| | | | | | | | | | The clock is ticking for extend-and-pretend. The days of delaying loan maturities to avoid distressed asset sales are running out, with 2025 set to force a reckoning across commercial real estate. Office loan delinquencies hit 11.2% in November — three times higher than at the start of 2023 — while only 11% of the $755M in CMBS office loans maturing in September were paid off, according to Moody’s. Lenders, who have been granting extensions to avoid fire-sale pricing in today’s low-liquidity market, are growing less tolerant of struggling assets. “Even institutional, great household names have hit the end of their rope,” said Glenn Grimaldi, CEO of Naftali Credit Partners. “The bank is hitting the end of its rope too. It’s ready to take the asset back.” Signs of distress are already emerging: Between April and August, seven properties sold at losses exceeding $100M, up from just two similar trades in all of 2023. Delinquencies are expected to worsen, peaking above 14% in office by mid-2025, while multifamily defaults rise under pressure from declining rent growth and higher operating costs. Despite a spike in loan origination — 154% higher in H1 2024 compared to the same period last year — borrowers face steeper equity demands to secure short-term extensions or modifications. “The deal’s not getting done without it,” said Rob Gilman of Anchin’s real estate group. | | | | | | | | Private capital has stepped in to fill the liquidity gap — but at a considerable cost. “The returns private equity is getting now look like equity returns at senior debt levels,” Grimaldi said, with Naftali Credit Partners raising $300M to capitalize on distressed opportunities. While some lenders remain hesitant to sell in a market where valuations appear near the bottom, Rachel Szymanski, chief economist at Trepp, warned that patience is wearing thin. “We’re seeing capitulation from lenders on distressed assets. They’re saying, ‘We can’t continue to feed this.’” For CRE, the long-dreaded reckoning may finally be arriving. Read More Here: Why 2025 Marks The Beginning Of The End Of Extend-And-Pretend — Mark F. Bonner, Jay Rickey, Kayla Carmicheal and Catie Dixon Not getting The First Draft in your inbox? Click here to sign up. Got any feedback or want to send us a mailbag letter? Email first...@bisnow.com. On Our Radar Retail beat expectations. Now, the countdown to the Fed decision begins. November retail sales rose 0.7%, surpassing Wall Street’s 0.6% forecast, signaling strong consumer resilience heading into the holiday season. Gains were led by a 2.4% jump in auto sales and a 1.8% increase in online shopping. The report underscores a hardy U.S. economy as investors await J-Pow’s rate decision tomorrow at 2 p.m. ET. There is a 97% chance of a 25-bps rate cut, according to CME FedWatch. Builder confidence is steady, and future sales optimism hit a nearly three-year high. The NAHB/Wells Fargo Housing Market Index held tough in December at 46, with high mortgage rates and costs keeping sentiment low. Despite challenges, optimism for future sales rose to 66, the highest since April 2022. Price cuts (31) and sales incentives (60) held, while regional confidence improved in the Northeast, Midwest and South — but fell in the West. Mortgage rates are expected to remain above 6% in 2025. Will Trump stop the TikTok ban? After all, it is a CRE driver. Despite supporting a ban during his first term, he has indicated he may fight to allow the social media app to continue operating in the U.S. He said Monday he has a “soft spot” for TikTok and is meeting with its CEO. TikTok is a warehouse user with its growing TikTok Shop, a data center owner and demand driver, and brokers use it for dealmaking. It also said it intended to grow its U.S. office footprint this year. The downside: Multifamily renters are increasingly using it to share tips to defraud landlords. A decade ago today, the U.S. and Cuba restored ties after more than 50 years. A far cry from then-President Obama’s promise to “leave the past behind,” Cuba's economy is expected to grow just 1% in 2025, following a severe downturn fueled by continued U.S. sanctions, pandemic fallout and an ongoing energy crisis. Export earnings fell $900M, while imports were 18% below forecasts, further straining agriculture, tourism and industrial sectors. Power outages lasting 12 hours daily have paralyzed the country. Once upon a time, CRE was ready to pounce during the thaw. No longer.
So, Tell Us The Future | | | | Bisnow/created with assistance from OpenAI's DALL-E | | | | | | | | Advanced location intelligence is transforming site selection, allowing retailers to pinpoint and secure high-performing spaces with greater precision. This data-driven approach is reshaping leasing dynamics and fostering increased competition for premier locations, especially in mixed-use developments and suburban markets. Notably, the demand for open-air neighborhood, community, and strip centers has pulled total availability to an all-time low of 5%. Brandon Isner
Head Of Retail Research, Newmark
Cleveland What's your bold 2025 prediction for real estate? The First Draft team wants to hear from the biggest players in CRE. Give us any and all takes in 150 or fewer words, and they may be published in future editions: first...@bisnow.com. This Morning’s News | | | | | | | | Wikimedia Commons/Federalreserve | | | | | | | | ECONOMY — Will The Fed Keep Cutting Rates? (WSJ): Analysts remain divided on the Federal Reserve's next moves, with some forecasting continued cuts in 2025 while others warn inflationary risks may limit action. Read more here.
CAPITAL MARKETS — Loan Modifications Ramp Up At Regional Banks (Bisnow): Small and midsized banks on average modified 0.32% of their CRE loans in the first nine months of 2024. Read more here.
LEGAL — DOJ Presses Douglas Elliman (Bloomberg): The brokerage is reportedly preparing to hand over records on the Alexander brothers, including details turned up in internal reviews amid the ongoing sex trafficking probe. Read more here.
LEGAL — Tal Alexander Offers ‘Any Amount’ After Bond Denial (Bloomberg): Tal Alexander offered "any amount" to secure release after a court denied his $115M bond request. Read more here.
HOTELS — Supply Drop To Reshape CRE (Hotel News Resource): A severe lack of new, high-quality space options for office occupiers in 2025 will likely increase the number of lease renewals and necessitate proactive portfolio management. Read more here.
| | | | | | | | Bisnow/created with assistance from OpenAI's DALL-E | | | | | | | | SUSTAINABILITY — What Will CRE Solar Look Like Under Trump? (Bisnow): The commercial solar industry has grown by double-digits this year. If Trump kills the Inflation Reduction Act’s 30% investment tax credit and two 10% bonus credits for solar energy systems, CRE’s solar industry could be at existential risk — though most experts said they believe Trump will rely on a hybrid power policy. Read more here.
AFFORDABLE HOUSING — CRE Leaders Bullish On Affordable (W&D): Commercial real estate leaders are optimistic about affordable housing investments in 2025, according to a Walker & Dunlop survey. Read more here.
HOUSING — Brookfield Sells $1.6B Of Manufactured Home Portfolio (Bisnow): Brookfield sold nearly 80 manufactured home properties, half its total portfolio, to multiple buyers. The company is reportedly in talks to sell the other half as investor interest booms in the segment that is seeing strong rent growth. Read more here.
DATA CENTERS — Tariffs Threaten Data Center, Manufacturing Costs (Construction Dive): Metals, coatings and MEP components could see significant price hikes. Electrical components are also at risk of price increases. Read more here.
DATA CENTERS — Sovereign Giant Backs Data Center Platform (Bisnow): GIC, Singapore’s sovereign wealth fund, teamed up with German investor MEAG to invest £1.2B into Vantage Data Centers’ Europe, Middle East and Africa business, bringing Vantage to $12B of equity raised in the past 18 months as it expands its development pipeline. Read more here.
INDUSTRIAL — Americans Stockpile Goods To Brace For Tariffs (WSJ): Fear of rising prices due to impending tariffs is driving Americans to stockpile goods. But some economists say that spending as though inflation is coming could actually be pushing it higher. Read more here.
RETAIL — Albertsons Eyes Real Estate Optimization (WSJ): Albertsons is evaluating ways to maximize its significant real estate holdings after its merger with Kroger was blocked. The grocer could be looking to sell and lease back stores. Read more here.
SUSTAINABILITY — Altus, CBRE Launch 10.5-MW Solar Project (Altus): Altus Power and CBRE are partnering on a 10.5-megawatt solar project spanning a 1.1M SF logistics portfolio. Read more here.
SUSTAINABILITY — Future Of Mid-Atlantic Hydrogen Hub Uncertain (Bisnow): Delaware Valley’s lawmakers gave the go-ahead for a $750M hydrogen production project in hopes it would solidify the area as a green energy powerhouse. However, its future is now in jeopardy as the election and second-guessing from construction partners have created a state of limbo for the hydrogen hub. Read more here.
| | | | | | | | Unsplash/Michal Parzuchowski | | | | | | | | ENTERTAINMENT — Gaming And Leisure Closes Sale-Leaseback For Casinos (Seeking Alpha): Gaming and Leisure Properties completed a $395M sale-leaseback deal with Bally’s for Bally’s Kansas City Casino and Bally’s Shreveport Casino & Hotel. Read more here.
PEOPLE — ShopCore CEO Departs After Merger (CoStar): ShopCore’s CEO has exited following Blackstone’s merging the company with EQ Office. Read more here.
INVESTMENT — CDPQ Invests $240M In TerraPact (CDPQ): Canadian pension fund CDPQ is investing $240M in real estate firm TerraPact, fueling its growth across North America. Read more here.
DEI — Walmart’s Compromise Offers Lessons (Bloomberg): Walmart’s approach to balancing DEI initiatives amid political pressure provides a case study for corporate America navigating diversity programs and stakeholder expectations. Read more here.
ENTERTAINMENT — Streaming Relies Increasingly On Theaters (NYT): Streaming platforms are turning to theatrical releases as a revenue driver, with box office performance proving critical for boosting content visibility and profitability. Read more here.
DEVELOPMENT — Massachusetts Plans Development On Military Base (Bisnow): MassDevelopment is looking for a consultant to identify areas for development on a 7,000-acre site at Joint Base Cape Cod. The consultant would undergo a two-year planning process for the base. Read more here. *** 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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