Smart Budgeting for Commercial Real Estate Owners in 2026: Navigating a Shifting Economic Landscape

By: Amy Melchior, Executive Vice President – Property Management at Forte Real Estate Partners

As we move into the latter half of 2025, commercial real estate (CRE) owners face a landscape shaped by cautious optimism, evolving tenant demands, and rising operating costs. Budgeting effectively in this environment requires a strategic blend of foresight, flexibility, and data-driven decision-making.

Here are six key tips to help property owners prepare for the year ahead.

1. Factor in Economic Headwinds and Tailwinds

Tariffs and geopolitical uncertainty continue to influence construction costs and leasing activity. While prime assets in office, retail, and industrial sectors are performing well, property owners should anticipate uneven recovery across markets.

Tip: Adjust revenue projections conservatively and build in buffers for inflation and interest rate volatility. Consider stress-testing your budget against scenarios of slower leasing or delayed rent growth.

2. Prioritize Risk Management in Insurance Planning

Insurance premiums have surged, with property and liability rates rising by over 5% in Q1 2025.  Factors such as aging infrastructure, frequent severe natural disasters and construction cost inflation are impacting carriers risk assessment and underwriting. This has resulted in carriers pushing premiums higher.

Tip: Review your coverage thoroughly. Consider higher deductibles to manage premiums but ensure adequate protection against catastrophic events.  Note that most insurers are now carving out wind and hail coverage with significantly higher deductibles.  Shop around for competitive rates and explore multi-property policies where owners can combine their properties with other owner’s properties to secure better coverage at more affordable rates.  Check with your qualified property manager to see if they offer an insurance procurement program.

3. Use Inspection Data to Drive Capital Expense Decisions

Modern inspection tools are transforming budgeting from reactive to predictive. Structured inspection workflows help identify recurring issues, prioritize repairs, and reduce capital misallocation.

Tip: Implement detailed inspection platforms to centralize data and track asset health.  Use this information to assess risk and guide capital expense allocation, especially for HVAC, roofing, elevators, and safety systems.  Nothing replaces a qualified property manager physically inspecting all components of your asset prior to preparing your budget.  Planning ahead for potential supply chain interruptions and tariff implications makes it even more important to assess your capital expense exposure.

4. Monitor Operating Expense Trends Closely

Operating costs—including labor, utilities, and property taxes—are rising across the board. In some regions, minimum wage hikes and business rate increases are adding pressure.

Tip: Conduct a line-by-line review of historical expenses and renegotiate vendor contracts where possible. Consider energy efficiency upgrades to reduce utility costs and qualify for green incentives.  Look into cost savings by negotiating multi-year or multi-property contracts with key vendors.

5. Plan for Tenant Shifts and Lease Dynamics

Return-to-office policies are stabilizing occupancy in Class A office buildings, while retail and industrial sectors remain strong.  However, tenant expectations are evolving, with demand for flexible, tech-enabled spaces on the rise.

Tip: Budget for tenant improvements and repositioning strategies that enhance user experience. Anticipate longer lease negotiations and build in contingencies for vacancy and turnover.  Be sure your property management team is visiting with your tenants often to stay ahead of any changes in their business plans.

6. Leverage Tax Incentives and Legislative Changes

The 2025 tax-and-spending bill maintains favorable treatment for real estate, including bonus depreciation and interest expense deductions if you qualify.

Tip: Consult with tax advisors to maximize deductions and explore cost segregation opportunities. Stay informed on legislative updates that may impact property valuations or compliance costs.  Retaining a qualified local tax appeal advisor is the key to understanding the local opportunities for tax appeals and incentives.

Final Thoughts

Budgeting for 2026 goes beyond forecasting income and expenses – it’s about strengthening asset resilience, ensuring a stable cost structure for, and aligning with the property owners’s financial objectives.   By integrating technology, anticipating economic shifts, and focusing on asset performance, property owners can position themselves for sustainable success in a dynamic market.

If you have real estate questions or would like to see how hiring a professional property manager could help you save time, money and stress—contact our experienced Forte advisors.