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. 

Dealing with this demands a strategic rethinking of cost management approaches, with real estate teams focused on three areas in 2026: interrogating budget lines closely; optimizing space utilization; and improving operational efficiencies. 

In 2026, cost reduction will involve meticulous scrutiny of every expense. For investors this means asset optimization – maximizing asset efficiency and performance, with proactive maintenance and capex management. For occupiers, it means scrutinizing every operational expense, from utilities to fit-out and improvement costs, to maintenance contracts. Space optimization and portfolio right-sizing will be a key focus to ensure the entire real estate footprint aligns with both current operations and future business needs. 

The continuous drive toward improved efficiency will increasingly lead organizations to external partnerships through outsourcing and supply chain optimization. Technology adoption for buildings/facilities management and service delivery will represent another critical efficiency pathway. Automation and digital solutions promise to significantly reduce operational costs while maintaining service quality, if implemented successfully.

Each cost management strategy will require careful calibration, as every cost reduction initiative must be evaluated for its potential impact on employee productivity, organizational resilience, user experience and talent retention.

In 2026, new supply will decline further across most commercial real estate property sectors in North America and Europe. Economic uncertainty combined with high build and finance costs (see trend 1) is continuing to push construction starts lower following a decrease in development during 2025. As organizations move through the next 12 months, the impacts from declining availability of modern space will become progressively larger for both occupiers and owners.

In the office sector, development is at an all-time low in the U.S., with completions set to fall by 75% in 2026 and three-quarters of the remaining pipeline already pre-leased. New construction starts in Europe are at their lowest levels since 2010, and deliveries are projected to decline by 5% next year following an equivalent decrease in 2025. Supply shortages of top-quality offices will be particularly acute in cities like Tokyo, New York and London. With leasing activity increasing, occupiers looking for new, large-block space will face fewer options and higher rental rates. This will bring availability and affordability into sharper focus as demand broadens beyond the top end of the market.

Across the global built environment, ‘experience’ has become the decisive factor shaping how people choose where to live, work, shop and spend their time. However, buildings and places are not keeping pace, with ‘experience obsolescence’ risks to assets emerging. While more than two-thirds of people worldwide now expect high-quality, personalized and wellness-enhancing experiences to be integrated into every type of space they engage with, up 5% from 2024, the undersupply of Grade A quality stock coupled with aging and obsolete stock in key U.S. and European markets, will focus experience factors as a fundamental investment driver in 2026.

Real estate organizations are approaching a critical juncture in their AI adoption journey. Following the rapid expansion of AI pilots in 2025 - with 92% of corporate occupiers and 88% of investors in our recent technology survey initiating AI programs - the industry will face increased scrutiny over implementation effectiveness and scalability in 2026.

Currently, organizations are pursuing an average of five AI use cases simultaneously (across data workflows, portfolio optimization, energy management, market analysis and risk modelling), yet only 5% report achieving most of their program goals. Private investors and investment management firms were slightly behind listed investors and institutional investors in their AI results.

In 2026, AI pilot fatigue will emerge as organizations struggle to scale 2025's AI initiatives beyond experimentation. Those that launched multiple pilots without systematic planning will face mounting pressure to demonstrate meaningful ROI, with many discovering their fragmented approach has limited scalability. Companies lacking foundational capabilities - data infrastructure, change management, talent - will hit implementation walls, forcing decisions between strategic investment or AI program abandonment. 

60% of investors across all types still do not have a unified technology strategy for their real estate functions and asset types. For occupiers, 70% do not have a change management framework for AI. 50% are not sufficiently resourced in terms of digital and AI talent. Industries such as life sciences and professional services are particularly challenged in CRE AI talent availability. 

The widening performance gap between systematic implementers and experimental pilots will become undeniable, with leading organizations pulling further ahead while laggards struggle to justify continued AI investment. As AI transformation shifts from productivity and efficiency to workflow redesign and business model innovation, the value propositions of real estate players will change. Strategic capabilities to open up new markets, operate with agility, and provide a data-driven edge in decision- making will become gradually more important in defining success.