In January 2026, the delinquency rate for office loans in commercial mortgage-backed securities hit a record 12.34%, according to Deloitte's analysis of the mergers and acquisitions outlook for this year. And their direction for the rest of the year could significantly affect transaction activity.
As the year progresses, there is also a prospect of increased consolidation of investment managers and service providers. Some may aim to combine to gain scale, diversify capital sources and strengthen margins. Stronger companies may seek specialized operators or niche strategies to build expertise in specific sectors.
Regarding the higher delinquency rate, two factors are at play: a growing consensus among banks that rates are unlikely to fall, and the persistent decline in office use.
"If delinquencies translate into an acceleration of foreclosures or forced asset sales, distressed transactions and recapitalizations could increase, providing additional fuel for M&A activity," the report commented.
Confidence in the direction of interest rates will affect prospects for future CRE deals. In recent years, the market was bedeviled by a lack of clarity about asset pricing as sellers hoped for lower financing costs and buyers struggled to underwrite deals. The announced passing of the Fed chairman's torch and a potential subsequent recalibration of monetary policy could create more uncertainty about interest rates but also lead to a clearer policy trajectory.
"Predictability may matter more than dramatic cuts," Deloitte stated.
It predicted that the available financing and steadier interest rates "may release a backlog of recapitalizations, portfolio sales, and platform-level transactions that have been building beneath the surface."
Investment in data centers remains a hot trend. However, the report predicted that the structure of data center transactions may shift this year, with many large public platforms already taken private or recapitalized and intense competition for stabilized assets. This could stimulate joint ventures, campus expansions and development partnerships instead of outright platform acquisition. And where growth will occur is likely to be affected by power supply, permitting timeliness and community attitudes.
The prospects for office deals are more problematic.
"Office is no longer uniformly off-limits. In several major US markets, return-to-office trends have lifted occupancy in high-quality buildings, and investors are showing greater willingness to transact where tenant demand is visible," the report stated, especially for "newer, amenitized properties" in New York City and some West Coast cities.
Citing the February sale of "Graffiti Towers" in Los Angeles—an unfinished three-tower project with 30 floors covered in graffiti—for $470 million, a significant discount, Deloitte said transactions are clearing when pricing reflects current fundamentals rather than peak-cycle expectations.
However, Class B and Class C office properties are still in difficulty as landlords weigh the capital required to renovate them against their uncertain leasing prospects. There may be selective distressed or value-driven opportunities for these properties, especially if they can be converted to residential or other uses, the report said. Nevertheless, transactions are likely to remain highly asset-specific instead of broad-based.
Deloitte also addressed demand for multifamily properties, noting two possible streams based on their location. Recently delivered projects that need permanent financing could see more recapitalization and selective acquisitions in regions with too much supply, while steady trade would continue in healthier markets.
The debate over the effect of institutional ownership of housing and whether to regulate it complicates the single-family rental market and means residential M&A is likely to be more affected by local fundamentals and policy development than by broad national trends, according to Deloitte. Federal or state actions could influence underwriting assumptions and portfolio strategies.
At the same time, Deloitte said "wild cards" could affect its predictions.
Data centers could shift to locations with greater power availability, invest directly in generation capacity, or partner with energy providers.
"These strategies could blur the line between real estate and energy infrastructure, redirect capital flows, and alter competitive positioning within the sector," the analysis noted.
Expanded municipal or state incentives in 2026 could spur more office-to-residential and mixed-use conversions that are hard to finance without government support.
Meanwhile, investors can prepare for the challenges of the year ahead by sharpening sector theses, stress- testing financing scenarios and identifying potential partners early, Deloitte advised - especially in capital-intensive fields like digital infrastructure and redevelopment projects. Operational preparedness for a merger or acquisition is equally important.
"Discipline paired with decisiveness may separate those who wait from those who move," Deloitte commented.
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