2026 US Commercial Real Estate Outlook

Investment performance for US commercial real estate (CRE) is solidly on the upswing, with CRE sector participants optimistic that the upswing will continue through 2026 and bring performance closer to long-term sector averages in the years ahead. Such expectations are reasonable and generally aligned with our own views.

However, sector participants’ optimism implicitly assumes that the US economy will provide a foundation for growth that is adequate to fulfill expectations for space absorption and rent growth. We believe substantial uncertainty surrounds that assumption and must be taken into account when making investment decisions.

More key takeaways

• Risk to economic growth is concentrated on the downside, in our view, reflecting lopsided growth drivers associated with artificial intelligence (AI) activity and soaring AI-related stock values. Federal policies related to tariffs and immigration have been economically detrimental and erratic, complicating business decision making.
• The benefit to metro markets from AI activity is not uniform, suggesting that CRE investors evaluate the concentration of AI activity as part of metro targeting. Brookings offers tools for doing so, which we describe in the body of the report.
• In addition, CRE investors are well-advised to evaluate the relative supply-demand balance as another component of metro targeting. If an economic downturn does materialize, we believe that metros with more balanced supply-demand conditions will fare better than those digesting excesses. 

Disclosures

Unless otherwise stated, references herein to "LGIM", "we" and "us" are meant to capture the global conglomerate that includes Legal & General Investment Management Ltd. (a U.K. FCA authorized adviser), Legal & General Investment Management America, Inc. (a U.S. SEC registered investment adviser) and Legal & General Investment Management Asia Limited (a Hong Kong SFC registered adviser). The LGIM Stewardship Team acts on behalf of all such locally authorized entities.

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