Summary: As we look ahead to 2026, the economic landscape presents a unique blend of opportunities and challenges for real estate investors and operators. In this article, we recap Aprio’s latest webinar, in which CIO Simeon Wallis explores what lies ahead for real estate this year and how investors, developers, operators, and property owners can prepare.
With 2026 in full swing, all eyes are on the markets and economy, especially when it comes to real estate. In our most recent real estate-focused webinar, Simeon Wallis, Aprio’s Chief Investment Officer and Director of Family Office, shared his comprehensive outlook for the year, highlighting what he describes as the “twin engines of growth” that will power the economy forward.
Want a recap of the discussion? Keep reading for the webinar’s most important highlights, tips, and key takeaways as you develop your business and strategic growth plan for 2026.
The Twin Engines: Liquidity and Productivity
To kick off the presentation, Simeon shed light on two powerful forces that will likely drive economic growth in 2026: liquidity and productivity. On the liquidity front, fiscal stimulus from the One Big Beautiful Bill (OBBB) is expected to add approximately 1% to GDP growth, with consumers potentially receiving between $3,000–$4,000 in tax refunds during the first half of the year. Combined with the Federal Reserve’s anticipated two to three rate cuts in 2026, this influx of capital should provide real estate firms with substantial fuel for economic activity.
At a foundational level, Simeon explained that innovations in AI and automation are powering this productivity engine, as new tools and technologies move beyond pilot phases into core business workflows. Real estate companies are already reporting significant gains: MercadoLibre handles seven times more transactions with 30% fewer customer service specialists, while Rocket Mortgage serves 50% more clients per loan officer. Productivity growth hit nearly 5% in recent quarters, while unit labor costs declined. These results make for a powerful, promising combination and will likely help landlords and property developers improve margins in 2026.
Real Estate Recovery: Off the Bottom
Private market real estate values have bottomed out, and the recovery is highly specific to asset type and location. Currently, the market’s strongest performers are coming from sectors that avoided the supply bubble between 2020 and 2023.
On the other hand, according to Bloomberg data, industrial real estate continues to show the strongest NOI growth at approximately 4.5% year-over-year, supported by e-commerce’s ongoing expansion to 16.4% of total retail sales. Retail shopping centers are posting positive NOI growth of 3.4%, benefiting from occupancy rates near 97%, which is a historically favorable level for rent growth. The multifamily sector has largely worked through its supply overhang, with building permits trending down and units under construction below trend levels.
Not surprisingly, office real estate faces continued challenges, though Class A properties in many markets are performing well as companies adjust to hybrid work arrangements and realize they need more space per employee than they initially anticipated.
The Capital Markets Opportunity
According to Simeon, a particularly encouraging sign for real estate comes from the broader capital markets. Merger and acquisition (M&A) activity accelerated in 2025, with investment banks reporting robust pipelines heading into 2026. This uptick in corporate transaction activity typically precedes increased real estate deal flow.
Another positive sign: capital markets activity remains well below historical averages, suggesting significant room for further growth. Bank lending shows a mixed picture: small- and mid-sized banks continue to be active, while larger banks have been more cautious. In particular, construction and land development lending has pulled back, which should help limit new supply in most markets.
Critical Considerations: Cap Rates and Interest Rates
One of Simeon’s most important pieces of advice relates to cap rates and long-term interest rates. Current cap rate spreads to the 10-year U.S. Treasury remain historically tight, creating risk for acquisitions if we see a normalization to historical levels. The era of easy money is over, and real estate investors need to adjust their expectations accordingly.
While the Fed is expected to cut short-term rates two to three times in 2026, longer-term rates (10-year and 30-year) may move higher. Simeon expects CPI inflation to settle between 2.5% and 3%, putting the Fed funds rate at 3.25% to 3.5%, and the 10-year Treasury between 4.5% and 5%. This creates a steepening yield curve that could impact real estate valuations.
If you’re a real estate investor who came of age professionally after 2008, this shift represents a new paradigm. It’s important for you to perform comprehensive scenario planning around exit cap rates, keeping in mind that the low-rate environment of 2010–2022 was an anomaly, not the norm.
Short Term Favors Acquisition, Long Term Favors Development
With many assets below replacement costs, acquisitions can be compelling in the near term as the financing environment improves. However, when we think longer-term, in selected situations and given tight cap rate spreads, we favor real estate development over acquisition in the current environment. Why? Development offers higher potential IRRs and more control over timing and market entry (though it comes with additional risk).
When it comes to construction development and activity, there are interesting dynamics at play: data center construction is driving a disproportionate share of commercial building projects, creating scarcity in related materials and utilities. However, projects that are not competing with data center infrastructure should find ample availability of materials and labor, particularly given the weak Architectural Billings Index.
Special Events to Watch
Real estate investors, owners, developers, and leaders should take note of two unique events in 2026: America’s 250th anniversary and the World Cup, which is being hosted in North America this year. Both these events are expected to drive economic stimulus, increased spending, and more international tourism, which should provide the economy and specific real estate sectors with an additional boost.
Risks to Monitor
While the overall economic outlook for real estate is positive, Simeon highlighted several risks that real estate investors, developers, and owners should monitor:
- The federal deficit is running at 5.5% of GDP during a non-recession period, which could potentially push long-term rates higher.
- Industrial commodity prices, particularly copper, have been spiking due to infrastructure demand, which could pressure construction costs.
- High valuations in both equity and fixed income markets create vulnerability to sell-offs that could raise the cost of capital across all assets.
- Geopolitical risks, including potential conflicts and ongoing trade policy uncertainty, could disrupt economic activity.
Final Thoughts
As we move through 2026, real estate appears positioned for recovery, particularly in well-located assets that avoided the supply bubble. The “twin engines” of liquidity and productivity should drive above-trend GDP growth, while improving tenant health should support NOI expansion across most property types.
To succeed in this market, real estate investors, developers, and owners will need to adapt to structurally higher financing costs, implement AI and automation to improve operational efficiency, and conduct thorough scenario planning that accounts for potential cap rate expansion. For distressed assets, the improving lending environment should enable more price discovery and transactions in the latter part of the year.
As you confront both opportunities and challenges in the current real estate market, Aprio is in your corner. Our real estate team is committed to being your strategic partner through every stage of the deal cycle, from the initial operating agreement to transaction structuring and exit planning.
