The year in commercial real estate so far has been mixed and uncertain, but the foundations remain solid, as JLL explained in its May 2026 Global Real Estate Perspective.
The uncertainty, especially from the Iran war, is clear in such signs as the sell-off in the Treasury market, widening CRE credit spreads, the potential for Federal Reserve rate hikes, falling bank optimism and worries about a global recession.
JLL said that despite the volatility, economic conditions could rebound if the conflict were “relatively short-lived.” Unfortunately, a review of news and economic data suggests that a quick end might be overly optimistic.
Leasing recovery overall has varied greatly in the U.S., with Atlanta at 89.3%, Dallas at -12.6%, New York showing 7%, San Francisco at -6.9% and Washington, D.C., as a heavily disappointing -47.4%, which could also be a sign of bottoming out. The last point is also being seen in Los Angeles and Chicago.
By category, office has seen healthy leasing demand, although with regional divergence. Part of the strong demand has been the lowest U.S. office construction on record. More than two-thirds of the remaining pipeline is pre-leased. Q1 2026 leasing volumes were close to the highest since 2020, even with hybrid and work-from-home, but still have a distance before achieving the levels of mid-to-early 2019.
The short-term outlook will continue to feel influence from the Iran war and its duration and scale. In the long-term, declining new construction and uncertainty about tenant occupancy levels will put more focus on flexible portfolio management and workplaces convenient for commuting.
In logistics, volatility and limited availability haven’t impacted activity. North America has continued to outperform, JLL says, with expansion in 3PL firms and big-box space. That might be a developing trend, as small bay properties have been dominating warehousing. Logistics in North America in completions reached a peak in 2023 and then started to decline, with 2025 being a low point at less than in 2019.
In the short term, for logistics, supply chain disruptions, rising transportation costs and ongoing trade policy adjustments have made decisions more complicated for occupiers to make. Some need greater flexibility, which speeds portfolio restructuring. In the long-term, because speculative construction is low, there will be less modern supply in core locations, driving rental growth. An increase in owner-user and build-to-suit is likely to occur.
Retail leasing continues to be active in core locations, with positive U.S. absorption during Q1 for Class A malls and general retail. Occupancy declined in power centers and lower-tier malls. In the short-term, some retailers are pulling back on expansion expectations until they are more certain about higher occupancy costs and consumer sentiment. Prime destinations and smaller formats for greater planning flexibility will be attractive for occupiers. In the long-term, experiential retail formats and service-led tenants will grow in ways that can’t be replicated online.
Residential transactions in Q1 were down slightly year-over-year, but up 41% from volumes two years ago. A rising forward pipeline shows strong pent-up demand. In the short-term, volatility and the growing energy crisis open new uncertainty. Long-term, investors will expand to include markets with institutionalized residential sector opportunities.
Hotel performance had modest overall RevPAR growth, though “meaningfully stronger” in some markets with major events and leisure demand. Transactions increased moderately with selective investor interest in quality assets and strategic opportunities.
Short-term implications are mixed in the U.S. International tourism has been dropping, according to the Congressional Research Service and that was before the war in Iran. Energy shortages are affecting jet fuel prices, and so, the cost of air travel has been rising. Long-term, the global travel landscape is changing with no certainty of what will happen. Also, the limited new supply will drive brand repositioning and consolidation.
