North America real estate market outlook Q4 2026

US economic outlook

Activity

We expect the US economy to remain resilient through the rest of 2026, supported by solid business investment and consumer spending. Core durable goods orders rose 11% year-on-year in August, while real consumption increased by 2.6%. However, the sustainability of household spending is less certain as income and wage growth soften. September payrolls rose by just 29,000, although the three-month average remains marginally above the breakeven rate. Political uncertainty around the midterms may also weigh on sentiment, with control of Congress finely balanced and the prospect of divided government rising.

Inflation

We expect inflation to moderate but remain above target. Core inflation slowed to 3.0% in August, while the three-month annualised rate fell to 2.0%, suggesting underlying pressures eased through the summer. However, higher energy and diesel costs are feeding through supply chains, with the ISM manufacturing prices-paid index rising sharply in September. These pressures are likely to produce a modest pick-up in inflation during the fourth quarter and delay a sustained return to target. We forecast CPI inflation of 3.3% at end-2026, before it falls more materially in 2027.

Policy

The Federal Reserve (Fed) raised rates to 3.75 - 4.00% in September and signalled that further tightening may be needed to contain spillovers from supply-driven inflation and keep expectations anchored. We expect one further 25-basis-point risk-management hike in December, followed by an extended pause, although stronger growth or renewed wage pressure could prolong the cycle. Fiscal policy is also increasingly uncertain ahead of the midterms. Democrats are expected to regain the House, while the Senate remains finely balanced, raising the prospect of divided government and some fiscal restraint, although spending pressures linked to the Iran conflict and healthcare policy are likely to persist. 

Figure 2: US economic outlook

Source: Aberdeen, October 2026

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

North America real estate market overview

Real estate returned 4.9% in the 12 months to June, up slightly from 4.6% one year prior.¹ Capital growth has flatlined over recent quarters, with just 0.3% growth registered over the last 12 months, although this isn’t being felt equally. The retail warehouse segment is seeing some of the strongest capital value growth at 2.3%, while offices at -2.3% continue to drag. Driven by healthcare and data centres, the ‘Other’ sector is the standout performer, with 8.8% capital value growth aiding a 15% total return over the year.

Across the US, rental growth remains positive but increasingly divergent across sectors and markets. Office is currently strongest at 2.5% nationally, with limited new supply supporting growth in higher-quality space, while retail rents are rising 1.7% amid historically tight availability.² Industrial and multifamily are softer at 1.4%, although apartment growth has improved from just 0.3% earlier in 2026. Regional variation is pronounced, particularly in apartments, where supply-constrained coastal markets are considerably stronger while several recently supply-heavy Sun Belt markets continue to record falling rents. Data centres and healthcare are notable exceptions as tight availability maintains rental tension.

Overall investment volumes have been strong throughout 2026, with the third quarter seeing nearly $213 billion of activity, the highest quarterly total since mid-2022.³ M&A activity has added to these volumes significantly, with the recent AvalonBay Communities/Equity Residential merger accounting for $69 billion. Excluding corporate activity, volumes are still healthy and we see institutional capital returning from 2023 lows, although still down on the long-term average.

US real estate market trends

Offices

The national office sector is beginning to look more constructive across key operating fundamentals. However, not all regions are improving equally and there are distinct drivers which are currently benefiting the dominant coastal markets, while others remain muted. At a national level, total returns were 3.1% in the 12 months to June, the strongest return since mid-2022, although still underperforming All Property. This is alongside an elevated national vacancy rate of 21%, owing to the strong polarisation seen across markets and building quality.

In particular, the coastal markets of New York City (NYC) and San Francisco are gaining momentum as broad-based job growth is driving rental premiums in the best quality space.⁴ This is particularly evident for NYC where the financial and legal sectors are driving strong leasing demand against a shrinking development pipeline. Availability is 12.3% in NYC, declining some 300 basis points over two years as demand strengthens and obsolete space is redeveloped.⁵ San Francisco is a more binary market and has been a beneficiary of the AI sector, although there are renewed signs of broadening demand from more traditional sources such as financial services. Net absorption has swung into positive territory, and rental growth has been strong with Class A/B rents growing by 11-15% over the year to September.⁶ Liquidity is also rapidly improving here off a low base. Investment volumes are up 124% year-on-year as fundamentals point to a longer-term growth story.⁷

Office-using job growth in the Sun Belt markets has improved at pace over the first half of 2026 and leasing volumes are around 80% of 2019 levels.⁸ Markets like Atlanta and Dallas-Fort Worth are performing better as higher income returns combine with demand for prime space. However, the occupational markets here are thinner and we expect the recovery will be more drawn out.

Industrial and logistics

The industrial sector returned 4.7% in the 12 months to June 2026, improving from 4.2% in March.⁹ Capital growth strengthened to 0.9% from 0.5% over the previous quarter, while a 3.8% income return continued to provide a stable underpinning. We are more positive about the sector lately, although relatively tight cap rates and restrictive monetary policy are still likely to limit the scope for meaningful yield compression.

Texas industrial markets retain strong long-term demand drivers, with both Dallas-Fort Worth and Houston delivering improving investment performance despite elevated supply. Dallas-Fort Worth remains comparatively resilient, supported by record leasing from large-format logistics, data-centre and advanced manufacturing occupiers, with vacancy easing and modern, well-located assets retaining pricing power. Total returns strengthened to 8.4% in the 12 months to June.¹⁰ Houston performed more strongly, with returns rising to 10.7%, although vacancy of 6.9% and a 28.3 million sq ft pipeline are likely to keep competitive pressure elevated into 2027 despite healthy leasing activity.¹¹

Industrial investment activity strengthened further in the third quarter, with $37 billion traded, 30% above the same period last year, taking rolling 12-month volumes to $140 billion.¹² Portfolio transactions were a significant driver, more than doubling year-on-year. Liquidity also broadened across markets, with Dallas and Houston volumes rising over the year, while private buyers remained the largest source of capital and institutional participation increased.

Retail

Retail continues to outperform the wider market, supported by resilient income and positive capital growth.¹³ Major-city retail delivered a 6.9% total return in the 12 months to June 2026, underpinned by a 5.5% income return and 1.3% capital growth. Major-city vacancy has stabilised around 9-10% over the last 12 months, but this is polarised by quality. High-quality space remains in demand, whereas secondary locations and shopping centres struggle with increased voids.

US retail spending remains robust, rising 3.5% year-on-year in September, with growth unusually broad-based across discretionary and necessity categories and 86% of discretionary retail categories recording positive spending growth. Encouragingly, this strength is increasingly broad across income groups, with lower-income household spending growing 5.5% year-on-year, although some nominal spending growth reflects higher prices and buy-now/pay-later usage continues to rise.¹⁴

Retail investment volumes were 14% higher year-on-year through September.¹⁵ Pricing remains stable, particularly for grocery-anchored neighbourhood centres, while investors continue to demand a yield premium. Yield compression has paused for net lease assets, which typically trade at lower cap rates, as they look more vulnerable to rising Treasury yields.¹⁶

Living

The multifamily segment is slowly turning a corner as markets see positive net absorption and rental growth. Coastal and supply-constrained markets are leading apartment performance through the second quarter: San Francisco delivered a 10.5% annual total return, followed by Chicago at 8.2%, while New York and Miami both returned around 6%, supported by stronger rental growth and positive capital appreciation.¹⁷ Sun Belt performance remains more mixed after the recent supply surge, but Dallas and Houston are improving as absorption strengthens and construction pipelines retreat. Broader employment growth should continue to support the large coastal cities, while we expect Sun Belt markets to improve more gradually. In Canada, slower population growth and excess higher-end supply are pushing vacancy higher and rents lower, although Alberta remains comparatively resilient due to stronger migration and affordability.

Despite the political uncertainty at the start of the year, sentiment towards the single-family rental segment has rebounded as the ‘ROAD to Housing Act’ proved less disruptive than initially feared: it restricts large investors from acquiring existing homes but does not require portfolio divestment and largely exempts purpose-built rental development. The average 30-year fixed mortgage rate of 7.4% in mid-October also continues to constrain homebuyer affordability and sustain rental demand from households priced out of ownership.¹⁸ As such, we are more positive on the sector than at the start of the year but see rental growth moderating as inflation cuts into real wages.

Apartment investment volumes reached $163 billion on a rolling four-quarter basis in Q3 2026, broadly in line with the long-term average. This excludes the AvalonBay Communities/Equity Residential merger, accounting for a further $69 billion in corporate activity. Direct investment activity remains concentrated in New York, Los Angeles and San Francisco, with Washington DC also attracting more investment. Cross-border and listed investors remained net sellers, despite comparatively strong Japanese activity.¹⁹

Despite robust numbers, pricing across the living sector appears tight against elevated Treasury yields. We expect values to adjust, especially in areas of the market where rental growth doesn’t compensate for a smaller spread over bonds.

Outlook for risk and performance

Much of the year has been defined by global tensions and consequences of disrupted supply chains. We don’t expect this disruption will disappear over the near term, and instead have adopted a medium-term disruptive outlook where global bonds are higher and rates increase once again. What this means for real estate is risk around pricing in general, but particularly in markets which are over-supplied and have limited rental tension.

Positive returns will be driven primarily by income over the short term, and any bounce-back in capital values would feed in slowly. This delays recovery of the office, multifamily and industrial markets, while retail performs better. We expect the most resilient segments to include grocery-anchored retail, healthcare, New York City multifamily and office, and data centres to an extent. However, we see risks skewed to the downside as global market volatility continues. That said, North American real estate should perform well on a global basis given depth of markets, capital and strength of the consumer.