Reflecting & Projecting – Observations from 2025, Projecting BDR’s Best Year in 2026

Commercial Real Estate Outlook: From Soft Growth to Renewed Momentum in 2026

Economic growth in the United States remained relatively soft throughout 2025, with uneven GDP performance and constrained job expansion contributing to cautious investor sentiment. Despite this, leading indicators suggest that a combination of lower interest rates and improving market fundamentals should spark increased activity in 2026. After a prolonged period of elevated borrowing costs, anticipated rate cuts are expected to make capital more accessible, igniting deal flow and investment confidence across sectors. Recent industry projections signal a meaningful shift in market trajectory.

Global commercial real estate powerhouse CBRE—the largest brokerage firm of its kind in the world—recently projected that commercial real estate sales volume will grow at a 5.7% compounded annual rate from 2026 through 2029. This forecast not only reflects renewed transactional activity but also underpins what many analysts view as a transition from the recessionary phase of Mueller’s real estate cycle into expansion territory for most property types, though not all sectors will participate equally.

Office Market: Signs of Improvement in Deal Flow

After years of subdued activity, deal flow in the office sector improved modestly in 2025, particularly within Class A and Class B space. Notable transactions included the leasing of 65 Professional Place and a significant long-term lease at 150 Clay Street, among others that helped stabilize sentiment in office markets traditionally strained by vacancy and changing workplace dynamics. In 2025, BDR closed 106 deals (58 lease and 48 sale). 38 of those deals were of the office sector. View our closed transactions page for the full list.

These improvements build on broader market indicators showing narrowing vacancy rates in higher-quality assets and rising lease demand relative to recent troughs, especially as tenants chase well-situated and amenitized office space. While legacy Class C office properties still lag, the inflection in Class A and B metrics points to early stabilization.

Investment Appetite Strengthens

Investor confidence has strengthened on the back of several positive catalysts:

• Lower interest rates now on the horizon are expected to reduce borrowing costs and stimulate acquisition activity. Business Insider

• Bonus depreciation provisions and enduring tax advantages keep real estate competitive as both a wealth-building and wealth-preservation tool.

• Improving fundamentals in sectors like industrial, multifamily, and prime office space support continued capital inflows.

Although cap rates have risen modestly in tertiary markets we serve, reflecting risk premiums and market recalibration, the outlook for 2026 anticipates cap rate compression of 25–50 basis points as borrowing costs decline. That said, cap rate trends will remain sensitive to local supply-demand dynamics within each sector, underscoring the importance of targeted underwriting and market selection.

Construction Activity Remains Limited

New construction starts continued to lag in 2025, a trend expected to persist into 2026. According to industry reports, construction costs have risen roughly 39% compared to a 27% inflation rate over the same period, exerting upward pressure on project budgets and timelines. Meanwhile, labor shortages—driven by an aging workforce, fewer new entrants, and restrictive immigration policies—have further constricted capacity. As a result, new construction projects are at multi-decade lows, with limited starts anticipated in 2026 given cost and complexity challenges. (Source: CRE Daily analysis.)

Geopolitical Tensions and Tariff Uncertainty

Policy developments in recent years, including tariffs instituted under President Trump’s strategy, contributed to challenging geopolitical relationships and broader market uncertainty. These dynamics led some investors and occupiers to adopt a cautious “wait and see” approach as markets absorbed the implications of trade policy shifts. While tariffs are expected to recede somewhat as a focal point in 2026, geopolitical tensions—heightened by events such as the recent developments in Venezuela and other regions—will continue to exert subtle pressure on capital flows and investor risk appetite.

Youth Sports: A Surging Real Estate Engine

One of the most dynamic and under-recognized drivers of real estate activity is the youth sports and tournaments industry. Now estimated as a $36 billion sector projected to balloon to $260 billion by 2034, youth sports represent nearly 20% annualized growth, creating robust demand for purpose-built facilities and ancillary development.

This trend is evident in a number of regional projects attracting teams, families, and associated commercial activity, including:

1. The Bridge in Bridgeport, WV – a multifaceted youth sports and event venue stimulating local hospitality and retail demand.

2. Mylan Park in Morgantown, WV – a community-anchoring sports complex drawing significant regional visitation.

3. Hagerstown Field House in Hagerstown, MD – a facility packed with action for all ages—from soccer, basketball, and flag football to lacrosse, volleyball, and more.
4. Berkeley County Sports & Event Center in Martinsburg, WV – a 256-acre facility that will be recognized as an elite tournament quality sports, fitness and recreation venue, serving athletes, coaches and fitness enthusiasts of all ages and abilities.

Youth sports campuses are becoming major placemaking assets, driving foot traffic, hotel stays, restaurant patronage, and broader economic spillover — reinforcing real estate’s role at the intersection of community and commerce.