2026 Q1 Real Estate Chartbook

Near Term Outlook

• The ongoing war in Iran and closure of the Strait of Hormuz has added downside risk to the US economic outlook, primarily through elevated energy prices which may increase inflation and slow growth.
• GDP growth of 2.0–2.5% is forecast through 2028, but recession risk has risen with geopolitical uncertainty.
• Inflation will likely remain elevated in the near term, driven primarily by higher energy prices.
• The Fed is unlikely to cut the Funds rate in the near term with annual inflation climbing back toward 4%.
• Downside risks include a prolonged Iran conflict and energy price volatility, job losses, and geopolitical risks.
• Upside scenarios include a near-term resolution of the Iran conflict, stronger consumer spending from tax refunds, continued AI-driven capital investment, and regulatory pullback

 

Real Estate Fundamentals

• Real estate fundamentals have continued to soften across most property types as large apartment and industrial pipelines deliver, though select sectors show signs of stabilization:
  • Multifamily – Annual absorption was strong but was outpaced by completions. Consequently, stabilized vacancy rose and YoY rent growth was a low 0.3%. Fundamentals should improve through 2029 as new supply moderates.
  • Office – Net absorption turned positive but remained low. Vacancy has likely peaked, and rent growth was modest at 1.6%. Premium office properties in top submarkets should outperform.
  • Neighborhood Retail – Vacancies ticked up due to negative absorption, but remain below their long-term average. Rent growth remained favorable at 3.2%. Limited new supply should support stable operating fundamentals through 2029.
  • Industrial – Absorption has cooled meaningfully and was far outpaced by completions, pushing vacancies above their long-term average. Rent growth has stayed resilient at 2.5%. Fundamentals are projected to soften further before improving in the mid term.
  • Senior housing, BTR, Self-storage – Structural demographic tailwinds and shifting homeownership trends are likely to drive above-inflation rent growth.
  • Data centers – Strong fundamentals in near term but risk of overbuilding in the mid term.