While recent geopolitical developments may continue to influence investor sentiment, the U.S. commercial real estate (CRE) market is entering a new phase – one defined less by broad cyclical swings and more by micromarket dynamics, asset quality, and alignment with evolving tenant and consumer priorities.

Performance across retail, multifamily, office, and industrial remains bifurcated, with well‑located, well‑managed assets supported by strong leasing activity and experienced sponsorship continue to attract interest, while less competitive properties face mounting challenges. The following analysis examines where activity is consolidating and how many KBS assets are positioned relative to these trends.

Experience and Convenience Support Retail Stabilization

Retail stabilized meaningfully in 2025, though results continued to vary by format and region. According to Lee & Associates’ Q4 2025 report, activity remains strongest in well‑located markets, with tenant demand increasingly shaped by experiential offerings and omnichannel integration rather than pure transactional volume.

Consumers are increasingly seeking intuitive, well-designed retail environments that support brand engagement and seamless movement between digital and physical channels, according to Colliers’ Global Retail: 2025 Trends & 2026 Outlook report. Preferences continue to favor retail tied to lifestyle, community, and convenience with mixed-use centers that integrate food, service, entertainment, or culture driving strong foot traffic and tenant retention. Despite ongoing macroeconomic pressures, Colliers expects the U.S. retail market to remain steady, with store‑based sales forecast to grow 1.5% in 2025, and tight supply supporting rent growth of around 2% by year-end.

Many KBS mixed-use assets, including Accenture Tower (Chicago), Meier & Frank (Portland), and 3003 Washington Boulevard (Washington, D.C.), reflect the characteristics supporting retail stabilization. Their infill locations, high-quality tenant mixes, and active assetmanagement strategies enhance resilience and long‑term performance amid shifting consumer preferences.

Structural Forces Support Multifamily Resilience

Despite moderation in 2025, multifamily remains one of the more durable segments of the real estate market. Persistent affordability constraints, limited for‑sale housing inventory, and flexible renter preferences continue to support rental activity across markets. Research from Harvard’s Joint Center for Housing Studies points to longer renter tenure, elevating the role of resident experience, service quality, and effective property management.

Communities offering modern finishes, functional layouts, and amenity packages that support everyday life, from coworking lounges to fitness centers, continue to outperform. Digital leasing, pricing transparency, and responsive operations have evolved from differentiators to expectations.

KBS’ sale of Park Central Apartments in Raleigh demonstrates the impact of aligning with these drivers, generating a 2.52x, return on the original investment through strategic placemaking and disciplined operations. The asset also supported leasing momentum at KBS’ neighboring Bank of America Tower, which is currently 95% occupied.

Quality Drives Office’s First Net Absorption Growth Since 2019

Office conditions diverged sharply in 2025, with the U.S. recording its first annual net absorption gain since 2019, according to Colliers. That progress was driven almost entirely by high-quality, modern office assets. Tenants now prioritize environments that support collaboration, culture, and talent attraction – not pure square footage.

Initial Q12026 numbers, released just before publication, show that though firstquarter office absorption remained negative at –4.0 million square feet, underlying tenant demand continues to gain momentum. Rolling fourquarter absorption reached 5.2 million square feet, marking the highest level in more than five years.

Top-performing office assets usually include:

  • Flexible, efficient floorplates
  • Hospitality-inspired amenity packages
  • Wellness and sustainability features
  • Advanced technology infrastructure
  • Transitaccessible and walkable locations

These characteristics continue to distinguish competitive assets from the broader office inventory.

The KBS Office Strategy: Modernization and Market Selectivity

KBS continues to prioritize reinvestment and modernization as core components of its office strategy as a pillar inside of the broader business ecosystem of a specific hubs across the country. Assets such as the Bank of America Tower in Raleigh, North Carolina, with 95% occupancy, demonstrates how premier assets in strategic hubs outperform legacy office inventory.

Leadership initiatives, including the addition of Sondra Wenger, and the introduction of a proprietary 10-point hub evaluation framework, further position KBS to capitalize on long-term trends through market selectivity and strategic capital deployment.

Industrial Fundamentals Remain Durable Despite NearTerm Softening

Industrial leasing softened in 2025 due to trade and tariff pressures across North America, but long-term demand fundamentals remain strong. World Economic Forum analysis suggests that supply chain modernization, automation, and renewed domestic manufacturing interest continue to shape the sector’s future.

Users seeking modern industrial space prioritize:

  • High, clear heights and loading capacity
  • Solid power infrastructure
  • Transportation and labor accessibility
  • Building flexibility

Well-located, institutional-grade assets continue to outperform older, less functional properties.

KBS’ sale of Crossroads Distribution Center highlights continued investor interest in premium industrial facilities within manufacturing‑oriented markets. CEO Marc DeLuca points to Charlotte’s pro‑growth policies and robust industrial workforce as key factors supporting the region’s long‑term attractiveness.

Selectivity Emerges as the Defining Theme of the 2025–2026 Cycle

Across U.S. commercial real estate, performance is increasingly shaped by asset‑level differentiation rather than sector‑wide recovery.

  • Retail favors experiential, convenience-focused environments
  • Multifamily benefits from areas with affordability, tenant retention, and well‑amenitized assets
  • Office recovery remains concentrated in modern, flexible, amenity‑rich buildings.
  • Industrial long‑term strength persists despite cyclical softening

Through disciplined reinvestment, active management, and targeted market selection, KBS is positioned to navigate a more selective cycle and capitalize on opportunities where fundamentals and execution converge.