'Exceptional In The Wrong Way'

[Bisnow First Draft]

Once the darling of global capital, U.S. real estate is losing its luster. At the end of 2024 and early days of 2025, the U.S. appeared poised to attract a new wave of foreign money as investors expected President Donald Trump to usher in tax cuts and supercharge the economy. U.S. CRE investment rose 14% in Q1, while most countries’ deal flow fell. But policy whiplash, rising tariffs, stagflation fears and new tax threats from Trump’s America-first mentality have brought that all to a screeching halt.  Now foreign money is actively avoiding the States.         “I think now it's exceptional in the wrong way, which is just huge policy uncertainty and stagflation at best,” CBRE Investment Management Chief Economist Sabina Reeves said.  Meanwhile, Europe is gaining favor as the European Central Bank cuts rates, Germany ramps up fiscal spending and real estate values look more compelling.  “It is a rare moment when Europe both offers higher potential returns than the U.S. and where the risk is arguably to the upside in Europe and to the downside in the U.S.,” Reeves said.  Dig into the global capital shift: 'Exceptional In The Wrong Way': Global Investors Hit Pause On U.S. As Europe Rises  — Mark F. Bonner, Catie Dixon, Jay Rickey and Kayla Carmicheal Not getting The First Draft in your inbox? Click here to sign up. Got any feedback or a news tip? Email first...@bisnow.com. You can catch all episodes of First Draft Live here. CRE News Quiz Amazon cannot get enough of a rural Virginia county whose entire population would fit in the Washington Nationals’ ballpark. On top of two data center developments underway totalling 550 acres, the e-commerce giant just announced a 1,370-acre data center campus there. What is the county?  (Answer at the bottom.) On Our Radar CRE hiring is dropping, but bright spots are emerging. Continuing U.S. unemployment claims rose to 1.96 million this morning — the highest since 2021 — highlighting slower reemployment as overall hiring cools. Initial claims held steady. In CRE, SelectLeaders reports a 14.2% YOY drop in May hiring, though YTD declines are just 5.5%, hinting at stabilization. Multifamily, data center and investment firms continue to show strong demand for talent, and capital markets hiring is beginning to rebound. However, entry-level CRE roles remain sluggish, with no postgraduation hiring bump for analysts or associates.  “Who's going to build our homes?” That’s George Carrillo, CEO of the Hispanic Construction Council, who warned the ICE crackdowns could “devastate” a sector already short on workers — and 4.5 million homes behind. An estimated 23% of laborers lack legal status. Latino workers now make up over 30% of the construction workforce and have driven nearly 60% of recent growth. As fear keeps crews off job sites, Carrillo is calling for a targeted work visa program. Meanwhile, a newly formed National Hispanic Construction Alliance is pushing reforms to protect labor, expand capital access and boost leadership diversity. First Draft Live — Episode 2: The One Big Beautiful Bill. Will it supercharge CRE or blow it up? From bonus depreciation to green tax credits, the stakes for real estate are sky-high. Joining Bisnow Editor-in-Chief Mark F. Bonner this Friday is EisnerAmper’s Ryan Sievers, real estate tax expert and co-author of a new deep dive on the bill. Catch it live tomorrow at 12:30 p.m. ET. Register here. Whoops … Our reference to “billionaire” in yesterday’s First Draft email subject line was intended as a nod to Adam Neumann, who is no longer affiliated with WeWork. In fact, the company’s current majority owner is billionaire Anant Yardi, who has invested more than $200M in its turnaround: One Year Postbankruptcy, WeWork Is Profitable, Mature And Growing Again. On The Charts: Special Servicing     Courtesy of Trepp         The CMBS special servicing rate is still rising. The percentage of CMBS loans in special servicing rose 13 basis points in May to 10.3%, Trepp said yesterday. That’s a $1.3B increase. The rate is up 41 bps so far this year and more than 350 bps since the beginning of 2024. There was one notable bright spot: Hotels fell 64 bps to 9.57%, welcome relief after hitting a three-year high in April.  But office rose another 86 bps last month, bringing its special servicing rate to 15.76%, a 524 bps surge YOY. About 50% of the loans newly transferred to special servicing last month were to office properties, but at $2.4B, they accounted for 80% of the dollar figure. This Morning’s News PEOPLE — Brookfield Names New CEO Of Real Estate (Bisnow): Lowell Baron is taking the reins at Brookfield Asset Management’s real estate arm, which manages more than a quarter of a trillion dollars in assets. Read more here. ENTERTAINMENT — Live Nation To Invest $1B In Music Venues (Bisnow): Live Nation plans to invest $1B into 18 music venues across the U.S. The initiative includes new venue construction and modernization of existing sites. Read more here. SENIOR HOUSING — Senior Living Hits Record Occupancy (Cushman & Wakefield): To meet market demand, supply growth must increase by 35,000 to 45,000 units per year. Read more here. ENTERTAINMENT — Castle Peak Closes $315M Fund (Castle Peak): The investment firm behind the Trailborn hospitality brands has closed on its second vehicle with $315M in committed capital. The firm's acquisition of Snow King Resort in Jackson Hole, Wyoming, is its first investment. Read more here. REITs — Earnings Growth Set To Accelerate Through 2026 (JPMorgan): JPMorgan projects REITs will notch 3% earnings growth in 2025, with momentum building to nearly 6% in 2026. Read more here. M&A — Blackstone, KKR Home In On Property Company Acquisitions (Bisnow): Blackstone’s bid for Warehouse REIT and KKR’s for Assura, two UK companies, were both accepted. The acquisitions show increased interest from private equity to buy European listed companies. Read more here. RETAIL — Couche-Tard Inches Closer To Seven & i Deal (Bloomberg): Several suitors have proposed buying the two companies’ overlapping convenience stores in the U.S., Couche-Tard said. The company said it believes its divestment of over 2,000 U.S. stores will appease FTC regulatory concerns. Read more here. INVESTMENT — CRE's 2025 Outlook Still Fuzzy (Cushman & Wakefield): Cushman’s near-term outlook for CRE has been slightly downgraded, but it expects leasing fundamentals to generally hold up, keeping marginal increases in vacancy capped. Further contracting development pipelines will also set the stage for stronger NOI growth. Read more here. M&A — $100M-Plus CRE Trades Rise (LightBox): There were 45 nine-figure deals closed in May, an uptick from 43 in April. But activity cooled further down the stack, with $50M–$100M transactions dropping to 37, nearly half of April’s 69. Read more here. DATA CENTERS — Startup Planning 'Oil and Gas' Approach (Bisnow): GridFree AI, led by former Microsoft and BP executives, is pioneering modular, off-grid “power foundry” campuses that integrate gas turbines, batteries and cooling systems to rapidly deploy data centers with up to 90% energy efficiency — cutting capital and operating costs by roughly one-third. Read more here.           Bisnow         POLITICS — Ross Perot Jr. Named U.S. Chamber Chair (Axios): The billionaire developer and Hillwood founder is now chairing the nation’s largest business lobby. Read more here. REITs — InvenTrust Unloads California Portfolio (InvenTrust): The REIT sold six West Coast grocery-anchored centers for $306M, the proceeds from which will be reinvested into key Sun Belt markets. The company has one remaining asset in California that is slated to be sold by the end of the year. Read more here. INVESTMENT — Small Investors Now Dominate Home Purchases (Fox Business): Investors with fewer than 10 properties account for 59% of all investor home purchases — the highest share on record. Read more here. TARIFFS — Midsize Businesses Hit Hardest By Trade War (Axios): The RSM U.S. Middle Market Business Index from consulting firm RSM and the U.S. Chamber of Commerce fell nearly 19 points, the biggest drop outside of the pandemic in the past 10 years. Read more here. OFFICE — Workplaces Are Not Shrinking (CBRE): The recalibration of space-per-seat for workplace design has stabilized, with less than 10% change YOY. Read more here. RETAIL — Bojangles Could Fetch $1.5B In Sale (WSJ): Charlotte-based fried chicken chain Bojangles has started to expand from its roots in the Southeast to locations like New York and New Jersey and is now considering a sale. Read more here. ENERGY — Hudson Sustainable Backs NextNRG (NextNRG): The agreement establishes a framework for NextNRG and Hudson to jointly develop a national portfolio of assets including utility-scale solar, battery storage, distributed smart microgrids and wireless EV charging infrastructure. Read more here. *** BTW … Most-read story on the website yesterday: Amazon Planning 1,370-Acre Virginia Data Center Campus  Most-clicked story in yesterday’s First Draft: 9th Circ. Revives Real Estate Investor Securities Suit, Again  Brian Wilson died yesterday at 82. He is considered one of America’s great songwriters, and his success came despite being largely deaf in one ear. It’s tough to pick a favorite Beach Boys song, but Catie might go with Sloop John B, while Mark said nothing can top God Only Knows. Variety goes viral every six months with Actors on Actors. For the finale, real-life BFFs Kate Hudson and Kathryn Hahn will take the stage on PBS. Kayla hopes this pair is as delightful as Kieran Culkin and Colman Domingo's impassioned skincare discussion.   So You’ve Come For An Answer Louisa County.  The area is about an hour outside of Richmond, a rising data center market. Amazon’s latest development will add 7.2M SF of data centers to the county.  *** The First Draft is produced by Director of Newsletters Jay Rickey, Managing Editor Catie Dixon, Editor-in-Chief Mark F. Bonner and Deputy Newsletter Editor Kayla Carmicheal, with an assist from AI. We’d love your feedback! Email us at first...@bisnow.com.

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