Commercial real estate is showing clear signs of strength and resilience as 2026 begins, supported by improving conditions in many markets and asset classes, with some variations, according to a range of NAIOP board members. Among the issues on their minds are interest rates, the availability of power generation and the cost of commercial insurance. Board members are divided on whether the office space will return after the COVID-19 pandemic or be largely converted into housing.
Commercial real estate in Houston has performed well, with debt more available than equity, said Ashley Grigsby, managing director of capital markets at Transwestern in Houston. Grigsby spends most of her time financing grassroots development, especially in the multifamily and industrial sectors, with a small boutique store. “You have to be a little more creative in building your capital stacks” for equity, she said. “It is very location specific, but debt is readily available.”
Power availability has become a top issue with the explosive growth of artificial intelligence data centers and the development happening in general in the region, Grigsby said, adding that colleagues in the mortgage banking business have told her that office and multifamily leasing is going well. “The office doesn’t necessarily seem to be a dirty world,” she says. “Houston is not [residential] conversion market. That’s not a product you would see there.”
Some commercial real estate leaders are wondering what to expect with interest rates, Grigsby said. “There’s still a question mark about what the Fed is going to do. There’s not a lot of certainty. Are rates going to go down? I don’t know. Can we be comfortable with where they are now? Yes. No one thinks they’re going to go up.”
For industrial real estate in the Indianapolis area, 2025 started slowly but picked up nicely, said Abigail Sievers, senior vice president of industrial brokerage at JLL. After record-breaking years during the COVID-19 pandemic, the industry plateaued for a while but has resumed momentum, thanks in part to mega-retailers like Walmart and Amazon, and the resurgence of advanced manufacturing relocation.
“We had so much spec development in those pair [pandemic] years. It’s just starting to sink in, which is fantastic,” she said. “The last two weeks have been crazy. I get calls several times a day and we see an increase in the demolition of 100, 200 or 300 hectares.”
An open question will be whether energy infrastructure continues to grow, especially given the proliferation of data centers. “Power is a big, big, big conversation right now,” Sievers said. “Manufacturers say, ‘Wait a minute, we need 6,000 amps. Power companies and cities say, ‘Prove it.’ It is difficult when developers start building based on specifications. You can’t prove that someone is going to use 6,000 amps. It’s chicken and egg; build it and they will come.”
The manufacturing, technology and R&D market in the Pittsburgh area is moving slowly but shows promise for the future, said Don Smith, president of RIDC, a nonprofit economic development organization that owns and operates 8 million square feet of buildings in 12 southwestern Pennsylvania counties.
“There is a lot of uncertainty in the market,” he says. “Tenants are being very deliberate when making decisions about signing leases. Interest rates and some regulatory changes have created a real headwind in getting people to make a decision. Construction costs have skyrocketed over the last four to five years, and rents haven’t increased nearly as much. It’s putting a lot of pressure on developers, putting pressure on their margins and the viability of projects.”
In the industrial and manufacturing sectors, a number of companies have entered the growth phase, but financing those deals is a challenge given the lack of credit history, Smith says. R&D remains solid in the region, with the prominent presence of research universities such as Carnegie Mellon and the University of Pittsburgh, but only for companies up to a certain size. “We have more success locating companies with 50, 100 or 150 employees than with 1,000, 2,000 or 5,000, partly because they are not confident they can easily get 2,500 employees in the region,” he said.
The industrial sector has remained stronger than the office market, where there is still an oversupply, especially in older products, says Smith. “Everyone wants to equip their offices with amenities to get employees back to work,” he said. “[High-end] buildings are doing well. The second level is crushed. I don’t see that changing.” Converting an office into a home seems like “a great idea, but I’m not sure it will work yet,” he added.
Smaller office-to-residential conversions have occurred in downtown Honolulu, and more could come thanks to local legislation to help this and a lack of Class A office space, said Todd Apo, CEO of Kapauu, Hawaii-based ‘Iole, who said 2025 has generally been a “stable” year for CRE in Hawaii.
“In the last half of 2025, we’ve been trying to revitalize downtown,” he said. “Activity during the workday is not at the same level as before COVID-19. We have never had a large residential population.” A special district created by the Honolulu City Council will provide money to fund safety and operations, he added, noting, “Other than renovations, we have not had any significant construction.”
Outside of the state’s only major urban core, Apo has seen an expansion of commercial space, and the retail market appears solid, though heavily impacted by tourism — and Hawaii still hasn’t fully recovered from the impacts of COVID-19, particularly the loss of Japanese tourists, and the impact of the 2023 Maui wildfires. “How that will affect retail, which is tied to the commercial sector, is probably the most nervous thing for people,” he said.
Looking ahead to 2026, Sievers predicts strategic land plays in the industrial sector, based on the availability of labor and energy. “It used to be that you wouldn’t see a life science deal coming to Indiana. Now companies are saying, ‘Great, Purdue University has great new nuclear medicine programs,'” she said. “Higher life sciences, advanced manufacturing and aerospace tenants are targeted markets where the talent is top-notch.”
Sievers expects more specific products to come online this year and early 2027 as most million-square-foot buildings across the country are purchased or leased. “We have the workforce to eliminate these jobs, especially in rural areas outside of Indianapolis,” she said. “Sufficient land is needed to build a manufacturing facility, coupled with the fact that we are a business-friendly state.”
Smith is optimistic that the picture in Pittsburgh will improve as interest rates continue to fall. “Moving Pennsylvania out of the Regional Greenhouse Gas Initiative (RGGI) will spur power plant construction and generation, helping to attract data centers and other large energy users.” Financial services, technology, life sciences and AI are important opportunities.
Grigsby is optimistic about the year ahead, noting, “We have some good institutional partners looking for good opportunities, from an equity perspective, and we think we have a few in the hopper.” Grigsby added that her biggest concern for 2026 is rising insurance costs, especially in multifamily properties, where the increases cannot be easily passed on to tenants. “It has a big impact on NOIs,” she said.
In Hawaii, commercial real estate should remain stable through 2026, depending in part on whether the federal government avoids another shutdown when the current appropriations bill expires at the end of January, given the state’s heavy military presence, Apo said. “The advantage is that we have good support from policy makers at both the provincial and state levels,” he said. “There is a recognition that commercial real estate is important to downtown Honolulu and economically important to our state.”
While development regulations can sometimes delay projects, that’s not a new problem, and given the proximity of most land to the coastline, “that raises a lot of necessary regulatory questions,” Apo added. “That’s something we have to continue to fight against. It’s a process we’re all working through.”
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