Exec forecasts 'year of stabilization' in commercial real estate for 2026

Key Concepts

• Commercial Real Estate Stabilization: The central theme, indicating a shift from post-pandemic uncertainty to a more predictable market across office, industrial, and retail sectors.
• Trophy Office Space: High-quality, premium office buildings that are performing exceptionally well, with vacancy rates below 5% in major markets.
• Tenant Demand (Office): A significant increase in demand for office space, with a 45% year-over-year rise and 70% of tenants seeking equal or more space.
• Lease Expirations: A substantial amount of commercial real estate (1.5 billion square feet) is set to expire between the end of 2025 and 2027, presenting opportunities for new leasing.
• Business Growth: A primary driver for increased demand for commercial real estate, suggesting a positive economic outlook.
• Industrial Leasing: Strong performance in the industrial sector, with a 63% increase in deals over 700,000 square feet in the last quarter.
• Supply Chain Recalibration: Ongoing adjustments in supply chains are expected to benefit industrial leasing.

Commercial Real Estate Outlook: Stabilization and Growth

Liz Hart, President of Newark Leasing for North America, discusses the current state and future outlook of the commercial real estate market. The primary message is one of stabilization across all three major categories: office, industrial, and retail. While 2025 is identified as a "pivot" year, 2026 is projected to be the year of stabilization, supported by concrete data rather than just sentiment.

Office Sector Performance

The office sector is showing significant improvement. Trophy office spaces are performing "marvelously," with vacancy rates in most major markets below 5%. Beyond trophy assets, there's a notable uptick in demand for other office categories. Tenant demand has increased by 45% year-over-year, indicating a strong resurgence. Furthermore, 70% of tenants are looking for either equal or more commercial real estate than they previously occupied, signaling a positive recalibration in the market.

This increased demand is partly attributed to people returning to the office, but more significantly, it's driven by business growth. This suggests a positive economic indicator for the commercial real estate sector heading into the next year. A substantial amount of commercial real estate, 1.5 billion square feet, is scheduled to expire between the end of 2025 and 2027, presenting a significant opportunity for new leasing as tenants express a desire for more space.

Industrial Sector Strength

The industrial sector is also demonstrating robust performance. After a slightly slower start to the year in terms of leasing demand, the last quarter saw a 63% increase in deals exceeding 700,000 square feet. This indicates strong activity in big block leasing within the industrial market. The ongoing recalibration of supply chains is expected to further bolster industrial leasing in 2026.

Conclusion

The overall forecast for commercial real estate is upbeat, with stabilization expected across office, industrial, and retail sectors in 2026. This stabilization is underpinned by tangible data, including a significant increase in tenant demand for office space and strong performance in industrial leasing, driven by business growth and supply chain adjustments.