Deloitte: CRE Investors Get More Selective With Capital Heading into 2027

Commercial real estate executives are conflicted as they look toward 2027.

On the one hand, more capital will likely be available and continue to move. On the other hand, there will be “less certainty about where to deploy it,” according to Deloitte’s 2027 Commercial Real Estate Outlook.

Based on a survey of 950 industry executives, Deloitte found that overall business sentiment has declined for the second consecutive year. At the same time, 51% of respondents still expect their organizations’ revenues to grow by more than 5% over the next 12 months.

Boiling this down, CRE companies aren’t necessarily preparing to stop spending. But they’re going to be much more selective about where the money goes.

“The biggest surprise was the combination of declining business sentiment amidst relatively strong revenue expectations,” Sally Ann Flood, partner and US real estate leader for Deloitte, told Connect CRE.

“That suggests respondents are not broadly optimistic about the market, but they are confident in their underlying operations along with their ability to outperform through selectivity, operating discipline and targeted investment.”

More triage, less broad-based expansion

The survey’s sentiment index fell to 57.8, down from last year’s 64.9 last year and 2025’s 68.3. “Respondents plan to tighten spending in areas like office space and talent management, and they anticipate slower growth in rents, alongside elevated vacancies,” the report said.

At the same time, nearly 80% said they plan to upgrade or reposition existing assets during the next 12 to 18 months, while 46% anticipate no sales activity, and 39% expect no conversions.

Cutting through the numbers, this suggests that investors are willing to invest in existing properties but may be reluctant to sell or convert assets because their values might not reach previous levels.

Flood said that may reflect a desire to preserve optionality and avoid realizing losses.

“For an asset with demonstrable tenant demand and achievable rent premiums, investing may be entirely rational,” Flood observed. “The risk arises when repositioning becomes a way to postpone a more difficult decision.”

To ensure that capital goes to the right spots, Deloitte recommended asset-by-asset triage, with owners determining what properties require upgrades, holds, conversions or sales.

Strength is in the property type

The report indicated that survey respondents favored logistics and warehousing as the property type offering the greatest opportunities over the next 12 to 18 months. Digital economy properties followed this. Neighborhood retail also improved because “limited availability and development pipelines have supported strong occupancy and rent growth in these areas,” the report said.

On the other side, hospitality properties dropped in ranking, possibly due to price sensitivity, safety concerns and growing competition from lodging alternatives.

In short, “respondents may be placing a higher premium on tried-and-tested fundamental conditions,” Flood said.

Tax moves closer to the investment committee

Tax strategy is also becoming more integrated with capital allocation. More than 60% of respondents plan to move capital toward regions or assets with stronger tax incentives. Over 90% said their tax strategies are, or will become, more central to investment decisions.

However, nearly half of respondents involve tax professionals during underwriting or investment committee review, while only 26% involve them at origination.

“In 2027, firms could consider embedding tax specialists earlier across acquisitions, development, capital projects, asset management and divestments,” the report suggested.

Flood pointed to cost segregation, accelerated cost recovery, repair-versus-capitalization treatment and basis planning as examples of lost opportunities when tax enters the process late.

“The 90%-versus-26% gap is a great callout from the survey,” she said. “Executives increasingly recognize tax as a source of investment value, but many respondents have not yet embedded it at the stage when it can potentially have the greatest influence.”

AI adoption is moving faster than governance

AI remains another area where CRE companies appear willing to invest, but the report finds a gap between experimentation and production.

Ninety-two percent of respondents remain in the research or pilot phase, while just 8% have integrated AI solutions. More than 90% expect to increase spending on data and technology next year, compared with 76% last year.

“The obstacles are likely organizational and control-related, not a lack of interest. The report points to uneven data foundations, legacy processes, governance gaps, and the effort required to redesign workflows,” Flood noted.

Firms need reliable data, modernized processes, access controls, decision logs, exception handling and human-review procedures, she said. They also need to know who is accountable for an AI system and whether it can be shut down when necessary.

“The largest underestimated risk is that companies may deploy technology solutions faster than they can govern them,” Flood said.

The overlooked issue: Who will lead the next cycle?

Two-thirds of respondents identified AI and data fluency as one of the most important capabilities for future CRE leaders, while 54% expected leadership skills to change significantly or fundamentally within the next 12 to 18 months.

At the same time, only 30% of respondents said their organizations were very prepared for C-suite transitions, with just 39% said indicating they had identified and were cultivating qualified successors.

Deloitte suggested that succession planning and workforce development require a “more systematic approach.” Boards should also stress-test leadership pipelines annually, while assessing successor readiness and retirement exposures.

Overall, a “wait-and-see” strategy might not be the best for 2027.

Flood pointed out that capital continues to move, while executives are confident in generating growth, even as opportunities are becoming more uneven throughout markets, individual assets and property types.

“Selectivity should not be confused with inaction,” she added. “It means being clearer about where to invest, where to adapt and where to pull back.”

Photo: Luliia Pilipeichenko/Shutterstock