Real estate investment managers are hopeful that the commercial office market—still reeling from the effects of the COVID-19 pandemic, the rise of work from home, and interest rate volatility—will rebound this year.
“I think 2025 was shaping up to be the first year of a recovery, and ultimately when we look back at the cycle it will be the first year of a recovery,” Joshua Scoville, global head of research at Hines, told reporters in January, noting that President Donald Trump’s tariffs and market volatility somewhat undermined that recovery.
“Ultimately 2025… we did have more acquisitions than we ever had, the uncertainty [that occurred] was something that I didn’t foresee, and I think [in] 2026, that uncertainty is kind of in the rear-view mirror,” Scoville said.
His comments were made before the U.S. Supreme Court overturned some 60% of Trump’s tariffs and volatility could follow as the administration implements new levies under different enabling legislation.
CBRE expects commercial real estate investment activity to increase by around 16% to $562 billion this year—nearing pre-pandemic averages. The firm noted in its outlook that last year, it had executed the most confidentiality agreements with prospective buyers since 2022.
The firm also expects annual leasing activities to surpass 2019 levels, driven by large tenants returning to the market.
“We believe the 2026–2027 period will resemble the 2010–2012 window that followed the global financial crisis,” says Chris Loeffler, CEO of Scottsdale, Arizona-based real estate asset manager Caliber Companies. “We’ve just lived through a nationwide repricing of commercial real estate driven by interest rates, capital market disruption, and refinancing pressure. That dislocation is ultimately what creates generational opportunity.”
According to Hines, the Manhattan office market has led in improvements, followed by San Francisco, which the firm noted is around 12 to 18 months behind NYC in the recovery of its market. “That said, many major markets continued to languish near their fundamental bottom,” a 2026 outlook report from Hines said.
“Manhattan is kind of a harbinger for the rest of the country, just way ahead of everywhere else,” Scoville said.
CBRE noted that lagging office markets such as Chicago and Los Angeles are still bottoming out, with Denver and Seattle expected to hit their lowest points by the end of the year. In the San Francisco Bay Area, a report by Colliers notes that the artificial intelligence industry has been a driver of leasing activity there.
“Leasing momentum and fundamentals are continuing to tighten and pushing the outlook for the U.S. office recovery,” said Matt Gannon, executive managing director at real estate services and investment manager Colliers, in its report. “Activity is at post-pandemic highs and is expected to accelerate through 2026 as tenants capitalize on expiring leases and limited new supply.”
Several managers point out the best opportunity in the market is in higher end, higher quality buildings, which in many markets such as in Manhattan and across Europe are both in high demand and short supply. “Spillover demand to the next tier of space will likely increase in early-recovery office markets,” the CBRE report said.
The U.S. office vacancy rate is expected to fall to below 18% by the end of the year, according to Colliers, driven by a constrained construction pipeline which has led to an increase in leasing activity in existing properties. Vacancy rate stood at around 13% pre-pandemic, according to Cushman & Wakefield.
In suburban markets, high-quality properties are expected to see increased demand. “In our view, the office opportunity in 2026 is less about ‘office is back’ and more about the best office winning, leaning into high-quality suburban assets with strong amenities and a clear value proposition for tenants,” says Eric Hochman, CIO of PEBB Enterprises a private equity family office that buys and develops commercial open-air retail and suburban office properties. .
Tags: Real Estate