Is Your Money Safe? Shocking Recovery in Commercial Real Estate Could Make You Rich or Ruin You!

As the commercial office market continues to feel the aftershocks of the COVID-19 pandemic, real estate investment managers are cautiously optimistic about a potential rebound in 2026. Following a tumultuous period characterized by the rise of remote work and fluctuating interest rates, experts believe the market is on the cusp of recovery.

Joshua Scoville, global head of research at Hines, expressed his optimism, stating, “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.” He noted that external factors, such as President Donald Trump’s tariffs and overall market volatility, had hindered this rebound. However, Scoville remains hopeful that by 2026, much of that uncertainty will be behind the industry.

The commercial real estate sector is anticipating a surge in investment activity this year, with CBRE forecasting a 16% increase, bringing the total to approximately $562 billion. This figure is nearing pre-pandemic levels, a sign that confidence is slowly returning to the market. Last year, CBRE executed the most confidentiality agreements with prospective buyers since 2022, suggesting heightened interest among investors.

Annual leasing activities are also projected to surpass 2019 levels, as larger tenants eagerly re-enter the market. Chris Loeffler, CEO of Caliber Companies, noted that the 2026–2027 timeframe may mirror the recovery period following the 2008 financial crisis. “We’ve just lived through a nationwide repricing of commercial real estate driven by interest rates, capital market disruption, and refinancing pressure,” he explained. “That dislocation is ultimately what creates generational opportunity.”

Highlighting the varying pace of recovery across different regions, Hines reports that the Manhattan office market is leading the way, while cities like San Francisco lag behind, still recovering from the pandemic's effects. “Manhattan is kind of a harbinger for the rest of the country, just way ahead of everywhere else,” Scoville added. In contrast, markets such as Chicago and Los Angeles are still grappling with challenges, while Denver and Seattle are expected to reach their lowest points by year-end.

Interestingly, the San Francisco Bay Area has seen a boost in leasing activity, largely attributed to the growth of the artificial intelligence industry. “Leasing momentum and fundamentals are continuing to tighten and pushing the outlook for the U.S. office recovery,” stated Matt Gannon, executive managing director at Colliers. He highlighted that activity is at post-pandemic highs and is expected to accelerate as tenants capitalize on expiring leases and face limited new supply.

A consensus among industry leaders indicates that the most lucrative opportunities will be found in high-quality, premium buildings. Demand for such properties remains strong, particularly in major markets like Manhattan. “Spillover demand to the next tier of space will likely increase in early-recovery office markets,” CBRE reported. Additionally, the U.S. office vacancy rate is anticipated to drop below 18% by the end of the year, a significant shift from the approximately 13% rate seen before the pandemic, according to Cushman & Wakefield.

In suburban areas, high-quality properties are expected to see a rise in demand, with Eric Hochman, CIO of PEBB Enterprises, emphasizing that the 2026 opportunity lies less in a blanket recovery for all office spaces and more within the best office spaces. “Leaning into high-quality suburban assets with strong amenities and a clear value proposition for tenants,” he stated, highlights a strategic approach to navigating the evolving landscape.

The commercial real estate sector is at a critical juncture, with shifts in demand and market dynamics presenting both challenges and opportunities. As industry leaders closely monitor these developments, the next few years will be pivotal in shaping the future of the American office market.