North America real estate market outlook Q3 2026

US economic outlook

Activity

We expect the US economy to remain resilient through 2026, supported by strong business investment and improving financial conditions following the reversal in energy prices. However, consumer spending is likely to moderate as labour market momentum softens; June payroll growth slowed to 57,000 and broader indicators suggest wage growth is unlikely to accelerate materially from current levels. While we forecast GDP growth of 2.3% this year, broadly in line with 2025, we expect weaker household income growth to keep consumption on a more subdued path through the remainder of the year.

Inflation

We continue to see inflation easing only gradually. Headline inflation reached 4.1% in May, while core inflation rose to 3.4%, its highest level in three years. Although lower fuel prices should help bring headline inflation down over coming months, underlying pressures remain sticky, supported by persistent services inflation and pockets of strength linked to ongoing AI-related investment. As a result, we expect core inflation to remain above 3% for much of 2026 before moderating more meaningfully thereafter.

Policy

We expect the Fed to keep interest rates on hold throughout 2026 and well into 2027. While policymakers have acknowledged that inflation risks have eased following the decline in oil prices, inflation remains too high to justify near-term easing, and recent Fed communication has retained a hawkish bias. In our view, the combination of stable labour market conditions, moderating but persistent inflation and solid economic growth means the next move is still likely to be a rate cut rather than a hike, but only once inflation is clearly moving back towards target.

Figure 2: US economic outlook

Source: Aberdeen, June 2026

Forecasts are a guide only, and actual outcomes could be significantly different.

North America real estate market overview

Real estate delivered returns of 4.7% in the 12 months to March, relatively unchanged over the prior year¹. Income has been the primary driver of returns as capital growth seems to have bottomed. Indeed, just 0.2% capital growth featured over the same period, led by the retail sector at 1.2%. Offices continue to lag the wider index, primarily due to secondary assets in unfavourable markets which continue to lose value. 

Investment volumes have been slowly recovering since the recent trough in 2024. However, activity certainly appears sluggish over the first half of the year, particularly over Q2. Certain markets are relatively more liquid than others, such as New York City and San Francisco. Multifamily remains a priority on investor intentions and accounts for around 25% of volumes year-to-date².

North America real estate market trends

Offices

The office market is continuing to shift towards a leaner and more polarised sector. Fundamentals are still soft nationally, although improving leasing demand and a focus on quality are driving performance for better quality assets. The next few years are likely to be defined by a gradual reduction in the overall vacancy rate, while best-in-class and Grade A assets will see the strongest leasing demand and rental growth. New York City and San Francisco are seeing strong demand, disproportionately so for new and refurbished offices, although a recovery is starting to appear beyond the coastal markets, which is a positive signal for the sector. Slightly behind the recovery of leading American markets are the major Canadian markets, although values in Toronto appear the most resilient due to a lack of quality stock. 

Office utilisation rates have improved in 2026, led by non-West Coast gateway markets³. This should help to provide certainty over office requirements as occupiers look to renew or expand into new space. Additionally, the labour market is proving resilient and job growth is picking up in the Sun Belt markets, led by the large Texas markets. Low future supply also supports the overall sector; compared to historical averages, non-gateway cities are forecast to see relatively fewer construction starts over the next five years, whereas large gateway cities such as New York City are seeing more activity, supported by strong prime rental growth.

Pricing remains fairly stable compared to recent years. A 40% decline in capital values since the 2022 peak has lost momentum, with just 2.6% of that decline seen over the last year⁴. Investment activity is steady at around $87 billion on an annual basis through Q2. This is down from the 2022 peak of $158 billion but represents a 20% increase year-on-year as investors get more comfortable with the sector’s direction. Around 14% of annual investment activity is for the purpose of redevelopment or renovation, in line with the long-term average⁵.

Industrial and logistics

Total returns for the industrial sector are holding fairly stable at 4.6% in the 12 months to March⁶ and occupancy seems to be stabilising around 7.5%⁷. The sector seems to be slowly improving, coming out of a holding period as trade uncertainty and a sluggish housing market have kept tenant activity muted. 

The supply landscape peaked in 2022 and completions have more closely mirrored the pre-Covid average since; with slowing rental growth and higher Treasury yields, construction starts are expected to fall at a national level over the near-term. Given the polarised nature of industrial markets, some are struggling more given the nature of present global uncertainty; for instance, trade-dependent markets – along the US-Mexico border, for example - have availability rates well above historical norms. Sun Belt markets which have seen rafts of supply come through will also take longer to absorb. 

The Southern California industrial market, which has seen one of the steepest corrections, is beginning to see signals of stabilising as net absorption ticks into positive territory over the first half of 2026⁸. Rents remain soft and should remain so until vacancy rates show stronger signs of compression, likely in 2027 or later. That said, the listed market is flashing positive signals around improving fundamentals; more consolidation at a platform level is likely as operators search for scale.

Retail

The retail sector, naturally higher yielding, has outperformed the wider market since 2022; this was also the case in the 12 months to March where retail’s 7.0% total return trumped All Property’s 4.7%. Rental performance is tempering somewhat, down to 2% on an annual basis, and is stronger in the more growth-heavy Sun Belt markets⁹.

The US consumer remains broadly resilient, but the picture has become more mixed over recent months. While real wage growth remains positive and unemployment is still relatively low at 4.2%, job creation has slowed materially, and households are becoming more cautious as the labour market softens. Consumer confidence edged higher in June as falling energy prices eased inflation concerns, but confidence remains well below long-term norms and consumers increasingly report that jobs are harder to find¹⁰.

Inflation has also moderated following the recent decline in oil prices, providing some relief to household budgets, but lingering cost pressures and a slower pace of employment growth are likely to weigh on discretionary spending. Overall, we expect consumption growth to cool modestly through the second half of the year, although healthy household balance sheets and a still-stable labour market should help prevent a more significant slowdown.

Investment activity remains relatively subdued despite signs of stabilisation. Total retail transaction volume reached $55.4 billion over the last four quarters, up 15.3% year-on-year¹¹. Activity continues to be concentrated in the most liquid gateway markets, particularly New York City, Los Angeles and Dallas, with cap rates around 7.0%¹². Investor appetite remains focused on necessity-based and open-air retail formats, with shopping centres accounting for the majority of transaction activity year-to-date. Construction remains near multi-decade lows due to elevated development and financing costs, with new supply largely limited to pre-leased and build-to-suit projects, or grocery-led, mixed-use schemes. A lack of construction will help to provide a floor for rents, and we would expect non-discretionary retail to perform well. 

Living

The living sector remains somewhat polarised across segments of the market. Multifamily continues to outperform the broader market, delivering a 5.4% annual total return versus 4.7% for All Property¹³, supported by resilient income growth and a stabilising supply backdrop. While occupancy remains under pressure in several Sun Belt markets following an unprecedented development cycle, completions are now falling sharply as elevated construction and financing costs limit new starts. This should help tighten fundamentals over the medium term, particularly in higher-quality Class A assets where demand remains strongest. In terms of rental growth, we expect the gateway cities of New York City and San Francisco to lead in the near-term, although the Texas markets are also showing signs of strength.

Incoming legislation on the single-family rental (SFR) segment has evolved from the start of the year. What was originally set to be fairly devastating for the institutional market - by way of banning institutional ownership of SFR housing - has now been watered down. The amendments, which became law in July, should focus institutional appetite on purpose-built rental housing units and should improve clarity and liquidity in the segment. 

Outlook for risk and performance

There is a sense of stabilisation in the US real estate market as supply overhangs are gradually worked through. Risks are still evident, particularly so in the face of renewed geopolitical uncertainty. Investors still seem happy to allocate to real estate, although there remains a firm quality bias in place across sectors. 

In terms of segments, the gateway office markets of New York City and San Francisco should outperform, and we like alternative segments such as healthcare and data centres due to favourable supply and rental growth dynamics. In the residential sector, we see the dynamics shifting back in favour of the SFR segment given recent legislation and slightly more favourable rental profiles than traditional multifamily.

Although the initial impacts of the conflict in Iran have seemed relatively benign, aside from fuel price inflation, the potential for further escalation and renewed pressure on prices is certainly a risk we are considering through the end of the year. For now, we have assumed a gradual de-escalation of the conflict with limited price shocks. Looking towards the end of the year, early polling suggests the midterm elections could slightly shift the balance of power away from the Republicans in the Senate, potentially creating more tension and policy delay into the second half of the current administration.