Commercial Real Estate Trends To Watch In 2026

Commercial real estate trends in 2026 are being shaped by shifting economic conditions, technological innovation, and evolving tenant demands. As the market adjusts to changing interest rates, capital flows, and workplace models, investors, owners, tenants, and developers must understand how these trends are influencing opportunities and risk in the year ahead.

Overall Outlook for Commercial Real Estate Industry

Last year brought increases in tariffs and immigration restrictions. Both have raised costs for builders and developers. At the same time, interest rates decreased in 2025, which is slowly unlocking more capital. Overall, expertsand research firms are predicting a year of stabilization and recovery for commercial real estate in 2026.

"As we head into 2026, the tone has shifted meaningfully," Kevin Thorpe, chief economist at Cushman & Wakefield, told CNBC. "There is still risk on both sides of the outlook, but we've moved past the peak levels of uncertainty, and confidence in the CRE sector is building. Capital is flowing again, interest rates are moving lower, and leasing fundamentals are generally stabilizing or improving. If 2025 was a test of resilience, 2026 has real potential to reward it."

Commercial Real Estate Sectors to Watch This Year

Certain commercial property sectors are better positioned for growth in 2026. Understanding which sectors are gaining traction can help investors and industry stakeholders align their 2026 strategies accordingly. Below are a few to watch:

• Multifamily: Multifamily properties, particularly in high-growth metro areas, continue to attract investment due to strong rental demand and demographic trends favoring rental housing. However, it is important that developers and builders pay careful attention to statutory and regulatory requirements, as certain areas may be bound by new laws and policies affecting the sale of multiple-dwelling buildings.
• Retail: Brick-and-mortar retail is not disappearing, but it is transforming. Retail spaces focused on experiential uses, service-oriented tenants, and dining/leisure concepts are performing better than traditional storefronts reliant on foot traffic alone. For malls and Shopping Center spaces are now being repurposed for other industrial uses. It is important that investors pay particular attention to zoning and land use requirements for properties and explore how difficult it will ultimately be to obtain variances when needed.
• Life Sciences: Life sciences real estate, including research labs and biotech facilities, remains a high-growth sector in key innovation hubs. Long-term leases with creditworthy institutional tenants underpin much of the demand.
• Industrial: The industrial sector continues its strong performance, supported by e-commerce, supply chain reconfiguration, and demand for cold storage and distribution facilities. Last-mile logistics assets near population centers are particularly in demand. While these sites remain in high demand, their supply is often curtailed by zoning and land-use issues. In some instances, the market will have to transition to accommodate these new uses.
• Office: While traditional office demand faces ongoing challenges due to hybrid work models, prime assets in major urban markets and properties offering best-in-class amenities remain attractive. Owners innovating around collaborative space, health and safety features, and connectivity are better positioned to retain and attract tenants.

Key Trends Influencing CRE in 2026

Below are several key trends that will likely define the commercial real estate market in 2026, along with legal insights for navigating each one.

Rising Demand for Flexible and Hybrid Workspaces

The trend toward flexible office space use is accelerating, driven by the continued prevalence of hybrid work models. Many companies are downsizing from traditional leased office space and instead seeking spaces that can accommodate fluctuating headcounts and collaboration needs.

As a result, leases are increasingly incorporating flexible terms such as shorter durations, early termination options, and co-working arrangements. Landlords and tenants should carefully negotiate clauses addressing rent escalations, space modifications, service commitments, and exit rights to reflect these evolving needs.

These leasing trends, however, are very dependent on the individual commercial leasing market involved.

Technology Integration and Smart Buildings

Smart building technologies—like IoT sensors, automated systems, and energy monitoring platforms—are becoming standard in new CRE developments and upgrades. These systems enhance building efficiency, reduce operating costs, and improve tenant satisfaction.

With increased connectivity comes heightened cybersecurity and data privacy risks. Businesses should review contracts with technology vendors to ensure adequate protections, liability limitations, and compliance with applicable data privacy laws.

Sustainable and ESG-Focused Properties

Environmental, social, and governance (ESG) criteria are no longer optional. Investors and tenants are prioritizing properties with strong sustainability credentials, including energy-efficient designs, electrification, and green certifications (e.g., LEED, ENERGY STAR). Additionally, "green" leases that allocate responsibilities for ESG-related improvements and criteria are on the rise. Financing agreements also increasingly tie interest rates to ESG performance. Businesses should work with legal counsel to ensure that contracts support compliance with sustainability commitments without exposing parties to unforeseen liabilities.

E-Commerce Continues to Shape Industrial Markets

E-commerce remains a major driver of industrial real estate demand, fueling the need for modern logistics facilities, distribution centers, and last-mile delivery hubs. Investors are eyeing strategically located properties that can support rapid delivery to urban populations.

Zoning, infrastructure access, and environmental due diligence are especially critical for industrial developments. Businesses should work closely with their legal team to assess land-use restrictions, traffic and emissions considerations, and any regulatory incentives or requirements related to industrial operations.

Capital Flows and Interest Rate Sensitivity

While interest rates have moderated from recent peaks, capital markets remain attentive to macroeconomic indicators, inflationary pressures, and lending standards. CRE investors are evaluating how funding costs influence asset valuations and investment strategies.

Loan documentation, refinancing terms, and covenants must be carefully structured to address rate volatility and borrower flexibility. Businesses should scrutinize provisions on interest rate adjustments, default triggers, and cross-defaults to protect their interests.

Adaptive Reuse and Repurposing of Space

As market preferences evolve, obsolete or underutilized properties—especially in the retail and office sectors—are being repurposed for alternative uses such as residential, mixed-use, or experiential venues. Redevelopment projects often involve complex land use issues, building code compliance, and community engagement. Legal teams should coordinate early with architects and municipalities to navigate zoning changes, historic preservation considerations, and permitting timelines that can impact project feasibility.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.