In our 2026 Global CRE Outlook, we argued that the CRE cycle had entered recovery by nearly every traditional measure. Our five signal market barometer suggests that recovery remained intact in 1Q26. No single signal is sufficient on its own, but their alignment and sequencing make a compelling case for the direction of commercial real estate. Bottom line, despite a volatile geopolitical backdrop, we believe the recovery remains intact and, in fact, has sustained momentum.
That said, a V-shaped recovery in headline valuations remains unlikely given the lack of meaningful stimulus. Instead, returns are expected to normalize gradually. While that may suggest a U-shaped path, widening dispersion across property types and markets points to something closer to a K-shaped recovery. As a result, headline returns understate underlying performance due to the law of averages.
This unevenness isn’t a flaw in the cycle - it is the cycle. Unlike the post global financial crisis (GFC) period - when price returns were amplified by accommodative policy and financial engineering - the next phase of performance will hinge on property fundamentals and effective asset management. Net operating income will likely drive both income returns and capital returns in a higher for longer rate backdrop where cap rate compression is limited. Structural themes will remain important, but clearing return hurdles requires sharper focus and execution.
We like to point to the latest Real Estate Roundtable and CREFC sentiment surveys that paints a picture of a market that has become more deliberate in 1Q26, but not one that is losing conviction. The Roundtable, based on responses from senior industry executives, indicates that most participants view current conditions as stable to improving. Asset values are seen as largely unchanged from a year ago, with expectations for prices and market conditions to improve over the next 12 months. Access to debt capital is widely viewed as better than last year, and expectations for future capital availability remain constructive. The CREFC Sentiment Index, published by the trade association for the commercial real estate finance industry, showed a sharper near term pullback following the Iran conflict, but context matters. The index had reached near historical highs in 4Q25 before retreating to a more neutral position in 1Q26. The primary areas of focus are interest rates, liquidity, and the economic outlook. Even so, a majority of respondents still expect stronger investor and borrower demand over the next year.
To hear about our belief that the CRE recovery remains intact and has sustained momentum, even amid a volatile geopolitical backdrop, read the full report.
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Risk considerations
Investing involves risk, including possible loss of Principal. Past Performance does not guarantee future return. Potential investors should be aware of the risks inherent to owning and investing in real estate, including value fluctuations, capital market pricing volatility, liquidity risks, leverage, credit risk, occupancy risk and legal risk. All these risks can lead to a decline in the value of the real estate, a decline in the income produced by the real estate and declines in the value or total loss in value of securities derived from investments in real estate. Commercial real estate (CRE) investing carries several inherent risks, including those related to the economy, interest rates, market fluctuations, high upfront costs, and tenant-related issues like defaults or high turnover. Economic downturns can lead to decreased property values and increased vacancy rates, while financing costs, insurance expenses, and potential environmental or structural problems can also pose significant challenges. Private debt investments, like alternative investments are not suitable for all investors given they are speculative, subject to substantial risks including the risks associated with limited liquidity, the potential use of leverage, potential short sales, concentrated investments and may involve complex tax structures and investment strategies.
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MM14982 | 05/2026 | 5512262-122027
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