Editor's note: This is a May 2026 update to the original January 6, 2026 outlook, written before the February 28 outbreak of the U.S. and Israeli war with Iran and the resulting closure of the Strait of Hormuz.
When I wrote the original version of this piece in early January, I framed 2026 as the year the market would stop arguing with gravity. The defining theme, I argued, would be acceptance: a measured recalibration to a world of slower inflation, a softer labor market, and rational risk pricing. Five months later, the cycle that was on track to "reset" has been overtaken by a geopolitical shock the January forecast did not contemplate.
The U.S. and Israeli strikes on Iran that began February 28, Iran's retaliatory campaign across the Gulf, and the de facto closure of the Strait of Hormuz, have produced what the International Energy Agency has characterized as the "largest supply disruption in the history of the global oil market". Brent traded above $120 in early March and remains volatile in the $90 to $105 range. The 30-year fixed mortgage averaged 6.51% for the week ending May 21, according to Freddie Mac's Primary Mortgage Market Survey, up from 5.99% the day before the strikes began. The spring selling season did not arrive on schedule.
That is the new backdrop. Real estate is not done arguing with gravity. It is now negotiating with with the second force, geopolitics. The thesis of this update is that the sector-level outlook from January 2026 still holds, but the influences have changed. Capital discipline, energy access, and operational engineering matter more. Thus, the cycle has not been canceled; it's been rolled downhill and, with credit to Mel Blanc, took a right turn at Pismo Beach.
Residential: A spring that didn't happen
The most immediate casualty of the Iran war has been the expected reset of the residential market. Mortgage applications dropped roughly 10% in the weeks following the military strikes, with refinancing activity off 15% from the prior week. Inventory continued to build, but transaction velocity did not. Buyers who had penciled in a low-6 handle on the 30-year suddenly found themselves underwriting closer to 6.5%, and pricing in upside risk to that figure if oil holds above $90.
The structural story I described in January remains intact. Households locked into pre-2022 rates are still not selling. Builders and build-to-rent operators are still setting the marginal unit price. Demographic drift into secondary Western and Midwestern metros continues. What has changed is the path. Zillow forecast a 4.3% gain in existing-home sales for 2026 before the war, treating it as a "reset" year. That postulation has been complicated by energy prices, inflation concerns, and reduced consumer spending power. The affordability inflection has been pushed into 2027 at the earliest. For the remainder of this year, expect a thin, choppy, regionally fragmented market with builder concessions and rate buydowns doing the work that lower mortgage rates were supposed to do. The exceptions are coastal communities and the constrained-supply metros. There, the bid is structural, not cyclical, and not particularly sensitive to a 60-basis-point move in the 10-year Treasury.
Multifamily: Supply tailwind, demand crosswind
The fundamentals story for multifamily improved because the apartment construction pullback accelerated. Higher steel, aluminum, copper, and cement costs, all driven by the energy shock, have stalled marginal projects that were approaching a negative risk-return ratio. Because producing steel, aluminum, and cement is energy-intensive, the construction industry now feels the effects of the blockade's logistical constraints on long lead items.
However, the demand side has weakened. Slowing wage growth, a softer labor market, the expansion of AI over new hires in the workplace, and a renewed cost-of-living squeeze on renters in the lower-income brackets are pressuring rent rolls in the very submarkets that were supposed to lead the recovery. The thesis that well-located workforce housing will regain pricing power still holds, but the timeline has stretched. Investors, borrowers, and lenders are underwriting micro-markets, not national averages, and stress-testing over an extended period and assuming expense growth outruns rent growth in their models.
Industrial and Logistics
The industrial story in January was about normalization after the 2020 - 2024 supercycle, with cold storage as the standout. That call has aged well, and the war has reinforced it. Inventory resilience strategy, which had been gradually unwinding as supply chains healed, has reversed course. Shippers and grocers are again building buffer stock, particularly in temperature-controlled categories.
Conventional big-box logistics remains soft, with tenant leverage in overbuilt markets. But infill logistics near consumption-dense metros, and modern cold-chain capacity in particular, have moved up the defensibility league table since February.
Power and refrigeration infrastructure are scarcer and cost more to replicate, which is exactly the kind of barrier-to-entry story that long-duration capital should be paying for.
Data Centers
Three things have shifted since then.
First, the supply chain for data center buildouts was hit harder than almost any other commercial real estate segment. Helium, which is extracted as a byproduct of Qatari LNG processing, is the unglamorous input that keeps semiconductor fabs running, and its supply has effectively collapsed since the closure of the Strait of Hormuz. Because helium is a byproduct of LNG processing, the suspension of LNG operations has frozen helium output, removing approximately 5.2 million cubic meters from the market each month and tightening a supply chain that underpins advanced manufacturing and data center infrastructure. Long-lead items like transformers, chillers, and switchgear are now quoted at 12 - 30 month delivery windows depending on spec. Delivery times for chillers, transformers, generators, and other critical plant equipment range from 5 - 38 months, even under normal conditions.
Second, the security profile of the data center asset class has changed. Drone strikes against AWS facilities in the Gulf during Iran's retaliatory phase caused structural damage, disrupted power, and triggered fire suppression systems, highlighting vulnerabilities in physical plant design that had previously been theoretical. Mature data center underwriting now includes physical hardening, drone defense, and supply chain redundancy as standard items, not nice-to-haves. That has implications for cap rates, for insurance, and for the universe of sites that institutional capital will accept. EnkiAI
Third, energy independence has moved to a survival requirement. There is an accelerated push for on-site generation, including small modular reactors, to ensure operational continuity even if regional power grids are disrupted. Behind-the-meter solar and storage, direct private power agreements with merchant generators, and co-located generation facilities are no longer aspirational. They are the difference between a financeable site and a stranded one.
The investable conclusion is unchanged in direction and stronger in conviction: control electrons, control the asset.
Office: A war that didn't change the office market
If there is a sector where the January thesis is still the May thesis, it is office. Prime, well-located, security-forward Class A is still leasing. Class B and C product is still on the conversion or obsolescence track. Adaptive reuse pipelines into urban multifamily, boutique hospitality, and life sciences are still moving where capex and zoning make sense. If anything, the war has reinforced the security-and-resilience premium at the top of the market, as well as the financing difficulty at the low end of the spectrum. Construction cost inflation has made conversion math harder, which will slow conversions and prolong the workout for the worst of the inventory.
Hotels and lodging: A bifurcated travel year
This is the sector most directly hit by the 2026 Iran conflict on the demand side. The war had immediate impacts on global travel and trade, with flights in and out of the Middle East coming to a near-complete stop, and Dubai International Airport, one of the world's busiest, damaged by drone strikes during the second day of the conflict. International long-haul travel into and through the Middle East has collapsed. Trans-Atlantic and trans-Pacific routings have been disrupted by insurance and fuel surcharges, and global tourism flows have rerouted.
For U.S. lodging specifically, the picture is more nuanced. Inbound international travel is down meaningfully, hitting gateway markets such as New York, Los Angeles, Miami, and San Francisco. Domestic leisure has held up better than feared. Drive-to destinations and lifestyle resorts are benefiting from domestic destinations substituting for international ones. Group and corporate travel are tracking the broader caution pattern.
On the cost side, the margin pressure I described in January has gotten worse. Energy is the obvious driver, but insurance, especially for Gulf-exposed brands and for any property with an elevated security profile, has spiked.
The 2026 lodging story is no longer about ADR heroics. It is about disciplined cost management and ancillary monetization in a year where the top line will not bail anyone out.
Self-storage: Boring is the new alpha
Self-storage has done exactly what self-storage is supposed to do in a stagflationary shock. It has held. Demand is structurally tied to life events (moves, downsizing, deaths, divorces) that do not stop because oil is at $100. Pricing power has been modest but positive. Expense growth has been manageable because operating leverage on a stabilized box is low.
The January 2026 thesis of fundamentals-driven operating businesses, and professional operators outperforming passive underwriting, is affirmed. In a year where most CRE sectors are getting more complicated, self-storage has the rare distinction of being roughly as simple as it was supposed to be.
Conclusion: Discipline, electrons, security
The January article argued that 2026 would reward those who could explain demand, access capital, and secure power. The 2026 Iran war has raised the risk of getting any one of those three wrong.
What I would add today is this: the geopolitical premium is not going away when the Strait reopens. It will sit in long-dated oil forwards, in insurance pricing, in supply chain redundancy budgets, in the security spec of new data centers, and in the discount rates that thoughtful capital applies to assets concentrated in chokepoint-exposed geographies. Some of that premium will compress over time, but some of it is structural.
The market spent the first weeks of the war trying to figure out whether the January thesis still held. Five months in, I think the answer is yes, in shape and direction, but with a heavier hand on the underwriting pen and a longer hold period on the timeline.
In brief: 2026 was always going to be the year of execution. It is now also the year of fortification.
Footnotes
Green Street Advisors, Cycle-rotation and capital-allocation outlook for 2026 commercial real estate, 2025.
RCLCO, U.S. real-estate capital deployment and sector normalization themes, 2025.
RCLCO, National multifamily completions forecast 2026; pre-war estimate of approximately 414,000 units, revised lower in light of Q1 and Q2 2026 construction cost inflation.
JLL Research Team, U.S. cold-storage resilience and supply constraints outlook for 2026, 2025.
CBRE Hotels Research, Margin compression and ancillary revenue optimization in U.S. lodging assets, 2026 outlook, 2025; updated for post-February international travel disruption.
CBRE Investment Management, Self-storage normalization and operator discipline by submarket, 2026.
Industry Data Center Research Consortium, Power-availability scarcity, redeployment constraints, and post-conflict resilience requirements for U.S. data-center site economics, 2026.
Green Street Advisors, Macro cycle rotation and broader commercial real-estate sector normalization themes for 2026, 2025.
Freddie Mac, Primary Mortgage Market Survey, week ending May 21, 2026 (30-year fixed at 6.51%).
International Energy Agency, Oil Market Report, March through May 2026, on the Strait of Hormuz supply disruption.
Goldman Sachs, Oil price forecast revision, March 22, 2026 (Brent revised upward to average $85 per barrel for 2026).
Moody's Ratings, Helium supply disruption and semiconductor and AI infrastructure exposure, April 2026.
Copyright: Feldman Law Group LLP, 2026