North America real estate market outlook Q1 2026

United States economic outlook

Activity

Activity growth and the labour market have decoupled, leading to a “jobless recovery”. The sharp increase in tariff uncertainty saw firms pause hiring but not necessarily reduce output. The surge in capital expenditure (capex) on artificial intelligence (AI) has boosted gross domestic product (GDP), but it’s not labour-intensive  . Productivity growth has improved, which may reflect early benefits from AI, but it’s also an endogenous response to the reduction in labour supply amid the fall in net migration. More workers are holding multiple jobs, and firms are still working through the post-pandemic over-hiring.

Inflation

The delayed Consumer Price Index data for November showed headline inflation falling back to 2.7% from 3%  previously. Core inflation moderated even more, to 2.6% from 3% . But the government shutdown means this data was artificially enhanced. The price-collection window was compressed in the weeks around festive discounts, and the Bureau of Labor Statistics had to assume many prices were unchanged in the missed October data. Some upside in inflation is likely in the first quarter, but with tariffs likely to be a one-time price-level shock, inflation should ease towards the Federal Reserve’s (Fed) 2%  target by the end of this year.

Policy

The Fed cut interest rates in December – a total of 75 basis points (bps) over the last three meetings. Chair Jay Powell gave a firm indication that the Fed thinks these cuts are sufficient to stabilise the labour market. It’s likely to now pause and assess how the economy develops in early 2026. Market pricing is leaning towards another cut by April, but we don’t expect any further cuts until after the new Chair’s term starts in May. A further 50 bps  of cuts are expected in the second half of the year. The new Chair will determine the precise pace and timing of further easing this year.

United States economic outlook

Source: Aberdeen, January 2026.
Forecasts are a guide only and actual outcomes could be significantly different.

North American real estate market overview 

The Fed ended 2025 with a total of 75 bps in cuts, which brought some positivity to the commercial real estate (CRE) market. We expect transaction activity to moderately increase as we work through the remaining two cuts that are pencilled in this year.

The US retail market ended 2025 with negative absorption. But when we consider that the cumulative net supply from 2020 is 2.7% [5], and existing stock is currently trading at a discount to replacement costs, high-quality retail centres are well positioned.

In multifamily, the supply pipeline is easing and new starts are down to their lowest level since 2012. Vacancy rates have stabilised and remain 0.9% below their historic peak. We expect a measured acceleration in rental growth during 2026 and into 2027.

For alternatives, we are most positive about the healthcare sector, given the lack of new supply and a growing population of over 80-year-olds. This is combined with tightening vacancy rates across existing senior housing operators. We think this sector is primed for above-average net-operating-income growth.

North American real estate market trends

Offices

Job growth in the office sector is expected to rise in 2026, with office-using employment expected to grow by 625,000 [6] between 2026 and 2027. This accounts for almost all the non-farm payroll employment gains over the period.

Select east-coast gateway markets, such as New York, are clear winners in the office space. Total vacancy rates decreased by 70 bps quarter-on-quarter to 14.1% [7], while direct vacancy rates fell by 50 bps to 11.7% [8].

For the rest of the US, we are still seeing bifurcated recoveries. Around 50% of US markets posted overall positive net absorption in the third quarter of 2025, with class-A space experiencing two consecutive quarters of sustained demand growth.

Overall, office performance will be largely bifurcated, not only in terms of the market but also by asset quality. The lack of relevant, competitive supply will support stronger growth in top-tier buildings.

Industrial and logistics 

Industrial and logistics markets remain exposed to trade policy developments and their downstream effects. Port-adjacent markets, especially with larger exposures to China, may experience softness as they start 2026.

On the bright side, the pipeline suggests below-trend deliveries during 2028. From 2026-2028, we expect 230 million square feet [9] (sq ft) of assets will be brought to the market per year, which is half the average rate from 2022-2025.

Demand has also surprised on the upside, with the third quarter of 2025 having the strongest absorption in over a year, totalling 45 million sq ft. As demand begins to match the shrinking pipeline, this would leave vacancy rates moving sideways at a still elevated 7.3% [10].

Higher vacancy rates will likely restrict landlords' ability to raise rents on larger properties. But asking rents remain 60% [11] above their pre-pandemic levels, which leads to the mark-to-market story – a compelling one in US industrials and logistics.

Retail

Retail started 2025 dealing with the aftermath of a significant number of big-box retailers filing for bankruptcy. This resulted in negative absorption for 2025, despite the backfilling that occurred since the bankruptcies.

Unlike the residential and industrial sectors, retail has missed out on the construction wave over the last few years. If we account for demolished and converted space, the cumulative net supply from 2020 is 2.7% [12] of inventory. With current financing challenges, existing stock is also trading at a discount to replacement cost.

Overall, we think that grocery-anchored retail and lifestyle centres should remain the more resilient group. But malls have also become the quiet outperformer. The three-largest mall owners posted new leasing numbers that were 20% [13] above 2019 levels. Yields for real estate investment trusts (REITs) have narrowed relative to other CRE sectors.

Multifamily

Demand has softened from its peak in 2024, and over 500,000 new units have been added, but lease renewals in 2025 rose to 63%. This keeps supply tight. Vacant apartments were filled in 41 days, on average, with nine renters competing for each unit.

We are seeing most apartment owners adopt defensive leasing strategies, which are focused on preserving occupancy rather than growing rents. The majority of the weakness originates from new leases, while renewal rents remain comparatively resilient.

One market turnaround to watch is San Francisco. Absorption for the first three quarters of 2025 was 9,504 [14] units, nearly the same level as for all of 2024. The number of units under construction moved 1,621 units higher to 7,375 [15], during the third quarter of 2025. This represents only 1.4% [16] of total inventory, well below the 10-year quarterly average of 3.4% [17].

With the supply pipeline easing and new starts at their lowest level since 2012, vacancy rates have stabilised and remain 0.9% below their historic peak. We expect a measured acceleration in rental growth during 2026 and into 2027.

Single-family rentals

It’s an uncertain time for single-family rentals. At the start of 2026, President Trump announced his intention to ban large institutional investors from buying single-family rentals (SFR).

This proposed ban will require legislation in Congress and it’s likely to require a lengthy process of fleshing out the details. But concerns over affordability and the start of the mid-term election year will result in increased headline risk for the SFR sector over the coming months.

Fundamentals should remain strong as construction costs are expected to be elevated, which will hamper new supply. Demand also remains robust, but the uncertainty for institutional investments and the possibility of rent control have dampened our positivity in the sector.

Alternatives

We believe that the tier-one data centre markets in the US will exhibit convincing rental growth numbers, as lease renewals are worked through 2026. However, the same can’t be said for secondary and tertiary markets, as there are early signs that supply is exceeding demand.

Most senior housing portfolios are currently running at an occupancy rate of over 80%. With 18-24-month lead times, any acceleration in new starts won’t translate into new supply until 2028. We are positive that this sector will continue to perform well during 2026.

We believe a housing recovery is needed for storage fundamentals to increase, as that transitional customer is key to a recovery. Additionally, regulatory requirements could be a headwind to transactions in some markets. Hence, we have not fully turned positive on the self-storage sector yet. 

Outlook for risk and performance 

US office fundamentals remain challenging, given low job growth in the office sector and a weakening economic growth outlook. Despite return-to-office mandates, technology-led office markets are struggling with a higher amount of available grey space. Performance is highly market- and asset-specific. 

Residential demand for coastal multifamily should strengthen this year. The supply pipeline is easing and new starts are down at their lowest level since 2012. Vacancy rates are stable and remain 0.9%  below their historic peak. We expect a measured acceleration in rental growth during 2026 and into 2027.

Grocery-anchored retail and lifestyle centres should remain the more resilient group. Malls have also become the quiet outperformer. The three largest mall owners posted new leasing numbers that were 20%  above 2019 levels. Yields for REITs have narrowed relative to other CRE sectors.

In industrial and logistics, elevated vacancy rates will likely restrict landlords' ability to raise rents on larger properties in 2026. National asking rents remain 60%  above their pre-pandemic levels, which leads to a compelling mark-to-market story for US industrial and logistics.

In alternatives, a rapidly ageing population and the lack of supply for senior housing are positive drivers for the healthcare sector. Self-storage remains on a slow recovery trajectory, as we expect the main demand drivers to be muted.