Commercial real estate is poised for a robust 2026, with multifamily and industrial properties leading the charge and select office markets showing signs of recovery, according to J.P. Morgan's latest market outlook. The global bank expects transaction volume to accelerate in the coming year after observing tangible improvements in both equity fundraising and deal flow throughout 2025.
Michelle Herrick, Head of Commercial Real Estate at J.P. Morgan, characterized the current environment as favorable from both capital availability and fundamental performance perspectives. The firm reported that 2025 brought measurable progress in real estate equity fundraising alongside rising transaction volume, setting the stage for increased dealmaking activity ahead.
The outlook identifies multifamily and industrial as particularly strong performers, while retail properties maintain steady fundamentals. Office real estate, long challenged by remote work trends, is experiencing selective rebounds in certain metropolitan areas, though the sector's recovery remains geographically uneven.
Political turbulence has emerged as a significant wild card for certain market segments. A 43-day federal government shutdown dominated headlines through much of fall 2025, creating ripple effects across the economy and specific corners of the commercial real estate landscape. The extended closure posed particular challenges for projects dependent on government funding streams.
Community development real estate bore the brunt of the shutdown's impact, given its heavy reliance on federal funding and administrative resources. Community Development Financial Institutions and Community Development Entities experienced the most acute disruptions during the closure period, with housing programs facing new operational obstacles that complicate project timelines and capital deployment.
While the administration reversed CDFI Fund layoffs implemented during the shutdown, the Office of Management and Budget is currently withholding previously appropriated CDFI Fund allocations. These funding holds threaten to delay new development projects and limit investment capacity in underserved communities that depend on these capital sources.
The continuing resolution passed on November 12 extends fiscal year 2025 government appropriations only through January 30, 2026, creating a compressed timeline before potential funding lapses. The short-term nature of the extension raises concerns about another federal shutdown emerging on the near-term horizon.
Ginger Chambless, Head of Market Insights for Commercial Banking at J.P. Morgan, warned that a renewed shutdown could suppress dealmaking activity through multiple channels. Reduced investor confidence, softening demand dynamics, and elevated economic and political uncertainty would all likely dampen transaction momentum if Washington fails to reach a lasting budget agreement.
Beyond shutdown risks, the outlook acknowledges that federal policies spanning regulation, immigration, and inflation management will shape market conditions throughout 2026. These macroeconomic and geopolitical factors add layers of complexity to an otherwise constructive fundamental picture for commercial real estate investment.
Despite near-term political uncertainties, J.P. Morgan emphasized its commitment to supporting clients across market cycles. The firm positions itself as providing consistent reliability regardless of prevailing economic conditions, offering capital and advisory services designed to help investors navigate both opportunities and headwinds in the year ahead.