For the past four years, commercial real estate has been the sector that investors loved to hate. Empty office towers, plummeting valuations, and fears of a cascading debt crisis dominated headlines. But as we enter 2026, something remarkable is happening: the industry is finally finding its footing.

The Numbers Tell a New Story

"2026 marks a turning point for U.S. commercial real estate," declared Steig Seaward, Senior Director at Colliers, in the firm's year-ahead outlook. "After years of navigating volatility, the industry is entering a period defined by greater clarity, confidence, and opportunity."

The data supports his optimism. Office attendance has settled at higher levels than at any point since the pandemic began. Gross leasing activity is trending upward. Most importantly, net absorption for Class A office space has turned positive for the first time in years—meaning more square footage is being occupied than vacated.

Sublease inventory, once a symbol of corporate retreat from physical offices, is declining. And with the office construction pipeline at its lowest level in a decade, the supply glut that plagued the market is slowly working itself out.

Manhattan Leads the Recovery

Nowhere is the turnaround more visible than in Manhattan. In the third quarter of 2025, just 16.6% of the city's office space was available for lease—the lowest availability rate since the end of 2020. Leasing volume surged to 23.2 million square feet in the first nine months of 2025, a stunning 40% increase from the same period in 2024.

Technology companies, once leading the retreat from office space, have re-emerged as major tenants. CBRE expects tech firms to account for 17-19% of Manhattan lease deals in 2026, signaling a meaningful shift in how Silicon Valley views physical workspaces.

A "Trifurcated" Market

Yet the recovery isn't uniform. Industry analysts describe the office market as "trifurcated"—split into three distinct segments with vastly different trajectories.

At the top, premium Class A properties in prime locations are experiencing genuine bidding wars for space. These modern buildings with top-tier amenities, sustainability certifications, and hospitality-driven services command premium rents and high occupancy.

In the middle, older Class A and quality Class B buildings face tough decisions. Many owners are investing heavily in renovations—adding rooftop decks, upgrading lobbies, and improving air quality systems—to compete for tenants increasingly focused on workplace experience.

At the bottom, older or poorly located buildings remain under severe pressure. Some may never return to their pre-pandemic occupancy levels and could face conversion to residential or other uses—or demolition.

Capital Returns to Commercial Real Estate

Perhaps the most encouraging sign for the sector: money is flowing back in. Third-quarter 2025 sales volume jumped more than 40% year-over-year, and Colliers forecasts a 15% to 20% increase in total sales volume in 2026 as institutional and cross-border capital re-enters the market.

Banks, which largely pulled back from commercial real estate lending in 2023 and 2024, are cautiously returning. "We're seeing banks easing back into commercial real estate lending," noted one industry report, though underwriting standards remain stricter than before the crisis.

The Debt Maturity Challenge Persists

One cloud still hangs over the sector: the wall of debt coming due. Nationwide, $539 billion in commercial mortgages mature in 2026—down from the $957 billion that came due in 2025, but still well above the 20-year average of $350 billion.

The delinquency rate on commercial mortgage-backed securities (CMBS) loans stood at 7.29% as of mid-2025, reflecting the stress still working through the system. Properties that borrowed at low interest rates and high valuations face difficult refinancing decisions in a higher-rate environment.

What It Means for Investors

For individual investors, the commercial real estate recovery creates opportunities—but requires selectivity. Real estate investment trusts (REITs) focused on Class A office properties in gateway cities like New York, Boston, and San Francisco are positioned to benefit from rising rents and occupancy.

Meanwhile, distressed opportunities continue to emerge as overleveraged owners sell at discounts. Private equity firms and institutional investors have been circling these deals, but patient individual investors with access through REITs or interval funds can participate as well.

"The office sector is showing real signs of momentum. A clear theme is emerging: strong demand for high-quality space, and not enough of it."

— Cushman & Wakefield, 2026 U.S. Real Estate Outlook

After years in the wilderness, commercial real estate appears ready for its comeback story. Whether 2026 delivers on its promise will depend on continued economic growth, stable interest rates, and workers' ongoing return to the office. But for the first time in half a decade, the industry has reason for genuine optimism.