Emerging New Real Estate Cycle with Josh Pristaw

 Discover why industry leaders believe commercial real estate is entering a new cycle in 2026. Insights on industrial, housing, healthcare, debt markets, and investment strategy with Josh Pristaw of Clarion Partners.

Emerging New Real Estate Cycle with Josh Pristaw

The commercial real estate (CRE) market has faced its share of negative headlines over the past few years—rising interest rates, office uncertainty, and capital market disruptions. However, according to industry leaders, the fundamentals are shifting in a positive direction. In a recent conversation on the America's Commercial Real Estate Show, host Michael Bull sat down with Josh Pristaw, President and Managing Director of Clarion Partners, to discuss why 2026 may mark the beginning of a new commercial real estate cycle.

With approximately $74 billion in assets under management across nine countries, Clarion’s perspective offers valuable insight into where the market is heading and where investors may find opportunities.

Signs a New Commercial Real Estate Cycle Has Begun

One of the strongest indicators pointing to a new cycle is performance data. According to Pristaw, the U.S. private real estate market has experienced five consecutive quarters of positive returns. Historically, sustained positive returns signal that a market bottom has passed and a new growth phase is beginning.

Several additional factors support this outlook:

• Strong property fundamentals: Vacancy rates remain below long-term averages in most sectors.

• Interest rate cuts: The start of a Federal Reserve easing cycle improves financing conditions and valuations.

• Attractive pricing: Compared to equities and bonds, real estate appears fairly valued or even discounted.

• Below replacement cost opportunities: Many assets can be acquired for less than the cost to build new, historically a leading indicator of strong future returns.
  

Together, these elements suggest CRE may be entering a favorable investment window.

Tenant Demand Across Property Sectors

Despite concerns in certain segments, tenant demand remains resilient across much of the market.

Industrial Real Estate

Industrial continues to benefit from structural demand drivers such as e-commerce growth and logistics optimization. While leasing activity slowed briefly due to trade policy uncertainty, demand rebounded toward the end of 2025 and resembles pre-pandemic “good years.”

Clarion remains highly constructive on industrial and related sectors, including outdoor storage (IOS).

Multifamily Housing

Demand for rental housing remains strong, though some markets have faced elevated supply levels. A major tailwind is that construction starts have dropped sharply—often 50% or more across asset classes, which should help restore balance and support rent growth in 2026 and beyond.

Office Sector: A Market Divide

Office performance varies dramatically by asset quality. High-amenity, modern buildings in strong locations continue to see leasing demand, while older properties struggle. This “flight to quality” trend is expected to persist.

High-Conviction Investment Themes: Healthcare, Housing, and Industrial

Clarion identifies three sectors with particularly strong long-term fundamentals.

1. Healthcare and Senior Housing

Demographics are a powerful driver. The U.S. population aged 80+ is growing by roughly 10,000 people per day, and the cohort is expected to double over the next decade.

Senior housing supply is not keeping pace:

• Required: ~100,000 new units annually

• Historical peak: 50,000 units

• Current pace: ~25,000 units

This imbalance could create significant cash flow growth opportunities for investors.

2. Housing Shortage and Demographics

According to Freddie Mac, the U.S. faces an estimated 3 million-unit housing shortage. At the same time, millennials—the largest generation in history—are entering prime household formation years, creating sustained demand for housing.

3. Industrial and E-Commerce Growth

Even though e-commerce growth rates have normalized since the pandemic surge, the absolute expansion remains significant. Research suggests annual e-commerce sales could increase by $1 trillion by 2035, supporting long-term demand for logistics space.

Supply Trends Favor Investors

Across most property types, new construction has fallen sharply due to higher financing costs and economic uncertainty.

For example:

• Industrial construction starts are down roughly 60% from peak levels.

• Multifamily development has slowed significantly.

• Developers face uncertainty around tariffs and material costs.

For long-term investors, reduced future supply combined with population and job growth creates favorable rent and cash flow prospects over the next five to ten years.

Debt Markets and Capital Availability

Financing conditions have improved meaningfully with interest rate cuts. Institutional borrowers with high-quality assets are finding:

• Positive leverage opportunities

• Tight lending spreads

• Strong liquidity from banks, insurers, and alternative lenders

Improved capital markets liquidity is another signal supporting the “new cycle” thesis.

Data Centers: Opportunity with Complexity

Data centers are attracting enormous investment, fueled by artificial intelligence and cloud computing growth. According to Jones Lang LaSalle, approximately $1 trillion in data center development is planned or underway in the U.S.

However, challenges remain:

• Large project sizes (often billions per asset)

• Rapid technological change

• Exit pricing uncertainty

• Limited buyer pools for stabilized assets
  

For diversified core investors, integrating data centers into portfolios requires careful risk management.

Demographics: The Most Powerful Driver of All

Perhaps the most compelling long-term theme is demographic change. Compared to prior generations, fewer seniors are living with adult children, increasing demand for independent and assisted living communities.

This demographic shift alone could create millions of additional residents needing senior housing over the coming decade—potentially one of the biggest CRE stories of the next 5–10 years.

Investment Outlook for 2026 and Beyond

While the ultra-low interest rate environment of the past decade is unlikely to return, the future of commercial real estate appears increasingly tied to fundamentals rather than financial engineering.

Key takeaways for investors:

• Focus on sectors with structural or demographic demand drivers.

• Expect moderate appreciation driven by cash flow growth.

• Take advantage of pricing opportunities below replacement cost.

• Consider long-term horizons of 3–10 years for maximum value creation.
  

According to Pristaw, the combination of improving capital markets, declining supply, and strong demand fundamentals makes the current environment one of the most attractive entry points for core and core-plus real estate in years.