Opportunity Amid Uncertainty in US Real Estate

After a prolonged period of repricing, the US commercial real estate market has hit an inflection point. Pricing data indicates that values bottomed in 2024 and remain approximately 16% below their 2022 peak. Property market fundamentals in almost all sectors are strong or are showing signs of a rebound following a period of softness. Levels of new construction are down substantially from the peaks seen in 2020-24, which bodes well for property performance over the next several years. This combination of reset pricing, strong or stabilizing fundamentals, and an improved outlook makes 2026-27 a more attractive entry point than at any time in the past three years.

Property Market Fundamentals Are Largely on Solid Ground 
The US real estate market correction that began in 2023 was driven by capital market conditions, as asset values adjusted in response to rising interest rates, rather than a broad deterioration in fundamentals. Property markets are either stabilizing following correction or are already supported by positive supply-demand dynamics. Exceptions to this include commercial office and life sciences, which are facing structural headwinds and oversupply. (see Figure 1) 

Stable sectors such as medical office, open-air retail, and manufactured housing benefit from resilient demand drivers and relatively balanced supply-demand dynamics. These segments have demonstrated consistent performance despite macroeconomic volatility and face little risk to fundamentals due to low levels of new construction.

Early Signs of Recovery in Cyclical Sectors
The residential, industrial, and self-storage sectors have undergone meaningful corrections and are now entering the early phases of recovery. In the apartment sector, the vacancy rate is expected to peak and begin declining in 2026, as the massive post-Covid supply wave subsides and demand remains resilient.

However, apartment performance dispersion has widened across regions, driven primarily by differences in recent supply growth. Sunbelt markets face elevated vacancy rates and flat-to-negative rent growth due to overly aggressive development, while more supply-constrained regions like the Midwest and Northeast have maintained steadier performance. 

Similarly, the industrial sector is expected to reach peak vacancy in 2026 before tightening as development activity has slowed dramatically. Within industrial, there is also notable variation in performance. Specific regions (Midwest, East Coast, and Southeast), size ranges (smaller than 100,000 square feet and 1 million square feet and larger), and subtypes (industrial outdoor storage and cold storage) are performing better than the sector overall. 

Alternative Sectors Gain Momentum
A defining feature of the past cycle has been the outperformance of alternative property types. Alternative sectors in the NCREIF Expanded NPI benchmark outperformed traditional ones by an average of 190 bps and 230 bps over the past 5- and 10-year periods, respectively. This outperformance is expected to persist, led by senior housing, self-storage, data centers, and manufactured housing. 

Senior housing, in particular, is poised for a period of robust growth. Limited new supply over the past five years coincides with accelerating demand from a rapidly aging population, creating one of the clearest supply-demand imbalances across all property types. 

Supply Contraction as a Key Catalyst
One of the most important drivers of the positive medium-term outlook for US real estate is the sharp decline in new construction activity. New construction starts have fallen by more than half from recent peaks across all sectors except for student housing. (see Figure 2) 

This reduction in future supply is expected to support occupancy levels and rent growth over the medium term. At the same time, it will create select development opportunities in sectors and markets where structural demand remains strong and speculative supply is constrained.

Implications for European Investors 
Despite ongoing geopolitical turmoil and macroeconomic uncertainty, US real estate is well positioned at the start of a new cycle. The current period represents a window of opportunity to deploy capital into repriced assets ahead of improving fundamentals. Investment strategies should focus on sectors where demand is linked to enduring themes—particularly housing affordability constraints, the aging of the population, and growth in digital infrastructure. Asset selection will also be crucial, requiring a keen understanding of nuances by geography, size range, and subtype in order to achieve differentiated performance.

Fachartikel, Informationen und Nachrichten der institutionellen Immobilienwirtschaft.

FondsForumMagazin