Good Morning,
And, if it isn’t already too late to be saying this, Happy New Year to you!
In today’s update, we are going to be updating you on where we see the market headed this year and to provide some context for our acquisition plans.
The driving themes today, are for greater rate stability, easing inflation, and moderating supply pressures provide a firmer foundation for investors heading into 2026.
Late-2025 economic data and early-2026 market signals point toward a more stable operating environment for commercial real estate. Rate volatility has eased, capital markets are more predictable, and national fundamentals are holding up better than expected. Across the Sun Belt and Southeast, where we have been focusing our attention, tenant demand remains resilient, helping the market absorb a peak cycle of new deliveries as developers recalibrate the pace of new starts.
CRE FUNDAMENTALS: NORMALIZATION TAKES HOLD
Fresh releases in early January reflect improving sentiment across the commercial real estate landscape.
CBRE’s U.S. Real Estate Market Outlook 2026 highlights a clearer bottom forming across major asset classes and notes that more predictable capital costs are supporting measured recovery across industrial, multifamily, and necessity-based retail. National vacancy rates remain stable, and leasing activity is gradually improving from the lows of early 2025.
At the same time, CRE Daily's Commercial Real Estate Outlook 2026 concludes that while short-term supply remains elevated, long-term demand drivers, particularly employment and migration, continue to support steady leasing activity across the Sun Belt.
Deloitte’s 2026 CRE strategy analysis notes that investors are shifting focus from caution to positioning, with greater emphasis on income durability and alignment with long-term demographic trends.
Multifamily remains stable nationally, with Sun Belt occupancy hovering in the mid-94 percent range and rent growth flattening rather than deteriorating. Industrial fundamentals remain among the strongest, supported by resilient goods movement and ongoing modernization of distribution networks.
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SUPPLY & DEVELOPMENT: PIPELINE PRESSURE EASES
Across the Southeast, development pacing continues to moderate from the intense cycle of 2023–2024. Fewer projects are breaking ground, and delivery schedules are extending into 2026–2027.
The Federal Reserve’s January Beige Book reports slowing construction activity across multiple districts as developers prioritize balance-sheet discipline and wait for more stable financing conditions. Regionally, the Atlanta Fed observed a “sluggish pace of new commercial starts” alongside continued demand for well-located multifamily and industrial products.
In addition, pipeline moderation is becoming more evident across key Southeast metros:
- Starts remain well below peak levels, reducing forward supply pressure.
- Lease-up velocity has improved as absorption tracks new deliveries more closely.
- Developers are emphasizing phasing strategies to match demand.
The result is a more competitive landscape for stabilized assets, where fewer incremental units or square footage are coming online in the near term.
CAPITAL MARKETS: RATE STABILITY IMPROVES UNDERWRITING VISIBILITY
CRE capital markets are starting 2026 with more stability than at any time in the prior two years.
The 10-year Treasury traded consistently in the low-4 percent range through late December and early January. This is materially lower and less volatile than mid-2025, helping narrow the bid-ask spread across several sectors.
Freddie Mac’s PMMS shows the 30-year fixed mortgage rate hovering near multi-month lows in early January, easing cost pressures on underwriting for both for-sale housing and CRE refinancing.
Market participants report:
- Increased selectivity but greater consistency from lenders
- Gradual tightening of CMBS spreads
- More debt-fund activity on stabilized product
- Renewed equity interest in necessity-based assets
Collectively, the capital environment is more navigable, and deal activity is expected to improve meaningfully later in 2026 as rate clarity strengthens.
MACRO BACKDROP: GROWTH HOLDS, INFLATION COOLS
The broader economic environment entering 2026 is more stable than it was a year ago. Inflation has continued to ease, rate expectations have settled, and businesses are operating with greater visibility around costs and demand. Consumer spending remains resilient, supported by steady job growth and improving real wages.
Treasury market behavior between mid-December and mid-January reflects this shift. Yields traded in a narrower, more predictable band as investors priced in a slower pace of policy adjustments and a cooling inflation trajectory. Lower volatility in the long end of the curve is easing uncertainty for borrowers and improving underwriting consistency across asset classes.
GDP forecasts for early 2026 remain positive, pointing to sustained economic momentum. Combined with ongoing household formation and continued net in-migration into the Sun Belt, these dynamics reinforce demand for multifamily, industrial, and necessity-based commercial space. Taken together, the macro backdrop provides a steadier foundation for operators and investors as the cycle moves into a more predictable phase.
WHAT WE’RE WATCHING — JANUARY SIGNALS
- Pipeline discipline as new starts remain subdued.
- Treasury and mortgage rate stability improving underwriting clarity.
- Selective capital re-entry into stabilized assets.
- Southeast absorption keeping pace with deliveries.
- Durable migration patterns supporting multifamily and industrial demand.
THE TAKEAWAY
CRE enters 2026 with growing clarity. Rate volatility has eased, capital markets are normalizing, and Sun Belt fundamentals remain anchored by structural demand. This phase favors disciplined operators focused on execution. With a more predictable cost of capital, a moderating supply pipeline, and stable demand drivers, 2026 is shaping up as a year defined by recovery, visibility, and operational strength.
