Recent data from CoStar showcase the supply and demand differences across property types. Net absorption (demand) and net deliveries (supply) for the four traditional property types (retail, apartments, industrial, and office) highlight the cyclicality of the space markets. They can also illustrate excess net demand (net absorption less net deliveries) for each sector.
Although generally showing signs of stabilization and positive momentum, net absorption fell short of net deliveries for the retail, apartment, and industrial sectors in the first quarter of 2026. Continuing its nascent equilibrium, office demand exceeded supply. Each property type’s ability to maintain or make sustained progress moving toward its equilibrium is expected to benefit property operational gains in 2026.
The chart above displays quarterly retail net absorption and net deliveries in millions of square feet, as well as excess net demand from the fourth quarter of 2008 to the first quarter of 2026. Since 2024, retail supply and demand metrics have generally maintained a slight imbalance. Although excess net demand breached into positive territory in the last quarter of 2025, it quickly reversed. Despite ongoing demand shortfalls, retail occupancy and year-over-year rental growth rates were 95.6% and 2.2%, respectively, in the first quarter of 2026.
The chart above presents quarterly apartment net absorption and net deliveries, as well as excess net demand from the fourth quarter of 2008 to the first quarter of 2026. Apartment supply has now exceeded demand for 18 consecutive quarters. While this has taken a toll on the sector’s occupancy and rental growth rates, excess net demand is approaching the tipping point into positive territory. As of the first quarter of 2026, apartment occupancy averaged 91.5%; its lowest level since 2000. Year-over-year rent growth struggled to remain positive at 0.2%.
The chart above shows quarterly industrial net absorption and net deliveries, as well as excess net demand from the fourth quarter of 2008 to the first quarter of 2026. At the end of 2021, net absorption started its decline, but net deliveries generally continued to grow through the end of 2023. At this time, industrial supply has bested demand for 15 quarters in a row, but excess net demand has generally followed a positive trajectory. In the first quarter of 2026, the industrial occupancy rate was 92.5% and year-over-year rent growth was 1.5%.
The chart above depicts quarterly office net absorption and net deliveries, as well as excess net demand from the fourth quarter of 2008 to the first quarter of 2026. While negative excess net demand has generally persisted since 2019, the sector saw positive excess net demand in the latter half of 2025 and into 2026. With restrained development and increased demand, office fundamentals have found an equilibrium. In the first quarter of 2026, the occupancy rate posted its third quarterly uptick to reach 86.0%, and the year-over-year rental gain was 1.4%.
Recent data from CoStar show that the broad office market is in the early stages of its space market equilibrium and that the retail, apartment, and industrial sectors are making strides toward reaching their respective equilibriums. These positive developments are anticipated to broadly benefit property operational gains in 2026.