If 2026 has taught us anything, it’s this: don’t get too attached to your January forecast. By February, assumptions about lower inflation, rate cuts, and a declining 10-year Treasury were off the table, and a war in Iran was about to begin. The volatility continued into Q2. In May, the 10-year Treasury climbed 75 basis points, swinging from a low of 4.37% to a high of 4.66% on May 19th, while oil prices spiked above $100 a barrel. Suddenly, nobody was talking about cuts.
This isn’t an anomaly. In three of the last five years, the January playbook has been torn up by spring: 2022’s war in Ukraine, 2023’s failure of Silicon Valley Bank, and 2024’s tariff wars all forced similar recalibrations.
LightBox sits at the center of the CRE ecosystem, giving us a unique perspective on the forces driving lending and investment activity across the US. Whether it’s environmental due diligence, appraisals, or property listings, aggregate LightBox metrics point to a market that has soldiered on this year despite one hurdle after another. Banks returned to CRE lending far faster than expected, with Q1 numbers coming in well above what the MBA had projected for all of 2026. And the LightBox CRE Activity Index held in triple-digit territory for the first five months of the year.
On a special Fourth of July episode of the CRE Weekly Digest, cohosts Manus Clancy and Dianne Crocker offered their predictions for the back half of 2026.
1. Sun Belt magnets yield to secondary Midwest metros. The Sun Belt migration story, centered on Austin, Phoenix, and the usual names, has been gospel since 2021. But that migration is decelerating faster than many models predicted, and Sun Belt multifamily markets are working through real oversupply. Meanwhile, LightBox’s Phase I environmental site assessment data shows stronger growth in Midwest secondary metros like Columbus, Indianapolis, and Milwaukee, markets that avoided the 2021-2022 run-up and are being bought at more attractive bases. Since environmental due diligence happens ahead of major deals and loans, this data supports the prediction that investors in the second half will favor these “flyover” markets over the previous cycle’s darlings.
2. Interest rates: a hike, then a reversal. Expect a short-lived hike from the Fed, a policy misstep driven by lingering inflation worries, followed by a reversal after softer CPI prints (aided by oil settling around $68 a barrel) come through later in the year.
3. The 10-year Treasury lands in the low 4s. The 10-year Treasury is expected to settle in the low 4% range by year-end, likely between 4.05% and 4.10%, well below its 2026 peak but not as low as a bullish 3.75% scenario. Just as important as the level itself is the expectation that it trades in a narrower, less volatile band, assuming market conditions remain stable.
4. Lending and transactions post strong 2H 2026 without tipping into euphoria. Lending could see its best second half since the 2022 refinancing boom, driven by heavy refi need on maturing loans and renewed origination activity, concentrated especially in sectors with real income growth like industrial, data centers, and multifamily. Transaction volume should grow as well, but without reaching 2022-style excess.
5. The LightBox CRE Activity Index ends 2026 roughly 15% above last year. With the latest May index at 126.6, the Index will land at 98-100 at year-end, a conservative forecast that accounts for the typical seasonal December dip (the index hit 86.7 last December) but still comes in 15% above last December.
The risks: what could derail a bull case for the second half?
The near-term forecast carries real risk. At the top of the list is the war in the Middle East. A collapse of the ceasefire and a return to high oil prices would ripple through every part of the CRE ecosystem. Close behind is the possibility of a weakening labor market, where anxiety about AI-driven job displacement remains elevated even if the immediate impact has been more muted than feared. Today’s jobs report added a fresh data point to that concern. Nonfarm payrolls rose by just 57,000 in June, well below the 110,000 economists expected and a sharp step down from May’s downwardly revised 129,000. Paired with the CRE sector’s own labor-market anxieties around AI-driven displacement, it is a reminder that the jobs picture remains one of the more fragile pieces holding up the second-half bull case, one worth watching closely heading into the next few reports.
Six months from now, we’ll revisit every one of these calls. For now, our mid-year look back shows that 2026 has rewritten its own script more than once already, and that commercial real estate has proven more resilient than almost anyone expected.
To listen to the full episode… 2026 Commercial Real Estate Outlook | CRE Weekly Digest
