CRE Recovery Trends Driving the Market Through 2026

First American identifies five key forces — pricing stabilization, increased transaction activity, refinancing rebound, rising distress levels, and lender re-engagement — that are setting the stage for a commercial real estate recovery.
CRE refinancing activity has surged from 2024 lows, indicating a turning point as more loans from 2021–2022 mature.
Distress is nearing a peak and expected to ease by 2026, as opportunistic deals and stabilized rates bring more capital back into the market.

Key Takeaways

A Market in Transition

CRE is slowly emerging from a turbulent stretch, per Globe St. First American’s latest outlook calls 2025 a year of recalibration. It sets the foundation for what could become a new business cycle by 2026.

“They said stay alive in ’25 and stay in the mix until ’26,” said Xander Snyder, senior economist at First American. The phrase reflects a cautious but growing optimism across the sector.

The Five Forces

The report identifies five key trends driving this transition:

Pricing Stabilization – Prices have stopped falling and are now seeing modest gains over 2024 levels. This is a sign that buyers are more willing to transact at current valuations.
Transaction Volume Growth – Deal activity has picked up in both dollar value and square footage. Volumes are approaching the five-year pre-pandemic average.
Refinancing Rebound – After falling sharply, refinancing volume has turned a corner. It dropped to $55B in Q1 2024 but surged to $114B by Q3 2025. That puts it back in line with levels last seen from late 2019 through early 2022.
Distress Nearing a Peak – Loans made during the 2021–2022 boom are starting to mature. Many owners have fewer options and are under pressure. Some took advantage of rate dips over the last year, but overall distress continues to build. It is now expected to peak in 2026.
Lender Re-Engagement – As pricing stabilizes and distress clears, lenders are showing renewed interest. This is expected to drive higher origination volumes heading into 2026.

Why It Matters

These five forces suggest that commercial real estate may be entering a new phase. While the sector still faces challenges, especially with distressed assets, the worst may be nearing an end.

The rebound in refinancing, combined with returning buyer interest and lender activity, points to improving market conditions. Although CMBS delinquency rates only cover 15–20% of CRE loans, they offer a useful signal. Public data from these loans reveals trends that are harder to track in private lending.

Many properties are still meeting debt obligations but face falling net operating income. That means the real level of distress may be higher than headline numbers suggest.

Looking Ahead

If current trends hold, 2026 could bring a new CRE cycle. As capital becomes more available and lenders grow more active, transaction volumes and development activity are likely to rise.

In some sectors, early indicators of expansion are already appearing. For example, shifts in permitting activity suggest that multifamily developers may be preparing for a new phase of supply growth, aligning with broader signs of market recovery.

The combination of pricing clarity, reduced uncertainty, and stabilizing rates may help unlock sidelined capital. CRE players who “stay in the mix until ’26” may find themselves well-positioned for the next phase of growth.