Whatever you thought about last Tuesday, and wherever you sit on the political spectrum, I think we can agree on one thing: commercial real estate is synonymous with uncertainty, and the year ahead is going to hand us plenty of it.
Jurisdictional policy, interest rates, and the capital markets (and how they shape supply, demand, and pricing) sit outside the direct control of any single owner or operator. What can be controlled, in good markets and bad ones, is operating cost. That’s what I want to talk about, because it is the most useful conversation our industry can have as we head into 2027.
What’s shifting
The recent election didn’t create our current environment, but it happened during one that is already testing one’s patience and fortitude. In September, the Federal Reserve raised rates for the first time since 2023 and signaled that another increase could follow, which puts a lot of 2027 underwriting assumptions back on the table.
At the same time, the debt picture keeps getting harder to wait out. Lenders who spent the last few years extending maturities are now less willing to keep extending than at any point in the last five or six years, and roughly $645 billion of commercial real estate debt matures in 2027 after an even heavier 2026. For a lot of owners, the question is no longer when rates come down, but what they can do with the assets and the teams they have right now.
And then there’s AI, which quietly became a local political issue this year. Voters in 10 states weighed in on 41 local ballot measures about data centers on November 3, covering everything from outright bans to rezonings that would clear the way for new projects. Whatever you make of those votes, the takeaway for our industry is that the infrastructure behind AI is now something communities debate and vote on, which adds one more variable that no investor or operator controls.
The parts of the business you don’t get to control
If you strip real estate down to its fundamentals, there are only a few levers that drive investment and performance, and several of them are impacted by market forces. Demand is a byproduct of the broader economy and the local one, of job growth and migration and a hundred decisions made by tenants and residents. Supply is a mix of zoning, permitting, construction costs and the willingness of capital to fund new projects, which is to say it is shaped by city councils and lenders as much as by developers.
Rates and policy sit even further out of reach. You can model them, hedge against them and plan around them, but you can’t set them, and this week was a good reminder of how quickly the assumptions behind them can change.
That leaves corporate and property costs. It’s the part of the EBITDA and NOI equation that is largely impacted by decisions within your own organization. In a market where everything else is a moving target, it deserves a more nuanced conversation than it usually gets.
Why operating cost is the lever that matters most right now
We know the math, but it’s worth saying out loud because it explains why operating costs are much more than line items on a budget. Every dollar you take out of operating expenses flows straight to net operating income, and NOI is what gets capitalized into the value of the asset.
As a simple illustration, at a 6% cap rate, $100,000 a year in operating savings translates into roughly $1.67 million in asset value. That isn’t a projection or a promise, it’s just arithmetic, but it shows why a small change in how you operate can matter as much as a move in rates, and why it’s a change you can make on your own timeline.
In a year when refinancing is getting harder and lenders are looking closely at debt service coverage, stronger NOI is also one of the few things that improves your position at the table. Margin isn’t just a nice outcome when markets are calm. It’s the thing that gives you options when they aren’t.
Where the AI line item went wrong
Here’s the irony of the past year. AI was supposed to be what finally helped real estate operators create cost efficiencies across the business, and for a lot of firms it has done the opposite.
Most of the AI that showed up in our industry in 2026 arrived one point solution at a time. A tool for abstracting leases, another for summarizing offering memorandums, a chatbot for one team and a reporting add-on for another. Each one came with its own line item, its own login, its own onboarding, and its own manual handoff to whatever system or person came next. Individually, each purchase made sense. Collectively, they added cost (usually variable) and complexity at exactly the moment firms were trying to reduce both.
The deeper problem is that speeding up a single task is not the same as creating efficiency. If a tool extracts data from a lease in thirty seconds but someone still has to check it, rekey it into another system and send it to a third team, the work hasn’t really changed, it has just moved. When those tasks are chained together across disconnected tools, the errors and the manual effort compound rather than disappear.
Then there’s the budgeting question, which is top of mind with everyone I speak to. The whole industry is asking, “how do you budget for AI when you don’t yet know exactly what you’re going to ask it to do?” Usage-based pricing, variable compute costs and a growing list of subscriptions make AI one of the least predictable lines in a 2027 operating budget, and commercial real estate has never had much tolerance for unpredictable costs. I’d argue that firms shouldn’t be budgeting for AI at all. They should be budgeting for outcomes.
What certainty actually looks like
Creating certainty – whether through outputs, analyses, or technology costs – is why we built Outcome. Outcome works as an action layer for real estate firms, automating complete workflows and providing a software layer with only the features you want. Point solutions that handle one step in a workflow or serve a single administrative purpose can come out of the budget giving you fewer line items, but more outcomes.
We’ve also taken the guesswork out of the cost side. Firms partner with us because we provide flat, predictable costs for our solutions, so the question in your 2027 budget isn’t how much compute you think you’ll consume, it’s which business outcomes you want delivered.
Control what you can
None of us knows exactly what 2027 will bring. Rates may go up again or start to come down, the policy picture will keep evolving, and the debate over how AI gets built and powered is only getting started. Those are real forces, and they will shape the market whether we like it or not.
But the firms that come through uncertain stretches in the best shape are usually the ones that spend their energy on what they can control. Right now, that means taking a hard look at your operating costs, asking whether every technology in your stack is earning its line item, and choosing partners that can create the operating leverage you need.
If you’re finalizing your 2027 plan and want to see what a less-loaded operating budget could look like, we’d love to show you. See what your first 90 days with Outcome look like: book a demo.