Following strong Q3 results, REITs enter 2026 with high occupancy, steady income growth, and...
Early signs from leasing activity and capital markets suggest the worst may be behind us. The recovery will not be even, but teams that stay close to the numbers and adjust quickly will be better positioned for what comes next.
The market is not “back,” but it is no longer sliding
After almost two years of questions around values, rates, and demand, recent data points to something CRE has not seen in a while: stability.
Not a full rebound. Not strong growth. But a shift away from the mood of “How much worse could this get?” toward something closer to “We may finally be finding the floor.”
Key indicators such as rent growth, absorption, lender activity, and transaction spreads are beginning to move in a more consistent direction. The results vary by asset type, and office remains under pressure, but the overall tone of the market is noticeably different from where it stood at mid-year.
Momentum in CRE rarely shows up all at once. It usually appears first in the fundamentals, long before sentiment catches up.
Demand improved while new supply remained limited
One of the clearest signs of change comes from the 2025 rental market recap. Demand did not simply hold; in many markets, it strengthened meaningfully.
A few highlights:
- National occupancy improved, particularly in metros where new construction has slowed.
- Rent growth returned in several regions that spent most of 2024 in neutral.
- Competition increased in a number of Sun Belt cities, with more applicants per available unit and shorter leasing timelines.
This is not the overheated leasing environment of 2021, but it is healthier than many expected. When demand firms while construction pipelines remain near historic lows, fundamentals tend to tighten sooner than sentiment does. That appears to be happening now.
Capital markets have become more functional, if not yet “easy”
The capital side of the business also looks different from a year ago.
Debt is not cheap, and underwriting remains cautious, but the market itself is working again.
Several shifts stand out:
- More lenders are quoting, especially for stabilized properties.
- Spreads have narrowed as volatility in rates declined.
- Deals that went quiet in 2024 have begun to re-engage.
- Buyers and sellers are moving closer together on pricing, which has improved the odds of execution.
Taken together, these changes suggest a market that has regained its footing. The environment still requires discipline, but it no longer feels frozen.
The combination of better fundamentals and improving liquidity matters
Tightening fundamentals alone do not create a new cycle. Neither does improved liquidity. But when both start moving in the right direction, the industry often shifts from defense to planning. This does not remove risk, particularly for office, where demand continues to reset.
Still, the broader trend is becoming more constructive, and a number of operators are preparing for selective opportunities rather than simply protecting downside.
Why budgeting and reforecasting matter more at this stage of the cycle
When conditions begin to stabilize, the gap between assumptions and reality becomes visible very quickly.
This is the moment when disciplined budgeting and reforecasting can create real advantages.
Teams that refine their assumptions regularly tend to make faster and more confident decisions around:
- Expense timing
- Capital planning
- Leasing exposure
- Debt maturity risks
- Cash flow under different rate scenarios
In practical terms, clarity becomes a competitive tool. Small adjustments made early often have an outsized impact on NOI, lender conversations, and year-end results.
The bottom line
Two forces are beginning to align: improving fundamentals and a healthier capital market. The combination is encouraging, even if uneven across asset types.
The next phase of the cycle will reward owners and managers who stay close to the numbers, adjust quickly, and maintain clear visibility into their properties and portfolios. The teams that do this well will be better positioned for whatever 2026 brings.
This article is provided for informational purposes only and reflects general market observations at the time of publication. Kardin does not provide investment, lending, or legal advice, nor does it endorse any third-party products, platforms, or data sources mentioned in this piece. Kardin uses common analytic tools, including select Google services, on kardin.com for performance and functionality. All market participants should evaluate conditions based on their own circumstances and professional guidance.
