Employment Outlook Drives CRE Demand in 2026

Employment Trends Shape CRE Environment

The 2026 employment outlook is marked by a sharp slowdown in job creation, averaging just 17,000 new positions monthly since May 2025, per Marcus and Millichap. Factors including recent tariffs, ongoing policy uncertainty, reduced immigration, and rapid advances in AI-driven productivity have contributed to this deceleration. As a result, the US unemployment rate has risen from 4.0% at the start of 2025 to 4.6% by November. Despite these labor headwinds, demand for commercial space will increase overall in 2026.

Office and Retail Face Shifting Dynamics

Office demand has remained positive, supported by a gradual recovery over the past six quarters, and is expected to slow slightly, with net absorption reaching around 65MSF in 2026. Most major markets will continue to experience net growth in office space usage this year. Persistent white-collar job losses, however, may limit future gains in some markets, especially where office-using employment remains under pressure. In the retail category, net absorption could exceed 10MSF, even as new construction—mainly single-tenant builds—outpaces demand. The national retail vacancy rate is likely to edge up by 20 basis points to 5.2% as a result.

Industrial and Multifamily Vacancy Pressures

Industrial space demand remains sturdy, with about 68MSF of net absorption forecast in 2026. However, it will lag behind the roughly 200MSF set for delivery. This imbalance should push national industrial vacancy up to 8.6%, especially in large warehouse markets. In multifamily, a sluggish labor market—particularly among young adults—may hold back leasing activity. Still, high for-sale home costs continue to support renter retention. Analysts project about 240,000 units of multifamily net absorption compared to 270,000 new completions. This gap will likely raise the national vacancy rate to 4.7%, though most major markets may still see declines by year-end.