2026 Commercial Real Estate Outlook

The 2026 commercial real estate market is characterized by strong fundamentals and an anticipated increase in transaction volume despite ongoing economic and political volatility. While the multifamily and industrial sectors continue to lead the market, the office sector is experiencing a polarized recovery centered on high-quality, sustainable assets in major metropolitan hubs. These trends are unfolding against a backdrop of federal policy uncertainty, including the impacts of a recent 43-day government shutdown on community development and housing programs.

Michelle Herrick, Head of Commercial Real Estate at J.P. Morgan, anticipates a strong 2026 market driven by improved equity fundraising and fundamental stability in key asset classes. The office sector is showing signs of a rebound in cities like New York, Los Angeles, and San Francisco, where high-quality, proptech-integrated buildings are seeing significant demand. Conversely, Burke Davis, Head of Real Estate Banking, notes that lower-quality office spaces in markets like Denver and Chicago remain at risk of obsolescence, suggesting a shift toward repurposing these assets for alternative uses rather than traditional upgrades.

The multifamily sector remains a primary focus for investors, bolstered by a 20.5% increase in lending caps for government-sponsored enterprises (GSEs). However, the industry must navigate a persistent housing supply crisis that has left 12 million households severely cost-burdened, according to the National Low Income Housing Coalition. In response, JPMorganChase has deployed over $5 billion in debt and equity to support affordable housing initiatives through the first three quarters of 2025, aiming to create or preserve nearly 39,000 units across the country.

Macroeconomic factors, including a 43-day federal government shutdown, have introduced significant friction into the market, particularly for community development projects relying on federal funding. Ginger Chambless, Head of Market Insights for Commercial Banking, warns that continued political uncertainty and potential future shutdowns could dampen investor confidence and dealmaking activity. Despite these headwinds, the industrial sector remains resilient, with high demand for manufacturing facilities driven by nearshoring and onshoring trends, particularly in Texas and California’s Inland Empire.