CRE Players Will Get the 2025 Recovery in 2026
The commercial real estate recovery was supposed to arrive in 2025. Instead, the year was wrought with uncertainty, limited access to capital and sustained elevated interest rates. The dynamic left the commercial real estate market largely stalled. Now, 2026 is shaping up to bring the recovery that investors have been waiting for.
That's the view of Matthews president David Harrington, who expects improvements in investment volumes and access to capital. Still, he reminds investors to maintain a conservative stance while the recovery takes firmer hold.
Activity Ramps Up
Harrington notes the seeds of a new cycle are already apparent. "We are finding ourselves in a bit more of a stable place," says Harrington. "We anticipate the transactional market to move, as well as the operational market, in tandem to improve."
In many ways, 2026 will be the year that many commercial real estate players expected in 2025, which was the beginning of a new investment cycle with declining interest rates, access to capital and improving investor sentiment.
"If you believe in real estate cycles, it would appear that all of the stars are aligned for us to see significant improvement in 2026. This year will be the rebound year that we anticipated for 2025," says Harrington. "I don't anticipate that crazy gut shot to the market. It's a recovery that we can build upon."
Improving Capital Environment
Harrington expects the capital environment to support renewed investment activity this year. At the end of 2025, short-term interest rates fell three times to a range of 3.5% to 3.75%. Additionally, several sources of capital are increasing allocation targets for the year. "Pick your bucket," says Harrington. "Whether it's the agencies or life companies, banks, credit unions or CMBS, they are all positioning for a bigger year and a more active year."
The agencies will play an important role in providing a liquidity option in multifamily, which continues to be the largest investment class. Fannie Mae and Freddie Mac will increase the allocations for multifamily to historical highs, about $88 billion, each. The additional access to capital will help investors seize opportunities.
Maintain Standards as Market Improves
While 2026 is promising to be a better year for the commercial real estate market, investors should continue to proceed with caution. Harrington warns investors to retain the conservative investment practices that have come to be a staple in the past year. "Be very thoughtful in your underwriting and be very specific on analyzing the marketplaces you're in," says Harrington.
In particular, commercial real estate is a local game, and every market will perform differently. "Some markets have experienced growth and some have been the victim of excitement," says Harrington, adding that those markets may not perform the same in the next cycle. "If you have enough perspective and your investment horizon is long enough, pretty much anything could work out," he says.
2026 is the beginning of a new cycle and the beginning of the recovery. Harrington says it will lay the foundation for even more activity in the years to come. As Harrington has started saying, "It's going to be heaven in 2027. We just keep marching forward until then."
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Source: GlobeSt/ALM