2026 Q2 Real Estate Chartbook

Near Term Outlook

• The war in Iran and disputes over the Strait of Hormuz have added downside risk to the U.S. economic outlook, primarily through elevated energy prices, supply chain disruption, and higher interest rates.
• GDP growth of 1.5–2.5% is forecast in the near term and a recession continues to be unlikely.
• Inflation will remain elevated (3-3.5%) in the near term, driven primarily by higher energy prices.
• The Fed is broadly expected to increase interest rates in 2026 with 1 or 2 rate hikes most likely by YE.
• Downside risks include a prolonged Iran conflict, other geopolitical challenges, an AI-led stock market correction, and low population/employment growth.
• Upside scenarios include a resolution of the Iran conflict, continued AI-driven capital investment, and ongoing regulatory pullback.

 

Real Estate Fundamentals

• Real estate fundamentals have softened further across most property types as elevated apartment and industrial pipelines continue to deliver, while retail and select niche sectors maintain stronger fundamentals.
  • Multifamily – Annual absorption slightly outpaced completions; however, due to a supply overhang stabilized vacancy rose and YoY rent growth was a low 0.3%. An acceleration of the supply pipeline may keep fundamentals depressed in the near term.
  • Office – Net absorption improved considerably although it remained outpaced by new supply. Vacancy has begun to moderate but rent growth will remain weak. Premium office properties in top submarkets should outperform.
  • Neighborhood Retail – Vacancies ticked up slightly but remain below their long-term average. Rent growth is forecast to soften slightly in 2026 but limited new supply should support stable operating fundamentals through 2029.
  • Industrial – Absorption improved but continued to lag completions, pushing vacancies higher. Rent growth has also slowed considerably. Fundamentals are projected to soften further in the near term 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.