Macroeconomic and Geopolitical Trends Shaping NYC Commercial Real Estate in 2026
Adapted from J.P. Morgan’s 2026 Commercial Real Estate Outlook
After a volatile 2025, commercial real estate is entering 2026 with a cautious sense of optimism—and a clear message: macro headlines still matter, but opportunities are increasingly market- and asset-specific.
One of the biggest reminders came from Washington.
The shutdown hangover: uncertainty that hits the real economy
The 43-day federal government shutdown dominated headlines through the fall and created real downstream impacts for the economy and commercial real estate—especially for projects tied to public funding.
Community development real estate felt the effects most directly. Many affordable and community-oriented projects rely on government programs, timing, and administrative capacity. When those systems pause—or even slow—projects can face delays, added costs, and increased execution risk.
Adding to the uncertainty, a continuing resolution extended FY2025 federal appropriations through January 30, 2026, meaning another shutdown risk could resurface this winter. Even the possibility of disruption can influence investor confidence and transaction pacing.
Policy uncertainty: tariffs, rates, and immigration are the key watch points
Beyond federal funding risk, investors are focused on three big variables that directly influence real estate fundamentals and feasibility:
1) Tariffs and construction costs
Shifts in tariff policy have already affected material pricing—especially inputs like steel, aluminum, and copper-related components. In real estate, this translates to higher budgets, less predictable bidding, and more conservative underwriting. For ground-up development and major repositioning projects, volatility matters as much as the price level itself.
2) Interest rates and inflation
Even when material costs rise, the primary factor slowing development activity—particularly in multifamily—has been the cost of capital. Higher rates compress feasibility, make refinances more challenging, and keep buyers and sellers further apart on price. While the market is watching for cuts, the bigger story is how long “higher for longer” affects deal volume, cap rates, and lending terms.
3) Immigration and labor supply
Labor is a major portion of total project cost. If immigration policy reduces labor supply, wage pressures can intensify—raising development costs and potentially reducing new supply. That dynamic can support rents long-term, but it makes execution tougher in the near term.
2026 outlook by asset class: where we’re seeing momentum
Office: early signs of a bifurcated recovery
Office is showing improving performance in select markets and submarkets, while remaining challenged elsewhere. The most consistent trend is flight to quality: best-in-class assets—especially those with strong wellness, sustainability, and modern building systems—continue to attract demand and command premium rents.
In Manhattan, tenants are still prioritizing high-performing buildings, strong ownership, efficient floor plates, and amenity packages that support employee experience. At the same time, older inventory with limited upgrade potential faces growing pressure.
For many obsolete assets, the long-term outcome may not be “lease up” but repurpose—whether through conversion, mixed-use repositioning, or alternative strategies depending on zoning, economics, and incentives.
Multifamily: fundamentals remain strong, but watch the job market
Multifamily remains resilient, supported by structural undersupply and persistent housing affordability challenges. Demand continues to outpace supply in many major cities, including New York, and long-term fundamentals remain healthy.
That said, macro risk still matters. If the economy weakens meaningfully and job losses increase, rent growth could soften in the short term. But in high-barrier markets with constrained new supply, any softness may be less dramatic than in markets that overbuilt.
Industrial and retail: steadier than the headlines suggest
Industrial leasing is off its post-COVID peak, but the sector remains strong—supported by nearshoring, onshoring, and supply chain reconfiguration. Tenant demand is especially durable in strategic logistics corridors and infill locations.
Retail is also entering 2026 with solid momentum, particularly in grocery-anchored and neighborhood center formats. With limited new supply and steady consumer spending, well-located retail continues to perform—especially in areas where office occupancy has improved and foot traffic is rising.
Don’t overlook operational risk: cybersecurity and fraud
As transactions, rent collections, and vendor payments become more digital, cyber hygiene is now a real estate operations issue—not just an IT issue. Owner-operators and property managers are increasingly focused on payment controls, employee training, and process safeguards that reduce exposure to fraud and disruption.
Bottom line: a more selective market, with real opportunity
The 2026 CRE outlook is constructive—but it’s not uniform.
- Top-tier office is attracting demand, while lower-quality space faces obsolescence risk.
- Multifamily remains structurally supported, though macro softness could affect near-term rent growth.
- Industrial and retail continue to offer opportunity, with careful attention to tenant credit and location quality.
In NYC, the theme is clear: execution and selectivity matter more than ever. The best opportunities will come from understanding submarket momentum, tenant behavior, and how policy-driven cost variables affect feasibility.
