Market Opinion: What Does 2026 Hold?

As we enter the 'slow' season, we tend to expect November through early January to be our time to catch up, plan, or reflect on the past year. This year seems to somewhat bucking the trend, with a surge in activity as 2025 comes to a close.

Our listing activity has remained elevated throughout all of 2025, with our active and pending inventory sitting at 53 listings across Southern Oregon, ranging from small warehouses for lease, apartment buildings, STNL retail deals, storage facilities, and everything in between.

We are excited to see a surge in activity, most notably for smaller lease deals. It appears that the most in-demand space is small warehouse space, 1,500 square feet or less - ideally with a roll-up door, small office, and private bathroom. We're achieving $1.00/SF/Mo NNN for older product of this size, and newer properties can run up to $1.15 or higher (!) For any owners that have small or medium warehouse space - we want to work with you!

The theme of 2026 will likely be cautious optimism, but blunted by a lack of commitment from buyers and tenants. Across the board, users are hesitant to commit to a space - they want a smaller footprint for less term, or if they are a buyer, most are taking much longer to commit to even writing an offer. We further expect to see a market dislocation between newer, higher-quality properties and the older stock of property that makes up a large portion of the local market. While 1960s, 70s, and 80s product (regardless of asset type) may continue to trade 'sideways' (flat values), we are seeing quality, newer construction assets (1990s+) capture a majority of buyer demand.

Older assets are becoming functionally obsolete at a faster and faster rate with the constantly changing buyer needs, building codes and standards, and cost of renovations ever increasing. This combination puts a strong downward pressure on older asset values, while further inflating newer properties appeal and subsequently their value.

While everyone has a differing opinion of the year ahead of us, we do have several tailwinds pointing to improvement. Mortgage interest rates may slowly start ticking downwards in '26, alongside renewal of 100% bonus depreciation, OZs being made essentially permanent, the rise of DST's providing some needed market liquidity, talks of 50-year mortgages (mixed reactions), and the overwhelming amount of 'dry powder' (liquid funds) sitting on the sidelines.

As cracks form in the foundation of the market, we are seeing those vacuums get quickly filled. Foreclosures, short-sales, etc. are still extremely rare, and almost non-existent for multifamily or other conventional commercial assets, barring extreme circumstances.

We're expecting a 'flat' 2026 - but hoping and preparing to be proven wrong with an uptick in sales and leasing. We are excited to continue to grow Merit Commercial Real Estate to serve every single property owner in our market!