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Morgan Stanley sees U.S. commercial real estate repricing ahead of a new up-cycle
The firm’s mid-year 2026 outlook cites CRE pricing down about 20 percent on average and reports transaction activity up 23 percent year over year in the U.S.
Commercial Observer reports that Tony Charles, global head of research and strategy at Morgan Stanley Real Estate Investing, says U.S. commercial real estate is entering the next up-cycle after a long downturn, with pricing now viewed as below replacement costs.
Charles attributes the slump to the Federal Reserve’s shift to higher rates that began in mid-2022 after the COVID-19 era, calling it the longest real estate downturn since the 1980s and early 1990s. He said commercial real estate pricing is still down an average of 20 percent across the board four years later.
He pointed to supply as a key support, saying it is down dramatically, and he cited a stronger macro backdrop including U.S. GDP growth of 2.1 percent year over year in the second quarter of 2026.
Morgan Stanley Investment Management also flagged momentum in activity, saying CRE transaction activity increased 23 percent year over year, institutional capital raising is up nearly 40 percent on the year, and CRE debt originations are up around 20 percent year over year. The outlet added that Charles argued the industry struggles most when rates are rising, but that cap rates have already adjusted given how long rates have remained high.