Commercial real estate set for stabilisation in 2026

Commercial real estate is set to stabilise in 2026 as better financing conditions, strong market fundamentals, and increased capital access improve prospects for most sectors outside of office.

Scope Ratings

According to Scope's CRE/CMBS outlook, the office market will continue to face significant pressure, with refinancing risk remaining high, especially for a quarter of all securitised office loans. Borrowers will likely need to inject equity and adjust expectations for struggling assets. Demand will favour high-quality, sustainable, and flexible spaces, increasing obsolescence risk for older buildings and requiring substantial capital expenditure for landlords to meet ESG standards.
The industrial and logistics sector is expected to remain a strong performer, fuelled by e-commerce, supply-chain restructuring, and near-shoring. Vacancy rates should stay low, and inflation-linked rents will help mitigate cost pressures. While some sub-markets might see yield expansion due to higher financing costs, robust occupier demand and limited new supply should support valuations.
The residential sector is projected to remain fundamentally strong, supported by housing undersupply and demographics driving rental demand. However, high construction costs and tighter financing will temper new development.
The retail sector shows signs of resilience, with all loans improving since December 2024. However, performance will be polarised, with prime, experience-focused locations doing well, while secondary assets face ongoing challenges from e-commerce and changing consumer habits. Turnover-linked rents and disciplined cost management will be key for well-located properties.
In the alternatives sector, Scope anticipates a positive outlook for data centres due to strong fundamentals, limited supply (both property and power grid), long leases, and high-quality tenants, with demand boosted by digital transformation, AI, and EU data protection.
Student housing is expected to remain structurally resilient, supported by consistent university enrollment and strong international student demand in major academic centres.
Hospitality is expected to maintain a steady performance from resilient leisure and business travel, especially in urban and tourist areas, while life Sciences should gradually stabilise after recent turbulence.