Following a challenging year, the outlook for 2026 is more positive. Improving market fundamentals, including positive economic growth across most major markets, easing trade concerns, moderating inflation and lower interest rates will contribute to a more stable operating environment. And yet, the convergence of economic, technological, and social forces leaves organizations across the globe navigating a complex and evolving environment, with the commercial real estate industry on the precipice of substantial – and exciting - transformation . 

This Outlook examines six critical forces reshaping commercial real estate: the imperative for efficiency in a higher-cost environment; intensifying supply shortages across property types; ‘experience’ as the new value driver in real estate; the maturation of AI implementation beyond pilot programs; the convergence of buildings with power systems; and the democratization of commercial real estate investing. Each represents both challenge and opportunity for real estate actors.

Organizations across all sectors are confronting an increasingly expensive operating environment as multiple external cost pressures converge. Debt and borrowing costs have risen as concerns about government fiscal sustainability have spilled over into private credit charges; employers face mounting labor expenses from rising payroll taxes, persistent skills mismatches and widespread worker shortages. Construction materials and fit-out costs are also elevated and face further upward pressure in 2026. For example, in Europe ‘all-in’ cost inflation for 2026 in the UK and Germany is expected to be in the range of 2.7-3% and 3.5-4% in the U.S., while estimates are higher in parts of Asia -Pacific with construction costs in Singapore and Australia predicted to rise by 5-6%. 

For investors, developers and occupiers alike, this confluence of factors has pushed cost management into the number one spot on their list of concerns: 72% of corporate real estate leaders have identified costs and budget efficiency as their top priority as we head into the new year. 

Lower supply is also evident across most other property types. Globally, industrial and logistics deliveries in 2026 are expected to be 42% below the peak levels seen in 2023, with less speculative new construction and greater competition for land from other uses such as data centers and manufacturing. Retail supply is near all-time lows in mature markets, while multi-housing development in the U.S. is down by more than three-quarters from its recent peak and still limited in many countries across Europe and Asia Pacific. Data center construction continues to be the outlier and is surging ahead with capacity forecast to increase by 19% in 2026 as hyperscalers, among others, commit record amounts of capital.

At the same time as increasing shortages of in-demand space, the need for extensive repositioning or retrofitting of properties at risk of obsolescence will accelerate. The top 10 largest office markets for repositioning have more than 130 million square meters of space at risk of stranding, and cities such as Paris, London, New York, Boston and Chicago will have some of the most compelling opportunities in this space. Owners are becoming more attuned to the advantages of retrofitting and repositioning existing assets, including faster construction timeframes, reductions in embodied carbon and lower costs. Energy-focused improvements not only help with managing expenses but can also yield a 55% higher return when done earlier in a building's lifecycle.

The energy system cannot expand quickly enough to meet accelerating demand and the implications are landing at the asset level. Energy costs are proportionate to as much as 26% of rental value, making efficiency essential for competitiveness. But the opportunity for real estate extends beyond cost avoidance. With rising price volatility, outage risks and surging demand, buildings can increasingly help address these pressures through distributed energy solutions. 

In markets such as California and New Jersey as well as Germany, strong policy frameworks and elevated electricity prices are already driving rapid uptake of rooftop PV and behind-the-meter storage as occupiers seek stability and resilience. In China, building owners and occupiers are accelerating rooftop-solar adoption to secure predictable power and hedge against grid variability. The trajectory is clear and these markets are at the forefront: buildings are moving from passive consumers to active energy resources — and assets able to integrate onsite solutions can unlock revenue uplift of 25% to 50% compared to rent.

Historically, commercial real estate investing has been the domain of institutional investors, real estate operating companies, family offices and high-net-worth individuals. Capital and financing requirements, operating experience, and market barriers to entry have favored experienced and well-capitalized investors. However, regulatory changes, new technologies, increased personal wealth and increased education are paving the way for the democratization of commercial real estate investing and ownership.

While pension plans have long invested in real estate via their investment managers, regulatory changes are now transforming the broader investment landscape.: Policies such as the UK's Mansion House Accord, or the more recent U.S. Executive Order allowing 401(k) plans to offer private real estate funds as a part of their offering, are paving the way for a potential new wave of capital into the sector in the coming years.

Beyond pension and retirement plans, the collective increase in private wealth over the past 15 years will result in a new class of investors seeking income-generating assets at a greater relative value to the global private equity and equities markets. Since the Global Financial Crisis, the aggregate wealth of billionaires has increased by 265%, reaching an estimated US$15.4 trillion in 2025, resulting in significant additional investment capital. 

Additionally, blockchain has at last become a viable platform for commercial real estate investing. Recent notable transactions include KJRM's Realty Token backed by Shiodome City Center as well as the token publicly offered by Kenedix, SMBC Trust Bank, Nomura Securities and BOOSTRY for the investment into rental homes. 

Regulatory changes stand to broaden the ways for individual retirement and pension fund investors to access private markets and commercial real estate and education on the benefits of real estate ownership is expanding as well. This will allow more private and retail investors to gain exposure to private real estate investment funds, and in some cases even own fractional shares of high-value properties—resulting in the democratization of real estate investing.

We would also like to invite you to explore LaSalle’s ISA Outlook 2026 which examines interest rate divergences, AI’s economic impact and identifies compelling investment opportunities in markets and sectors across the globe.