How AI and Flight to Quality Are Reshaping Commercial Real Estate Market Trends 2026

Commercial real estate market trends in 2026 are forcing occupiers to plan for AI-driven uncertainty about space needs after years of adapting to hybrid work. Lease flexibility is becoming central to decisions that must account for changes they cannot yet predict.

First came the pandemic and the rapid shift in how and where people work. Companies responded by reevaluating portfolios, consolidating space, and right-sizing offices around new workplace strategies. Now, just as many organizations have established a clearer approach to hybrid work, another variable is reshaping long-term planning: artificial intelligence.

For Craig Van Pelt, Head of Research at Cresa, that combination is creating a particularly challenging environment for occupiers making real estate decisions today.

Craig recently joined Matt Waters, Head of Lease Administration at Cresa and host of New Lease On, for a conversation about his career, the commercial real estate market, the forces shaping office and industrial demand, and why flexibility may be more important than ever.

Research Through an Occupier's Lens

Craig's path to commercial real estate research has included roles in urban planning, appraisal, consulting, association research and major commercial real estate firms. That experience ultimately led him to Cresa, where he was brought on to establish a more centralized national research function.

Today, his focus is distinctly occupier-oriented.

Rather than evaluating market conditions through the competing perspectives of landlords, investors and tenants, Cresa's occupier-only model allows Craig to concentrate on a more specific question: What does today's market mean for the companies actually using real estate?

That means looking beyond vacancy, rents and leasing activity to understand how changes in the economy, workforce, technology and workplace strategy could affect decisions that often extend 10 or more years into the future.

And those decisions are becoming increasingly complicated.

Is the Office Market Recovering in 2026?

According to Craig, the commercial real estate market today looks very different from the broad downturn experienced during the Great Recession.

Office and industrial real estate moved in dramatically different directions following the pandemic. Industrial experienced significant demand growth, while office absorbed the effects of remote and hybrid work.

Now, Craig believes much of the disruption associated with workplace strategy has been incorporated into companies' planning.

The office market has hit the bottom and it's starting to, very slowly, float higher.

That does not mean the office market has returned to its pre-pandemic state.

Craig notes that overall office leasing velocity remains roughly 15 to 20 percent below pre-pandemic levels, with total leasing volume down further. But activity has also become considerably more stable.

Many occupiers have already made some of their largest portfolio adjustments, consolidating locations, reducing footprints or reconsidering how space should support their workforce.

The next stage of the market may therefore be less about reacting to the pandemic and more about determining what comes after it.

What Does Flight-to-Quality Mean for Occupiers?

One trend that has persisted is the flight-to-quality.

Occupiers continue to favor newer, highly amenitized and well-located properties. That demand has contributed to a widening divide between the best buildings and older, less competitive inventory.

Craig describes today's market as increasingly bifurcated.

Trophy and top-tier Class A office buildings continue to perform well, while older Class B buildings and properties that have not been meaningfully renovated face greater challenges. A similar pattern can be seen within industrial real estate, where newly constructed, highly amenitized facilities and certain smaller-bay properties continue to attract demand.

As premium inventory fills, however, some demand may begin moving into the next tier of available properties.

For occupiers, that distinction matters. Broad market statistics may suggest significant availability and negotiating leverage, while the specific type of space a company wants could be considerably more competitive.

Understanding the market therefore requires looking beyond overall vacancy to evaluate the quality, location and functionality of the space that actually meets an organization's requirements.

How Is AI Affecting Commercial Real Estate Decisions?

Perhaps the most significant emerging variable is artificial intelligence.

Companies have only recently adjusted their real estate strategies around hybrid work. Now they are confronting questions about how AI could affect employment, business operations and future space requirements.

That uncertainty can make long-term real estate commitments difficult.

Employment is shifting so quickly. I think a lot of occupiers are frozen a little bit because they don't know how to plan for what this means moving forward after they just right sized.

Real estate decisions inherently operate on a different timeline than technology.

An organization may sign a lease lasting five, 10 or even 15 years, while the technology influencing its workforce can change significantly within months.

Craig describes the challenge as making long-term decisions amid short-term uncertainty.

AI does not necessarily mean jobs will simply disappear. Roles may evolve, new skills may emerge and organizations may structure their workforces differently. But until companies better understand those changes, accurately forecasting future space demand becomes more difficult.

The effect is not limited to office occupiers. Automation, advanced manufacturing, data infrastructure and changing workforce requirements could also influence industrial real estate strategies.

The impact of AI is already visible in certain markets. Craig points to San Francisco as an example of how quickly commercial real estate conditions can shift.

After becoming one of the most challenged major office markets following the pandemic, San Francisco has experienced renewed demand from AI companies taking space downtown and in surrounding areas.

The change illustrates a broader lesson for occupiers: conditions that appear relatively settled can shift rapidly when new industries, technologies or sources of employment growth emerge. 

That makes forecasting increasingly difficult and increases the value of building optionality into real estate decisions.

What Lease Flexibility Provisions Should Occupiers Consider?

For occupiers considering a lease today, one word repeatedly emerges: flexibility.

Organizations may need the ability to expand if headcount grows, contract if workforce needs change or reconsider their portfolios as
technology reshapes operations.

As a result, Craig sees greater emphasis on provisions and strategies that can provide occupiers more options over the life of a lease.

Depending on the market and transaction, that could include:

• Expansion and contraction right
• Early termination or opt-out provisions
• Options that allow companies to scale their footprints over time.
• Space configurations that can accommodate changing workplace needs. 

These provisions have always had value, but uncertainty surrounding future employment and space requirements makes them increasingly
important. 

The strongest real estate strategy may not be the one that perfectly predicts what an organization will need 10 years from now. It may be the one that gives the organization enough flexibility to respond when those needs inevitably change.

How Can Market Research Inform Occupier Decisions?

Craig's role at Cresa is built around helping occupiers navigate exactly these kinds of questions. Matt Waters’ Lease Administration and Lease Accounting perspective adds a portfolio-level question: how will an organization track and manage the options it negotiates all the way through to the P&L, balance sheet, and financial disclosures?

Research cannot eliminate uncertainty, particularly when technology and employment patterns are evolving as quickly as they are today. It can, however, help organizations understand where the market is moving, identify leverage, and evaluate the risks associated with different real estate
strategies.

For occupiers, the current environment presents both opportunity and complexity.

Office conditions have stabilized, but performance varies significantly by building quality and market. Industrial remains comparatively resilient, but demand is becoming more selective. Flight-to-quality continues to shape both sectors. And AI is introducing another potentially significant shift in workforce and space requirements.

That makes looking beyond today's market conditions increasingly important.

As Craig explains, his own role has changed considerably over just the past two years, and he expects it will continue changing. The same adaptability may be necessary for the organizations planning their real estate portfolios.

In an environment where the future is difficult to forecast, creating room to adapt may be one of the most valuable strategies an occupier can pursue. 

Hear More from Commercial Real Estate Experts

Hear more from Craig Van Pelt and other commercial real estate experts on New Lease On, where host Matt Waters explores the trends, challenges, and changing perspectives shaping the industry.

Watch Craig’s conversation and explore more episodes of New Lease On on YouTube. To discuss lease flexibility or portfolio strategy,
connect with Cresa.