Commercial real estate (CRE) has long been one of the bedrocks of global capital markets, acting as both a reflection of economic health and a driver of long-term institutional returns. But in 2026, the sector stands at a structural inflection point. Growth is uneven across regions and asset classes, capital flows are migrating toward uses that favor human proximity and flexibility while macroeconomic forces, especially interest rates, continue to dictate the risk/reward calculus. The old playbook of long-term leases, predictable cash flows and stable occupancy is being challenged by technological disruption, evolving work patterns and a deep rethinking of what real estate should be in a post-pandemic, increasingly digitized economy.

Where Commercial Real Estate Is Growing And Why

Asia Pacific: Rising Demand in Secondary Cities
Cities across Asia Pacific continue to showcase robust commercial real estate expansion, fueled by rapid urbanization, rising disposable incomes and strong domestic demand. Singapore, Seoul and select markets in India are drawing attention for both office and logistics investment. In Southeast Asia, logistics and industrial assets, warehouses and last-mile distribution centers are booming due to sustained e-commerce growth. Secondary cities in China and Vietnam are also attracting capital as investors look beyond overheated coastal hubs to new urban growth corridors.

Logistics & Data Centers
CRE growth is highest where digital infrastructure meets real demand. Data centers, critical for cloud computing, AI workloads and global connectivity, are expanding sharply in North America, Europe and Asia. Logistics properties are in the spotlight globally as supply chains are reconfigured for resilience and speed. These sectors benefit from secular trends that are less sensitive to traditional office traffic patterns or retail footfall.

Residential Conversions & Urban Redevelopment
Some of the most dynamic activity is occurring in the conversion of underutilized office buildings to apartments. In major metropolitan markets like New York, London, Toronto and Sydney, developers and policymakers are accelerating adaptive reuse projects to address housing shortages. These conversions not only repurpose obsolete CRE stock but unlock new cash flows rooted in rental income, an asset class showing strong investor preference.

Where Growth Is Slowing And What That Means

Office Space, A Structural Reset
Perhaps no segment illustrates the CRE shift better than the office market. Post-pandemic work patterns have fundamentally changed demand. While prime, central business district (CBD) office towers in global capitals still command premiums, many markets are grappling with persistently high vacancy rates. Suburban and lower-tier offices, once stable cash cows, are now under pressure from remote work, downsizing leases and hybrid work cultures. Major markets in the U.S. and Europe still registering negative absorption are prompting landlords to rethink their portfolios or negotiate concessions unheard of in the pre-pandemic world.

Retail is Not Dead it’s Just Evolving
Retail real estate isn’t collapsing, but growth has slowed dramatically. Demand has shifted toward experiential and necessity-based retail, such as grocery-anchored centers, outlet malls and mixed-use destinations that combine dining, entertainment and services. Traditional enclosed malls are increasingly being repurposed or renovated to attract foot traffic rather than purely serve as shopping corridors.

Interest Rates, The Decisive Macro Lever

Interest rates remain one of the most consequential forces shaping CRE outcomes. Unlike equities or bonds, real estate is fundamentally leveraged, underwriting assumes the ability to borrow cheaply to finance the carry until income stabilizes.

When Rates Rise
Higher interest rates increase borrowing costs, compress cap rates and reduce valuation multiples, especially for properties with long-term, fixed leases. Investors demand higher yields to compensate for elevated financing costs. Rising rates can also widen the spread between the cost of capital and net operating income (NOI), pressuring returns and slowing transactional activity. In many markets, rising rates have cooled bidding and increased hold-period skepticism, particularly for trophy assets where yields tightened aggressively in the prior decade.

When Rates Fall
Conversely, lower rates typically fuel CRE investment, as cheaper capital boosts leverage affordability, cap rates compress and risk premia narrow. Markets with stable inflation expectations and accommodative monetary policy often see increased deal flow, especially in trophy and core assets. However, there’s a caveat, low rates can encourage overbuilding or create pricing bubbles in specific submarkets.

Conversions Are A Structural Strategy

One of the most thought-provoking trends in CRE is the acceleration of conversions, transforming obsolete or underutilized commercial buildings into residential, mixed-use, life sciences labs or logistics hubs.

This is especially prominent in:

• Office to apartments: Urban cores with aging office stock and strong housing demand are prime candidates. Adaptive reuse projects in cities like Chicago, London, and Toronto are already moving forward at scale.

• Retail to community-centric spaces: Some malls are being reimagined as mixed-use campuses with housing, healthcare clinics, community spaces, and services.

• Office to life sciences: Cities with strong biotech demand (Boston, San Diego) are converting older offices into specialized lab and research facilities.

These conversions require capital, vision, and regulatory cooperation but when successful, they unlock latent value and enhance urban density without sprawl.

A Provocative Look Ahead

The trajectory of commercial real estate is no longer linear, it’s interconnected with technology, work culture, demographic shifts and urban policy. The growth prospects of CRE will likely hinge on how well markets adapt to:

• Hybrid work environments

• Digital nomad trends

• Aging infrastructure needing repurposing

• Sustainability and ESG requirements

• Integration with real-world tokenization and digital asset platforms (which could unlock new liquidity avenues for traditionally illiquid properties)

Investors are increasingly asking not just where real estate is growing, but how value is created and who captures it, whether through traditional rents, conversion premiums or new forms of capital being deployed into evolving asset uses.

Commercial real estate is no longer just “where companies do business.” It is becoming the foundation for cities, lifestyles and hybrid economies. The markets that adapt by reimagining assets, embracing adaptive reuse and leveraging macro trends, will not only survive the next decade, they will define it.