The Start of a New Cycle – Dec. 15, 2025
LaSalle’s Strategy and Analysis Outlook 2026 report sees “the foundations of a more supportive environment for real estate investment on the horizon”
Looking beyond the borders of the U.S. and Canada, it often appears as though the geopolitical uncertainty of the past few years merely shifts from one region to another. Domestically, though, commercial real estate is on the cusp of a new cycle. That’s among the topline conclusions of LaSalle Investment Management in the North American chapter of its just-published Insights, Strategy and Analysis (ISA) Outlook 2026 report.
Although 2025 has often felt like a repeat of the year before, the ISA Outlook points to shifts in several key dynamics. “Economic performance across the U.S. and Canada proved steadier than sentiment suggested, interest rate cuts arrived late in the year, and both institutional investors and lenders are beginning to re-engage after a prolonged slowdown,” according to LaSalle. Combine this with subdued construction pipelines across sectors and a clearer link between valuations and sale prices, and you have “the foundations of a more supportive environment for real estate investment on the horizon.”
Brian Klinksiek, global head of research and strategy at LaSalle, said: “Despite the fits and starts of 2025, the foundations for a new real estate cycle in the Americas are taking shape. Supply pipelines have collapsed, debt markets have reopened and valuations now align more closely with transacted pricing. These shifts create early-cycle opportunities, though investors should expect uneven performance across sectors and markets.”
From a macroeconomic standpoint, the U.S. is positioned to continue a period of slightly below-trend growth in 2026 while avoiding an outright recession, LaSalle says. Economic performance, as measured by job growth and consumer spending, has been steady in the U.S., while Canada has faced greater economic headwinds stemming in part from trade uncertainty.
Meanwhile, debt capital markets “strengthened noticeably” in 2025, says LaSalle. CMBS and CLO issuance improved, private debt funds saw strong inflows and refinancing activity helped keep liquidity moving even as transaction volumes remained below long-term averages. Borrowing spreads tightened through the year, signaling renewed confidence.
Although the equity side of the capital markets continuum hasn’t rebounded to quite the same degree, the ISA Outlook cites “early signs of a turning point. The denominator effect has faded for many institutional investors, appraisal metrics have stabilized, and capital raised in previous vintages remains available for deployment.” Look for transaction volume to pick up gradually in 2026 and 2027 as borrowing costs decline and confidence improves. A relatively weaker Canadian dollar is also expected to attract more foreign capital into Canadian real estate.
It’s ironic to call a slowdown a tailwind, but LaSalle sees limited new supply as an advantage across the major CRE sectors. “Fewer new development starts – driven by higher financing costs, tighter bank lending and declining valuations – position most major property types for improving occupancy and rental dynamics,” according to LaSalle. Here are some highlights:
- Apartments: “U.S. apartment fundamentals surprised positively in 2025, and long-term data continues to show income growth outpacing inflation. LaSalle’s value assessment reflects these persistent structural strengths. In Canada, markets remain supported by demographic demand, with newer units in Ontario benefiting from exemption from rent control.”
- Industrial: Demand is expected to recover as tariff-related uncertainty eases. “With availability rates projected to decline and acquisition pricing often at or below replacement cost, industrial represents one of LaSalle’s most attractive relative-value opportunities for 2026.”
- Retail: “While sector-level value screens as challenged, pockets of opportunity exist, particularly in grocery-anchored centers, certain Canadian high-street corridors and U.S. power centers, where rental growth potential is underappreciated.”
- Office: Although fundamentals stabilized in 2025, “LaSalle remains cautious about relative value due to capital expenditure burdens and underpriced income drag. While opportunistic investments may emerge, broad-based recovery is not yet evident.”
- Specialty sectors: “Affordable housing, senior housing and industrial outdoor storage present some of the strongest niche opportunities. These sectors benefit from structural drivers: stable demand, demographic shifts or low capex requirements and compelling risk-adjusted return potential.”