Tuesday, 29 September 2026
The global economy is proving more resilient than expected in 2026, but the improvement is being accompanied by a renewed rise in borrowing costs that could complicate the recovery of real estate investment markets. Fitch Ratings has increased its forecast for global GDP growth this year from 2.4% to 2.6%, while leaving its projections for 2027 and 2028 at 2.5% and 2.6%, respectively.
Europe has contributed to the improved outlook. Fitch raised its eurozone growth forecast for 2026 to 1.0% and for 2027 to 1.2%. Germany is expected to grow by 1.1% this year following stronger activity in the second quarter, while Spain is forecast to expand by 2.5% and Italy by 1.0%. France remains considerably weaker, with its 2026 projection reduced to 0.5%. Investment supported by EU-funded projects has remained an important source of activity in Italy and Spain.
The more difficult development for property markets is the change in the interest-rate environment. Fitch expects the European Central Bank’s deposit rate to reach 2.75% by the end of 2026, compared with 2.0% at the end of 2025, before returning to 2.0% in 2027. In the US, the agency expects rates to reach 4.25% by year-end and remain at that level through 2027. These projections represent a significant increase from Fitch’s assumptions only three months earlier.
Longer-term financing conditions have also become more demanding. Global government bond yields have increased since June, with the US 10-year yield moving above 5% during September. Fitch now expects it to stand at 4.8% at the end of both 2026 and 2027. The agency attributes the movement not only to expectations for tighter monetary policy but also to government borrowing requirements, reduced central-bank participation in bond markets and greater competition for capital.
For commercial property, this combination creates a less straightforward recovery than stronger economic growth alone might suggest. Improving GDP can support employment, occupier demand and rental income, but higher benchmark yields increase financing costs and the returns investors require from property. The result is likely to be continued pressure on acquisition pricing and development feasibility, particularly for highly leveraged assets or projects dependent on refinancing. This property-market interpretation follows from the financing conditions described in Fitch’s report rather than being a forecast made directly by Fitch.
Energy remains another source of uncertainty. Fitch assumes an average oil price of $87 per barrel in 2026 and has raised its 2027 assumption from $65 to $70. The agency nevertheless expects supply conditions eventually to improve and prices to fall as geopolitical disruption eases, although it acknowledges a wide range of possible outcomes. Continued energy-price volatility could affect construction costs, operating expenses and inflation expectations, adding another variable to property investment decisions.
The September outlook therefore points to a changing environment for real estate rather than a simple return to the low-rate conditions that previously supported the sector. Economic activity is holding up better than expected, including across several major European markets, but investors and developers may have to operate with higher real financing costs for longer. For property markets, the next phase of recovery could consequently depend increasingly on rental growth, asset quality and operating performance rather than cheaper debt and falling yields alone.
