizing ROI often takes longer than leaders anticipate, in part because adoption is a human change curve as much as a technology rollout. As more organizations encounter mixed results, getting the first deployments right—well-scoped, well-governed, and operationally embedded—becomes even more important.
Smaller, more efficient models and sector-specific specializations appear to be gaining traction. Voice and chat assistants are increasingly treated as operational tools rather than experiments, supporting prospect engagement, intake, and lead qualification. At the same time, CRE leaders are showing broad interest in a wide range of AI capabilities—multimodal systems, multi-agent approaches, small language models, AI-enabled digital twins, large action models, and agentic AI—suggesting the industry sees AI as relevant across property operations, client engagement, and decision-making.
That ambition, however, runs into a predictable constraint: data readiness. Having “a lot of data” is not the same as having usable data. Volume does not guarantee utility, and many organizations still face heavy extract-transform-load work to make inputs reliable enough to produce valuable outputs. In CRE, this is compounded by sensitivity and privacy risk. Tenant names, bank details, social security numbers, and loan payment statuses are not inputs that can be casually fed into training or inference workflows, which is one reason synthetic data is drawing interest. But synthetic data creation is rarely a plug-and-play solution; it requires specialized expertise and rigorous quality controls to ensure the data is realistic, fit for purpose, and does not introduce downstream bias or faulty signals.
Rather than attempting broad, enterprise-wide AI strategies, some CRE organizations appear to be narrowing focus toward use cases with clearer economics and operational pull-through. Survey respondents point to tenant relationship management, lease drafting, and portfolio management as priority areas over the next 12 to 18 months.
Even within those areas, impact is uneven. Some respondents reporting limited effect or implementation friction call out property operations/management and marketing as more problematic. Trust and reliability may be improving, but explainability remains a common gap. In practice, this means organizations need to treat model outputs as decision support, not decision replacement—especially when outputs affect contracts, financial commitments, or regulated reporting. Human validation, regular audits, and feedback loops that improve performance over time are essential. For example, generative AI may summarize standard leases effectively but struggle with atypical terms or negotiated riders; that is precisely where tighter prompting, fine-tuning, and structured review workflows can improve accuracy and reduce risk.
A consistent theme is that no single AI approach wins across all needs. The right tool depends on the problem: generative AI may be best for drafting, summarizing, and assisting knowledge work, while predictive modeling and traditional machine learning may be better suited to forecasting, risk scoring, and anomaly detection. Multimodal and deep learning methods that process images, audio, and natural language also expand the feasible use-case set, particularly in operations and inspections.
Many real estate firms appear to be moving toward a portfolio model: multiple smaller, pretrained models deployed for specific tasks, rather than a single monolithic LLM intended to function as data store, compute layer, and interface simultaneously. In parallel, some organizations are exploring agent-based systems that orchestrate multiple models and tools across a workflow. This architecture can be faster, cheaper, and easier to govern—provided the underlying data and controls are disciplined.
Survey results also suggest a split in where organizations are sourcing capability: some are leveraging industry platforms (for example, IWMS or CAFM tools), while others are using publicly available LLMs and then tailoring them to CRE tasks. Fine-tuning can produce smaller, more efficient models aligned to domain needs, though it requires effort and strong human input. Alternatively, some organizations may train smaller models from scratch on curated, domain-specific datasets, or customize open-source models for their operating environment—an approach that can be attractive for public REITs that prioritize control, cost discipline, and repeatable workflows.
Treat AI tools as part of the control environment, not a side project. Partner early with SOX and internal audit teams so risk assessment, control design, monitoring, remediation, reporting, and testing are aligned to how AI will actually be used. This reduces the likelihood of compliance surprises later and improves the durability of modernization efforts.
Where AI supports material decisions—leasing, valuation, underwriting-like assessments, financial reporting inputs, or operational risk—embed explainability and verification as a standard step. In practical terms, organizations should aim for outputs that include rationale (“why this recommendation”), confidence indicators where feasible, and clear escalation rules for human review. Routine algorithm audits and structured human validation are not optional if the goal is sustained trust and reliable performance over time.
If AI-enabled workflows are becoming core to execution, literacy must be treated as a board-level enabler. Build a companywide learning program that covers high-value use cases, data privacy, effective prompting, and model risk. Track adoption and readiness with operational KPIs—completion rates, use-case pipeline health, time-to-pilot, and indicators of misuse or noncompliance. Then tie literacy expectations to roles so capability is not concentrated in a few specialists but distributed across the functions expected to use AI in daily work.
The next chapter for commercial real estate may reward prepared realists. The headline risks—macroeconomic volatility, policy whiplash, and “higher-for-longer” rates—are not theoretical. They are already influencing capital flows, underwriting, and timelines. At the same time, the 2026 survey results and market signals point to credible openings over the next 12 to 18 months: loans that are being repriced and restructured on more disciplined terms, a lender pool that is cautiously returning alongside deep private credit capacity, and selective sector strength in digital infrastructure, logistics, and parts of the office market.
For 2026, CRE leaders should operate from a pragmatic playbook. Capital agility matters because timing and flexibility may separate winners from laggards as the market regains traction unevenly. Portfolio decisions should emphasize resilient, income-producing exposures and realistic downside protection, not just pro forma upside. Partnerships can be a force multiplier—both for scale and for specialized operating expertise—especially in sectors where execution and operational intensity drive returns as much as the asset itself.
Technology should be treated the same way: as an enabler of outcomes, not a branding exercise. Deploy advanced analytics and automation where they clearly improve leasing execution, underwriting discipline, and portfolio decision-making, and where the supporting data and controls are strong enough to sustain trust. At the same time, legacy exposures should be stress-tested with a bias toward action—refinancing risk, cash-flow sensitivity, and operational fragility should be surfaced early, documented clearly, and addressed with transparent plans that lenders and investors can underwrite.
The market rarely delivers perfect certainty. Leaders who wait for it often miss the advantage. The objective in 2026 is to move with discipline before the crowd, while the window for differentiated entry and structured risk-taking remains open—and to create confidence through preparation, clarity, and execution.
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