{"id":70846,"date":"2025-12-15T09:20:10","date_gmt":"2025-12-15T09:20:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-ny\/70846\/"},"modified":"2025-12-15T09:20:10","modified_gmt":"2025-12-15T09:20:10","slug":"what-trends-will-drive-commercial-real-estate-in-2026","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-ny\/70846\/","title":{"rendered":"What trends will drive commercial real estate in 2026?"},"content":{"rendered":"

Listen to this article<\/p>\n

The basics:<\/p>\n

Report ranks Jersey City<\/a> and North Jersey<\/a> among 2026\u2019s top commercial real estate<\/a> markets
\nExperts cite redevelopment, data center demand and mixed-use projects as major drivers
\nRising costs, tariffs, interest rates and municipal fatigue continue to create headwinds
\nHealth care facilities and adaptive reuse projects are emerging as strong investment opportunities<\/p>\n

Looking ahead at the commercial real estate business in 2026, industry experts believe New Jersey has some markets to watch. According to a recently released report<\/a> from the Urban Land Institute and professional services firm PwC<\/a>, Jersey City and North Jersey are among the most promising areas for real estate investment and development.\n<\/p>\n

Based on input from more than 1,700 real estate investors, developers, lenders and advisors in the U.S. and Canada, the annual survey aims to identify key opportunities, risks and market shifts affecting the real estate industry in the coming year.\n<\/p>\n

Now in its 47th year, the Emerging Trends in Real Estate analysis<\/a> explores how the industry is adapting amid economic change, demographic shifts and rapid advances in technology.<\/p>\n

Andrew Alperstein, a partner with PwC\u2019s real estate practice, said, \u201cThe past few years have tested the industry\u2019s ability to pivot. In today\u2019s environment, we\u2019re seeing a renewed focus on core fundamentals and deploying capital into high-growth areas. From the rapid evolution of AI infrastructure to the growing demand for senior housing, the opportunities in 2026 will favor those who combine speed, data-driven insight and a long-term strategic vision.\u201d\n<\/p>\n

Featuring a mix of both established and emerging urban centers, the list of top 10 markets capturing investor attention are:\n<\/p>\n

Dallas-Fort Worth
\nJersey City
\nMiami
\nBrooklyn
\nHouston
\nNashville
\nNorth Jersey
\nTampa-St. Petersburg
\nManhattan
\nPhoenix<\/p>\n

After coming in at No. 19 in last year\u2019s survey, Jersey City jumped 17 spots in the latest ranking<\/a>. North Jersey climbed from No. 22 to No. 7.<\/p>\n

\u201cNorthern New Jersey is considered a net buy for apartments, while second-ranked Jersey City is broadly considered for acquisitions outside of office properties,\u201d PwC and ULI<\/a> wrote.\n<\/p>\n

The report billed Jersey City as a \u201cfast-growing commercial hub with convenient proximity and connection to New York City that enhances its appeal to startups and established firms alike.\u201d The state\u2019s second-largest city also \u201coffers access to top talent, investors, and global markets, while maintaining a more affordable and scalable business environment,\u201d the report said.
\n\"Jersey\"JerseyPwC\u2019s Emerging Trends in Real Estate report billed Jersey City as a \u201cfast-growing commercial hub with convenient proximity and connection to New York City that enhances its appeal to startups and established firms alike.\u201d \u2013 DEPOSIT PHOTOS\n<\/p>\n

\u201cFrom innovative lab spaces and skyscraping office towers to spacious warehouses and dynamic retail environments, the market has plenty to offer. While its office market is certainly diversifying, financial firms likely will continue to dominate leasing activity for some time. From 2022 to 2025, firms in the finance, insurance, and real estate (FIRE) sector accounted for 63 percent of all leasing activity in Jersey City,\u201d PwC and ULI said.\n<\/p>\n

The firm also noted Jersey City\u2019s 1,300 acres of parkland, numerous high-quality dining options and cheaper rents than nearby Manhattan as factors in the city\u2019s 7.5% population increase between 2020 and 2024.\n<\/p>\n

Immediate hurdles<\/p>\n

Despite the potential for growth, innovation and long-term resilience in parts of New Jersey, the market is still dealing with challenges such as uncertainty over tariffs and the impact on cost of goods, construction costs, operating costs and consumer spending. In addition, interest rates and potential inflation caused by tariffs and labor supply issues could prevent rates from falling much further.\n<\/p>\n

NJBIZ recently chatted with Donald Pepe<\/a> and Joe DeMarco<\/a>, partners of the commercial real estate group at Scarinci Hollenbeck<\/a> LLC, about ongoing headwinds and overall expectations for 2026. Based in Little Falls, the firm is recognized for its strength in commercial real estate, environmental and land use work.
\n\"Donald\"DonaldPepe\n<\/p>\n

Pepe said, \u201cI\u2019m involved in a lot of projects that are basically stalled with difficulties getting financing, increases in costs, getting approvals from municipalities and financial agreements. Long-term tax abatements, which historically had helped to make projects that are difficult to finance, have largely disappeared in the marketplace.\u201d
\n\"Scarinci\"ScarinciDeMarco\n<\/p>\n

Although the industry expressed cautious optimism ahead of 2025 regarding leasing and financing, DeMarco<\/a> said growth wasn\u2019t \u201cas expected.\u201d\n<\/p>\n

\u201cThere are some things that are still getting done that are in the pipeline, but there is just not that pent up need or desire,\u201d he said. \u201cAnd some of it is just, I think, from a municipality perspective, some fatigue. I think the municipalities have just gone through a beating on the affordable housing on the residential side, and I think the development is on the mind of the average resident voter or taxpayer. And once that occurs, sometimes you can lose a good deal because you get caught up in that backswing.\u201d\n<\/p>\n

Pepe added that the increased construction costs due to tariffs and borrowing are having a varying effect on what\u2019s moving forward.\n<\/p>\n

\u201cThe huge projects, the skyscrapers, those people are well-heeled and they\u2019re just waiting it out \u2026 the smaller developers, the ones with five units, 10 units, 12 units, those are the guys unable to get projects off the ground,\u201d he said.\n<\/p>\n

While AI and cloud computing are driving unprecedented demand for data centers<\/a>, power limitations and supply hurdles continue to restrict how fast the sector can expand, according to PwC and ULI. The firms noted that the national vacancy rate is below 2%, and most facilities are pre-leased even before completion.
\n\"CoreSite\"CoreSiteCoreSite announced in September the completion of its newest facility, NY3, located in Secaucus. The data center adds more than 138,000 square feet to CoreSite\u2019s regional footprint. \u2013 PROVIDED BY CORESITE\n<\/p>\n

DeMarco, \u201cData centers are popping up everywhere in the country. But it\u2019s a little bit more challenging in New Jersey because you\u2019re paying a premium for the space required for them. And they\u2019re smacking up on the challenge of the discussion of what does that do to my personal utility rate when the average person now is fully aware of the data center comes with an increased demand on water systems and utility systems \u2026 There\u2019s a lot of headwinds and some of these things are outside the control of the developer.\u201d\n<\/p>\n

Getting center-ed<\/p>\n

As for the deals making it over the finish line, DeMarco and Pepe said projects aimed at transforming retail properties into mixed-used destinations tend to be the most successful.\n<\/p>\n

\u201cI have one now that\u2019s in Mount Arlington that is an old project that stalled \u2026 and we\u2019re buying it with the approvals,\u201d DeMarco said. \u201cIt\u2019s a redo of an outdated strip mall center that\u2019ll get a facelift on the commercial side and hopefully draws better tenants. And then it has a residential component to it, so it becomes more of a center than the old model of just shops.\u201d\n<\/p>\n

The Roundup<\/p>\n

\"Lawyers\"\"Lawyers\"DEPOSIT PHOTOS\n<\/p>\n

Significant legal developments in the real estate industry around the state:\n<\/p>\n

DeMarco said he\u2019s also representing a client who aims to work with Raritan Valley Community College to build residential housing with a commercial component for the Branchburg campus.\n<\/p>\n

\u201cThe community college then would lease back a portion of that for student dormitories without them having to incur the expense and with the developer having to guarantee renters and then the school supports the retail space. Those kinds of marriages are a little bit more creative, but they also pencil out better,\u201d he said.\n<\/p>\n

Pepe is currently involved with Hoboken Brownstone Co.\u2019s efforts to transform Liberty Village Premium Outlets in Flemington<\/a> and Voorhees Town Center in Voorhees<\/a> into mixed-use communities with housing, shops and public spaces.\n<\/p>\n

The Flemington Planning Board unanimously approved the preliminary and final major site plan and subdivision for Liberty Village late last year. In Voorhees, the township committee recently signed off on a redevelopment agreement to revitalize the property formerly known as the Echelon Mall<\/a>.\n<\/p>\n

Flemington and Voorhees are among several towns across the state trying to save dying retail centers by reimagining them as housing and retail destinations. Similar projects are in the works at Monmouth Mall in Eatontown<\/a> and Westfield Garden State Plaza in Paramus<\/a>.
\n\"An\"AnAn aerial rendering for Monmouth Square, which is underway at the former Monmouth Mall site in Eatontown. \u2013 PROVIDED BY KUSHNER\n<\/p>\n

\u201cI think that\u2019s largely because municipalities recognize that they\u2019re on the precipice of losing a large ratable if they don\u2019t cooperate,\u201d Pepe said.\n<\/p>\n

DeMarco added, \u201cOr, they\u2019re going to have empty storefronts and a dead little mall. That\u2019s not the retail model that works currently.\u201d\n<\/p>\n

While strip malls and smaller shopping centers were a \u201cgreat design when it was done in 1975,\u201d DeMarco said, \u201cIt doesn\u2019t really pan up when everyone\u2019s doing DoorDash and everything gets delivered. So how do you revitalize that? And that works, especially when there is this desire for these more suburban places to have a more center of town. Everybody wants a center of town. They\u2019re also great places to put your residential affordable component.\u201d\n<\/p>\n

A healthy outlook<\/p>\n

Additionally, health systems in New Jersey are increasingly investing in ambulatory care facilities designed to bring services and specialists out of the hospital and into the community.\n<\/p>\n

For instance, over the past four years, Hackensack Meridian Health has opened four health and wellness centers across New Jersey (Clifton<\/a>, Paramus<\/a>, Clark and Eatontown<\/a>) as a way to make health care easier and more convenient. A fifth facility is coming soon to Metropark Station in Woodbridge<\/a>.\n<\/p>\n

DeMarco said, \u201cI think health care is the new warehouse for New Jersey.\u201d
\n\"Hackensack\"HackensackHackensack Meridian Health and Wellness Center at Clifton is an 80,000-square-foot, $79 million ambulatory care facility. \u2013 PROVIDED BY HMH\n<\/p>\n

\u201cFive, 10 years ago, it was all supply chains and warehousing and that was the push. I think now there is a consolidation of health care in their market space and they\u2019re looking to capitalize or build those centers. And that seems to be the easier thing to get funded or marketed or placed. And no planning board or resident ever complains to when someone says, \u2018We\u2019re going to put a health center or a cancer center or some sort of treatment center in your downtown.\u2019 Everyone says, \u2018Great \u2013 doctors and nurses, I don\u2019t have to travel to a hospital anymore.\u2019\u201d\n<\/p>\n

I think health care is the new warehouse for New Jersey.
\u2013 Joe DeMarco, partner, Scarinci Hollenbeck LLC<\/p>\n

Pepe said, \u201cAt one point in time, retail was the highest and best use. And developers all went after retail. Then the highest and best use was industrial space. That\u2019s been the case for the past five years now. The highest and best use with the least hurdles is the medical facilities. It\u2019s all about getting something done \u2026 and the path of least resistance is through the health care.\u201d\n<\/p>\n

Affordability concerns<\/p>\n

The report by PwC and ULI also indicated that affordability concerns are driving key trends in the multifamily housing market. According to the firms, new construction is slowing as demand softens due to weaker job growth and reduced immigration, while the affordability crisis is pushing residents toward smaller, less expensive cities.\n<\/p>\n

\u201cAffordable housing has become an incredible burden as we saw in the last election. It\u2019s a very significant concern for the government<\/a> and significant concern for everybody getting priced out of the market. I\u2019m a big supporter of affordable housing, but it takes five market rate units to offset the cost of an affordable unit. And municipalities aren\u2019t willing to provide additional densities that you need to offset that affordable housing. Having an affordable housing requirement on the books doesn\u2019t mean affordable housing gets built,\u201d said Pepe, adding that such projects \u201cabsolutely require a partnership.\u201d\n<\/p>\n

Addressing affordable housing<\/p>\n

\u201cI think the problem on the municipal end is they feel like it\u2019s forced on them,\u201d DeMarco said. \u201cProjects work best when everyone feels that it\u2019s their project. And that they had a partner, they helped it along, they gave birth to it and were part of the planning process. When an outside agency comes in and says to you, \u2018this is the number, this is the ratio, this is the mix, and these are the requirements,\u2019 you don\u2019t respond the same way. And that\u2019s why you\u2019re getting pushback that then just sours the whole concept sometimes of development.\u201d\n<\/p>\n

Pepe said, \u201cTo a degree, the affordable housing guidelines will actually dictate the design of your building because there are requirements that a certain number of affordable units be dispersed throughout a project.\u201d\n<\/p>\n

\u201cSo, if you design a project and get it approved and then worry about affordable housing, you might find out that you really can\u2019t accommodate the requirement in the building that you designed. Literally, it is a driving force, and I think a lot of people forget about supply and demand because supply is coming down, demand is coming up, and that\u2019s going to result in higher rents and higher costs,\u201d he said.
\n\"One\"OneOne Thompson Ave is an affordable housing community in Dover that repurposed a previously underutilized municipal parking lot to create 70 units of affordable multifamily housing. \u2013 PROVIDED BY DON PEARSE PHOTOGRAPHERS\n<\/p>\n

DeMarco went on to say, \u201cThe affordable housing debate is not done. What\u2019s on the horizon is another deadline that requires all these municipalities that submitted their plans that are now getting approved is that now they need to take the next affirmative step to actually implement the zoning to support those plans anticipate. And that\u2019s a March-April deadline.\u201d\n<\/p>\n

\u201cSo, I anticipate late winter, early spring to be filled with a lot of activity on these planning boards and towns on for affordable housing. Why does that matter to commercial? Because if the towns and the planning boards have to deal with that, they don\u2019t get to plans for other stuff that we\u2019re trying to get across. There\u2019s only so many meetings, only so many board members, only so many town planners or town engineers. And if they\u2019re all working on that, they\u2019re not working on the other stuff,\u201d he said.\n<\/p>\n

\u2018A very sharp knife\u2019<\/p>\n

Although the use of artificial intelligence is expanding in multiple industries, exploration and adoption of the technology varies in the commercial real estate space.\n<\/p>\n

Pepe said his firm is \u201cstudying that quite extensively now.\u201d\n<\/p>\n

\u201cWe\u2019re kind of in the midst of it because there are a lot of ethical requirements we have to deal with. Lots of attorneys are getting sanctioned for AI because it can hallucinate cases and they are citing them,\u201d he said. \u201cThere\u2019s also an issue of privacy. If you go into ChatGPT and put in a contract with your client\u2019s name and a purchase price, that then becomes information that\u2019s available to the world,\u201d he said. \u201cLicensing also. Did you pull somebody else\u2019s proprietary, data, design or something that you didn\u2019t realize because AI gave it to you?\u201d\n<\/p>\n

\u201cI\u2019m not a big fan of using it to write stuff. I\u2019m a big fan of letting it summarize things that then I will read,\u201d Pepe said. \u201cIt\u2019s like reading the book jacket, right? A good summary makes me buy the book. I don\u2019t just read the book jacket and then say, \u2018Oh, I read that book.\u2019\u201d\n<\/p>\n

DeMarco said, \u201cIt is a very sharp knife that you have to handle carefully. It\u2019s a great tool, but you want to make sure it\u2019s used properly. It\u2019s not a blunt instrument. And what I mean by that is you can now take an agreement or a contract and have it run through in three, four minutes and it\u2019ll give you the key points of it or what it believed the key points were with a little summary and a little paperclip or bookmark that you click and it takes you right to that page of the document.\u201d\n<\/p>\n

[AI] is a very sharp knife that you have to handle carefully. It\u2019s a great tool, but you want to make sure it\u2019s used properly.
\u2013 Joe DeMarco, partner, Scarinci Hollenbeck LLC<\/p>\n

\u201cThe initial read of a document you can get a fairly decent summary of it. Do I still have to go read the document? Hell yeah \u2013 because it doesn\u2019t catch everything. But it gives you that first read through it. Before, I might have spent an hour because I\u2019m going to read it a couple times, maybe now I do that in 15 minutes, right? Because I read the summary and then I read the full,\u201d he said.\n<\/p>\n

Pepe said a downside of AI\u2019s growing use is that he feels \u201cthe younger attorneys who are over relying on AI don\u2019t develop the skills that they need to understand what\u2019s important.\u201d\n<\/p>\n

\u201cI already understand what\u2019s important. I could probably tell you where you\u2019ll find a specific provision in a contract without ever looking at it. I\u2019ve touched and done so many of them, I know what they say and where they say it. That was developed over decades. If you\u2019re relying on AI to do these things for you, you\u2019re never going to learn that,\u201d he said.\n<\/p>\n

In a good spot<\/p>\n

Despite the challenges, DeMarco feels the state\u2019s \u201cbright spot\u201d is that its \u201csituated in a great place between New York and Philadelphia.\u201d\n<\/p>\n

\u201cWe have a lot of great things between the farmers, the education systems and schools, and the skilled workers. It\u2019s a place where people still want to live, where you can come make a good living, live in a nice community and raise your kids safely. In the Monopoly game, we are Boardwalk or Park Place. So, I think that is always a bright spot that we\u2019ll figure it out in the end, but we just always have to make sure we keep it so it\u2019s a valuable state and a valuable commodity that people want,\u201d he said.\n<\/p>\n

\u201cDevelopers are a special breed of individuals that see something, see the risk and understand all the ways it can go wrong and then still willingly show up to try and figure it out. But it is a long process that does require a good navigator or good ferry pilot to get you through those waters,\u201d he said, \u201cI think it\u2019s just a great line of business to be involved in. I think helping projects along and shepherd them when done right has long lasting positive impacts on where the project is, on the people who built it and on the people who utilize it.\u201d\n<\/p>\n

\u201cThere\u2019s not many things in the law that you can get job satisfaction out of. But driving by a building that people are living in, working in, visiting or eating in and knowing that five years before that you sat it a room and said, \u2018This is crazy. This is never going to happen\u2019 is fantastic,\u201d DeMarco said.\n<\/p>\n

Pepe remarked, \u201cI can\u2019t tell you how many times I\u2019ve driven by things and pointed them out to my son. There\u2019s definitely a lot of pride that can go into having been involved in certain projects \u2026 And I\u2019m just focused on being able to find pathways to solve all of these many problems that we just discussed. I mean, there are hurdles, but hurdles are there to be jumped over. And our team here is pretty diverse. We cover all aspects of the development process. I just want to improve our ability to do that for the developers and the municipalities that we represent.\u201d\n<\/p>\n

[T]here are hurdles, but hurdles are there to be jumped over.
\u2013 Donald Pepe, partner, Scarinci Hollenbeck LLC<\/p>\n

One of Pepe\u2019s favorite projects was NY Vue, an approved 26-story residential and mixed-use development in Bayonne<\/a> that will become the city\u2019s tallest building.\n<\/p>\n

\u201cI have one of the four tallest buildings in New Jersey \u2026 Then there\u2019s the mall redevelopment project at Flemington Outlet mall \u2026 I used to go there as a kid with my parents and it\u2019s been vacant for eight years. So, it\u2019s nice to see that come back to life as something new,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"Listen to this article The basics: Report ranks Jersey City and North Jersey among 2026\u2019s top commercial real…\n","protected":false},"author":2,"featured_media":70847,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[36302,1489,2053,11487,9,11,10,36303,36304,36305,36306,36307],"class_list":["post-70846","post","type-post","status-publish","format-standard","has-post-thumbnail","category-new-york","tag-2026-forecast","tag-commercial-real-estate","tag-data-centers","tag-jersey-city","tag-new-york","tag-new-york-headlines","tag-new-york-news","tag-north-jersey","tag-pwc","tag-real-estate-trends","tag-scarinci-hollenbeck","tag-uli"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts\/70846","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/comments?post=70846"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts\/70846\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/media\/70847"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/media?parent=70846"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/categories?post=70846"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/tags?post=70846"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}