Author: abigail_grenadier

Fed Raises Rates for the First Time Since 2023

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The Federal Reserve raised its benchmark interest rate by a quarter point on Wednesday to a target range of 3.75-4 percent, its first increase since 2023. The Federal Open Market Committee (FOMC) voted unanimously, a sharp turn from July when three officials dissented in favor of a hike. (Cushman & Wakefield, Sept. 17)

Fed’s Decision

  • The FOMC voted 12-0 to raise the target range by 25 basis points, citing economic activity expanding at a solid pace, resilient domestic spending, strong productivity growth, robust capital investment, and job gains keeping pace with the workforce. (Federal Reserve | Implementation Note, Sept. 16)
  • Chair Warsh said this summer’s readings do not show underlying inflation trends meaningfully improving, putting 12-month total PCE inflation at roughly 3.6 percent in August, with too many categories still running above 3 percent. (Opening Statement, Sept. 16)
  • Repeating a point from Jackson Hole, Warsh said he would be “hard-pressed to describe broad financial conditions as restrictive,” a view he said the Committee widely shared. (Opening Statement, Sept. 16)
  • The Summary of Economic Projections put median real GDP growth at 2.3 percent this year, total PCE inflation at 3.7 percent falling to 2.3 percent next year, and unemployment steady near 4.1 percent. (Projections | Opening Statement, Sept. 16)

Housing and CRE Outlook

  • The 10-year Treasury breached 5 percent on Sept. 15, and the 30-year topped 5.4 percent, both the highest since 2007. Most permanent commercial mortgages price off Treasury benchmarks rather than the federal funds rate. (Scotsman Guide, Sept. 16)
  • Lenders report that higher debt service costs are reducing loan proceeds and widening the gap between buyers and sellers, requiring sponsors to contribute more equity. Deal structures are adapting, with more cash-in refinancings, recapitalizations, and loan sales as lenders grow less willing to extend. (Commercial Observer, Sept. 16)

What to Watch

  • The FOMC next meets Oct. 27-28, followed by Dec. 8-9. With the median projection pointing to one more increase this year, attention will remain on both meetings for signs of when the Fed could make its next move. (Federal Reserve Calendar)
  • Nearly $983 billion of U.S. commercial real estate mortgages are estimated to mature in 2027. Sustained higher long-term yields would increase refinancing costs as those loans come due. (RER Policy Priorities, Capital & Credit)

RER will continue to advocate for policies that strengthen capital markets, preserve access to credit, and support the capital formation needed to drive long-term economic growth.

Tax Policy Roundup: Foreign Investment, Demolition Expenses, Data Centers, and Partnership Taxes

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FIRPTA

The Real Estate Roundtable (RER) submitted recommendations this week aimed at removing barriers to foreign investment in US real estate and reforming the tax treatment of demolition costs, as lawmakers introduced data center tax legislation and a federal appeals court ruled on the self-employment tax treatment of limited partners.

FIRPTA: RER Requests Repeal of IRS Notice

  • This week, RER submitted a letter to Treasury Secretary Scott Bessent requesting revocation of IRS Notice 2007-55, citing its negative impact on foreign investment in U.S. commercial real estate. (Letter, Sept. 15)
  • The IRS Notice took the position that REIT distributions are not exempt from tax under the tax exemption for foreign governments (section 892). It also treats REIT liquidating distributions as sales of real property subject to tax under the Foreign Investment in Real Property Tax Act (FIRPTA).
  • The letter notes that nearly 20 years have passed without regulations implementing the Notice. Since that time, statutory changes to FIRPTA have eliminated much of its original rationale, and foreign capital’s importance to U.S. real estate investment and jobs has only increased. (Letter, Sept. 15)
  • RER contends that the Notice creates unnecessary transaction costs, limits investment flexibility, and discourages otherwise productive transactions. (Letter, Sept. 15)
  • “[S]ound legal reasoning, good governance, and favorable economic policy strongly support an administrative action to revoke Notice 2007-55,” wrote RER President and CEO Jeffrey DeBoer. “Repeal of the Notice would align squarely with the Administration’s stated priority of ‘unleashing prosperity through deregulation.’”

Property Redevelopment and Demolition Costs: Coalition Seeks Tax Reforms

  • On Wednesday, RER and 13 other national real estate organizations sent Congress a letter encouraging changes to the tax treatment of demolished buildings and demolition expenses.  (Letter, Sept. 15)
  • Current treatment: Section 280B generally requires both demolition expenses and a demolished building’s remaining tax basis to be added to the basis of nondepreciable land. Owners typically cannot recover those amounts for tax purposes until the land is sold, potentially years or decades later.
  • “This treatment can delay or deter redevelopment projects that would otherwise support increased housing supply and commercial activity, particularly in high-cost areas and downtown corridors facing elevated vacancy rates,” the 14 organizations wrote. (Letter, Sept. 15)
  • Proposed changes: The coalition recommends allowing taxpayers to deduct as a loss any remaining tax basis of a demolished building and allowing taxpayers to deduct the actual demolition expenses. The reforms should be paired with reasonable guardrails to protect historic buildings and ensure timely redevelopment of the property.

  • The issue was recently highlighted in an op-ed written by RER Tax Policy Advisory Committee Chairman Joshua Parker and published in The Hill. (The Hill, Aug. 30 | Roundtable Weekly, Sept. 11)
  • Future legislation in this area could also restore the deductibility of environmental remediation expenses.
  • The recently enacted, bipartisan ROAD to Housing Act removed many barriers to creating new housing. The organizations’ proposal would continue building on these efforts by promoting productive real estate investment.

Data Centers: House Democrats Propose Tax Restrictions

  • Reps. Kristen McDonald Rivet (D-MI) and Don Davis (D-NC) introduced the Reverse Big Ugly Tax Breaks for Data Centers Act on Sept. 16, seeking to exclude covered data centers from investment incentives expanded in the 2025 tax law. (Politico |  Rep. Rivet Press Release, Sept. 16)
  • The bill would deny 100% bonus depreciation and Opportunity Zone eligibility to covered data-center property. Its definition covers facilities exceeding 50 megawatts of maximum rated power capacity or total peak power load, including property dedicated to their operation. (Bill text)
  • The legislation follows an August white paper from Senate Finance Committee Ranking Member Ron Wyden (D-OR) addressing bonus depreciation, Opportunity Zones and REIT treatment for data centers, along with a proposed excise tax on operators. (Senate Finance proposal, Aug. 6 | Roundtable Weekly, Aug. 7)

Partnership Taxes: Second Circuit Rules in Soroban

  • The U.S. Court of Appeals for the Second Circuit on Sept. 17 affirmed the Tax Court’s decision in Soroban Capital Partners LP v. Commissioner, holding that three principals did not qualify for the limited partner exception from self-employment tax because they exercised managerial control over the firm. (Opinion, Sept. 17)
  • The court focused on the partners’ actual responsibilities, including managing investments, serving on governing committees, and directing personnel decisions. It clarified that partners may provide some services and still qualify for the exception if those activities do not involve controlling, managing or running the business. (Bloomberg Law, Sept. 17)
  • The opinion appears to align, at least in significant part, with the Fifth Circuit’s revised approach in K Alain, formerly Sirius Solutions. (Court Opinion | JD Supra, Aug. 12)
  • RER filed an amicus brief supporting the taxpayer in Soroban as part of its broader challenge to the IRS’s restrictive interpretation of the limited partner exception from self-employment tax. RER also filed briefs supporting taxpayers in Sirius Solutions in the Fifth Circuit and Denham Capital in the First Circuit. (Roundtable Weekly, Jan. 30 | Feb. 13 | Sept. 11)

RER will continue working with Congress, Treasury and the IRS to advance tax policies that expand access to capital, encourage redevelopment and support long-term economic growth.

RER Recommends Clear, Workable Standards for Data Centers and Grid Reliability

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The Real Estate Roundtable (RER) submitted comments on Thursday to the North American Electric Reliability Corporation (NERC) supporting efforts to address the grid impacts of large computational loads, while urging the organization for clear, workable standards to reflect how data centers are actually owned, leased and operated. (Letter, Sept. 17)

State of Play

  • NERC’s Project 2026-02 would establish new definitions, registration criteria and mandatory reliability standards for certain data centers called, “large computational loads,” connected to the U.S. electric grid.
  • The proposal would require Computational Load Owners (CLOs) and Computational Load Operators (CLOPs) to register with NERC when a site has at least 50 megawatts of total connected load and meets a separate 100-kilovolt connection criterion.
  • The proposed standards address data-center interconnections, grid-impact studies and modeling, operational communications, information sharing, and monitoring of how facilities respond to grid disturbances.

RER Recommendations

  • RER’s comments call for clear responsibilities based on which entity owns or controls the property, equipment, operations, and information covered by each requirement. (Letter, Sept. 17)
  • Distinguish owners from operators. At many leased and colocation facilities, the entity that owns the land and buildings is separate from the tenant that controls the servers, computing equipment, and associated electricity load. NERC’s definitions should account for these distinct roles and assign compliance responsibilities accordingly.
  • Clearly define covered sites. RER recommended that NERC limit the definition of a “Computational Load Site” to properties primarily used by information technology infrastructure to process, store, transmit or manipulate digital information—including cloud services, artificial intelligence and cryptocurrency mining.
  • Clarify the 50-MW threshold. “Total Connected Load” should include computational load as well as electricity used for HVAC, lighting, elevators, security, fire-safety equipment, and other building systems. NERC should also provide examples showing how the threshold applies across different leasing arrangements.
  • Define a “single location.” Objective criteria are needed to determine when electricity use from separate buildings or leased spaces must be combined for registration purposes, particularly at multi-building data-center campuses.
  • Identify the voltage measurement point. RER asked NERC to clarify where the proposal’s 100-kV threshold should be measured, using a point reasonably attributable to the site’s electricity use rather than a remote point farther upstream on the grid.
  • Require two-way information sharing. NERC should establish reciprocal obligations for owners and operators to confidentially and timely exchange the data each needs to comply with the proposed standards.

Why It Matters

  • Data centers often operate under complex ownership and leasing arrangements. A building owner may be responsible for the property and its connection to the grid while having limited control over the tenant-owned equipment and operating decisions that drive computational demand.
  • RER raised concerns about assigning a compliance obligation to one entity when another party controls the information, equipment or operational capability needed to satisfy it.
  • Clear definitions and appropriately assigned responsibilities can support grid reliability while giving data-center owners, operators and tenants a workable framework for compliance.

Data Center Policy Developments

  • The House passed the bipartisan Ratepayer Protection Act (H.R. 9340) on Wednesday by a vote of 417–3, marking Congress’ first major legislative action addressing the potential energy costs associated with the rapid expansion of AI and data centers.
  • The bill would require states to consider standards preventing data centers and other large power users from shifting infrastructure costs onto existing customers. (Utility Dive, Sept. 17)
  • On Thursday, Sen. Martin Heinrich (D-NM) blocked Sen. Jon Husted’s (R-OH) effort to pass companion legislation by unanimous consent, preventing immediate Senate passage. (The Hill, Sept. 17)

House Democrats Release Energy Policy Framework

  • House Democrats and the Sustainable Energy and Environment Coalition (SEEC) Institute released the Thriving Economy Project, a collection of more than 800 energy, environmental and economic policy proposals that may be considered in the next session of Congress. (Report, Sept. 15)
  • The recommendations include an ENERGY STAR-equivalent program for AI tools, data-center energy and water reporting, energy benchmarking for commercial and residential buildings, and disclosure of energy costs in sales and leases. (Roll Call, Sept. 15)
  • Other proposals include high-performance building standards tied to federal housing and infrastructure programs, along with stronger federal siting, design, and efficiency standards for data centers.
  • Data center recommendations also include mandatory NERC reliability standards, requirements to cover the infrastructure costs their electricity demand creates, and waste heat reuse to support heating and cooling nearby buildings.

What’s Next

RER will continue working with NERC and other stakeholders to support reliability standards that protect the electric grid, provide clear regulatory accountability, and reflect the operational realities of data-center ownership and leasing.

Senate Banking Committee Advances TRIA Reauthorization

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The Senate Banking Committee voted 24–0 on Sept. 17 to advance the bipartisan Terrorism Risk Insurance Program Reauthorization Act of 2026 (S. 4395), moving a long-term extension of the federal terrorism insurance program toward full Senate consideration. (Coalition Letter, Sept. 16 | Insurance Journal, Sept. 17)

State of Play

  • As introduced, the Senate legislation would extend the program for seven years through Dec. 31, 2034, maintaining its existing framework. TRIA is currently scheduled to expire on Dec. 31, 2027. (Senate Banking Statement, Sept. 17 | Bill Text)
  • On June 29, the House voted 373–15 to pass its bipartisan reauthorization bill (H.R. 7128), also extending the program through 2034. (Roundtable Weekly, July 17)
  • The House measure would also raise the minimum loss threshold for terrorism certification from $5 million to $10 million beginning in 2029 and establish a 90-day timeframe for Treasury certification decisions. (Roundtable Weekly, July 17)

Roundtable Advocacy

  • Ahead of the vote, RER, the Coalition to Insure Against Terrorism (CIAT), and a broad group of trade associations submitted a letter to Senate Banking Committee Chairman Tim Scott (R-SC) and Ranking Member Elizabeth Warren (D-Mass.), urging them to advance S. 4395 to the full Senate. (Coalition Letter, Sept. 16
  • The coalition warned that policyholders are already negotiating coverage extending beyond TRIA’s 2027 expiration. Past reauthorization delays have prompted insurers to include conditional exclusions that eliminate terrorism coverage if the program lapses.
  • RER, which co-chairs CIAT, has consistently urged Congress to act early. The latest letter builds on the coalition’s July call to include long-term TRIA reauthorization in must-pass legislation this year. (Coalition Letter, July 29)

Why It Matters

  • Following the Sept. 11 attacks, terrorism insurance became largely unavailable, disrupting commercial real estate financing and construction. TRIA’s public-private partnership helps maintain access to coverage needed to finance projects, protect jobs, and support investment. (Roundtable Weekly, May 1)
  • Since 2002, the program has served as a public-private risk-sharing mechanism that helps maintain the availability of terrorism insurance at virtually no cost to taxpayers.

The bill now heads to the full Senate for consideration. RER and its coalition partners will continue urging Senate passage and enactment of a long-term TRIA extension this year.

In Remembrance of September 11

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As our nation marks the 25th anniversary of the September 11 attacks, The Real Estate Roundtable remembers the nearly 3,000 lives lost, the families and communities forever changed, and the first responders, public servants, and countless Americans who responded with extraordinary courage and selflessness. We will never forget.

Tax Policy Roundup: Community Revitalization, Opportunity Zones, Foreign Investment, and Judicial Developments

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As Congress returns to Washington, The Real Estate Roundtable (RER) is working to advance several tax policy initiatives aimed at expanding housing supply, revitalizing communities, and removing barriers to capital formation for real estate investment.

Tax Policies to Support Community Revitalization

  • On August 30, RER’s Tax Policy Advisory Committee (TPAC) Chairman Joshua Parker published an op-ed in The Hill newspaper setting forth a three-part framework for how lawmakers should think about potential tax policies to support community revitalization. (The Hill, Aug. 30)
  • “Preserve buildings that can serve again,” wrote Parker. “Convert those that can meet a new need. Clear those that cannot and require the land to be rebuilt.”
  • Parker’s op-ed outlines three actionable tax changes advocated by RER to advance this framework: (1) reforming the tax treatment of demolition costs, including the lost tax basis when a building is torn down; (2) strengthening the historic tax credit, and (3) incentivizing commercial-to-residential conversions through the bipartisan Revitalizing Downtowns and Main Streets Act (H.R. 2410).

Opportunity Zones

  • RER is continuing to encourage Treasury and the IRS to move forward with transitional tax guidance that will provide much-needed clarity to Opportunity Zone (OZ) investors pursuing new housing and other real estate projects that straddle the pre- and post-2025 OZ statutory regimes.
  • IRS Notice 2026-40, released in June, embraced several RER recommendations and clarified certain key issues for taxpayers with OZ projects in expiring census tracts. (Roundtable Weekly, June 26)
  • RER followed up the Notice with additional suggestions, and met virtually with Treasury and IRS staff, along with other stakeholders, on Aug. 27. Formal proposed regulations from Treasury are expected before the end of the year. (Letter, July 29 | Roundtable Weekly, July 31)
  • This week, Treasury and the IRS issued proposed regulations implementing new reporting requirements for Qualified Opportunity Funds and Qualified Opportunity Zone Businesses. (PoliticoPro, Sept. 10)

FIRPTA and Tax Barriers to Foreign Investment in US Real Estate

FIRPTA
  • RER is finalizing a request to Treasury to revoke outdated administrative guidance (IRS Notice 2007-55) that creates unnecessary hurdles and tax burdens for foreign investors seeking to deploy capital in US real estate.
  • Notice 2007-55 treats REIT liquidating distributions as a sale of real property rather than the sale of stock, thus subjecting the transactions to tax under FIRPTA. The Notice also treats REIT distributions as ineligible for the section 892 foreign government tax exemption.
  • RER believes the Notice’s conclusions were incorrect at the time, and more recent events strongly favor its repeal.
  • These include changes in the FIRPTA statute since the Notice was issued, growth in the importance of foreign capital to U.S. real estate jobs and investment, and the corrosive effect of 20 year-old sub-regulatory guidance that has never been subject to the formal rulemaking process.

SECA Limited Partner Exception

  • On Aug. 12, the Fifth Circuit withdrew its January opinion in Sirius Solutions and issued a substitute opinion holding that the self-employment tax exception applies to a limited partner who plays “no significant role in managing or running a business.” (JD Supra, Sept. 9)
  • The new standard is a step back from the court’s earlier ruling, which based eligibility on limited liability and state-law limited partner status. However, the court again rejected the Tax Court’s stricter “passive investor” test and remanded the case for further consideration. (Grant Thornton, Aug. 17)
  • RER has filed amicus briefs supporting taxpayers in Sirius and two related appeals—Denham Capital in the First Circuit and Soroban Capital Partners in the Second Circuit. (Roundtable Weekly, Jan. 30 | Feb. 13)

RER will continue engaging with Congress, Treasury, and the IRS to advocate for clear, effective tax rules that expand access to capital, encourage investment and redevelopment, and support long-term economic growth.

Data Centers, Grid Reliability and Building Standards Draw Increased Attention Ahead of Midterms

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Energy issues are front and center in Washington, D.C., and the states in the weeks leading up to the midterm elections. Rising electricity costs, rapid data center development, and evolving AI technologies are fueling debates over grid reliability, infrastructure investment, tax policy, and job impacts.

State of Play

  • The House is expected to vote next week on the bipartisan Ratepayer Protection Act, which would require technology companies to cover energy infrastructure costs associated with their data centers rather than pass them on to consumers. (Axios | Politico, Sept. 10)
  • The North American Electric Reliability Corporation (NERC) is developing reliability standards for large “computational loads,” including data centers and cryptocurrency facilities. (NERC Project 2026-02)
  • The proposed standards address data-center interconnections, grid-impact studies and modeling, information sharing and records of disturbances such as sudden load losses or voltage drops. (Roundtable Weekly, July 17 | 24 | Aug. 7)

Why It Matters

  • As federal policies evolve, regulators must distinguish between data-center ownership and operations. Requirements should track which parties control facility operations, possess relevant data, and are responsible for managing grid impacts due to intensive “computational loads” from activities like cloud computing, AI modeling, and crypto mining.
  • NERC’s imminent data center owner and operator rules should also respect leasing arrangements at these facilities. Hyperscalers and other AI tenants in leased spaces should have affirmative obligations to share relevant data, such as their electricity usage and water consumption, with facility owners that may have reporting obligations.

Data Center Tax Proposals

  • Senate Finance Committee Ranking Member Ron Wyden (D-OR) recently released a framework that restricts Opportunity Zone (OZ) investments and bonus depreciation for new data centers, changes the treatment of certain data-center rents under the REIT rules, and establishes a federal excise tax on operators’ gross receipts. (Senate Finance Committee, Aug. 6 | Roundtable Weekly, Aug. 7 | GlobeSt. Sept. 8)
  • A recent Bipartisan Policy Center analysis outlined significant questions surrounding proposals to tax AI, including which activities should be taxed, who would ultimately bear the cost, and whether new taxes could discourage investment or innovation. (Bipartisan Policy Center, Aug. 24)
  • A separate Cato Institute analysis warned that an excise tax based on revenue rather than profits could impose especially high effective tax rates on lower-margin data-center operators and discourage new development. (Cato Institute, Sept. 3)
  • RER Advocacy: RER’s Tax Policy Advisory Committee is preparing comments on the Wyden framework. Maintaining the owner-operator distinction is critical to preventing provisions aimed at hyperscalers from penalizing real estate owners that do not control facility operations.

Data Centers & CRE By the Numbers

  • A new National Association of Realtors report found that 50% of surveyed agents with a data center in their market reported higher nearby commercial property values, while 42% cited increased demand for commercial space. Industrial properties saw the strongest gains in interest at 58%. (CoStar | Housing Wire, Sept. 9)
  • Recent reports from JLL and CBRE found that North American data-center demand reached record levels in the first half of 2026, doubling from the previous year and increasing fivefold from the same period in 2024. (BisNow, Sept. 3)

California Building Performance Standards (BPS)

  • On Aug. 18, RER submitted comments to the California Energy Commission on its strategy for developing future statewide building performance standards. (RER Letter, Aug. 18)
  • RER also coordinated with the California Business Properties Association and California Building Industry Association to align its recommendations with a broader coalition letter joined by AHLA, BOMA International, CREDA, ICSC and Nareit. (Coalition Letter, Aug. 18)

What’s Next

RER will continue working with policymakers and industry partners to advance reliable and affordable energy supplies, efficient buildings, and clear rules that recognize the distinct responsibilities of data-center owners and operators.

DOE, EPA Release ENERGY STAR Transition Plan

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The Department of Energy (DOE) and Environmental Protection Agency (EPA) released a detailed plan outlining how DOE will assume leadership and core operations of the federal ENERGY STAR program. The transition is expected to be completed by July 2027, with continued congressional oversight. (ENERGY STAR Transition Plan, Aug. 28)

ENERGY STAR Transition

  • The plan details the steps DOE will take to assume ownership of the ENERGY STAR trademark, lead the program, and oversee its core operations. (Utility Dive, Sept. 4)
  • DOE is expected to host ENERGY STAR’s information technology portfolio—including Portfolio Manager and related datasets—once the transition is complete by July 2027. (Government Market News, Sept. 7)
  • The plan also calls for ENERGY STAR appropriations to be transferred from EPA to DOE as needed to financially support the program.
  • Congress provided approximately $33 million for ENERGY STAR through EPA in the FY 2026 appropriations law, preserving the program’s funding through Sept. 30.
  • The transition plan calls for DOE to leverage the expertise of existing EPA staff and contractors while recruiting personnel to support ENERGY STAR’s essential functions. (ENERGY STAR Transition Plan, Aug. 28)

ENERGY STAR by the Numbers

  • More than 2,100 non-data center buildings have earned ENERGY STAR certification so far in 2026.
  • ENERGY STAR has helped families and businesses save more than $500 billion in energy costs since 1992.

Roundtable View

Tony Malkin (Chairman and CEO, Empire State Realty Trust, Inc.), chair of The Roundtable’s Sustainability Policy Advisory (SPAC) Committee.
Anthony Malkin (Chairman and CEO, Empire State Realty Trust, Inc.)
  • The transition plan aligns with RER’s policy priority to maintain and evolve ENERGY STAR as a voluntary federal program and continue building the industry’s relationship with DOE’s implementation team.
  • “It has been a privilege for RER to be involved in the discussions around transition of ENERGY STAR from the EPA to the DOE. RER has productively partnered with the Agency and the Department on a number of issues, and we are fortunate that ENERGY STAR, a critical program for our industry, has found a logical home to provide us with a credible, voluntary, global framework to measure building performance, reduce wasted energy, and improve profitability,” said RER Sustainability Policy Advisory Committee Chair Anthony Malkin (Chairman and CEO, Empire State Realty Trust, Inc.).
  • Malkin continued, “ENERGY STAR’s continued success depends on the expertise and reliable data available that is fully housed at the DOE.  ENERGY STAR’s Portfolio Manager is a unique tool that provides our industry with the most widely used software to measure and quantify building performance. The DOE’s stewardship will allow ENERGY STAR to evolve alongside the market and continue to provide owners, tenants, and investors with its immensely valuable objective metrics.”
  • “This plan provides a clear roadmap for DOE to assume responsibility for ENERGY STAR while maintaining Congress’s oversight of the program,” said RER President and CEO Jeffrey DeBoer. “RER will continue working with DOE, the House and the Senate to support adequate funding, retain essential expertise, and ensure a smooth transition that strengthens America’s energy and global economic competitiveness.”

RER and its coalition partners will continue working with DOE, Congress, and other stakeholders to support the program and help ensure a smooth transition

Q3 Sentiment Index Shows Healthier Conditions, Persistent Capital Challenges

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(WASHINGTON, D.C.) — The Real Estate Roundtable (RER) released its Third Quarter 2026 Sentiment Index, a quarterly measure of confidence among senior commercial real estate (CRE) executives. The overall index registered 63, unchanged from the previous quarter, as improving property fundamentals and strong debt availability were offset by persistent challenges raising equity capital and subdued transaction activity.

More than half of respondents (56%) say current market conditions are better than a year ago, while 54% expect a more favorable market environment one year from now.

 “Commercial real estate fundamentals are improving, supported by stronger leasing, healthier debt markets, and greater stability in asset values. However, limited equity capital and high costs continue to constrain transactions and development,” said Jeffrey DeBoer, RER President and CEO.

The Q3 Sentiment Index topline findings include:

  • The Q3 2026 Real Estate Roundtable Sentiment Index registered an overall score of 63, no change from the previous quarter. The Current Index registered 63, a 2-point increase from Q2 2026. The Future Index posted a score of 63 points, a 1-point decrease from the previous quarter. The collective sentiment across the interviews is that U.S. real estate fundamentals are improving, but the market remains highly divided and constrained by capital formation challenges. Most participants described operating conditions as healthier than they were a year ago, supported by improving leasing fundamentals, abundant debt capital, and stabilization of post-COVID dislocations. However, fundraising remains challenging, transaction volume remains below desired levels, and investors are still navigating valuation resets and geopolitical uncertainty.
  • Sentiment varies sharply by asset class. Data centers are viewed as the clear leader, supported by AI-driven demand, capital inflows, supply constraints, and strong fundamentals. Retail has also improved, benefiting from limited new supply and durable demand. Industrial and logistics remain attractive, though enthusiasm has cooled from pandemic highs. Multifamily is more mixed, with long-term demand offset by oversupply and affordability pressures in some markets. Office remains highly bifurcated, as trophy assets and markets gain traction while weaker markets lag.
  • Almost half (45%) of respondents believe asset values are relatively unchanged compared to a year ago, while 43% feel they are higher and 12% think values have declined. Interviewees pointed to REITs trading at a premium to NAV, moderating cap rate compression, and early signs of stabilization in select markets as evidence that private valuations may be approaching an inflection point. Looking ahead, the outlook is overall optimistic: 49% expect asset prices to rise over the next year, 50% believe asset values will remain stable, and only 1% anticipate that values will decrease.
  • Perceptions on equity capital are split, with 25% believing availability is worse compared to a year ago, 35% thinking it is better, and 40% feeling it is the same. On the other hand, sentiment around debt capital is positive, as 63% said the availability of debt capital has improved from last year. Looking forward, 50% of respondents believe that equity capital availability will be better in one year and 29% believe debt capital availability will be better.

“Data centers continue to outperform other property sectors, as AI reshapes commercial real estate and drives unprecedented demand for reliable, affordable energy, DeBoer added. Policymakers must ensure that energy infrastructure, permitting, tax, and regulatory policies keep pace with this growth. A coordinated approach that expands power generation and transmission, modernizes the grid, and preserves a stable investment environment will help support data center development while protecting ratepayers and meeting the needs of communities and the broader economy.”

Sample responses from participants in the Sentiment Index’s Q3 survey include:

  • “Capital raising remains difficult across nearly every property type despite modest improvement from last year; investors are demanding more certainty before committing fresh capital.”
  • “Liquidity in real estate debt markets is among the strongest seen in recent years; the principal challenge is now the cost of capital rather than the availability of capital.”
  • “Property fundamentals are healthier than public sentiment would suggest; elevated replacement costs are protecting existing asset values by suppressing new supply.”
  • “Data centers are experiencing stronger demand than the industry has ever seen and are attracting capital more easily than nearly any other property type.”

Data for the Q3 survey was gathered by Chicago-based Ferguson Partners on RER’s behalf in July. See the full Q3 report.

The Real Estate Roundtable (RER) brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy.

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Q3 Sentiment Index Shows Healthier Conditions, Persistent Capital Challenges

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The Real Estate Roundtable’s (RER) Q3 2026 Sentiment Index registered an overall score of 63, unchanged from the previous quarter, as improving property fundamentals and strong debt liquidity were offset by persistent challenges raising equity capital and subdued transaction activity. (Q3 2026 Report)

Topline Findings

The Q3 Sentiment Index topline findings include:

  • The Q3 2026 Index registered an overall score of 63, unchanged from the previous quarter. The Current Index rose 2 points to 63, while the Future Index declined 1 point to 63. (Q3 2026 Report)
  • Operating conditions are healthier, but the recovery remains uneven. Improving leasing fundamentals, abundant debt capital, and the stabilization of post-pandemic disruptions are supporting the market. However, fundraising remains challenging, transaction volume remains below desired levels, and investors continue to navigate valuation resets and geopolitical uncertainty.
  • Sentiment varies sharply by asset class. Data centers are the clear leader, supported by AI-driven demand, capital inflows, supply constraints, and strong fundamentals. Retail has improved, benefiting from limited new supply and durable demand. Industrial and logistics remain attractive, though enthusiasm has cooled from pandemic highs. Multifamily is more mixed, with long-term demand offset by oversupply and affordability pressures in some markets. Office remains highly bifurcated, as trophy assets and markets gain traction while weaker markets lag.
  • Asset values show signs of stabilization. 45% of respondents said values are relatively unchanged from one year ago, 43% said they are higher, and 12% said they have declined. Looking ahead, 49% expect values to rise, 50% expect them to remain stable, and only 1% anticipate a decline.
  • Equity capital remains selective. 25% of respondents said availability is worse than one year ago, 35% said it has improved, and 40% said it is unchanged. Half expect equity availability to improve over the next year.
  • Debt capital remains widely available. 63% said debt availability has improved from one year ago, while 36% said it is unchanged and only 1% said it has worsened. Looking ahead, 29% expect debt availability to improve further.

Roundtable View

  • RER President and CEO Jeffrey DeBoer said, “Commercial real estate fundamentals are improving, supported by stronger leasing, healthier debt markets, and greater stability in asset values. However, limited equity capital and high costs continue to constrain transactions and development.”
  • DeBoer added, “Data centers continue to outperform other property sectors, as AI reshapes commercial real estate and drives unprecedented demand for reliable, affordable energy. Policymakers must ensure that energy infrastructure, permitting, tax, and regulatory policies keep pace with this growth. A coordinated approach that expands power generation and transmission, modernizes the grid, and preserves a stable investment environment will help support data center development while protecting ratepayers and meeting the needs of communities and the broader economy.”

RER’s Q3 survey was conducted in July by Chicago-based Ferguson Partners. The Q4 survey will be sent out to members in October.