Commercial real estate outlook for 2026, the importance mobile shopping this holiday season

Key Concepts

Market Rally: Stocks are trading higher, indicating positive investor sentiment.
Sector Rotation: Investors are shifting their investments between different sectors of the market.
AI Trade: Investments related to Artificial Intelligence technology.
Healthcare Sector: Performing well, driven by demographic trends and new drug developments.
Retail Sector: Bifurcated performance, with necessities outperforming luxury items.
Defensive Sectors: Staples, energy, and real estate are areas to potentially avoid due to capped upside.
Mobile Shopping: Dominant trend in retail, driven by value, convenience, and experience.
Loyalty Programs: Evolving to offer exclusivity and tiered discounts to retain customers.
K-Shaped Economy: Divergence in consumer spending based on income levels.
AI in Retail: Enhancing search, comparison shopping, and personalization.
Buy Now, Pay Later (BNPL): Popular payment option for consumers.
Crypto Stocks: Highly correlated with Bitcoin's price movements.
Starbucks: Facing challenges with unionization and underperforming stock.
GameStop: Meme stock showing a recent bounce ahead of earnings.
Tech Shopping: Impacted by tariffs, supply pressures, and the rise of generative AI.
Zscaler: Strong performance in ARR and revenue growth, focusing on cybersecurity and cost reduction for enterprises.
Commercial Real Estate: Positive outlook for 2026 across office, industrial, and retail sectors.
Reshoring: Driving demand for industrial and logistics spaces.
Hybrid Office: Here to stay, but not necessarily leading to reduced office space demand.

Market Performance and Sector Analysis

The market is experiencing a rally as the month of November concludes, with the Dow, NASDAQ, and S&P 500 all trading to the upside. The Russell 2000, representing small caps, has shown significant strength over the past five days, up another half a percent. Bond markets are also seeing slight increases, with the 10-year Treasury yield at 4.02% and the 30-year at 4.67%. Sector-wise, healthcare is leading to the downside, while energy, financials, and materials are performing well.

Alex Spencer, Chief Investment Officer at Bogart Wealth, discusses the market's performance, attributing the recent gains to tempered interest rate expectations following the Fed meeting and subsequent rhetoric. He notes a shift away from the "AI trade," which has cooled down after a period of intense heat.

Month-to-Date Sector Returns:

Leading: Healthcare (XLV) - a "come from behind" story and leading sector this quarter.
Also Performing Well: Materials, Staples (defensive), Energy.
Lagging: Technology (XLK) - down 5.1%, and Consumer Discretionary.

Spencer expresses continued optimism for Information Technology, Communication Services, and Industrials, citing secular strength in technology that spans decades, from electricity and the internet to SaaS, AI, robotics, and quantum computing. He also highlights the strategic national economic security aspect, framing it as a US-China competition, with government stakes in companies like Intel (10%) and MP Materials (15% by the US Department of Defense) as examples of increased US involvement.

Strategic Partnerships and Government Involvement

The discussion touches upon strategic partnerships and government stakes in major chip companies and related industries. While acknowledging the ideal of a free market, Spencer points out that many countries, including China and Europe, heavily subsidize their local industries. The US government's involvement in bringing chip manufacturing and rare earth mineral processing back to the US is seen as creating support and endorsement for these sectors. An example cited is Nvidia's $5 billion partnership with Intel, which likely wouldn't have occurred without government support, underscoring the conversation around national economic security.

Healthcare Sector Outlook

The healthcare sector, particularly the XLV ETF and biotech, is highlighted as a "come from behind" story with renewed ETF inflows, the first in years. Spencer views healthcare favorably due to its secular growth stories, demographic trends, and emerging growth drivers like GLP-1 drugs. He suggests it's a good area to balance portfolios with growth-oriented names, offering stronger growth stories compared to some other defensive sectors with asset-heavy business models and thinner margins.

Retail Sector Performance and Consumer Behavior

The retail sector presents a bifurcated picture. Amazon, Home Depot, and Shopify are down month-to-date, while Walmart is hitting record highs (up 9% this month), and TJX and Ross Stores are also performing well. Spencer advises selectivity in the retail space. He notes that Amazon's performance can be influenced by the AI narrative, and some retailers are experiencing pressure due to consumer insecurity about their labor market status.

However, on aggregate, retailers are doing "okay." The key trend is a more cautious consumer focusing on necessities over luxury items, exemplified by consumers "trading down" to brands like Walmart over Target. Spencer suggests that as consumer confidence returns, retailers focusing on premium brands might present future opportunities.

Sectors and Industries to Avoid

Spencer advises caution regarding defensive sectors like Staples, Energy, and Real Estate.

Energy: The long-term outlook for oil futures suggests a capped industry. With EVs projected to be 50% of the car fleet by 2030 (up from 20% currently), the upside potential in energy is seen as limited. He prefers asset-light business models with stronger profit margins.
Real Estate: High interest rate costs, affordability crises, and the need for home builders to offer incentives like mortgage rate buy-downs are creating cost pressures.
Staples: Concerns exist about restocking shelves after earlier inventory build-ups of cheaper goods. The question remains whether companies will absorb rising costs or pass them to consumers, potentially impacting already thin margins.

Mobile Shopping and Consumer Experience

Natalie Cutler, National Retail Practice Leader at BDO, discusses the dominance of mobile shopping, with Adobe projecting over half of holiday purchases to be made on phones. This trend is driven by consumers' constant connection to their devices and the ability of retailers to create exceptional mobile experiences. The three key consumer priorities are value, convenience, and experience. Mobile devices can deliver on convenience and experience, while value encompasses discounts, pricing, and product quality.

Loyalty Programs and Consumer Divergence

Loyalty programs are evolving beyond simple discounts to include exclusivity (products, purchase times) and tiered discounts, aiming to keep consumers engaged and purchasing from a single retailer. Cutler also addresses the "K-shaped" or two-track consumer economy, where average consumers focus on promotional deals and value due to fixed budgets, while affluent consumers may prioritize convenience and experience.

AI's Impact on Retail and Consumer Behavior

AI is significantly impacting the retail landscape. Consumers are using AI for comparison shopping and visual search. Retailers with strong back-end systems leveraging AI, robust supply chains, and predictive analytics are better positioned to manage inventory effectively. From a consumer perspective, understanding what they are looking for and who has it is crucial.

Buy Now, Pay Later (BNPL)

BNPL options continue to be popular, especially heading into the holiday season, as consumers seek to make purchases within their fixed budgets.

Trending Tickers: Crypto, Starbucks, and GameStop

Crypto: Shares of Coinbase, Strategy, and Bullish are trading higher as Bitcoin hovers around $91,000. Michelle Schneider, Chief Strategist at MarketGauge.com, believes $80,000 may have been the floor for Bitcoin, with a target of holding around $88-$89,000 and potentially breaking $100,000. Jonathan Krinsky, Technical Strategist at BTIG, calls this a "reflex rally" potentially towards $100,000. The correlation between Coinbase and Bitcoin is very high (around 0.89), meaning Coinbase's performance is closely tied to Bitcoin's.
Starbucks: The coffee giant is facing an escalating indefinite strike at over 120 stores. The stock has struggled to maintain uptrends, with CEO Brian Nickel's tenure (since September 2024) seeing an 8% stock decline. The five-year chart shows significant sideways movement.
GameStop: The meme stock is up over 12% in the last five days ahead of its earnings release. However, the month-to-date performance shows a different story, with significant red. Year-to-date, the recent bounce appears small. Social media chatter is contributing to the increased attention. The stock's peak was around $87-$88 in 2021, and it has not come close to reattaining that level.

Black Friday Tech Shopping: Tariffs and Supply Pressures

Danielle Holly, Yahoo Finance Tech Editor, discusses the complexities of Black Friday tech shopping, influenced by tariffs and supply pressures that are pushing prices higher.

Generative AI: Enhancing gift-finding through personalized requests and shopping offerings (e.g., ChatGPT, Bing Copilot, Gemini).
Tariffs: Impacting electronics, with video game console prices already raised earlier in the year (Microsoft twice, Sony by $50, Nintendo Switch). Even older consoles are seeing price increases.
Supply Chain Issues: While computers and displays are exempt from tariffs, broader market issues like data center buildouts are making memory more expensive, potentially impacting pricing.
Recommended Tech Purchases: Headphones, fitness trackers, smartwatches (Apple Watch), AirPods, Pixel Buds, and accessories like keyboards and personalized chargers are suggested.

Zscaler's Performance and Enterprise Spending

Jay Chudrey, CEO of Zscaler, reports strong results with ARR growing 26%, revenue growth at 26%, RPO accelerating to 35%, and a free cash flow margin of 52%. He highlights their "Rule of 78" performance (revenue + free cash flow growth) for companies over $3 billion in ARR growing at over 25%.

Regarding enterprise spending, Chudrey notes that while budgets are tight and deal scrutiny is high, Zscaler is successful due to two factors:

Cybersecurity Importance: Enterprises prioritize cybersecurity, especially with the convergence of AI and security.
Cost Reduction: CIOs are seeking simplification and consolidation, which Zscaler's platform provides by eliminating redundant network and security point products.

Chudrey views Zscaler's competition as less about other vendors and more about inertia, lack of education, and lack of awareness regarding zero-trust architecture. He contrasts Zscaler with firewall companies, likening it to comparing an electric car to an internal combustion engine car in terms of achieving zero emissions.

AI's Role in Cybersecurity and Zscaler's Operations

Zscaler is helping customers implement AI by securing AI applications through products like red teaming and guardrailing. They emphasize the need for a strong zero-trust foundation for good AI security. Chudrey believes the AI journey is in its early stages but is already seeing AI-driven security threats.

Internally, Zscaler is experiencing tangible productivity gains from AI in customer support (faster case resolution, better training) and software development (testing, code generation), potentially leading to a lower headcount increase than otherwise needed.

The threat landscape is worsening, with hackers leveraging AI for automation and attack surface identification. However, Zscaler is using AI to identify hacker activity within its vast dataset (half a trillion transactions per day), enabling them to fight AI with AI.