The office crisis
Office vacancy hit 21% nationally in Q1 2026 — and Class B/C buildings in second-tier downtowns are above 30% in cities like San Francisco, Houston, and Chicago. Lender losses on office loans hit $74B in 2025; the Fed expects another $40–60B through 2027.
Industrial flips to weakness
Industrial — the post-COVID darling — has softened materially. Vacancy rose from 3.2% in 2022 to 6.8% in Q1 2026 as new construction caught up with Amazon-driven demand. Rent growth has gone from +25% YoY to negative -2%.
Retail surprisingly fine
Retail vacancy of 4.1% is the lowest of any major property type. Open-air shopping centers anchored by grocery stores or service tenants (Starbucks, T-Mobile, salons) are at all-time-low vacancy. Enclosed regional malls remain in long-term decline.
Sources
- Federal Reserve Beige Book + CRE Report Q1 2026
- CoStar Group Q1 2026 Q1 2026
- CBRE U.S. MarketFlash Q1 2026