The year 2026 began with high hopes for commercial real estate capital markets. At the close of 2025, respondents to CBRE’s cap rate survey, a bi-annual poll of capital markets and valuations professionals, overwhelmingly expected yields to either hold steady or decline over the next six months.

Things turned significantly more negative in the most recent survey. Roughly 60% of respondents expect to see “No Change” in cap rates through the end of 2026, but there was an uptick in the number of respondents who expect them to rise.

This view was particularly notable in the multifamily space, likely reflecting softer rent growth expectations and higher interest rates. Across property types, more investors expect higher cap rates for Class C assets, likely reflecting higher capex requirements and greater lease-up risk.

Source: CBRE

• Q2 2026 had 117,000 multifamily unit starts, up 5% from Q2 2025.
• 8,000 of those units were condos built to purchase.

• Q1 2026 had 107,000 multifamily unit starts, up 21% from Q1 2025.
• 4,000 of those units were condos built to purchase.

The red lines on the graph below show multifamily starts and the blue line shows the percentage of units built for rental (vs. condos for sale). You can see the brief spike downward during the condo boom from 2003 to 2008. It peaked in Q3 2025 when 53% of starts were built as condos for sale.

The new supply growth in 2026 has been concentrated in smaller metropolitan areas and lower-density markets.

Source: Globe St.

Senior housing occupancy has reached 90% nationwide. As the first of 70 million baby boomers turn 80 this year, development of housing built to cater to the elderly is slowing sharply, creating a growing chasm between demand and supply of senior housing.

Senior housing generated a 10.6% one-year total return in 2025, making it the best-performing asset class in commercial real estate. That was more than twice the overall average of 4.9%.

Developers haven’t responded in kind. Construction starts have plummeted 67% from roughly 30,000 units to 10,000 between 2021 and 2025.

The industry would need to add 578,000 units by 2030 and more than 1 million by 2035 to keep up with demand. That would mean building roughly 140,000 additional units by 2027 and maintaining about a 100,000-unit annual pace after that.

The significant financial need for the sector also includes updating existing properties; more than 2 in 5 units are older than 25 years.

Source: BisNow

Higher education is hitting a demographic cliff. After years of growth, the pipeline of 18-year-olds is dwindling; a result of lower birthrates.

The largest number of Americans born in a single year arrived on campus in the autumn of 2025, and now a falloff is looming. College enrollments are forecast to drop 13% by 2041. In some parts of the country, especially the Midwest and the Northeast, the declines have already begun.

The demographic cliff is hitting just as another phenomenon is coming into play: a flight-to-quality, where the most sought-after schools are attracting an ever-growing number of applicants, while less-attractive schools draw fewer.

Part of the reason is rising skepticism about the value of a college degree. More families reason that if they are going to spend tens of thousands of dollars, the diploma better pay off with a good job—otherwise why bother?

Source: Wall Street Journal

Year-over-year rent growth through July 2026:

Source: Jay Parsons

Cap rates had never been below 6% until 2017. The chart below shows the cap rate for all CRE properties, the 10-year yield, and the spread between the two going back to 1952:

Source: Commercial Property Executive

With Cap Rates:

From the New York Fed: The share of renters planning to move within 3 years plunged from 56% in 2019 to just 37% in 2026.

The main driver? High mortgage rates and home prices.

Source: Jay Parsons

As supply has dropped off, year-over-year rent growth has trended upward and is on track to come in around 2% for calendar 2026.

Source: Jay Parsons

Source: Housing+Markets