More Capital Is Coming Back to CRE but Not to Every Asset
Commercial real estate firms are heading into 2027 with capital returning to the market but a sharper divide between assets that can justify new investment and those facing diminished prospects for recovery, according to Deloitte’s latest industry outlook.
The report, based on a June and July survey of 950 senior executives at real estate owners and investment companies with at least $250 million in assets under management, describes a market where discipline, not broad-based recovery, is likely to determine returns. Respondents cited the cost and availability of capital and elevated interest rates as their top macroeconomic concerns for the next 12 to 18 months, while trillions of dollars of commercial real estate debt approach maturity.
Confidence Falls, Revenue Hopes Endure
Deloitte’s commercial real estate sentiment index declined for a second consecutive year to 57.8 out of 100, from 64.9 in 2026 and 68.3 in 2025. Executives expect slower rent growth, elevated vacancy and tighter spending on office space and talent management.
Yet many remain optimistic about their own businesses. Fifty-one percent expect revenue to rise more than 5% in the coming year, including 41% forecasting growth of 5% to 10%. Deloitte’s revenue-sentiment index measured 67.9, close to its 2025 record of 70.3.
The contrast reflects a market in which capital and demand are increasingly concentrated in certain properties and strategies. Digital-economy and debt strategies accounted for more than two-thirds of capital raised in 2025, Deloitte said, while cross-border commercial real estate investment rose 18% year over year in the first quarter of 2026. Nearly 80% of respondents expect to raise real-asset allocations by early 2028, with the United States, United Kingdom and India named the most attractive foreign markets.
Triage Replaces Broad Recovery Bets
Nearly 80% of respondents expect to upgrade or reposition existing assets in the next 12 to 18 months, including 38% that expect to be highly active. But 39% do not anticipate conversion activity and 46% do not expect to sell assets, underscoring the reluctance of many owners to crystallize losses.
“Markets are not lifting all properties equally,” the report said, as tenant demand concentrates in modern, well-located buildings and older properties confront higher vacancy, rising capital expenditure needs and uncertain conversion economics.
Logistics and warehousing ranked as the leading property opportunity for the coming year, followed closely by digital-economy assets such as data centers. Neighborhood retail rose six positions from Deloitte’s prior survey to rank fifth, aided by constrained supply, high occupancy and rent growth. Hotels fell from eighth to 13th as travelers became more sensitive to pricing and competition from alternative lodging.
Deloitte advised owners to complete asset-by-asset triage within six months, categorizing properties for upgrades, holds, conversions or sale. Capital spending should be directed only to assets where documented tenant demand and rent premiums can cover the required investment.
Tax Moves to the Investment Committee
Tax strategy is becoming a more active component of real estate underwriting. More than 90% of executives said tax considerations are already central to investment decisions or will become more central, while more than 60% plan to shift capital toward jurisdictions or assets with stronger tax incentives.
The report urged firms to incorporate transfer taxes, property taxes, accelerated cost recovery, cost segregation, repair-versus-capitalization treatment and after-tax internal-rate-of-return analysis earlier in the deal process. Only 26% of respondents currently involve tax teams at origination, compared with nearly half that wait until underwriting or investment-committee review.
AI Adoption Advances Ahead of Controls
Real estate firms are accelerating technology spending, with more than 90% of executives planning to raise data and technology investment next year, up from 76% in Deloitte’s prior survey. Yet AI implementation remains early: 92% of respondents are still researching or piloting AI, and only 8% report integrated solutions.
Nearly half of respondents said agentic AI is operating in at least some live workflows. But Deloitte found that governance trails experimentation. While 72% have completed preliminary data mapping and source verification, fewer than half have implemented advanced controls such as challenger models, exception handling or detective controls.
The report warned that tenant-screening and pricing tools can create compliance, bias and regulatory risks without clear governance, human oversight and auditable decision processes.
Leadership Gap Widens
Deloitte also flagged succession planning as a strategic challenge. The median age of real estate workers is 48.9, the highest among financial services sectors, and 59% of commercial real estate leaders could reach retirement age within a decade.
Two-thirds of executives identified AI and data fluency as a leading capability for future management, but only 30% said their organizations were very prepared for C-suite transitions. Deloitte’s conclusion: 2027 will reward firms that apply capital, tax strategy, technology and leadership development with more discipline than their competitors.