REAL ESTATE NEWS

After nearly three years of disruption, the commercial real estate market may finally be turning a corner. In an interview with Yahoo Finance, Marcus & Millichap CEO Hessam Nadji said the passage of time itself has become the sector?s biggest ally heading into 2026, as price corrections and more favorable capital conditions begin to restore investor confidence.

?The most important element going into 2026 is the effect of time,? Nadji told Yahoo Finance. Values have fallen ?measurably? across nearly every property type, and that reset?combined with the rising costs of new construction in materials, labor, and land?has created a stronger incentive to buy existing assets rather than build new ones, according to Nadji.

?That difference is a very big advantage to replacement cost,? he said, adding that the combination is bringing significant capital back to the market.

Nadji pointed to monetary policy as another tailwind. Despite uncertainty around the Federal Reserve?s next moves, he said Marcus & Millichap expects economic conditions to push borrowing costs lower.

?We believe that the economic slowdown, especially with the job revisions that we saw a few months ago, will sort of force the Fed's hand to become more accommodative,? Nadji said. ?And that?s going to be a major catalyst for transactions as well.?

When asked about individual property sectors, Nadji acknowledged that office remains an area of strain. Pandemic closures, remote work, and hybrid schedules all took a toll, but he noted that the situation is improving.

?About a year ago, daily office attendance across the country was around 55 to 60% at best, and now it?s sitting at about 80%, maybe even north of 80%, compared to 2019, pre-pandemic levels,? he said. While office demand has stabilized, conversions to other uses remain difficult and costly, representing only a small share of inventory despite the attention the trend receives.

Retail, by contrast, has emerged as an outperformer. Nadji said the sector?s long-term restructuring?nearly two decades of adaptation to e-commerce competition and minimal new construction?has positioned it well for the current cycle.

?A lot of shopping centers have been either modified or rebuilt or even converted entirely to other uses,? he said. ?So, there has been a supply reduction in retail, and the consumer is back, of course, with experiential retail foot traffic into restaurants, bars, and fitness and beauty-related kinds of reasons to go to a destination retail shopping center.?

That renewed consumer activity is fueling success at open-air and power centers featuring destination discount chains. Retailers are also using space more efficiently, Nadji added, blending physical footprints with online ordering and smaller storage needs?a shift he called ?probably the most important aspect of retail.?

Source: GlobeSt/ALM