Industrial real estate will diverge by market, driven by supply-chain realignment, defense and tech spending, and the need for power-ready logistics, with vacancies tightening in both smaller and large-scale spaces.

The 2026 macro backdrop features lower inflation and generally lower interest rates (with some exceptions like Japan) and a steepening yield curve, favoring cash-flow growth strategies over cap-rate compression.

Opportunities vary by subsector: self-storage may improve as demand normalizes; net lease offers durable cash flows with strong tenants and assets; data centers benefit from hyperscaler demand despite AI concerns and power constraints.

Healthcare varies by segment: senior housing delivers solid risk-adjusted returns, life sciences face oversupply, medical offices show solid demand tied to outpatient trends, and regulatory plus demographic factors shape performance.

The sector-by-sector outlook highlights robust demand drivers across areas like industrials linked to power and defense, residential driven by migration and urbanization, office with premium Class A assets commanding strong pricing, retail showing stability in essential and luxury segments, healthcare balancing strong outpatient demand with life-science headwinds, and data centers expanding as a scalable growth engine fueled by AI demand.

MSREI predicts 2026 will be an inflection year after years of value decline and stagnation, with rising transaction activity and potential value growth on the horizon.

Supply is expected to tighten due to high construction costs and rent gaps, while demand should recover, signaling an upcycle across multiple sectors and regions.

Geopolitical risks remain elevated, with policy uncertainty and conflicts driving volatility and underscoring the need for a flexible, diversified, asset-level approach.

Residential demand remains supported by tight supply and long-term fundamentals, with strong for-rent markets, European urbanization, migration trends, and robust student housing near universities.

Retail resilience persists with limited new development and steady occupancy, particularly in grocery-anchored and luxury centers in strong markets.

Hospitality trends are favorable due to demographic tailwinds for travel and experiences, with demand drivers diversifying and urban markets remaining concentrated.

Office markets continue to favor high-quality, well-located Class A properties, even as leasing costs, ESG mandates, and uncertainty about AI’s long-term impact on office employment pose headwinds.