Commercial real estate leaders expect industry conditions to worsen slightly over the next 12 months, according to the Commercial Real Estate Development Association (CREDA) CRE Sentiment Index for fall 2026. Rising interest rates and construction costs are outweighing a stronger outlook for rents and occupancy.

The index fell to 48 from 52 in March 2026. It measures industry expectations on a 100-point scale, where 50 means no change is expected. This is the first reading below 50 since September 2023.

Key findings:

• Respondents are less optimistic about capital market conditions. They expect that equity and debt will be slightly less available and anticipate that first-year cap rates will rise. Respondents are significantly less optimistic about each of these three measures than they were in the spring.
• Rising interest rates are likely behind this shift. Developers and building owners indicated that they expect interest rates to be unfavorable over the next year. The favorability score for interest rates fell to 31 from 52 in March, the largest decline between surveys since April 2022, which was the last time the survey coincided with the Federal Reserve shifting to a more restrictive monetary policy.
• Survey respondents expect both construction material and labor costs to rise more rapidly than they anticipated in March, and they are now more pessimistic about both measures than at any time since the April 2022 survey.
• The outlook for property-level fundamentals is strong. Respondents expect face and effective rents to grow more quickly than was their expectation in March, and they continue to anticipate that occupancy rates will increase.
• Developers and building owners expect an increase in the dollar volume of transactions and projects and that employment will grow slightly within their own firms. This suggests that improving fundamentals may be enough to encourage expansion despite rising interest rates and construction costs, though this environment favors investments in stabilized properties over new development.
• Most respondents expect to be most active in either industrial or multifamily real estate during the next 12 months. Data centers and retail properties attract the next highest levels of interest.

“The CRE Sentiment Index gives us an early read on where industry conditions are headed,” said Marc Selvitelli, CAE, CREDA president and CEO. “This fall, respondents are telling us that property-level performance remains strong, while uncertainty around capital markets, costs and policy is shaping when and where new development makes sense.”

The CREDA CRE Sentiment Index is conducted twice a year. It is designed to predict general conditions in the commercial real estate industry over the next 12 months by asking industry professionals about expected conditions for their projects and markets. The fall 2026 survey was sent to roughly 10,000 CREDA members in the U.S. and collected responses between Sept. 15 and Sept. 23, 2026. A total of 401 respondents from 299 companies took part, and the margin of error for the composite index score was 4.9%. CREDA Research Analyst Max Shpilband authored the current edition.

The full report is available at credaresearch.foundation.