Real Estate Key Themes 2026: CRE deal recovery delayed, not derailed

Our expectation a year ago for a tentative revival in commercial real estate growth remains on track, but the pickup in deal activity that we anticipated has been delayed by global trade policy uncertainty and fiscal concerns. Still, the main drivers haven’t changed, so we maintain our key call for 2026.

1. Higher investment activity ahead. A major rotation of capital, driven by equity gains and private fund maturities returning assets to market should coincide with portfolio realignment to sectors with positive secular trends. This will set the stage for a sustained rise in global trading volumes.
2. Low development supports rental growth. A synchronised slowdown in CRE development across Europe and the US is limiting new supply, helping to put a floor under rents and support income-driven returns.
3. AI build out re-shapes allocations, offering upside. Accelerating AI adoption has propelled data centres into the mainstream, driving record investment. While fast-changing technology poses challenges, an AI-led boost to demand offers an upside to returns across all property sectors.
4. Relative return opportunities converge across sectors. Excess returns are scarce as differences in performance across sectors narrow, but industrial and residential still offer more opportunities – especially in Europe and Japan.
5. Picking markets not sectors will drive outperformance. On an absolute basis, total returns will hinge on income rather than yield compression, favouring high-yielding and high-growth cities such as Manchester, Sydney, Dublin, Melbourne, and Dallas.

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