Morgan Stanley Raises 2026 CRE Volume Forecast
Morgan Stanley has revised its outlook for 2026 commercial real‑estate (CRE) transaction volumes, increasing the forecast to $635 billion, which represents a 12% year‑over‑year rise from its prior estimate. The upward revision follows a stronger‑than‑expected first‑half performance, where CRE transaction volumes reached $279 billion in the first six months of 2026, 23% higher than the same period in 2025.
In the second quarter of 2026, commercial and multifamily loan originations grew 16% year‑over‑year and 12% quarter‑over‑quarter, indicating robust financing activity. Correspondingly, outstanding mortgage debt in the CRE sector rose to $5.02 trillion, a 4.5% increase compared with the previous year. Morgan Stanley attributes part of this expansion to eased bank lending standards for commercial real estate, which have contributed to improved capital‑market conditions during the quarter.
Price appreciation in the sector remained modest, with property values increasing only 0.9% year‑over‑year in June. Distressed property sales accounted for 3.3% of all CRE transactions, and net distress rose by $5.8 billion. The composition of distressed sales shifted in Q2 2026: apartments represented 38% of distressed transactions, while office properties accounted for 37%, marking a reversal from earlier quarters when office assets dominated distressed sales.
Morgan Stanley concluded that, although CRE capital markets continue to improve, price growth stays limited and distress levels are rising.