REcap: Q2 2026

The continued and intermittent nature of U.S. conflict with Iran has created significant pressure on energy prices, though markets generally do not seem overly concerned with the conflict as equity markets have sustained their recovery after the initial dip when the conflict erupted.

Broader U.S. M&A markets continued megadeal-fueled momentum, particularly in the technology and energy infrastructure. Absent any significant new geopolitical crises, we anticipate markets will continue to gain momentum the rest of the year.

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Key takeaways:

Multifamily housing: The second quarter marked a shift away from simple stabilization toward the early stages of recovery. Demand accelerated, vacancy declined, and absorption caught up with new supply on a trailing basis. The sharp contraction in construction starts also means that existing inventory should face progressively less competition through 2027. The declining construction pipeline is becoming more supportive of existing owners, although conditions remain favorable to renters in many supply-heavy markets.
Office: The second quarter of 2026 reinforced that the office market is not recovering evenly, even as large trades are beginning to clear. The most compelling activity remained concentrated in assets where buyers had a defined reason for conviction, whether through long-term occupancy, owner-user demand, strong sponsorship, or a credible path to repositioning. A notable shift during the quarter was the return of tenants seeking ownership rather than simply leasing space. Overall, the quarter points to a market becoming more functional at the upper end, while still relying on creative structures, recapitalizations and distressed resolutions to clear larger office assets.
Retail: Recent research indicates that retail market fundamentals remain generally favorable. Demand continues to be concentrated in grocery-anchored centers, neighborhood and strip centers, power centers, and other necessity and service-oriented formats. Although overall market conditions remain stable, performance is becoming increasingly differentiated based on property quality, location, and tenant composition. Leasing activity remains strongest in prime locations and higher-quality retail properties, while lower-tier malls and certain older power centers continue to experience occupancy pressure.
Industrial: The second quarter of 2026 reinforced that the industrial sector has moved beyond the supply-driven correction that characterized much of the past two years and is entering a more disciplined phase of the market cycle. While elevated vacancy persists in select markets following the historic development wave of 2023 through 2025, slowing speculative construction and steady occupier demand are allowing fundamentals to gradually rebalance.
Capital markets: Real estate M&A continued and expanded the volume from last quarter with several significant deals announced. While market conditions are still challenging, the overall trend remains positive in terms of availability and cost of capital, fundamentals, and transactions. Markets have demonstrated resiliency and massive amounts of capital are in the wings to spark more dynamic activity when bid-ask spreads narrow.
Opportunity zones: Opportunity Zones (OZ) are at an inflection point. In the second quarter of 2026, the program is both nearing an end of its initial seven-year tax deferral period and entering a new beginning with permanence, enhanced program requirements, and potential for further capital invested in underserved communities. The program has clearly succeeded in mobilizing capital and supporting housing and development activity, although its benefits have been distributed unevenly across communities and markets.