Commercial Real Estate Leasing Benchmarks 2026: What the Data Is Really Telling Occupiers, Owners and Investors
Office vacancy just posted its sharpest quarterly drop in over a decade. Industrial leasing volume surged past 175 million square feet in a single quarter. Retail space is harder to find than at almost any point in the last ten years. Beneath the headlines, three property sectors are moving in three different directions — and the benchmarks below explain why that matters for every lease being negotiated right now.
In This Article
- The 2026 leasing snapshot
- Office leasing benchmarks: vacancy, rent and the flight to quality
- Industrial leasing benchmarks: absorption accelerates
- Retail leasing benchmarks: scarcity becomes the norm
- Capital markets: cap rates and investment volume
- Decoding concessions: TI allowances, free rent and effective rent
- Regional divergence: where the outperformance is concentrated
- 2026–2027 outlook
- Advisory for stakeholders
- Frequently asked questions
- Related reading
- Sources and methodology
1. The 2026 Leasing Snapshot
Commercial real estate has spent the last three years re-pricing risk, and 2026 is the year the recalibration is showing up in hard numbers rather than sentiment surveys. Office fundamentals are improving from a low base, industrial has snapped out of its two-year digestion phase, and retail has quietly become the tightest major property type in the country. Investment capital is following the same script: it is chasing operational performance, not just discounted basis.
Office vacancy fell 30 basis points quarter over quarter to 18.3% in the second quarter, the steepest single-quarter decline the sector has recorded since 2015, while prime space performed even better, with vacancy dropping 40 basis points to 12.3%.1 Industrial followed a similar path: leasing activity jumped to 175.7 million square feet, up 49.4% year over year, pushing net absorption to 99.1 million square feet for the quarter.2 Retail, meanwhile, continues to operate with almost no slack, prompting Cushman & Wakefield to describe the sector's vacancy as resilient and near historic lows through the second quarter.3
Sources: CBRE Research Q2 2026 U.S. Office Market Report; JLL Research U.S. Industrial Market Dynamics Q2 2026; Cushman & Wakefield U.S. Retail MarketBeat Q2 2026.
2. Office Leasing Benchmarks: Vacancy, Rent and the Flight to Quality
The office story in 2026 is no longer a single number — it's a widening gap between two markets operating under the same roofline. Overall vacancy sits at 18.3%, but prime space is tightening far faster than the average suggests, and Midtown Manhattan's prime vacancy rate has fallen to just 2.2%, underscoring how concentrated the recovery has become in top-tier buildings.1
Endpoints sourced directly from CBRE Research Q1 2026 and Q2 2026 U.S. Office Market Reports; intermediate points are directional interpolations, not independently reported figures.
Rent growth is the more surprising data point. Average asking rent climbed 2.6% year over year to $37.58 per square foot in the second quarter — the fastest pace of growth in six years and above the market's 30-year historical average, even with vacancy still elevated by pre-pandemic standards.1 The gap between asking and taking rents, a proxy for how much negotiating leverage tenants still hold, narrowed to 10.1%, tighter than in recent quarters but still wider than the 8.6% spread seen in 2019.1
Cushman & Wakefield's research frames the broader trend as a demand story rather than a supply story: net absorption on a four-quarter rolling basis reached 14.3 million square feet in the second quarter, a six-year high and the seventh straight quarter of improvement, with positive absorption now showing up in 55 of the 92 markets the firm tracks.4 Supply, in the meantime, keeps shrinking — conversions, demolitions and repositioning have pulled U.S. office inventory down 0.6% over five quarters, removing 33 million square feet of competitive stock from the market.4
3. Industrial Leasing Benchmarks: Absorption Accelerates
Industrial real estate spent 2024 and most of 2025 digesting a historic wave of pandemic-era construction. That digestion phase appears to be over. National vacancy compressed 60 basis points in the second quarter to 6.8%, described by JLL Research as the first meaningful contraction in the metric since mid-2023.2 Cushman & Wakefield's parallel tracking shows vacancy easing 10 basis points to 6.9% at midyear, with the gap between the two firms' figures reflecting differences in market coverage and methodology rather than a contradiction in the underlying trend.5
The recovery is uneven by design. Occupiers are prioritizing power availability, automation-ready specifications and skilled-labor access over discounted rent in older buildings, a flight-to-quality dynamic that mirrors what's happening in office.2 Third-party logistics providers and manufacturers expanding supply chains accounted for more than 55% of leasing activity through the first half of the year, with Dallas-Fort Worth (40.3 million square feet), the Inland Empire (28.5 million square feet) and Chicago (21.8 million square feet) leading national leasing volume.5
Source: Cushman & Wakefield U.S. Industrial MarketBeat, Q2 2026 — nine markets recorded more than 10 million sq. ft. of leasing since the start of 2026.
Construction discipline is also playing a role in the tightening. CBRE's 2026 outlook expects vacancy to stabilize in the mid-6% range as speculative development remains minimal, and notes that occupiers are locking in renewals earlier than in prior years — an average of 219 days before lease expiration in 2025, nearly a month sooner than in 2024 — as landlords sweeten tenant-improvement allowances and free-rent periods to secure early commitments.6
4. Retail Leasing Benchmarks: Scarcity Becomes the Norm
Retail is arguably the tightest major property sector in the country right now, a reversal few would have predicted a decade ago. Average asking rent reached $24.79 per square foot in the second quarter, up 2.4% year over year, and Cushman & Wakefield's midyear research characterizes national vacancy as resilient and holding near historic lows.3
The scarcity is structural rather than cyclical. Elevated construction financing costs and limited available land in established retail corridors have kept new supply well below the pace needed to meet demand from grocery-anchored centers, off-price retailers and experiential concepts. That imbalance shows up directly in pricing power: landlords in well-located neighborhood and community centers are increasingly able to hold the line on concessions, a sharp contrast to the office sector's still-elevated incentive packages.
5. Capital Markets: Cap Rates and Investment Volume
Pricing and capital flows are where the sector split becomes most visible. MSCI's second-quarter Real Capital Analytics data shows industrial as the most liquid major sector, with $32.5 billion in transaction volume, up 27% year over year, while office investment volume declined 9% year over year in the quarter to $18.5 billion — though first-half 2026 volume for office is still running 14% ahead of last year's pace.7
Suburban office is quietly outperforming its central-business-district counterpart in the capital markets: suburban transaction volume fell only 5% year over year compared with a 17% decline for CBD assets, and the RCA Commercial Property Price Index for office posted its fourth straight quarter of gains for CBD product and fifth for suburban.7 Retail pricing has stabilized rather than compressed further, with cap rates holding around 6.9% even as a single large portfolio transaction — the sale of ECHO Realty to a TPG-led joint venture — inflated the sector's headline volume growth.7
Source: CBRE U.S. Cap Rate Survey, H2 2025 (most recent published full survey); MSCI Real Capital Analytics Q2 2026 for retail and office pricing trend confirmation. Ranges are indicative and vary by market tier and asset quality.
6. Decoding Concessions: TI Allowances, Free Rent and Effective Rent
Headline asking rent tells only part of the story in any lease negotiation. The gap between face rent and what a tenant actually pays — effective rent — is driven almost entirely by three levers: tenant-improvement (TI) allowances, leasing commissions, and free-rent periods. On a Class A urban office lease in 2026, that discount cascade typically shaves 20% to 35% off the quoted face rent.8
Illustrative institutional underwriting example based on typical Class A gateway-market terms. Source: apers.app office underwriting analysis, citing Newmark Q1 2026 U.S. Office Market Conditions & Trends.
| Concession benchmark | 2026 range | Note |
|---|---|---|
| Class A gateway office TI allowance | $70–$90 per sq. ft. | Roughly 75% above pre-pandemic norms; trophy Manhattan deals have pulled back from a 2024 peak of $212/sf to $133–$162/sf.8 |
| Office free rent (10-year gateway lease) | 8–12 months | Peaks near 14.5 months in Midtown Manhattan; represents a direct hit to landlord NOI, not just a marketing incentive.8 |
| Retail TI allowance | $10–$250 per sq. ft. | Wide range driven by shell condition; restaurant build-outs commonly exceed $100/sf.9 |
| Industrial/flex TI | Amortized into rent | Typically amortized at roughly an 8% rate over the lease term rather than paid as a lump sum.9 |
7. Regional Divergence: Where the Outperformance Is Concentrated
National averages obscure how concentrated the 2026 recovery really is. A handful of metros are absorbing a disproportionate share of leasing demand across every property type.
| Sector | Markets leading benchmarks | Key indicator |
|---|---|---|
| Office rent growth | Manhattan, San Francisco, Dallas, San Jose, Charlotte | Expected to lead the U.S. in office rent growth through 202610 |
| Industrial leasing volume | Dallas-Fort Worth, Inland Empire, Chicago | Combined 90.6 million sq. ft. leased since the start of 20265 |
| Industrial vacancy compression | Dallas-Fort Worth | Vacancy down for seven consecutive quarters to 9.3%, from an 11.1% 2024 peak11 |
| Office prime vacancy | Midtown Manhattan | Prime vacancy at just 2.2%, among the tightest in the nation1 |
8. 2026–2027 Outlook
Three forward-looking signals stand out for stakeholders planning lease and capital decisions into 2027:
Office prime vacancy is on a path back to pre-pandemic levels. CBRE's research team expects prime office vacancy to reach pre-pandemic levels by the end of 2027, supported by construction pipelines still running near Great Financial Crisis lows and continued net removal of obsolete inventory through conversions and demolitions.10
Industrial rent growth will stay selective rather than broad-based. CBRE's outlook anticipates that overall rent growth remains subdued as the sector adjusts to shifting trade policy, even as gateway markets and supply-constrained secondary markets such as Nashville and Louisville continue to post healthy gains.6
Cap rate compression will be modest, not sharp. Market forecasts point to roughly 5 to 15 basis points of cap rate compression across most sectors through 2026, a continuation of stabilization rather than a return to the ultra-low-rate pricing environment of 2021.12
9. Advisory for Stakeholders
The divergence across sectors means a single playbook no longer works. Here is how the current benchmarks should shape decisions for the four groups most exposed to them.
For Landlords & Building Owners
Prime, well-located space is regaining pricing power — use it. Push term length in exchange for TI, since seven-year-plus commitments are unlocking materially higher landlord returns on concession spend. In older or commodity space, prioritize earlier renewal conversations; tenants are already signing roughly a month sooner than they did a year ago, so waiting until expiration cedes leverage.
For Tenants & Occupiers
Negotiate on effective rent, not face rent — a 20–35% gap between the two is now standard in gateway office markets, and ignoring it means overpaying. In industrial and retail, move early: absorption and leasing velocity are both accelerating, and the window for tenant-favorable terms is narrowing fastest in big-box and grocery-anchored formats.
For Investors & Capital Allocators
Industrial remains the most liquid sector for a reason — absorption, rent growth and transaction volume are all confirming the thesis simultaneously. Retail deserves a second look given historically tight vacancy and stable cap rates; treat headline volume figures with caution when a single large portfolio trade is skewing the quarter. Suburban office is outperforming CBD on a relative basis and merits closer underwriting attention.
For Brokers & Advisors
Always disclose whether a vacancy or rent figure is "overall" or "prime" — the spread between the two has widened to a point where it changes deal strategy. Cross-check vacancy benchmarks across at least two research providers (CBRE, JLL, Cushman & Wakefield, Colliers) before presenting them to clients, since methodology differences of 10–30 basis points are common and can be mistaken for market movement.
10. Frequently Asked Questions
What is a good office vacancy benchmark in 2026?
Context matters more than a single number. Overall U.S. office vacancy was 18.3% in the second quarter of 2026, but prime space was far tighter at 12.3%, and select submarkets like Midtown Manhattan were near 2.2%.1 A "good" benchmark depends on whether you're comparing overall stock or top-tier buildings.
Why is industrial vacancy falling while office vacancy stays elevated?
Industrial supply growth has slowed sharply after the 2021–2023 construction boom, while leasing demand from logistics, manufacturing and e-commerce tenants has re-accelerated, pushing vacancy down 60 basis points in a single quarter.2 Office supply is also shrinking, but from a much higher starting vacancy base, so the percentage impact is smaller even though the underlying dynamics — less new space, steady demand for the best buildings — are similar.
How much should I budget for tenant improvement allowances in 2026?
For Class A gateway office space, budget in the $70–$90 per square foot range, and expect meaningfully higher figures for trophy space in markets like Manhattan.8 Retail TI varies enormously by shell condition and use, from roughly $10 to $250 per square foot.9 Always confirm whether the number is a lump-sum allowance or amortized into rent.
11. Related Reading on Core Insights Review
Commercial Real Estate Outlook 2026
Sector-by-sector cap rate forecasts, deal volume projections, and where capital is rotating in 2026. Read the outlook →
Commercial Real Estate Valuation Methods
How the cost, sales comparison, income and DCF approaches work together, with current cap rate data by sector. Read the guide →
12. Sources & Methodology
All figures in this article are drawn from primary industry research published between January and August 2026, cross-referenced across multiple providers where possible to flag methodology differences rather than presenting a single source as definitive.
- CBRE Research, Q2 2026 U.S. Office Market Report and Q1 2026 U.S. Office Market Report, cbre.com
- JLL Research, U.S. Industrial Market Dynamics, Q2 2026, jll.com
- Cushman & Wakefield, U.S. Retail MarketBeat, Q2 2026, cushmanwakefield.com
- Cushman & Wakefield, U.S. Office MarketBeat Reports, Q2 2026, cushmanwakefield.com
- Cushman & Wakefield, U.S. Industrial MarketBeat Report, Q2 2026, cushmanwakefield.com
- CBRE, U.S. Real Estate Market Outlook 2026 — Industrial, cbre.com
- MSCI Real Capital Analytics, Q2 2026 U.S. Capital Trends, via Colliers Knowledge Leader, colliers.com
- apers.app, Office Underwriting: TI/LC and Effective Rent, citing Newmark Q1 2026 U.S. Office Market Conditions & Trends
- The Cauble Group, Tenant Improvement Allowance: 2026 Ranges + Calculator, tylercauble.com; TerrapinCG, Tenant Improvement Buildout Costs for Commercial Retail Space (2026)
- CBRE, U.S. Real Estate Market Outlook 2026 — Office, cbre.com
- JLL Research, Dallas-Fort Worth Industrial Market Dynamics, Q2 2026, jll.com
- Neuhaus Realty Group / CBRE 2026 Cap Rate Outlook commentary, referencing CBRE's H2 2025 U.S. Cap Rate Survey
Figures are current as of publication and subject to revision as providers issue updated quarterly data. Readers underwriting individual transactions should confirm the latest figures directly with the cited research provider before relying on any single data point.
