You Have to Work for It: What the Emerging Trends in Real Estate Report Says About Rates, Sectors, and Markets
For 48 years, the Emerging Trends in Real Estate report from PwC and the Urban Land Institute (ULI) has captured what the people who own, lend on, and build commercial property expect from the year ahead. This year’s edition draws on more than 500 interviews and close to 1,000 surveys of property owners, lenders, developers, and home builders across the US and Canada, most of them C-suite executives. At 152 pages, it is one of the most thorough forward-looking reads in our industry.
To walk through the highlights of Emerging Trends in Real Estate 2027, I welcomed Andrew Alperstein, Partner and Financial Markets and Real Estate Leader at PwC, back to America’s Commercial Real Estate Show.
The report’s theme sums up the year in five words: you have to work for it. For owners and investors, that message carries real implications for how to buy, finance, and operate property over the next several years.
The Rate Reality: Higher, and for Longer Than Expected
The top economic issue on respondents’ minds was the cost of capital. The interviews and surveys ran from July through September, while the 10-year Treasury climbed toward 5% before settling near that level. Real estate is a leveraged business, so that move shaped nearly every conversation.
As Andrew put it, rates came in higher than people expected, and the longer has proven more persistent. Respondents expect rates to stay elevated through 2027, though most still see some moderation five years out.
What struck me most is that the industry has stopped counting on a rescue. For much of the last cycle, appreciation in multifamily and industrial was driven by refinancing and nearly free money as much as by the assets themselves. That tailwind is gone. Asset selection and asset management now carry the return, which is where the “work for it” theme came from. In my own business, veterans who started in double-digit rate environments call today’s rates normal, while investors who came up in the last decade see them as punishing.
Inflation and Limited Supply Favor Owners Who Hold Quality Assets
Respondents expect higher inflation alongside higher rates, with elevated diesel and oil prices flowing through to costs, especially for retailers. Many also see opportunity: real estate has historically been a strong inflation hedge, and new construction has fallen to very low levels for most property types.
Retail: Almost no new supply is being built, which supports rents and occupancy at well-located centers.
Office: New construction is very limited, and obsolete space is slowly leaving the market through conversions and demolitions.
Industrial: The development wave of recent years has moderated, and demand has largely caught up.
Multifamily: Certain markets are still absorbing recent deliveries, which will take some time.
Data Centers: This is where most new supply is concentrated, driven by hyperscaler demand.
I cannot remember another point in my career when this little new supply was coming online at this stage of a cycle. That constraint can help property performance faster than many expect. It also widens the gap between pricing and replacement cost. At Bull Realty we recently brought to market a 17-story tower that can be acquired for about $64 per square foot, a figure some buildings collect in annual rent.
Sentiment Is Down, Buy Signals Are Up
The report’s sentiment gauge tells two stories at once. On the profitability outlook, the share of respondents rating it good or excellent has slipped steadily.
Two Years Ago: 65% rated the outlook good or excellent.
Last Year: 55% rated the outlook good or excellent.
This Year: 50% rated the outlook good or excellent.
At the same time, buy signals across all US property types were among the strongest in recent years. Andrew attributes that to the basis opportunity: well-located assets can be acquired at attractive prices relative to replacement cost.
Distress came up less than PwC expected. Banks are in better shape than a few years ago, and debt funds and private lenders have joined banks, insurance companies, and CMBS in supplying capital. Still, a large volume of 2019 and 2021 vintage loans comes due in 2027 and 2028, weighted toward office and then multifamily, and some of those owners will need to sell or recapitalize below the prices they hoped for.
AI Shifts From Early Experiments to Scaled Use
Respondents were net positive on AI. The challenge now is measuring its impact and scaling it from research into diligence and asset management, with a human still in the loop on investment committee memos. Andrew also raised a concern I share: if AI absorbs the analyst work that trains young professionals, the industry needs new ways to develop talent.
AI companies have also driven much of the recent office leasing in San Francisco and New York. Any early drag on office demand is more likely to hit suburban call centers and back-office campuses, while growing central business district tenants want amenities and technology that pull employees back four or five days a week. At Bull Realty, AI has made our team more productive, and we have added people. Andrew heard the same from many firms that want to grow with the people they have trained.
Where Investors Want to Be: Sectors and Markets
With cap rate compression off the table, investors are favoring sectors where operations can drive growth.
Senior Housing: The clear leader. An aging population, recovered staffing, and little new supply point to strong net operating income (NOI) growth, though the country is not building enough at the right price points or in the right places.
Retail: Once written off, now a core holding, led by grocery-anchored and experiential centers serving the top end of a K-shaped economy.
Industrial: Well positioned, supported by onshoring, advanced manufacturing, and defense tech.
Office: Still a story of winners and losers, but for the first time in years it was not the clear laggard.
Data Centers and Multifamily: Both stepped back slightly, data centers on policy headlines and multifamily on new supply still being absorbed.
The report also highlights an expanding real estate universe that includes infrastructure, marinas, and golf courses, operational assets where a hands-on owner has more ways to add value.
For markets, Dallas ranked No. 1 for the third straight year, followed by Nashville, Miami, Raleigh-Durham, and San Francisco, which posted the biggest move on the back of AI-driven office demand. Houston, Manhattan, Jersey City, Tampa-St. Petersburg, and Charlotte completed the top 10. Andrew also noted improving scores for several Midwest markets as Sunbelt costs rise, and a much larger role for federal, state, and local policy in where capital is willing to go.
Final Thoughts: Earning the Return
Transaction volume this year is running near last year’s pace, well below 2021 and 2022, and Andrew describes it as selective. Buyers want a specific asset in a specific submarket. The desirable assets are highly sought after, and the rest sit in a logjam.
That selectivity is the opportunity. When you can buy below replacement cost, new supply is scarce, and higher rates thin out the competition, a disciplined investor with a clear operating plan is well positioned. The report’s message is that returns will be earned through careful acquisition and hands-on management, and I think that is a healthy place for our industry to be.
Have a Commercial Real Estate Strategy to Discuss?
How do you see the year ahead? With new supply at historic lows, well-located properties trading below replacement cost, and fewer buyers competing for them, this may be one of the better acquisition windows in years for investors willing to work for their returns. We are experiencing good activity on properties we take to market. If you would like to discuss the market and your goals, give me a call.
Michael Bull, CCIM
Michael@BullRealty.com
404-876-1640 x 101