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During the depths of the Covid-era recession, a dark joke made the rounds in real estate circles: all we had to do was “stay alive ‘til ’25.” For battered property and hospitality owners – especially hotel folks who saw business evaporate overnight – 2025 became a distant beacon of hope. Just hang on a few more years, we told ourselves, and normalcy would return.
Well, 2025 has come and gone (almost), and it turns out staying alive is still no small feat. Many real estate markets remain on life support: investment activity is sluggish, funds are stretched thin, interest rates are punishingly high, and construction costs are insane (yes, still). The global geopolitical situation is tense, and the U.S. economy and political climate often feel on the brink.
From this sobering outlook, how can real estate and hospitality owners and investors possibly plan for 2026? Will 2026 be any different from 2025 – or should we cynically update the rhyme to “stay alive ‘til ’29”?
• The expected post-COVID recovery has been slower and more fragile than anticipated
• Capital is still expensive, confidence remains thin, and easy financial engineering is gone
• 2026 will not “save” real estate - but it may reward those who adapt with discipline and execution
Despite the grim backdrop, now is not the time to lose heart. Instead, it’s time to turn that gallows- humor motto into an actionable battle plan. In true Harvard Business Review fashion – with a wink and some data – let’s dissect where we stand and chart a path forward. We’ll touch on everything from interest rates and elections to the AI investment frenzy, and distill five practical strategies for real estate professionals. By the end, we’ll aim to transform “stay alive” from a passive mantra into a proactive roadmap for coming out stronger (or at least still standing) on the other side. And yes, we’ll even summon Viktor Frankl from the depths of despair to help us turn lemons into lemonade. Buckle up – 2026 is around the corner, and it’s shaping up to be a hand-to-hand combat market. But with the right mindset and moves, we will fight our way through.
Back in early 2022, as the Federal Reserve kicked off an unprecedented interest-rate hiking cycle, “Stay alive ‘til ’25” emerged as the real estate industry’s mantra of survival. The idea was simple: absorb the pain for a few years, and things would get better by 2025. But as one skeptical investor recently asked, what exactly was supposed to improve? As of late 2024, interest rates were still sky-high, rents hadn’t rebounded, and construction prices had not come down at all. In other words, the hoped-for relief hadn’t arrived.
In fact, the speed and magnitude of the Fed’s rate hikes inflicted genuine stress on the industry. Remember, the effective federal funds rate sat near zero from spring 2020 through early 2022. Then inflation took off, and in just 18 months, the Fed jacked rates up to about 5.33% by August 2023. That’s an unprecedented whiplash. Anyone caught with floating-rate debt faced a major crunch as borrowing costs spiked literally overnight. Deals that were marginal at 3% interest became impossible at 7%. Development projects penciled at 4% cap rates suddenly didn’t pencil at all when cap rates blew out to 5.5% or higher. The result? Countless projects were shelved or canceled, transaction volumes plunged, and property values in some sectors (looking at you, offices) started to sink.
By 2025, real estate was indeed alive, but certainly not well. Uncertainty is a killer for development, and until the Fed’s hikes finally paused in late 2023, nobody knew where the top would be. Land values had to adjust, and many planned projects simply died on the vine. Even in 2024, with rate hikes paused and inflation gradually ebbing, new investment was tepid. Developers tiptoed back in, but financing was expensive, and equity capital was cautious. Many private funds, which had raised war chests anticipating a rebound, found themselves squeezed – charging fees on committed capital but unable to deploy much of it, hurting their economics. Traditional lenders pulled back, leaving only the most creative or well-capitalized players to finance deals. No wonder industry sentiment often bordered on pessimistic.
For a vivid example of how unforgiving the environment became, consider the fate of Sonder—a high-profile startup once hailed as an "asset-light" disruptor in hospitality.
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Sonder had expanded rapidly by master-leasing blocks of apartments and hotels to sublet as trendy short-term rentals. It even struck a partnership with Marriott’s Bonvoy program. But by late 2025, Sonder collapsed into bankruptcy virtually overnight. The speed of the wind-down shocked many (guests were literally stranded mid-stay when Marriott pulled the plug), but the downfall itself was not surprising – Sonder had been bleeding cash for years. Its fatal flaw? Relying on fixed long-term leases while operating in a highly volatile, capital-intensive market. When the post-COVID travel recovery proved weaker than hoped and capital dried up, Sonder’s model couldn’t survive. The lesson for 2026: even darlings of the last boom can fail if they don’t respect the new financial reality.
Join leading industry participants as we unpack Sonder's story and what it means for the next chapter of the short-term rental industry.
So here we stand, on the cusp of 2026, with many markets still struggling to find their footing. Commercial real estate has shifted from a survival mode to more of a grim endurance game, as one investor put it. The oft-repeated “stay alive ‘til ’25” line has quietly been retired and replaced with a wry update: “Stay in the mix till ’26.” In other words, keep your head in the game and don’t give up, because the hoped-for near-term recovery has been upended by ongoing macroeconomic and geopolitical turmoil. It’s not exactly the rallying cry we dreamed of, but it captures the current psychology well. Allocators and dealmakers are cautious, not frozen – managing existing assets, tiptoeing into new deals when they see an opening, but largely waiting for real conviction to return on the equity side. The collective realization has set in that the zero-interest-rate era is gone for good, and that means everyone from landlords to investors has to recalibrate how value is created. In a world where you can no longer count on cheap debt or cap rate compression to bail you out, operational execution and capital efficiency take center stage. This is the new normal we carry into 2026.
In an environment where execution discipline matters more than leverage, many firms are turning to fractional executive leadership to bring senior capability into critical moments without long-term structural risk.
It’s tempting to ask: why might 2026 be any better than 2025? We still face many of the same headwinds. However, there are a few wildcards on the horizon that could shake things up—for better or worse. Real estate professionals would be wise to keep these in sight as we formulate our 2026 game plans:
2026 will bring midterm elections in the United States, which could alter the balance of power in Congress. Typically, elections inject some uncertainty into markets, and this cycle will be no exception. If one party decisively gains control, we might see shifts in fiscal policy, tax law, or regulatory priorities that affect real estate (for instance, changes to zoning, housing incentives, or tax treatments like 1031 exchanges). However, don’t bank on a political miracle. Policy analysts note that even if, say, Democrats take control of the House, it “may not change the trajectory of the policies that matter most to market pricing.” Much of the heavy legislative lifting (e.g., a major tax bill) was already done recently, and other market-moving actions (tariffs, certain regulations) have come via executive authority. In short, a midterm flip might grab headlines but not fundamentally alter the economic landscape in the short term. The more immediate issue is likely continued political gridlock or brinkmanship (think government shutdowns or debt-ceiling standoffs), which can roil financial markets. Real estate investors should be prepared for a bit of political turbulence – but also recognize that, historically, markets tend to absorb the impact of elections quickly. Prudence means scenario planning for various outcomes (for example, if a new Congress were to pass a large infrastructure stimulus, that could boost construction and maybe benefit certain property sectors). But overall, it would be unwise to pin your 2026 strategy on who wins in November; there are too many other variables in play.
Now for some potentially good news. By late 2025, it appears the tide of interest rates is finally turning. After an aggressive tightening cycle to tame inflation, the Federal Reserve began cutting rates at the very end of 2025, reducing the policy rate by 25 basis points in December. Fed officials have signaled that further rapid cuts are unlikely – the median expectation is for only one more rate reduction in 2026 – but the key point is that the era of rate hikes is over for now. We’ve likely seen the peak of interest costs. In fact, some forecasts (e.g., Goldman Sachs Research) suggest the Fed could resume gradual cuts by Q1–Q2 of 2026, bringing the federal funds rate into the low 3% range by mid-year. Lower interest rates should eventually relieve some pressure on real estate finance: debt will get a bit cheaper, refinance windows may open, and buyers and sellers can start to find a pricing equilibrium again as borrowing costs stabilize. Keep in mind, though, there will be a lag. Just because the Fed cuts its rate doesn’t mean banks loosen up immediately. Lenders are still grappling with credit risk and regulatory capital constraints. And importantly, even a 3% Fed rate is far above the near-0% world we had from 2009-2021. In other words, “higher for longer” is here to stay, even if it’s a bit lower than last year. Real estate pros should thus assume that 6-8% mortgage rates could be the norm for a while across many asset classes. The upside scenario is a modest thaw in capital markets: expect a slight uptick in deal activity and refinancing as rates ease, but not a 2021-style frenzy.
Plan your 2026 budgets with some cautious optimism on interest expense – perhaps you’ll catch a break on that floating loan – but also line up contingencies in case inflation or other shocks force central banks to tighten again.
AI represents both opportunity and tail risk for real estate capital markets.
If 2023-2025 had a speculative poster child, it was Artificial Intelligence. We saw a frenzied investment boom in AI – from skyrocketing tech stock valuations to billions poured into AI startups – reminiscent of the late-90s dot-com mania. This boom has clearly been a key theme shaping the broader economy and markets. For real estate, the AI wave cuts both ways. On the one hand, certain property sectors are benefiting: data centers are hot as demand for AI computing capacity surges, and lab/R&D spaces are in demand for AI-related research. On the other hand, there’s a growing debate about whether the AI frenzy is a bubble due to pop – and what happens to the economy if it does. History offers caution: the dot-com bubble’s burst in 2000 caused a mild recession and a 15-year commercial real estate slump in some tech-heavy markets. If the current AI boom were to sharply deflate, we could see a pullback in business investment, layoffs in tech, and reduced demand for certain property types (like offices in San Francisco – though, frankly, they’re already hurting). More alarmingly, some economists point out a unique dynamic today: huge amounts of foreign capital have been flowing into the U.S., chasing the “outsized promised returns” of AI. This influx has helped finance America’s large federal deficits. If an AI bubble collapses, that capital could flee, forcing the U.S. to fund its deficits internally, which could drive interest rates up again suddenly. In plain English: an AI bust might spike borrowing costs just when we expect them to fall, a double whammy for leveraged real estate. That is a tail-risk scenario to keep in mind.
Yet, it’s not all gloom in tech-land. AI is also a long-term transformative force, much like the internet. Even if there’s a short-term bubble, the structural trend of AI adoption will likely continue to reshape how we do business. Forward-looking real estate firms are already leveraging AI for efficiency – from AI-driven analytics in underwriting to proptech solutions in building management. Those investments could pay off big in competitiveness. So the takeaway on AI: don’t ignore it. Be aware of macro risks (a bubble pop could jolt the economy), but also seize micro opportunities (where can AI improve your operations or decision-making?). As with the dot-com era, the winners will be those who innovate through the cycle, not those who dismiss the technology outright.
In summary, 2026 will have its share of new twists – a political changing of the guard (maybe), a gentler interest rate regime (hopefully), and the unfolding saga of AI’s impact (certainly). None of these factors alone will magically rescue real estate. But they will influence the playing field on which we fight. Speaking of which, let’s talk about the fight itself – because surviving (and thriving) in 2026 is going to require a warrior mentality and a smart playbook.
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If the past few years were about hunkering down, the year ahead will be about pushing forward – cautiously, but deliberately. One industry veteran described the current environment well: “This remains a hand-to-hand combat market” where those who stay engaged and underwrite rigorously – rather than waiting timidly on the sidelines – will be the ones to shape the next cycle. In other words, waiting for perfect clarity is not an option. We don’t control when the clouds finally part. What we can control is how we respond amidst the fog.
Real estate professionals should approach 2026 like preparing for a difficult campaign. It’s going to be challenging and unpredictable, but it’s also full of opportunity for the nimble and the bold. Below, we outline five practical tactics to navigate this environment. Think of these as your field manual to go from merely surviving to actively strategizing and thriving in the year ahead:
In a high-rate, uncertain market, cash flow is king and liquidity is survival. Take a hard look at your financial footing. Stress-test your portfolio for downside scenarios – what if occupancies dip further,
Markets in dislocation often create once-in-a-decade vintages. But this is not the moment for speculative “home runs.” In a higher-rate, capital-constrained environment, offense has to be disciplined. The priority is not velocity, but structure - protecting downside through basis resets, senior positions in the capital stack, and staged deployment of capital.
With financial engineering less effective now, competitive advantage shifts to execution. Sweat the details on your assets. If you own hotels or multifamily, this might mean ramping up marketing to drive occupancy, improving service quality,
We talked about the AI boom – now make it work for you. Technology is a force multiplier for those who deploy it thoughtfully. This is an ideal time to implement PropTech solutions that can cut costs or open new revenue streams.
If you’re still feeling dour about the road ahead, it might help to remember that adversity has a way of breeding innovation and strength. History is full of examples of how terrible economic times have given rise to some of the greatest companies and achievements, including in real estate and hospitality. A little perspective:
During the Great Depression of the 1930s – an era when the U.S. economy contracted by nearly 30% – a small animation studio in California was on the brink of failure. Walt Disney had founded his company in 1923, and by 1929,
In 1939, as the Depression finally ended but World War II loomed, two recent Stanford engineering grads decided it was the perfect time to start a business in a Palo Alto garage. That crazy idea became Hewlett-Packard (HP). “A more inappropriate time to start a business can hardly be found,”
Fast forward to the Great Recession of 2008–2009. The real estate market was in shambles, global travel was down, and few were thinking about new ventures… except two young entrepreneurs in San Francisco who were having trouble paying rent. They decided to rent out air mattresses in their apartment to strangers and serve home made breakfast – a gimmick to make extra cash.
The point of these stories?Great companies and great outcomescanemergefrom awful economic times. In fact,about halfof today’s Fortune 500 companies were founded during recessions or bear markets. Adversity forces people and organizations to be resourceful, solve real problems, and pursue opportunities others overlook. As real estate professionals, we should take heart in this. The current period may feel like trench warfare, but it is also forging the next generation of industry leaders and dominant firms. Who will they be?Perhaps theinvestors who scooped up distressed hotels in 2025 will be the hospitality powerhouses of 2030.Perhaps thedevelopers who masterconvertingdead malls into thriving mixed-use hubs will become the new legends of adaptive reuse. Theseeds of future success are planted in today’s soil of struggle. Our job is to nurture those seeds.
Finally, let’s address the mental and emotional side of this journey. It’s easy to get discouraged when headlines scream “recession,” when projects stall, or when you’re slogging through yet another round of painful budget cuts. But maintaining the right mindsetisn’t just feel-good fluff – it’s a strategic asset. Few understood this better than Viktor Frankl, the famed psychiatrist who survived Nazi concentration camps.
His quote holds true in commercial real estate just as it did in wartime:
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Now, the challenges of real estate in 2025–2026 thankfully do not compare to the horrors Frankl endured. But the lesson absolutely applies. We cannot control interest rates, geopolitical conflicts, pandemics, or who wins elections. We can control how we respond – whether we react with panic and despair, or with resilience, determination, even humor. A positive, proactive outlook won’t magically raise equity or lease a building, but it will keep you in the problem-solving frame of mind needed to find solutions. And it will be contagious to your colleagues and partners. Leaders who stay calm, focused, and optimistic in tough times inspire others to do the same. This collective resolve can carry an organization through unbelievable difficulty. Think of the legendary hotelier who stands in front of her staff in the middle of a crisis and says, “We’ve got this, we will get through it together.”That’s not denying reality –that’s choosing an empowering interpretation of reality. It’s saying the future is uncertain, yes, but within that uncertainty lies the possibility of our success, and we will seize it.
So,let’srewrite our internal script. Instead ofwishful thinking– “hopefully things will get better next year” –let’sembrace a mindset ofintentional action: “we willmakethings better next year, starting with ourselves.” If “Stay Alive ‘til ’25” was about hunkering down, our new mantrashould be aboutfighting forward. We are not passively awaiting rescue by the market; we are actively engineering our own outcome. We prepare for the worst while also positioning ourselves for the best. We acknowledgewhat’sout of our control, but double down onwhat is in our control– our strategy, our work ethic, our creativity, our relationships, our attitude.
In practical terms, this might mean setting bold goals even if the environment is bleak. It might mean celebrating small wins (a lease signed, a project completed on budget) to build momentum. It certainly means supporting each other – check in on that colleague who seems down, share that promising lead with a friend at another firm,mentorthat younger professionalwho’snever seen a downcycle before. In adversity, weallneed a bit of uplift. By giving it, you often get it. As the saying goes,turn lemons into lemonade– find the sweet opportunities in the sour situation.
And remember:this stormwillpass.Wedon’tknow ifit’s2026, 2027, or 2029, but cycles are cycles. When the upturn comes, those who endured and learned from hardship will rise fastest and farthest. Your company canemergeleaner, smarter, and more agile. Youpersonally canemergeas a stronger leader, with crisis-tested experience that few others have. These tough years can be themakingof your career if you seize the growth hidden in them. Many of the greats we admire – be it investors like Sam Zell (who cut his teeth in the 1970s downturn) or builders like Trammell Crow –were forged in tough times. Nowit’sour turn to forge our legacy.
In closing, 2026 may not magically herald “good times” again. But armed with realism, fortified by history, and guided by a fierce but flexible strategy, it can be the year we stop merely surviving and start shaping our destiny. The futureremainsuncertain, andmuchlies beyond our control – butour response is firmly in our hands.Sotighten your grip, real estate warriors.We’vestayed alive ’til ’25; now let’s strive and thrive ’26 and beyond. The battle will be hard, no doubt. Yet with perseverance, ingenuity, and the unwavering belief that wewillcome out the other side (alive, andmaybe evenstronger), we can look at 2026 not with fear, but with resolve. Onwards – see you on the battlefield,and ultimately, seeyou in the winner’s circle when the clouds clear.Stay alive, stay in the fight, and the future will be ours to create.
As leaders begin translating strategy into action,this is where CrimsonCoPilotsis spending its time alongside executive teams, investors, and operators- helping navigate the questions that will matter most in 2026, not in theory, but in execution:
Helping teams interpret how strategies play out differently across office, hospitality, multifamily, and other asset classes as operating conditions continue to diverge.
Guiding executives on the first three concrete actions to prioritize in Q1 2026—building momentum without overextending capital, teams, or governance structures.
Supporting portfolio leaders in identifying the internal metrics, external benchmarks, and market signals that matter most for stress-testing assets and measuring true operational excellence.
Advising on where PropTech and AI are delivering near-term ROI in real estate operations —and where discipline is required to separate durable value from experimentation.
Helping executives prepare portfolios and capital structures for renewed credit tightening, capital volatility, or a potential correction in AI-driven markets.
These conversations are already shaping decisions across investment committees and operating teams - and they will define which organizations enter the next cycle positioned to lead.
For leadership teams translating these dynamics into first-move decisions, we welcome the opportunity to discuss your 2026 priorities.
These focus areas reflect the advisory work Crimson CoPilots is actively engaged in across real estate, hospitality, and adjacent sectors.
We are not consultants. We embed as operators, take ownership, and drive results.
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