Following a challenging year, the outlook for 2026 is more positive: Improving market fundamentals, including positive economic growth across most major markets, easing trade concerns, moderating inflation and lower interest rates will contribute to a more stable operating environment.
And yet, the convergence of economic, technological, and social forces leaves organizations across the globe navigating a complex and evolving environment, with the commercial real estate industry on the precipice of substantial – and exciting - transformation .
This Outlook examines six critical forces reshaping commercial real estate: the imperative for efficiency in a higher-cost environment; intensifying supply shortages across property types; ‘experience’ as the new value driver in real estate; the maturation of AI implementation beyond pilot programs; the convergence of buildings with power systems; and the democratization of commercial real estate investing. Each represents both challenge and opportunity for real estate actors.
For real estate capital markets, the environment strengthened notably in the second half of 2025 and momentum is expected to build further in 2026. We expect debt markets to remain very active and for lender appetite to continue to broaden across property sectors.
Over the next year we anticipate the competitiveness of investor bidding to rise further as the real estate investment cycle gains momentum, resulting in an expansion of transaction volumes through the year. The AI infrastructure boom will continue to drive demand for data centers, while the Living sector will remain the world’s largest investment sector, with growing investor demand across all forms of housing. Markets with deep product pools will continue to be active and we expect growing demand in a range of countries, from Australia to Spain.
Meanwhile, leasing demand is expected to strengthen across many markets and property types in 2026. Office and industrial take-up are projected to increase globally, with growth in most major countries including the U.S., India and the UK. The impact of lower new construction will become progressively larger in the office sector as occupiers looking for new, large-block space face fewer options and higher rental rates.
In supply-constrained locations, shortages of quality space – particularly acute in Tokyo, New York and London - will mean demand broadens beyond the top end of the market. Industrial and logistics deliveries are also falling globally, which will contribute to contracting vacancy as leasing increases.
1. Higher-cost environment will sharpen focus on efficiency
Organizations across all sectors are confronting an increasingly expensive operating environment as multiple external cost pressures converge. Debt and borrowing costs have risen as concerns about government fiscal sustainability have spilled over into private credit charges; employers face mounting labor expenses from rising payroll taxes, persistent skills mismatches and widespread worker shortages.
Construction materials and fit-out costs are also elevated and face further upward pressure in 2026. For example, in Europe ‘all-in’ cost inflation for 2026 in the UK and Germany is expected to be in the range of 2.7-3% and 3.5-4% in the U.S., while estimates are higher in parts of Asia -Pacific with construction costs in Singapore and Australia predicted to rise by 5-6%.
For investors, developers and occupiers alike, this confluence of factors has pushed cost management into the number one spot on their list of concerns: 72% of corporate real estate leaders have identified costs and budget efficiency as their top priority as we head into the new year.
Dealing with this demands a strategic rethinking of cost management approaches, with real estate teams focused on three areas in 2026: interrogating budget lines closely; optimizing space utilization; and improving operational efficiencies.
In 2026, cost reduction will involve meticulous scrutiny of every expense. For investors this means asset optimization – maximizing asset efficiency and performance, with proactive maintenance and capex management. For occupiers, it means scrutinizing every operational expense, from utilities to fit-out and improvement costs, to maintenance contracts. Space optimization and portfolio right-sizing will be a key focus to ensure the entire real estate footprint aligns with both current operations and future business needs.
The continuous drive toward improved efficiency will increasingly lead organizations to external partnerships through outsourcing and supply chain optimization. Technology adoption for buildings/facilities management and service delivery will represent another critical efficiency pathway. Automation and digital solutions promise to significantly reduce operational costs while maintaining service quality, if implemented successfully.
Each cost management strategy will require careful calibration, as every cost reduction initiative must be evaluated for its potential impact on employee productivity, organizational resilience, user experience and talent retention.
Other topics in the report:
2. Supply shortages will intensify for top-quality space across property types
3. ‘Experience’ is the new value driver
4. The AI strategy reckoning: when pilots hit the wall
5. Energy solutions: the convergence of buildings and power
6. The democratization of commercial real estate investing
Looking ahead
The commercial real estate landscape of 2026 will reward organizations that embrace strategic adaptation over tactical responses. The six forces outlined - cost pressures, supply constraints, experience as a value -driver, AI maturation, energy convergence and investment democratization - are not isolated challenges and opportunities but interconnected dynamics that require holistic thinking and coordinated action.
For investors, success in this environment demands moving beyond traditional real estate management to integrated asset strategy that considers operational efficiency, experience, technological capability, energy performance and capital access as unified components of competitive advantage. Investors that view these forces as opportunities for differentiation rather than obstacles to overcome, will emerge as leaders in the transformed real estate ecosystem of 2026 and beyond.
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