July opened with the biggest trade-policy event of the year — the mandatory six-year USMCA joint review — landing without a renewal, while the Federal Reserve holds a hawkish line under new Chair Kevin Warsh. Against that backdrop, AI infrastructure and AI-tenant office demand remain the market's clearest bright spot, and nowhere is that more visible than in Seattle, where a wave of AI-anchored leasing is doing what four years of hope could not. Here is what the data says.
This TenantBase commercial real estate market report analyzes the key forces shaping the industry in July 2026, with a spotlight on Seattle, Washington. The month opened with the resolution — or, more precisely, the non-resolution — of the single largest policy question hanging over North American trade, while the Federal Reserve's June meeting confirmed that "higher-for-longer" isn't a placeholder phrase anymore; it's the operating assumption for the back half of 2026.4,8
Against that uncertain macro backdrop, the sector's clearest through-line remains the same one that has defined 2026 all year: capital and tenants alike are chasing AI infrastructure and AI-adjacent office demand wherever it appears. In Seattle, that demand is now visible in the leasing statistics themselves — not just in venture funding rounds or data center announcements. For submarket-level guidance on how these conditions are affecting tenant decisions in real time, TenantBase's market resources offer on-the-ground intelligence for occupiers across the country.
North American trade policy has been on a slow burn all year heading into the July 1 review deadline. What emerged was neither a clean extension nor a collapse of the agreement — it was something messier and, for CRE underwriting purposes, harder to price.1,2,3
The July 1 Non-Renewal: Government representatives from the U.S., Mexico, and Canada met virtually on July 1, 2026, for the USMCA's mandatory six-year joint review. USTR Ambassador Jamieson Greer stated plainly that "the United States did not agree to renew the USMCA in its current form. As a result, the USMCA is not renewed." Mexico and Canada each confirmed their own support for the 16-year extension, but unanimity was required and wasn't reached.1,2 The agreement itself has not lapsed — it remains fully in force under its original 16-year term running through July 1, 2036 — but the automatic-extension option that was on the table is now off it, at least for now.3
Annual Reviews Begin: The non-renewal triggers Article 34.7.4's fallback mechanism: the three parties must now conduct a joint review every year until they either agree to an extension or the agreement expires in 2036. That converts what was a single six-year decision point into a recurring annual event — a structural source of policy-driven uncertainty that industrial and logistics underwriting in border markets will have to price in going forward.2
Border-Market Risk Repriced, Not Resolved: For CRE specifically, the practical effect is limited in the near term — trade rules under USMCA are unchanged today — but the review process removes the assumption that the agreement's terms are settled for the next decade. Investors in border-adjacent logistics hubs (El Paso, Laredo, San Diego, Detroit, Buffalo) should expect the annual review cycle to periodically reintroduce headline risk into leasing and capital-deployment timelines even though nothing changes contractually in the short run.2,3
The Fed's June meeting removed any remaining ambiguity about the direction of travel for 2026: this is not a market waiting for cuts anymore. It's a market bracing for the possibility of a hike.4,5
The Warsh Fed's First Real Signal: Kevin Warsh's first meeting as Fed Chair concluded with rates unchanged but with the post-meeting statement stripped of language that had signaled an easing bias. The median year-end 2026 rate projection among participants rose to 3.8% — up from 3.4% in the prior projection round — with nine of eighteen participants now anticipating at least one hike this year against just one expecting a cut. A softer-than-expected June jobs report (57,000 net new jobs, well below prior revisions) has since pulled July hike odds back down, but the higher-for-longer stance itself is intact heading into the July 28–29 meeting.5,6
CMBS Distress Eases Overall, But Diverges by Property Type: Trepp's headline CMBS delinquency rate fell 20 bps to 7.35% in June — helped by the cure of a large lodging portfolio — but that improvement masks a split market. Retail delinquencies rose 30 bps to 6.91% and multifamily rose 28 bps to 7.23%, both reversing prior-month improvement as several large assets turned delinquent. If loans past maturity but current on interest are included, the effective delinquency rate is a multi-year high of 9.53%.7,8
The Maturity Wall's Turning Point: The Mortgage Bankers Association now projects $875 billion in commercial and multifamily mortgage maturities for 2026 — down from $957 billion in 2025 — and, more importantly, loan extensions are declining sharply: only about 21% of scheduled 2025 maturities were extended into 2026, down from 41% the year before. Total commercial mortgage origination volume is projected to rise 27% to $805.5 billion in 2026 as more of this debt actually resolves rather than rolls forward again.10,11
If 2025 was the year AI infrastructure demand became undeniable, mid-2026 is the year it started showing up in office leasing statistics well beyond the handful of gateway data center markets that dominated the headlines.
Data Centers Remain Power-Constrained, Not Demand-Constrained: CBRE's Global Data Center Trends 2026 report found average vacancy across the 16 largest global markets fell to 6.7% even as supply grew 25% year-over-year, with some U.S. markets — Northern Virginia (0.3%) and Atlanta (1%) — effectively sold out. Power availability and grid-interconnection timelines, not capital or land, remain the binding constraint on new supply, extending construction timelines and pushing rental rates and construction costs higher across every major hub.15
AI Tenants Are Now Office-Market Bellwethers: The same dynamic reshaping industrial and data center site selection is now visible in office leasing. Puget Sound office leasing reached 4.6 million square feet in H1 2026 — the strongest first half since 2019 — as AI and AI-adjacent tenants signed some of the region's largest new leases (detailed in the Seattle spotlight below). This is a materially different recovery story than 2023–2025, when leasing gains were driven almost entirely by return-to-office mandates rather than net new demand.12,13
Distressed Capital Positioning for H2: With CMBS distress concentrated in retail, multifamily, and legacy office, and with fewer extensions being granted, well-capitalized private credit and opportunistic funds are positioning to acquire clearing-priced assets in H2 2026 — particularly Class B/C office and overbuilt Sun Belt multifamily — even as capital continues to chase power-secured data center sites and AI-tenant-anchored office at premium pricing.10,11
Seattle enters the back half of 2026 as one of the clearest real-world tests of whether AI-driven office demand can meaningfully move a market that has carried the nation's highest or second-highest office vacancy rate for the better part of three years. The early evidence says: yes, but unevenly, and starting from a very deep hole.
AI Leasing Drives the Strongest H1 Since 2019: Puget Sound office leasing reached 4.6 million square feet in the first half of 2026, pulling regional availability down to roughly 26.5%, with Seattle-specific office availability easing to about 32.1% in Q2 — the market's first meaningful improvement in availability in several years.12 A 3.4-million-square-foot leasing surge anchored by AI and tech tenants is doing the heavy lifting: OpenAI and Uber anchored large commitments, Anthropic signed a 113,000-square-foot lease at Dexter Yard North in South Lake Union, Stripe expanded by 44,500 square feet at Madison Centre downtown, and Salesforce's Tableau renewed 114,318 square feet at Fremont's DATA 1 building.13,14,16,17
Still the Deepest Vacancy Hole in the Country: Even with the improvement, downtown Seattle vacancy closed 2025 at roughly 35.6%, and the CBD alone reached 36.5% in Q1 2026 — among the highest of any major U.S. downtown. Class A asking rents in the CBD have fallen from roughly $45 PSF a year ago to around $40–41 PSF, and King County Assessor data shows the city's most valuable office towers — including three Amazon buildings — have lost a combined $3.7 billion in assessed value since 2022.18
A Ranking That Matches the Leasing Data: A Hubble Group study released in June ranked Seattle the nation's No. 3 AI metro, and tech tenants are increasingly cited as the driver anchoring the broader Puget Sound office recovery — a notable shift from a market whose story for the past three years was almost entirely about contraction.15
Vacancy Rising, But Absorption Still Positive: Puget Sound industrial vacancy climbed to 9.5% in Q2 2026, up from 8.9% at year-end 2025, as new deliveries continued to outpace tenant demand — yet year-over-year net absorption still totaled a positive 1.2 million square feet across the region's 410.9 million square feet of inventory. The average blended asking rate held at $1.06 PSF, ranging from roughly $0.76 PSF in Thurston County to $1.88 PSF on the Eastside.19
Institutional Capital Still Buying: Newport Beach-based BKM Capital Partners acquired a multi-tenant industrial portfolio spanning Kent and Tukwila for $85.7 million in July, deepening a decade-long bet on South King County's logistics corridor — a signal that institutional appetite for well-located Puget Sound industrial product remains intact even as headline vacancy rises.20
Tariffs Are Visibly Denting Port-Adjacent Demand: The Northwest Seaport Alliance (combined Port of Seattle/Port of Tacoma operations) reported container volumes down sharply from 2025's tariff-driven import pull-forward — 228,166 containers handled in January 2026 versus 264,869 a year earlier, a 13.9% year-over-year decline — and industry trackers note port throughput growth swung from roughly 16% to essentially flat as new tariff policy took hold. That volume drag is a headwind for the region's port-proximate warehouse and distribution submarkets specifically, even as broader industrial fundamentals hold up.22,23
A Market Normalizing, Not Correcting: Seattle-area multifamily vacancy held near 7.1% through Q2 2026, with average asking rent around $2,034 per unit — essentially flat year-over-year. Citywide median rent (Apartment List, June 2026) actually ticked down about 1.4% year-over-year to roughly $2,058, while new apartment deliveries fell 59% year-over-year, pointing toward a tighter supply pipeline heading into 2027.24
A Bifurcated Submarket Picture: East King County remains the region's priciest submarket at roughly $2,571 average rent with 6.6% vacancy, while Snohomish County posts the lowest vacancy in the region at 6.1%. Redmond leads the metro in year-over-year rent growth at 2.0%, and Issaquah remains the metro's most expensive city at a $2,731 median rent — a reminder that Eastside submarkets tied to tech employment are outperforming the city core.24
Tight and Getting Slightly Less So: Seattle-area retail vacancy reached 4.0% in Q1 2026, up from 3.3% a year earlier but still well below many major U.S. metros, with asking rents holding steady near $23.40 PSF annually. Net absorption improved to a modest -17,800 square feet, a meaningful improvement from the deeper negative absorption of prior years.21
Grocery-Anchored Product Continues to Outperform: Smaller-format, service-oriented and grocery-anchored retail continue to lease well, while larger-format boxes face longer lease-up timelines. Kitsap County posts the region's highest retail vacancy at 5.6%; King County sits at 4.6%; Pierce, Snohomish, and Thurston Counties remain tighter, in the low-3% range.21
The defining shift in CRE credit markets this year isn't the size of the maturity wall — it's that lenders are increasingly declining to extend. That's forcing genuine price discovery on distressed assets for the first time in several years, rather than another round of "extend and pretend."10,11
| Capital Source | Status | Key Takeaway |
|---|---|---|
| Regional & Community Banks | Retreating | Continuing to prune CRE exposure under regulatory pressure; ceding share of the 2026 maturity wave to non-bank lenders10 |
| Private Credit / Debt Funds | Surging | MBA data shows investor-driven lender originations up 83% year-over-year through Q3 2025 — the largest gain of any origination category10 |
| CMBS / SASB | Stabilizing | Headline delinquency eased 20 bps to 7.35% in June, though property-type performance is diverging sharply7 |
| Distressed Office / Retail / Multifamily | Elevated, But Clearing | Fewer extensions being granted — 21% of 2025 maturities extended into 2026, down from 41% the prior year — meaning more assets are actually resolving rather than rolling forward11 |
Fewer Extensions, More Resolution: The defining shift in CRE credit markets this year isn't the size of the maturity wall — it's that lenders are increasingly declining to extend. Only about 21% of loans scheduled to mature in 2025 were pushed into 2026, compared with 41% of 2024 maturities extended into 2025. That's forcing genuine price discovery on distressed assets for the first time in several years, rather than another round of "extend and pretend."11
Private Credit Keeps Filling the Bank-Retreat Gap: Investor-driven, non-bank lenders posted an 83% year-over-year increase in originations through Q3 2025, the single largest gain across any lender category tracked by the MBA, while depository originations rose a more modest 52% and CMBS issuance grew just 5%. The structural retreat of regional banks from CRE lending continues to be private credit's opportunity.10
Heading into the back half of 2026, the market's central tension is unchanged: real, durable demand for power-secured data centers, AI-tenant office space, and supply-constrained multifamily is colliding with a financing environment that just got materially less accommodative than anyone expected six months ago.
Where capital is flowing: Power- and grid-secured data center sites remain the highest-conviction position in the market, joined by AI-tenant-anchored office in metros like Seattle that can credibly claim tech-talent depth, supply-constrained multifamily in undersupplied submarkets, grocery-anchored retail, and institutional-grade industrial in logistics corridors with real absorption (like South King County). Investors should treat the USMCA's new annual-review cycle as a recurring source of headline risk for border-adjacent logistics assets specifically, rather than a one-time event now behind us.2,15,19
A market that rewards patience and precision: With extensions declining and $875 billion in 2026 maturities working their way toward actual resolution, H2 2026 is shaping up as one of the more transparent — if less accommodative — underwriting environments the sector has seen in years. For well-capitalized sponsors, that combination of real price discovery and a hawkish-but-not-hiking Fed creates a genuine window, even as the cost of capital itself stays higher for longer than most models assumed at the start of the year. Brokers and tenants navigating this shifting landscape can explore current availabilities through TenantBase's platform, which tracks active requirements and off-market opportunities across all major U.S. markets.10,11
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