- MetLife Investment Management forecasts gross unleveraged U.S. CRE returns of 5% in 2026 and 6.4% in 2027, with shrinking construction pipelines driving income growth across property types.
- Higher August and September rates are prompting re-trading on roughly half of deals under contract, and MetLife cut its 2026 return forecast from its July view.
- MetLife ranks senior housing, retail net lease, medical office, manufactured housing and malls as top picks, while it stays cautious on Sun Belt apartments and life science.
Returns on U.S. commercial property should improve in 2027, MetLife Investment Management says in its H2 2026 chartbook, as Institutional Real Estate reports.
MetLife forecasts gross unleveraged total returns of 5% this year and 6.4% in 2027, driven by income growth as construction pipelines shrink.
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Rates Are Biting
The 5% call for 2026 is below MetLife’s July view, from a time when Treasuries yielded 4.6%. Higher yields in August and September are weighing on deals.
MetLife says roughly half of pending deals have been renegotiated downward during diligence lately. We covered the broader trend in CRE retrades climbing as buyers push for 5% to 10% discounts.
Values Lag Inflation
MetLife argues values look cheap against the long-run link to building costs. NCREIF’s market value index sits roughly 19% below its inflation trend, which suggests CRE may be undervalued.
The gap between appraisals and sale prices has narrowed since 2023, especially for apartments and industrial. Office remains volatile: second-quarter appraisals ran 12.6% below sale prices.
Winners and Laggards
Senior housing earned 12.8% for the trailing year and manufactured housing 12.3%, the best of any sector. Strip retail returned 8.2%, while life science lost 1.5%.
MetLife’s top five picks are senior housing, net-lease retail, medical office, manufactured housing and malls, and it recommends overweighting each. Office jumped 11 spots in its ranking to ninth, and traditional apartments sit near the bottom, with a rank of 16.
Market by Market
Nashville led metros at 8.02%, helped by 93 industrial assets worth $4.4B that returned 11.56%. Inland Empire ranked last at 0.38%, which MetLife tied to trade friction with Asia.
On office, Miami and West Palm Beach have fully recovered. Dallas vacancy is 21.9%, 65% of the way back, while Houston’s is 24.1%. Los Angeles and Portland haven’t recovered from the downturn.
Why It Matters
Construction has slowed across sectors, and MetLife says current values often don’t reflect it. Newmark made a similar point in a report we covered on the thin office pipeline, with 2026 deliveries of 12.3M SF.
MetLife remains cautious on apartments in Sun Belt markets, citing fundamentals and pricing, and sees strong office opportunities across a mix of markets.
What’s Next
Treasury yields are the swing factor. If rates ease, retrading should fade and the 2027 recovery MetLife expects has room to start earlier.
