Commercial real estate is showing clear signs of strength and resilience as 2026 begins, supported by improving conditions across many markets and asset classes, with some variations, according to an array of NAIOP board members. Among the issues on their minds are interest rates, availability of power generation and the costs of commercial insurance. Board members are split about whether office space is coming back post-COVID-19 pandemic or largely being converted to residential.
Commercial real estate in Houston has performed well, with debt more available than equity, said Ashley Grigsby, managing director, capital markets, for Transwestern in Houston. Grigsby spends most of her time financing ground-up development, particularly in multifamily and industrial, with a little boutique retail. “You have to be a little bit more creative in putting together your capital stacks” for equity, she said. “It’s very location specific, but debt is readily available.”
The availability of power has become a top-tier issue with the explosive growth of artificial intelligence data centers and development occurring generally in the region, Grigsby said, adding that colleagues in mortgage banking have told her that office and multifamily are leasing well. “Office seems to not be a dirty world, necessarily,” she says. “Houston is not a [residential] conversion market. That’s not a product you would see there.”
Some commercial real estate leaders are wondering what to expect with interest rates, Grigsby said. “There’s still a question mark with what the Fed is going to do. There’s not a lot of certainty there. Are the rates going to go down? I don’t know. Can we be comfortable with where they are today? Yes. Nobody thinks they’re going to go up.”
For industrial property in the Indianapolis region, 2025 started slowly but picked up nicely, said Abigail Sievers, senior vice president, industrial brokerage, for JLL. After record years during COVID-19, the sector plateaued for a while but has resumed its momentum, partly due to mega-retailers like Walmart and Amazon, along with the resurgence in reshoring of advanced manufacturing.
“We had so much spec development in those few [pandemic] years. It’s just now getting absorbed, which is fantastic,” she said. “The last two weeks have been insane. I’m getting calls multiple times a day, and we’re seeing a rise of 100-, 200- or 300-acre takedowns.”
One open question will be whether the power infrastructure continues to grow, especially given the proliferation of data centers. “Power is a big, big, big conversation right now,” Sievers said. “Manufacturers are saying, ‘Wait a second, we need 6,000 amps. Power companies and towns are saying, ‘Prove it.’ It’s tricky when developers go to build on spec. You can’t prove someone is going to use 6,000 amps. It’s chicken and egg; build it and they will come.”
The market for manufacturing, technology and R&D in the Pittsburgh area has been moving slowly but seems promising going forward, said Don Smith, president of RIDC, a nonprofit economic development corporation that owns and operates 8 million square feet of buildings across 12 counties in southwestern Pennsylvania.
“There’s a lot of uncertainty in the market,” he said. “Tenants are being very deliberate about making decisions about signing leases. Interest rates and some regulatory changes have been a real headwind to getting people to make a decision. The cost of construction is up massively over the last four to five years, and rents are not up nearly as much. It’s putting a lot of pressure on the developers, squeezing their margins and the viability of projects.”
Industrial and manufacturing have seen some reshoring and growth-stage companies are emerging, but it’s challenging to finance those deals given lack of credit history, Smith said. R&D remains solid in the region with the prominence of research universities like Carnegie Mellon and University of Pittsburgh, but only for companies up to a certain size. “We have more success locating 50-, 100- or 150-person companies than 1,000, 2,000 or 5,000, in part because they’re not certain they can get 2,500 workers in the region easily,” he said.
Industrial has stayed stronger than the office market, where oversupply remains, especially older product, Smith says. “Everybody wants to amenitize their offices to get workers to come back to work,” he said. “[High-end] buildings are doing OK. The second tier is getting crushed. I don’t see that changing.” Office-to-residential conversion seems like “a great idea, but I’m not sure it pencils yet,” he added.
Smaller office-to-residential conversions have occurred in downtown Honolulu, and there could be more to come thanks to local legislation to help it along and a lack of Class A office space, said Todd Apo, CEO of Kapauu, Hawai’i-based ’Iole, who said 2025 overall has been a “steady” year for CRE in Hawaii.
“In the last half of 2025, we’ve been working to try to revitalize downtown,” he said. “Activity isn’t at the same levels during the workday as it was pre-COVID-19. We’ve never had much of a residential population.” A special district created by the Honolulu City Council will provide monies for security and activity funding, he added, noting, “Aside from conversions, we have not had any significant builds.”
Beyond the state’s one major urban core, Apo has seen addition of commercial space, and the retail market seems solid, although that’s heavily impacted by tourism – and Hawai’i still has not completely recovered from the effects of COVID-19, in particular the loss of Japanese tourists, and the impact of the 2023 Maui wildfires. “How that will impact retail, which ties into commercial, is probably the most nervous point for people,” he said.
Going forward into 2026, Sievers predicts strategic land plays in the industrial sector based around labor and power availability. “Before, you wouldn’t see a life science deal come to Indiana. Now companies are saying, ‘Great, Purdue University has fantastic, new nuclear medicine programs,’” she said. “Higher-end life sciences, advanced manufacturing and aviation tenants are focused markets where the talent is top-notch.”
Sievers expects more spec product will come online this year and in early 2027 given that most million-square-foot buildings across the country are bought or leased. “We have the labor to take down those jobs, especially in rural areas outside of Indianapolis,” she said. “There’s plenty of land to be had to build a manufacturing facility, coupled with the fact that we’re a business-friendly state.”
Smith is optimistic the picture in Pittsburgh will improve as interest rates come down further. “Moving Pennsylvania out of the Regional Greenhouse Gas Initiative (RGGI) will stimulate power plant construction and generation, which helps attract data centers and other big power users.” Financial services, technology, life sciences and AI are important opportunities.
Grigsby is optimistic about the year ahead, noting that, “We’ve got some good institutional partners looking for good opportunities, from an equity perspective, and we think we’ve got some in the hopper.” Grigsby added that her biggest concern for 2026 is rising insurance costs, especially in multifamily, where increases can’t easily be passed along to tenants. “It’s having a big impact on NOIs,” she said.
In Hawai’i, commercial real estate should remain steady in 2026, depending partly on whether the federal government avoids another shutdown when the current appropriations bill expires in late January, given the state’s heavy military presence, Apo said. “The upside is, we have good support from policymakers at both the county and state levels,” he said. “There’s a recognition that commercial real estate is important to downtown Honolulu and important economically for our state.”
While regulation on development can sometimes delay projects, that’s not a new issue, and given the proximity of most land to the shoreline, “that brings in a lot of necessary regulatory questions,” Apo added. “That’s something we have continue to battle. … It’s a process we’re all working through.”
