ULI And PwC: 5 Trends Defining The 'Mix Of Excitement And Fear' About 2026

Commercial real estate executives don’t expect it to get easier to find deals in 2026. 

Tariff shifts, immigration crackdowns and a murky interest rate outlook are clouding forecasts, according to the closely watched Emerging Trends in Real Estate 2026 report released Wednesday. The fog hanging over the economy will define the year ahead for developers, investors and lenders alike.

“Real estate continues to offer development and investment opportunities but requires navigating through the fog,” the authors wrote in the report’s opening paragraph.

Researchers from the Urban Land Institute and PwC found a wide divergence in views on how long the policy-driven uncertainty will last. 

Decision-makers who were surveyed are split about where interest rates and inflation are headed. But optimism around buying opportunities is at a 20-year high, suggesting that pent-up capital is ready to move once pricing clarity returns.

The 2026 report’s framing of a market stuck in a fog follows last year’s declaration that “the skies are finally clearing over commercial real estate,” as investors hoped that easing monetary policy would boost markets. 

“The mix of excitement and fear is palpable and, depending on the view of each firm and decision maker, navigating through the fog is easy, difficult, or temporary,” the 2026 report’s authors wrote.

The report, based on more than 500 interviews and 1,200 survey responses, identified five key trends for commercial real estate markets in 2026 — from capital availability and demographic shifts to the rapid integration of artificial intelligence. 

1. Navigating The Fog

Transaction volume has accelerated through 2025, with third-quarter volumes 16% ahead of the prior year. But PwC and ULI tracked a divide in sentiment over whether the trend can continue through next year. 

Market optimists believe that sidelined investors will finally return to the market as the Federal Reserve continues easing monetary policy. Limited new development activity over the last two years adds another tailwind, the thinking goes, along with changes to tax policy, manufacturing incentives, opportunity zones and other initiatives from the White House.

But the pessimists on the other side expect a higher-for-longer rate environment that will weigh on activity and maintain what has been a persistent gap between buyer and seller pricing expectations. The market bears are finding higher returns today in secondary markets than on opportunistic assets and expect more distress to manifest as loans mature. 

“The half-empty case expects moderate deployment of dry powder from sidelined equity investors and does not anticipate cap rate compression,” the report’s authors wrote. 

There is agreement on both sides, however, that an influx of liquidity is likely coming over a longer time horizon. President Donald Trump signed an executive order that opens defined contribution retirement accounts to real estate investments, and industry leaders expect it will eventually funnel trillions of dollars into the sector, the report found. 

2. Niche No More 

Investors are rewriting their playbooks as sectors like data centers and senior housing become core holdings.

“What was once considered niche is now essential,” the report’s authors wrote. 

Data centers beat out all other property sectors and subsectors in investors’ ranking of acquisition and development prospects for 2026. But industry leaders are also looking to increase their exposure to senior housing to provide services for the wave of aging baby boomers who are expected to propel demand. 

U.S. core funds increased their exposure to warehouses by 20% over the last decade and cut their office holdings by 25.5% over the same period. All other sectors had swings of less than 5 percentage points. 

Self-storage assets continue to pull in new investment and now represent the largest share of core funds’ investments after the four major property types — apartment, industrial, office and retail. Buyers are also more frequently picking up medical offices for their durability across cycles.

Institutional funds have been especially focused on single-family rentals, which accounted for more of the group’s acquisitions than manufactured housing, data centers and senior housing combined, the researchers found.  

Meanwhile, family offices and high net worth individuals are increasingly targeting marinas and “clipping the coupon on slip rentals,” according to the report. 

3. Embedding Analytics In Operations

The uncertain macroeconomic landscape has put a renewed focus on optimizing portfolio performance and market research ahead of acquisitions.

“Operating performance is expected to drive total returns over the near term due to the uncertain path ahead for inflation and interest rates,” the authors wrote.

Operators are looking to cut costs but are also aware of the growing performance divide between high-quality properties and practically everything else. ULI and PwC found that industry leaders expect tenant demand to remain crowded at the top in 2026.

Investors and owners are finding that demand is lumpy across markets, sectors and asset classes, and the economic fog that has descended on the country is forcing them to take a granular approach to asset selection. 

PwC and ULI expect this will lead to a more fragmented capital environment in 2026 as investors adapt their strategies to be more market-dependent. The researchers forecast that the wide spread of economic outlooks represented in survey responses and the broad range of strategies that are being pursued will keep any one market or sector from becoming overheated. 

“Strategy considerations and portfolio construction are likely to keep industry leaders from piling in on the same block,” they wrote. 

4. Demographics Define Demand

Trump’s immigration crackdown and a slowdown in interstate migration are forcing investors to rebalance growth expectations for the markets where they own assets and the U.S. at large. 

The U.S. faces lower growth prospects as the White House cuts international migration, which has historically helped fuel economic growth. Labor force growth is expected to decline, keeping labor markets tight, especially in industries that rely on immigrant labor. 

Household mobility reached its lowest point in 50 years in 2024, with homeowners still unwilling to replace their low-rate mortgages with debt at today’s costs. The current rate environment will continue to weigh down migration in 2026. For the people who are moving, new considerations are impacting where they land. 

Climate change is a growing factor, with the decadeslong migration of Americans from colder climates to warmer locations showing signs of reversing as the Sun Belt experiences more days of extreme heat, testing residents' appetite for sunshine, the report’s authors said.

Healthcare access has also become a key consideration for interstate movers after the Supreme Court cleared the way in 2022 for states to restrict abortion access. A working paper from the National Bureau of Economic Research found that 36,000 people have moved out of states with abortion restrictions each quarter since the court’s ruling.  

“The combined effects of less migration, lower growth, and new considerations for where to live and work are changing the landscape for real estate demand. Old patterns may not hold, but new opportunities will emerge,” the report says. 

5. Entry-Level AI

Operators are quickly moving to integrate AI into real estate workflows, with larger institutions pursuing the most aggressive deployment strategies, PwC and ULI found. 

Administrative tasks and customer service have been the first proving grounds for the tech. Internally, AI is commonly being leveraged to complete paperwork and do routine research, while operators are deploying chatbots to handle customer service and inventory management.

The firms going all-in are developing properties with AI in mind, the researchers found. They are building multifamily properties with fewer or no on-site amenities and a fully automated leasing and resident services platform, which allows the developer to offer units at a cheaper price point. 

Industry giants rather than market insurgents are leading the push to integrate AI into higher-value tasks and property operations, the researchers found. 

Current AI solutions are more likely to supplement a worker’s output rather than replace them, but job losses from automation are happening in commercial real estate and the broader economy and are likely to accelerate. 

“As AI use expands further into research, underwriting, and reporting tasks, it is becoming a larger threat to hiring, particularly for entry-level roles,” the authors wrote.