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Geopolitics and higher costs force shift in commercial real estate outlook
JLL now expects lower growth, higher inflation, and a change in the interest-rate path from its earlier 2026 view, citing Middle East and trade disruptions and rising fuel, materials, and logistics costs.
ConnectCRE highlights that JLL’s mid-year update to its Global Real Estate Outlook points to a notably less favorable commercial real estate environment than the relatively optimistic 2026 baseline projected earlier. The firm tied the change to greater uncertainty linked to geopolitical developments, including the Middle East conflict, the closure of the Strait of Hormuz, and ongoing trade tensions.
In the updated outlook, JLL said it expects somewhat lower growth and higher inflation, along with a shift in the direction of interest rates compared with what it anticipated at the start of the year. JLL also said these effects are likely temporary and reversible.
The report also emphasizes how cost pressures have intensified as energy, commodity, and freight disruptions have driven up expenses for corporate budgets. ConnectCRE reports that higher fuel, materials, and logistics costs are affecting operating budgets, increasing construction expenses, raising fit-out costs, and slowing project timelines, while development pipelines continue to shrink in many mature markets.
JLL further expects well-located secondary assets to benefit from demand spillover where available space is limited, and it sees potential for owners to retrofit and reposition existing properties instead of pursuing new construction. ConnectCRE also notes that JLL’s Future of Work Survey found 66% of organizations prefer AI-enabled buildings over basic building management systems.