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Real Estate

U.S. Real Estate: Gradual Recovery Supported by Low New Supply

February 2026 – 9 min read

The recovery is supported by solid fundamentals, but structural changes are putting greater emphasis on assets and locations that can benefit from—or remain insulated against—economic shifts and a narrower set of demand drivers.

Executive Summary

Economy

  • The economy was resilient and supported by solid household balance sheets and ongoing AI and infrastructure investment, though uncertainty remains with significant changes in trade, demographics, and technology set to shape the outlook.
  • The Federal Reserve remains cautious in its policy stance as it balances risks and trade-offs to its dual mandate, given the cooling labor market and inflation concerns. Still, the rate outlook is incrementally positive for economic growth.
  • CRE construction activity has declined significantly, setting a favorable supply back-drop for recovering fundamentals.

Property Markets

  • CRE transaction activity strengthened in the fourth quarter, with volumes rising to a three-year high and gains across all major sectors. Cap rates blended across sectors edged modestly higher—led by office—while overall property values held steady.
  • Debt capital markets were active with increased originations across most lender groups, including record CMBS issuance. There was increased competition on pricing and structures for certain sectors, but overall underwriting standards remained sound.

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Lincoln Janes, CFA

Director, Real Estate Research & Strategy

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