The rise of data centers tied to artificial intelligence remains the biggest news in commercial real estate in the first half of 2026. But if you strip out the booming data center segment, construction starts in the CRE sector have slackened to a pace resembling the sluggish crawl in the aftermath of the Great Recession, according to a mid-year outlook from Wells Fargo.

Despite the slowdown in new construction, Wells Fargo describes commercial real estate as showing resilience in 2026, with transaction volumes rising in the first half of the year even though long-term Treasury yields have climbed higher in recent months. Valuations have been mixed, with office space and retail properties seeing prices rise, while apartments and industrial properties have experienced a slight price drop.

While elevated interest rates remain a challenge for refinancing properties and a barrier to compressing capitalization rates, the report still finds positive aspects for the sector. That includes the fact that lending is still active and the slowdown in new construction has helped prop up prices. Another good sign is that tenant demand has remained strong during the first half of the year.

“Vacancy rates are still broadly elevated and exerting downward pressure on rent growth for most major property types,” the report states. “But a thin development pipeline and expected sturdy property demand ahead suggest market fundamentals are likely to become more balanced in the not-too-distant future.”

As for the boom in data centers, Wells Fargo estimates that construction spending this year reached $68.3 billion by June. New developments remain concentrated in northern Virginia and the Atlanta area, but focus is shifting to other parts of the country, including lower-cost markets such as Columbus, Ohio, and Abilene, Texas.

Even with the large number of new projects, it is estimated that the data center vacancy rate in North America has remained at about 1% since 2024, meaning there appears to be plenty of demand. The data center expansion has also resulted in a surge of tech-related imports.

Beyond the impact of AI, most sectors of commercial real estate are facing challenges. Wells Fargo reports the delinquency rate for office commercial mortgage-backed securities had reached 16.9% in June, the highest level on record. Delinquencies also rose for industrial and multifamily properties but remained within historical ranges.

The mid-year analysis of the office sector states that vacancy and availability rates are falling, aided by return-to-work policies and office conversions. Net absorption has been positive for four consecutive quarters.

Growth in artificial intelligence companies and firms that cater to their needs has helped increase demand for office space in New York City and San Francisco. At the same time, Sun Belt markets such as Dallas and Houston continue to benefit from growing populations and strong job growth.

Chicago, Los Angeles, Minneapolis and Washington, D.C., saw office net absorption decline in the first half of the year, but the pace of those declines was slowing. The number of employees returning to the office for work continues to gradually increase. Wells Fargo cites Placer.AI, an analytics company, as reporting that June was the second-highest month of office attendance since the pandemic.