Marcus & Millichap (MMI) investor relations material

Economic outlook for 2026

• GDP growth projected at 2.5%-3%, with job growth remaining subdued and unemployment expected between 4.5%-5% in 2026.

• AI and fiscal stimulus are key tailwinds, with AI-driven investment and stock market gains boosting consumer spending.

• Headwinds include deglobalization, restrictive immigration policy, and high tariffs, which are dampening labor force growth and job creation.

• Downside risks include high equity valuations, potential bond market dislocation, and economic dependence on top-income households.

• Inflation is expected to remain above the Fed's target through most of 2026, with tariffs as a potential wildcard.

Commercial real estate market trends

• Apartment and retail sectors show stable fundamentals, while office is gradually recovering from demand shocks and industrial faces high vacancies due to a construction surge.

• Multifamily construction starts have dropped sharply, setting up a future supply shortage, especially in high-growth metros.

• Affordability challenges persist, with only 28% of Americans able to qualify for a typical first home, supporting strong rental demand.

• Office market shows first signs of positive net absorption in years, with Class A and trophy assets outperforming older, less-amenitized buildings.

• Industrial market is normalizing as new supply slows, but larger assets face higher vacancies; data centers are a growing focus but face energy and public perception challenges.

Capital flows and investment sentiment

• Capital markets are stabilizing, with increased buyer interest and expectations for higher deal volume in 2026.

• Cap rates have adjusted upward, attracting new and experienced buyers, especially for higher-quality assets.

• Apartment sector anticipates more activity as construction slows and supply tightens, with potential for strong returns if demand and job growth rebound.

• Office and industrial investors are more optimistic, expecting improved cap rates and deal flow over the next year.

• Market volatility is expected to persist due to rate policy, bond market dynamics, and potential tariff or Fed leadership changes.