Same Market, Three Different Negotiations: What Retail, Office, and Medical Tenants in Northern Virginia Should Actually Watch in H2 2026

If you've read anything about commercial real estate this year, you've seen some version of the same headline: interest rates are stabilizing, somewhere in the 5.5% to 6.5% range depending on asset and borrower. That's a real story if you're buying a building.

But if you're a business leasing space, that headline isn't your story. Your lease economics are driven by a completely different set of numbers: what your landlord will pay toward your build out, how much construction actually costs right now, and how much competition exists for the space you want. And here's the part that gets flattened in most market commentary: those numbers are moving in three different directions right now, depending on whether you're leasing office, retail, or medical space.

Treating "the tenant market" as one thing in 2026 will cost you leverage you didn't know you had, or blind you to leverage you've lost. Here's how each one actually breaks down, and where the data is coming from.

Office: It's All About Which Building Class You're Targeting

The office story right now is a split market, and the split determines who has the leverage in your negotiation.

According to a July 2026 Bisnow report citing Savills research, new office construction nationally is projected at roughly 12.2 million square feet in 2026, about a third of what delivered in 2024. That scarcity is concentrated in trophy and Class A space, and owners of that space know it. Landlords in the highest demand buildings have started pulling back on tenant improvement dollars because they're confident they don't need to compete as hard. The same report, citing Newmark data, notes that trophy building TI allowances in Midtown Manhattan have already dropped from roughly $162 per square foot to $133 per square foot as landlords regained pricing power.

Class B and C office buildings are telling the opposite story. Those owners are still fighting for tenants, still offering larger allowances, longer free rent, and more flexible terms to fill space that isn't in high demand.

What this means practically: the office negotiation isn't about the Fed. It's about which tier of building you're targeting. Go after trophy space and you're negotiating from a position of scarcity working against you. Go after well located second tier space and the leverage swings back in your favor. Knowing which game you're playing before you tour a single building changes how the whole negotiation should be structured.

Retail: The Fight Is Over Shell Condition, Not Headline Numbers

Retail tenants are dealing with a different pressure entirely, one that has nothing to do with how strong or weak they look as a tenant.

Here's the specific number, and what it actually means: on second generation retail space (previously occupied space, not new construction), the dollar amount landlords are offering per square foot toward tenant build out has dropped somewhere between 8% and 15% since the start of 2026. In practical terms, a landlord who was offering around $30 per square foot toward your build out in January is more likely offering something closer to $25 to $27 per square foot for a similar space today. That compression isn't coming from tenants losing negotiating power. It's coming from landlords' own rising debt service costs on their buildings, plus softer rent growth in commodity retail centers. Landlords are simply able to offer less than they could a year ago.

At the same time, gross construction costs keep climbing. Tariff driven material costs on steel and aluminum, plus continued pressure on skilled trade labor, are pushing build out budgets higher across the board.

Put those two trends together and the real negotiation isn't the allowance number by itself. It's the gap between the allowance and the actual construction cost, and that gap is dictated almost entirely by shell condition. A vanilla shell paired with a reasonable allowance can pencil out fine for most retail concepts. A cold dark shell at that same allowance can leave a tenant covering an extra $50 to $90 per square foot out of pocket that the lease economics never accounted for.

The lesson for retail tenants: never sign a letter of intent until shell condition is spelled out in specific, unambiguous terms. That's where the deal is actually won or lost this year, not in the headline TI figure.

Medical & Dental: The Rare Market Where Tenants Are Gaining Ground

This is the one worth paying closest attention to if you're a healthcare or dental group.

While office and retail landlords are pulling back or getting squeezed, medical office tenant improvement allowances are moving in the opposite direction, up roughly 5% to 8% year over year according to the same CBRE and Cushman & Wakefield MarketBeat data referenced above. That's happening because landlords are actively competing for credit quality healthcare tenants specifically. At the same time, CBRE's 2026 U.S. Real Estate Market Outlook notes that construction completions for medical outpatient buildings are expected to drop sharply in 2026, which is tightening available medical space even further and supporting continued rent growth.

That combination, landlords chasing you while the supply of space shrinks, is a genuinely rare position for a tenant to be in. It's the opposite of what's happening in office and retail, and it won't last forever. As healthcare supply eventually catches up with demand, that leverage will fade the way it always does.

For DSOs and healthcare groups evaluating submarkets like Reston Herndon, Merrifield, eastern Prince William, and the Stafford Fredericksburg corridor, this is the moment to negotiate from strength, not after the next wave of medical construction shows up and the landlords calling you today stop calling.

What to Do With This

Three different tenant types, three different negotiations, all happening in the same interest rate environment.

• Office tenants: figure out which tier of building you're actually competing for before you assume the market favors you or doesn't.

• Retail tenants: get shell condition nailed down in writing before you sign anything, because that's where the real cost gap hides.

• Medical and dental groups: you have leverage right now that's unusual and won't be permanent. Use it.

If you're weighing a lease decision in any of these categories in Northern Virginia, DC, or Maryland, I'd be glad to walk through what the data means for your specific situation.

Brian Perry, CCIM

Vice President, eXp Commercial

Brian Perry Advisory

Sources: CBRE U.S. Retail MarketView, as cited in industry construction cost reporting (2026); CBRE U.S. Real Estate Market Outlook 2026; Cushman & Wakefield MarketBeat reports; Bisnow, "Rising Costs, Shifting Market Have Office Landlords Tightening The Purse Strings On TI," citing Savills and Newmark research (2026).