Trixy Castro is the founder and CEO of TRX Capital, as well as a partner and board member of Verifee.
As we end 2025 and head into 2026, I anticipate that the U.S. real estate market will be shaped by several emerging trends.
The trends I predict are elevated interest rates, the need for creative financing solutions, the need for increased asset diversification and, finally, transformations spurred by artificial intelligence (AI).
1. Elevated Interest Rates Compared To Historic Lows
On July 24, 2025, the Associated Press reported that, per data from Freddie Mac, the average 30-year U.S. mortgage rate had slightly dipped to 6.74%, down from 6.75% the prior week. The article also explained that a year earlier, the average rate was 6.78%. Additionally, JPMorgan noted in its analysis of 2025 trends in the commercial real estate sector that “although the Federal Reserve cut interest rates in 2024, there’s no guarantee the easing cycle will continue. The timing and pace of further rate decreases will depend on many factors.”
My outlook aligns with the data from Freddie Mac and JPMorgan’s analysis. I predict that while we might see real estate interest rates slightly ease throughout the year, those dips won’t be significant, and rates will remain elevated compared to historic lows, such as the 2.67% 30-year fixed rate mortgage average in the U.S. as of December 31, 2020, as per data supplied by Freddie Mac.
2. The Need For More Creative Financing Solutions
Given the stricter lending environment in light of interest rates in 2025, there will arguably be a need for real estate investors and firm leaders to pursue more creative financing solutions in 2026.
From my perspective, relying on traditional bank loans could be risky in 2026. Consider this: According to Crain’s New York Business (paywalled), in April 2025, one of the world’s largest banks, JPMorgan, “advised investors to avoid commercial real estate debt, a move that could ramp up pressure on landlords who need to refinance their mortgages for industrial space, shopping centers, or office towers.”
In my view, real estate investors and firm leaders should not write off trying to secure traditional bank loans. However, I believe that rather than just centering their efforts to secure financing on traditional bank loans, real estate investors and firm leaders should also consider alternative financing approaches, such as tapping into private investment funds, partnering with other investors and leaders and offering investors equity in projects.
3. The Need For Increased Diversification And Differentiation
Geographic and asset diversification is always imperative, I believe, but will arguably be even more so in 2026.
When real estate investors and firm leaders rely on more than just one geographic area or type of asset, they’re able to better spread and mitigate risk in their portfolios. Market forces can shift rapidly in real estate. For instance, in terms of geography, according to PwC’s 2026 “Emerging Trends in Real Estate” report, “over half of the Primary Markets moved up the ranks this year” compared to the firm’s 2025 survey. As for asset diversification, McKinsey’s analysis (gated) of the outlook for office space demand in various cities paints a good picture of why it’s important. In San Francisco, for instance, office space demand “is modeled to drop significantly by 2030.” So, a real estate investment firm that mainly or only has San Francisco office spaces in its portfolio will likely face financial strain in the next few years. In my view, real estate investors and firm leaders shouldn’t focus on diversifying in only primary markets—they should also explore opportunities in secondary and tertiary markets. I also believe that recession-resilient asset classes, such as multifamily and built-to-rent properties, can be strategic opportunities.
Additionally, I believe that differentiation will be increasingly important the rest of this year and into 2026. By taking certain steps, such as creating environmentally friendly housing and inclusive tenant programs, real estate investors and firm leaders can stand out in the market.
4. Further Transformations Spurred By AI
AI is bringing swift changes to many industries, and real estate is no exception.
AI, particularly generative AI, is one of the most significant technological advances that stands to transform the real estate industry by making various processes faster and more efficient. According to McKinsey, GenAI can help real estate companies streamline their operations in several key ways. Specifically, GenAI can analyze “mountains of leasing documentation,” serve as a copilot “for a variety of real estate interactions,” help prospective tenants “visualize exactly what an apartment would look like” in the style of their choice and, finally, enable investors to make “faster, more precise investment decisions.”
Notably, AI is also enhancing PropTech. As noted by Jones Lang LaSalle (JLL), “digital transformation began impacting real estate decades ago with property management software, customer relationship management systems and financial analysis tools”—and, JLL continued, per data from PitchBook, “the total capital raised to fund AI-powered Proptech reached $4 billion globally in 2022” which was two times the amount of funding that was raised in 2021.
Real estate investors and firm leaders should not become overreliant on AI tools. However, they should carefully research AI tools and pinpoint how they can weave this technology into critical facets of their operations—and in turn, enable themselves and their teams to save time and increase the likelihood of securing better outcomes.
To Safeguard Their Businesses, Investors And Leaders Should Think Long-Term
Real estate investors and leaders should keep a pulse on market forces and remain aware of these four predictions. To safeguard their businesses the rest of this year and in 2026, I believe that the most important step they can take is to adopt investment mindsets that are more geared toward the long term than the short term.
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