Economic conditions were mixed in August. The economy continued to grow, but at a slower pace. The labor market remained relatively steady, while inflation was still elevated. At the same time, interest rates remained high, suggesting that borrowing costs are likely to stay elevated in the near term.
With little change in the broader economy, commercial real estate also continued a similar path in August. Some sectors improved further, while others remained mostly steady. Below is a summary of the performance of each major commercial real estate sector in August of 2026:
The office market continued to stabilize in August as positive annual absorption strengthened and vacancy edged lower. Improving demand and firmer rent growth suggest the sector is moving further from the prolonged period of occupancy losses, though the recovery remains uneven. Class A continued to lead leasing activity, while Class B remained pressured by tenant move-outs despite substantial inventory removal. Class C also recorded negative absorption, although its comparatively low vacancy continues to distinguish it from the rest of the market.
Multifamily conditions improved further in August as solid demand combined with a continued slowdown in new supply, allowing absorption to remain above deliveries. This rebalancing is helping the sector work through excess inventory, with vacancy declining and rent growth gradually strengthening, though pricing power remains limited. Class A continued to benefit from demand exceeding new supply, while Class B maintained resilient absorption and modestly improving fundamentals. Class C also improved, returning to slightly positive absorption while retaining the lowest vacancy among the three classes.
Fundamentals across the retail sector remained resilient in August as positive absorption broadened across major formats and vacancy stayed near historically low levels. General retail remained the largest source of demand, while Neighborhood Centers, Malls, and Power Centers all posted positive absorption. Supply growth continues to outpace demand, creating some risk of modest vacancy pressure as new space is delivered. Even so, limited availability continues to support rents, with Neighborhood and Power Centers posting the strongest growth among the major formats.
Conditions across the industrial sector continued to normalize in August as stronger absorption narrowed the gap with new supply and helped limit further vacancy pressure. Demand more than doubled from a year earlier, signaling continued progress in working through excess inventory, though rent growth remained restrained. Logistics accounted for most leasing activity, while specialized facilities maintained the tightest vacancy. Flex continued to lag the broader market, with negative absorption and the highest vacancy among the three major property types.
Hospitality performance remained relatively steady in August, although occupancy continued to trail pre-pandemic levels as remote work and softer corporate travel constrained business-focused markets. ADR and RevPAR stayed well above 2019 benchmarks, helping support operating results despite weaker occupancy. Investment activity remained restrained as high borrowing costs and economic uncertainty continued to weigh on investor appetite.
Source: “October 2026 Commercial Real Estate Market Insights Report”
