September 2026 Commercial Real Estate Market Insights Report

Economic conditions held broadly steady in July. Hiring continued to slow, although unemployment eased to 4.1%. Inflation also moderated further to 3.4%, while the economy continued to grow at a modest pace. Real GDP increased at a 1.5% annual rate in the second quarter, with stronger consumer spending helping offset slower investment, exports, and government spending. Interest rates remained a challenge for commercial real estate. The Federal Reserve kept rates unchanged, but higher 10-year Treasury yields continued to put upward pressure on borrowing costs, limiting relief for commercial real estate financing despite signs of resilience in private demand.

With little change in the broader economy, commercial real estate also continued a similar path in July. Some sectors improved further, while others remained mostly steady. Below is a summary of the performance of each major commercial real estate sector in July of 2026:

The office market continued its gradual stabilization in July, with annual absorption remaining positive and signaling that demand is moving further away from the prolonged period of tenant losses. That improvement, however, remains concentrated in Class A, while elevated vacancy and modest rent growth continue to limit the recovery’s breadth. Class B remained under pressure despite inventory removal, and Class C continued to lose tenants, reinforcing the uneven nature of the sector’s adjustment.

Multifamily conditions improved further in July as steady demand met a sharper slowdown in new supply, allowing absorption to exceed deliveries for the first time in nearly five years. This shift is helping the sector work through excess inventory, with vacancy easing and rent growth gradually firming. Class A benefited most clearly as demand continued to outpace new supply, supporting lower vacancy and stronger rent growth. At the same time, Class B showed resilience through rising absorption and modest improvement in both vacancy and rents. Class C continued to post tenant losses, and regional performance remained uneven, with oversupplied Sun Belt markets still under pressure.

Conditions across the retail sector remained relatively steady in July, with stronger demand accompanied by continued supply additions and vacancy holding at 4.3%. General retail continued to lead absorption and maintained the lowest vacancy, while improvement broadened across Neighborhood Centers, Malls, and Power Centers. Even so, deliveries remained ahead of demand, and a sizable construction pipeline could place modest upward pressure on vacancy, while rent growth stayed comparatively firm.

Rebalancing in the industrial sector continued in July, with supply still running ahead of demand. Still, the gap narrowed substantially from a year earlier, helping stabilize vacancy while rent growth remained restrained. Logistics continued to drive demand, accounting for the bulk of annual absorption, while specialized facilities showed comparatively tighter fundamentals with the lowest vacancy. Flex remained the weakest segment, with continued tenant move-outs and the highest vacancy among the three property types.

Hospitality performance remained relatively steady in July, although occupancy continued to trail pre-pandemic levels as remote work and softer corporate travel constrained business-focused markets. ADR and RevPAR stayed well above 2019 benchmarks, helping support operating results despite weaker occupancy. Investment activity remained restrained as high borrowing costs and economic uncertainty continued to weigh on investor appetite

Source: NAR