| | | | | | | | | | Call it a crescent-shaped recovery. New Orleans just broke ground on what the developers say is its first Class-A office tower in 35 years. Cypress Equities and Lauricella Land Co. started construction on an eight-story, 124K SF office tower — supposedly the city’s first new office building since 1989 and the first major office project ever in NOLA’s River District. It will be anchored by Shell’s Gulf of Mexico (or are we calling it the Gulf of America yet?) operations. It’s a fairly small deal, and we don’t know how big Shell’s lease is, but it’s still a surprising moment for the city and the office market. | | | | Perhaps it shouldn’t be — ULI and PwC spotlighted New Orleans as a market mover in its 2025 Emerging Markets report, moving it up 25 slots from nearly the bottom of the pack for real estate opportunity to 42nd out of the 81 metros it tracks. It’s a long time coming. This year marks the 20th anniversary of Hurricane Katrina, and the city is still not the same economically. New Orleans is expected to lose 34,000 residents between now and 2029, and its climate risks keep rising, with storm after storm pummeling it. But it’s a cheap place to live and do business — and its healthcare industry has become a major economic driver beyond its traditional tourism, oil and gas, and shipping activity. This project joins a very limited office pipeline nationally. There was 24M SF of office under construction in the U.S. at the end of 2024, less than half the prior year and deeply below the 115M SF underway in Q4 2020, according to CBRE. But the constant storyline has been that newer office buildings are crushing older ones in soaking up tenants. CBRE reported vacancy in top-tier buildings fell 10 bps to 15.3% in Q4, while nonprime buildings held flat at 19.2%. As lease activity picks up and (hopefully) the capital markets stabilize, that could incentivize more developers to follow the Big Easy’s lead and put some cranes in the air. — Mark F. Bonner, Kayla Carmicheal, Jay Rickey 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. CRE News Quiz Nearly 42% of office conversions are to resi — the biggest share. What’s the second most common conversion type for old office buildings? (Answer at the bottom.) On Our Radar Could a U.S. sovereign wealth fund boost real estate? You probably missed it amid the tariff turmoil, but Trump signed an executive order on Monday to create a U.S. sovereign wealth fund, with Treasury Secretary Scott Bessent and Commerce nominee Howard Lutnick tasked to launch it within 12 months. The fund aims to support initiatives like the TikTok sale, manufacturing, defense and medical research. Given that global sovereign wealth funds such as Norway’s and Singapore’s are major real estate investors, the U.S. version could significantly impact CRE. However, the U.S. deficit complicates the traditional funding model, and the structure means America’s SWF may not get the buying power others do. About those tariffs … Mexico got a pass. Canada got a pass. But what about China? They earned a 10% tariff that went into effect overnight. But China struck back and imposed tariffs of their own on U.S. exports — including LNG, coal, crude oil, cars and farm equipment. Beijing also launched an antitrust probe into Google and added U.S. biotech firms Illumina and PVH to its “unreliable entity list.” The Chinese measures target about $14B in goods. Meanwhile, hedge funds have been dumping global stocks en masse, but they are keeping their real estate positions. Why? Analysts say real estate’s inflation-hedging potential is attractive as tariffs drive up import costs and inflation. “It might mean that we are waiting for a while.” That is Atlanta Fed President Raphael Bostic on the future of rate cut decisions in 2025. On Monday, he said the uncertainty stems from the U.S. economy’s response to last year’s 100 basis points of rate reductions. Bostic emphasized the need to take more time to assess the impact of these cuts. That stance seems to be perfectly aligned with Fed Chair Jerome Powell, who already said the Fed is in no hurry to lower rates further given the activities of “elected officials” he would not name or comment on during his remarks last week. “The Lakers just bought an off-market, single-tenant Chick-fil-A at a 12 cap.” Bravo, StripMallGuy. We couldn’t have said it better ourselves. What is Dallas thinking? Tin hat firmly in place, Jay thinks there is something to the rumor that the Mavericks are eying a move to Las Vegas.
This Morning’s News OFFICE — Elon Musk's DOGE Says It Has Terminated 22 Federal Leases (Bisnow): The GSA has canceled 22 leases totaling $44.6M in cost savings. It didn’t release what the buildings and leases were. Read more here. | | | | Pixabay/chapay | | | | | | | | SFR — Single-Family Rentals On A Tear (Bisnow): Just under 1 in 10 homes that broke ground in the United States in 2024 was being built for a tenant as investors poured $6.3B into the space 2024 and the year set a new record for SFR deliveries with more than 34,000 units. Read more here.
INVESTMENT — Centerbridge Alum Billy Rahm Launches Everview Partners (Bloomberg): Billy Rahm has founded Everview Partners, a new firm targeting real asset investments. Rahm previously oversaw real estate at Centerbridge Partners. Read more here.
PEOPLE — Proterra Taps David Kay To Lead Net Lease Strategy (Proterra): Kay previously served as president and CEO of American Realty Capital Properties, which was later renamed VEREIT. Read more here.
HOUSING — Lendlease Sells U.S. Military Housing To Guggenheim Partners Affiliate (Bisnow): The Australian developer’s offloading of properties aligns with its planned exit from U.S. and U.K. construction and developments, announced in May. The sales are expected to generate a total of AU$4.5B. Read more here.
AFFORDABLE HOUSING — Affordable Housing Deliveries To Peak In 2025 (Yardi): Affordable housing completions are set to peak reach 78,377 units in 2025, 12.6% higher than the level registered in 2024. 2026 deliveries are set to fall to 64,745 units. Read more here.
AFFORDABLE HOUSING — Affordable Home Commissions Up Post-NAR Settlement (Redfin): Commissions have risen for affordable home sales but declined for high-end properties since the NAR settlement, according to Redfin. Read more here.
CAPITAL MARKETS — Heitman Raises $806M (Bisnow): Heitman exceeded its $600M fundraising goal as investors continue to pour into real estate credit funds that want to capitalize on uncertainty in the market. Read more here.
HEALTHCARE — Medical Properties Trust Secures $2.5B In Debt (Bisnow): MPT said in an announcement the private offering of $1.5B and 1 billion euros in senior secured notes is expected to close Feb. 13. They come along with 8.5% and 7% interest, respectively. Read more here.
| | | | | | | | Flickr/CAL FIRE | | | | | | | | CONSTRUCTION — Rick Caruso Launches Foundation To Help Speed Up Los Angeles Rebuilding Effort (Bisnow): Steadfast LA includes Gensler Global co-Chair Andy Cohen, Parsons President Carey Smith, CBRE Advisory Services President Lew Horne, and other real estate, banking, insurance and PE execs. Read more here.
CAPITAL MARKETS — Temasek, CenterSquare JV On $200M Debt Fund (Mingtiandi and CenterSquare): Singapore's Temasek is backing a $200M commercial real estate debt fund with CenterSquare targeting subordinate real estate loans. Read more here and here.
CAPITAL MARKETS — Balbec Capital Raises $1.7B For Mortgage Debt Fund (Bloomberg): InSolve Global Credit Fund VI will invest in mortgage debt, including residential and commercial mortgage loans, mortgage servicing rights and consumer non-performing loans. Read more here.
HOUSING — L&G Takes Affordable Housing Fund Past £500M Mark (Bisnow): UK institutional investment manager Legal & General got £130M of new commitments in its second fund close to invest in UK affordable housing nationally. The fund is expected to create up to 4,000 homes. Read more here.
CONVERSIONS — From Cells To Condos: Old Prisons Reimagined As Chic Apartments (NYT): Over 1,000 prison facilities were constructed between 1970 to 2000, but the number of incarcerated people began to decline around 2010. Nearly 200 state and federal correctional facilities closed between 2000 to 2022. Read more here.
PEOPLE — 20,000 Federal Workers Accept Buyouts Amid Government Restructuring (Axios): An official said 20,000 federal employees have taken buyouts Trump offered as part of a government downsizing effort. This is about 1% of the federal workforce, less than the White House's target of 5% to 10%. Read more here.
RETAIL — TGI Fridays Offloads Corporate-Owned Restaurant Leases (CoStar): A bankruptcy judge has approved the sale of over 12 TGI Fridays and the rejection of eight of the restaurant chain's leases. Read more here.
LEGAL — Lender Files For $500M Foreclosure On Massive NYC Portfolio (Bisnow): A&E Real Estate Holdings, one of NYC’s largest multifamily owners, was hit with a preforeclosure suit over a $506M loan backed by 31 properties totaling 53 buildings. It defaulted on its CMBS loan in June. Read more here.
LEGAL — Subcontractor Sues Obama Presidential Center Over Cost Overruns (Chicago Tribune): A Chicago company that provided concrete and rebar services for the Obama Center sued Thornton Tomasetti seeking about $40M in construction costs it says it covered itself along with its joint venture partners. Read more here.
| | | | | | | | Unsplash/NASA | | | | | | | | AEROSPACE — Hines Highlights Intergalactic Exploration CRE Boom (Hines): According to Hines Research, Brevard County’s industrial market — where the Space Coast is located — has a 3% vacancy rate and just over 330K SF under construction, 65% of which is pre-leased. Read more here.
M&A — VICI Properties Secures $2.5B Unsecured Credit Facility (VICI Properties): “This new facility maintains our depth of liquidity and multicurrency financing flexibility for our investment grade balance sheet to take advantage of potential investment opportunities,” said David Kieske, Vici’s EVP and CFO. Read more here.
HOUSING — Equity Residential Exceeds Q4 Expectations (Reuters and EQR): 61.3% of Equity Residential residents renewed leases in Q4, compared to 56.7% in Q3. Occupancy in the quarter came in at 96.1%, unchanged from Q3. The REIT's revenue came in at $766.7M, topping estimates of $755.9M. Read more here and here.
REITs — Green Bond Issuance By U.S. REITs Surges (S&P Global): Five REITs issued green bonds securing $4.25B in gross proceeds in 2024, about 8.1% of the REIT sector’s total bond proceeds for the year. Read more here.
HOTELS — Santa Monica Hotels Seek $2M Per Room Valuations (Bloomberg): The owners of two popular hotels in Santa Monica, California, are exploring a capital raise to develop branded residences on adjacent land. Read more here. *** So You’ve Come For An Answer Along with the influx of apartments coming from offices, 22% of them are becoming hotels. Adaptive reuse, especially of buildings built between the 1990s and the 2010s, has skyrocketed since 2022, increasing from 1.7% to an expected 7%, according to RentCafe. Do you think you have a harder CRE news question? Email us. Take your best shot and we may feature you and your question in this space. *** 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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