CRE Continues Holding Up as Occupiers and Investors are More Selective

The first half of 2026 generated considerable concern among commercial real estate investors and occupiers. Inflation remained sticky, prompting the Federal Reserve to hold interest rates steady. Tariff and trade uncertainty continued to generate pricing pressures, the Middle East conflict impacted oil prices, and the labor market softened despite a still-low unemployment rate.

Yet commercial real estate has continued to perform relatively well.

According to a recent CBRE newsletter, occupier demand remains strong, investment activity has increased, and fundamentals continue to improve across property sectors.

Several factors are supporting the industry.

Limited New Supply

Office and retail construction remain near historic lows, while industrial supply growth is leveling off. Apartment starts are also declining.

That supply constraint is beginning to affect tenant behavior. Occupiers are planning further ahead to secure early renewals and available space. Meanwhile, increased bank financing is giving owners and investors more opportunities to repurpose obsolete properties into higher-quality assets.

Quality Is Changing

“Quality” also means something different than it once did.

For office occupiers, quality is about attracting and retaining talent rather than newer, shinier finishes. Retailers want space in locations where customers congregate. Industrial tenants look for functionality, including truck-flow efficiency, dock configurations and yard design.

While prime office assets continue to attract capital, CBRE said that investors are also looking at well-located, second-generation facilities with existing power that could be converted into data centers.

AI Changes the Equation

Technology has historically reshaped workplaces and real estate. CBRE said that artificial intelligence will do the same.

The firm said AI adoption should boost productivity, create new occupations and increase demand for skilled workers. Rather than eliminating the need for offices, AI could reinforce their role as places for collaboration, knowledge sharing and interaction.

This could further change how occupiers evaluate space and where investors see demand.

Capital Follows Fundamentals

Healthy debt markets, ample liquidity and available capital are supporting deal activity despite elevated interest rates and economic uncertainty.

But CBRE doesn’t expect the current cycle to be driven by cap-rate compression. Instead, returns will depend more heavily on income growth and asset selection.

Investors may focus less on potential increases in asset values and pay more attention to individual properties, markets and operating fundamentals.

The Outlook

CBRE said it remains optimistic about the remainder of 2026, due to supply scarcity, an evolving flight to quality and AI-driven changes in how tenants and investors evaluate talent, demand and capital allocation.

For occupiers, that means finding and securing quality space before options become even more limited. For investors, it means taking advantage of improving fundamentals while paying attention to widening performance gaps among sectors, asset classes and markets.