CRE Heads Into New Year With Optimism Fuelled by Multifamily and Office Momentum Article originally posted on Globe St. on December 4, 2025 The CRE industry is moving from resilience in 2025 to optimism for 2026, driven by artificial intelligence, lower interest rates and a stabilization of policy uncertainty, according to Cushman & Wakefield’s 2026 CRE Outlook report. Across property types, fundamentals are strengthening, demand is improving and capital is slowly re-engaging, setting the stage for selective growth. The office sector, particularly, is showing early signs of momentum. Attendance is stabilizing at higher levels, leasing is trending upward, Class A net absorption is positive, sublease inventory is declining and new construction is at its lowest level in a decade. Strong demand is emerging for high-quality space, though the market is expected to remain trifurcated, with some segments performing well, others struggling and many in between. After two years of stagnant growth, office-using employment is forecast to increase by 625,000 over the next two years, led by finance and legal services. Leasing activity in hubs like New York and the Bay Area reflects optimism around AI investment as a potential driver of demand. Capital markets are gradually returning, with transaction volumes up 27% year-over-year in the third quarter and multiple billion-dollar refinancing deals taking place on trophy office assets. Upward pricing trends and improved lender confidence are supporting both owners and buyers, reinforcing a budding leasing recovery. Industrial demand picked up in late 2025 as trade-policy uncertainty eased, allowing previously delayed leasing decisions to move forward. E-commerce continues to drive activity, with Q3 marking the strongest leasing quarter in over a year at 45 million square feet. The development pipeline is peaking this year and is expected to slow through 2028, with annual deliveries projected at 230 million square feet, roughly half the average rate from 2022 to 2025. Build-to-suit projects now comprise 39% of completions. Vacancy is expected to hold at 7.3% in 2026, and national rents remain about 60% above pre-pandemic levels, despite regional variations, according to Cushman & Wakefield. Multifamily demand remains robust, projected to exceed the 10-year average by 30% this year, supported by high mortgage rates, limited for-sale inventory and affordability pressures that favor renting. Although demand has softened from 2024’s peak, the market has absorbed much of the recent construction surge, which delivered 12% of prior inventory over three years. With new starts down sharply from their peak and defensive leasing strategies in place, rent growth is expected to accelerate toward 5% by 2027, while stabilized vacancy remains below historic highs. Retail fundamentals remain resilient, with strong leasing velocity, rising rents and limited new supply keeping high-quality space at a premium. While 2025 absorption was negative due to large retailers vacating stores, leasing speed and mark-to-market rents remained positive. Malls have quietly outperformed, with new leasing 20% above 2019 levels, refinancings more than doubling, and cumulative unleveraged returns of 6.9% over the past year. Premium retail space remains scarce, with high-end tenants driving the top tier of the market amid a “K-shaped” economy where wealthy households support consumer spending even as others face inflation pressures. Demand across alternative CRE sectors continues to evolve, shaped by demographic shifts, technological needs and market conditions. Senior housing is seeing accelerating occupancy above 89% as the 75+ population grows, while student housing benefits from enrollment growth and counter-cyclical demand. Built-to-rent properties remain in high demand due to unaffordable homeownership, with easing supply supporting recovery in rents and occupancy. Data centers are expanding in secondary and tertiary markets due to persistent power constraints in primary hubs. Life sciences are stabilizing, aided by rebounding venture funding and smaller development pipelines. Medical office properties continue to see solid demand, driven by an aging population and limited new supply, prompting creative space solutions. Hospitality remains subdued, affected by weaker international travel, geopolitical tensions and cautious consumer confidence.