Explore our 2026 Mid-Year Western U.S. Market Forecast for expert analysis on the economic signals, structural shifts, and sector-specific trends shaping commercial real estate. Drawing on market data and local expertise, the forecast provides forward-looking insights across office, industrial, retail, and multifamily highlighting where conditions are stabilizing, where risks remain, and where opportunity is beginning to emerge.
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The office market is gaining stability as leasing improves, sublease availability declines, and the flight to quality continues. With new construction near historic lows, strengthening demand is expected to support steady recovery, although performance will remain divided between premium and lower-quality properties.
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The industrial sector is gaining momentum as leasing strengthens and vacancy approaches its cyclical peak. A sharply reduced construction pipeline, combined with demand from logistics, advanced manufacturing, automation, and data center users, is creating a healthier balance between supply and demand.
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Retail remains resilient, supported by low vacancy, near-record consumer spending, and historically limited new supply. Suburban and neighborhood shopping centers continue to outperform, positioning the sector for stable occupancy and measured rent growth through the balance of the year.
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Multifamily is moving toward greater balance as renter demand strengthens, new construction slows, and investment activity gains momentum. While some markets are still absorbing recent deliveries, stabilizing occupancy and reduced future supply are setting the stage for gradual improvement.
View ForecastThe report analyzes the Western U.S. commercial real estate market across five areas: economic outlook, office, industrial, retail, and multifamily. According to Kidder Mathews research, the mid-year 2026 edition reflects data through the second quarter of 2026 and provides a forecast for the remainder of the year.
U.S. real GDP grew 0.4% in the second quarter of 2026 and 2.1% over the trailing year (data source: U.S. Bureau of Economic Analysis). Many forecasts project full-year GDP growth of 2.3% in 2026 and 2.2% in 2027, according to Kidder Mathews research.
AI-related investment added approximately 0.9 percentage points to U.S. GDP growth and accounted for more than 40% of total growth in the past year, according to Kidder Mathews research. Consumer spending remained the largest single contributor, adding roughly 1.5 percentage points.
Yes, the Western U.S. office sublease rate fell from a peak of 15.3% in 2023 to 9.0% by mid-year 2026, according to Kidder Mathews research (data source: CoStar). That rate remains above the pre-pandemic average of 4.7%, but the steady decline points to improving conditions.
Western U.S. industrial vacancy stood at 8.4% at the end of the second quarter of 2026, according to Kidder Mathews research (data source: CoStar). Big-box warehouse and distribution vacancy has risen further, from roughly 3% in 2022 to 10.2% at mid-year 2026, while infill industrial (4.8%) and data centers (1.8%) remain much tighter.
Yes, significantly. New industrial deliveries fell more than 45% in 2025 from recent peaks, space under construction dropped more than 60% from 2023 highs, and new construction starts declined roughly 65% from late-2022 levels, according to Kidder Mathews research (data source: CoStar).
Western U.S. industrial leasing volume averaged 247 million square feet on a four-quarter basis between 2023 and mid-year 2026, above the pre-pandemic 10-year average of 235 million square feet, according to Kidder Mathews research (data source: CoStar). Large industrial leases over 200,000 square feet signed in the first half of 2026 were nearly 20% above the same period in 2025.
Yes, nominal U.S. retail sales reached $768.6 billion in June 2026, up 6.7% year-over-year and marking the fifth consecutive month of growth, according to Kidder Mathews research. Inflation-adjusted retail sales have also climbed to near-record levels, showing consumers are buying more, not just paying more.
Suburban retail markets are outperforming urban ones. Since 2019, vacancy rates in urban retail corridors have risen by roughly 330 basis points, compared with only about 60 basis points in suburban markets, according to Kidder Mathews research (data source: CoStar). Urban vacancy did improve in the first half of 2026, declining 60 basis points since January.
Western U.S. multifamily transaction volume approached $40 billion in 2025 and remained near that pace through the first six months of 2026, according to Kidder Mathews research. Improving lender activity, lower interest rate volatility, and clearer underwriting assumptions have brought more buyers back to the market.
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