Our annual outlook examines macroeconomic conditions, deal flow projections, and the strategic posture capital allocators should adopt entering H2 2026. The themes we identified at the start of the year remain operative — the question is how aggressively to lean into the opportunities they create.
Macroeconomic Conditions
The U.S. economy has proven more resilient than consensus expected at the start of the year. Labor market strength has supported consumer spending and kept commercial real estate fundamentals more stable than feared. However, the lagged effects of the rate hiking cycle are now materializing in commercial real estate — refinancing pressure, valuation resets, and a transaction market that remains below historical norms.
The path for rates matters. If the Fed begins a gradual easing cycle, we expect transaction volumes to recover meaningfully as buyers and sellers find alignment on pricing. If rates remain elevated, the market will continue to find equilibrium at lower transaction volumes with deal flow concentrated in distress and motivated-seller situations.
## Deal Flow Projections
We expect deal flow in H2 2026 to be driven by: - Bridge-to-permanent refinances as existing loans mature and need extension or takeout - Portfolio transactions as institutional sellers look to prune positions - Distressed acquisition opportunities as overleveraged owners run out of options - Strategic acquisitions in sectors with strong fundamentals (industrial, multifamily in supply-constrained markets)
Deal flow in office and retail will remain constrained. Multifamily will be more active, with transaction volume depending on the interest rate path. Industrial will be the most active sector.
Strategic Posture
Our recommendation for capital allocators entering H2 2026: position for increased deal flow activity while maintaining underwriting discipline. The opportunity set will expand as the year progresses — but the expanded flow will include more complex and distressed situations that require deeper due diligence and more sophisticated structuring.
Disciplined capital with available dry powder and deal expertise should be actively sourcing in the current environment. Forced sellers and motivated repositioning opportunities will be more available in the second half of the year than they have been in the past two years.
