| | | | | | | | | | Distress is still rising, but at a slower pace, and the property sales block is starting to hum along again. That’s the top-line takeaway from two reports MSCI released this morning. There was $107B of U.S. property distress at the end of the year, a $21B YOY increase, putting the industry at the highest level of distress in more than a decade. But the $2.2B net new distress in Q4 was the smallest net change in two years. Office unsurprisingly leads the way with $51.6M of distress, nearly half of the total. But keep your eye on multifamily. It sits at $17.1M of distress now, but it had the largest growth in Q4 and significantly leads the pack for potential distress, accounting for $108.7M of MSCI’s $311.8M watchlist. MSCI said multifamily climbing the rankings may be more about office improving than apartments worsening. Sales of distressed properties were 2.5% of the total deal, the largest share since 2015. That’s amid a broader pickup in transactions. Property sales across the board rose 32% YOY in Q4, with Dallas leading the U.S. for the fifth straight year with $21.1B in deals. | | | | | | | | Prices are stabilizing, but with a new regent among property types. “Rather than talking about beds and sheds, the industry needs a clever term to describe the price growth for the retail and industrial sectors, which posted 3.2% and 2.7% YOY increases, respectively,” MSCI wrote. (Got ideas? Let us know, and we’ll pass them along to MSCI.) One thing that raised our eyebrows a bit in the capital trends report is the hotel data. Hotel sales fell 21% in 2024, and pricing is down 11.5%, putting the sector at the bottom of both lists. Its cap rates have fallen 20 basis points while every other property type’s rose. But JLL and CBRE both put out reports this week that hotel sales are about to take off. JLL forecast a 15% to 25% increase globally this year. It predicts urban markets will snag most of the deals and resort sales will slow. CBRE said 94% of U.S. investors it surveyed said they will maintain or expand their hotel portfolios, up from 85% last year. The draw: Investors are expecting better bargains and higher returns, plus more distressed deals coming to the market. Both brokerages flagged NYC as the place to buy. Most respondents to a Bisnow survey in December said they would mostly hold in 2025 across asset classes. Are strategies already shifting? Let us know! — Kayla Carmicheal, Jay Rickey, Catie Dixon and Mark F. Bonner 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 The 10-year Treasury yield is at 4.52% today, frustrating CRE investors hoping for it to come down. But it has been much higher. What was the record-high 10-year Treasury rate, and when was it? (Answer at the bottom.) On Our Radar Fed isn't “in a hurry” and pauses rate cuts amid strong economy. The Fed held its benchmark rate at 4.25%-4.5%, ending a streak of cuts since September. Chair Jerome Powell cited resilient economic growth and stable labor conditions but acknowledged inflation remains “somewhat elevated.” Despite political pressure, Powell emphasized the Fed's independence and repeatedly refused questions about “elected officials.” That would be a reference to President Donald Trump, who later said on Truth Social, “The Fed has done a terrible job.” Investors expect rates to stay high, impacting long-term debt and mortgage rates, though CRE activity is set to improve in 2025 as $1.5T in debt matures. IQHQ just secured $900M to boost leasing at struggling megaprojects. The life sciences developer raised $900M to support its projects, including San Diego’s RaDD campus, which has yet to land a life sciences tenant. An IQHQ spokesperson told Bisnow the lion’s share of the $900M is “corporate-level and can be used for all projects.” The company expects leases in early 2025 and is also in talks with office tenants. Meanwhile, IQHQ is exiting a $250M UK project and renewing a 75K SF lease in Massachusetts. Congress is eying (checks notes) … a bipartisan housing fix. Amid the political hullabaloo on Capitol Hill, one year after stalled talks on high housing costs, bipartisan compromise seems to be gaining traction. Senate Banking Committee members, including Sen. Mark Warner, a Democrat from Virginia, and Chair Tim Scott, a Republican from South Carolina, are exploring federal incentives for local governments to streamline permitting and boost affordable housing supply. Fresh from the campaign trail, Vice President J.D. Vance is also flagging housing as a key voter concern. While Democrats push for federal investment and Republicans favor deregulation, growing constituent pressure may drive a deal.
This Morning’s News | | | | Bisnow/Sasha Jones | | | | | | | | OFFICE — Blackstone’s Jon Gray Declares Office Market Bottom (Bloomberg): The firm’s president said office valuations have fallen 70% from their peak and are poised to rebound. Read more here.
CAPITAL MARKETS — Pension Funds Clock Another Weak Year For CRE Investment (Bisnow): Pension funds committed $31.6B last year, down 3% year-over-year. The two-year total amounts to $64.3B, its lowest since 2013. In 2022, a record year, $65B was raised, according to data from Ferguson Partners. Read more here.
MULTIFAMILY — Branded Residences Expand Into Affordable Rentals (WSJ): There are around 1,500 consumer-branded residences around the world. Using well-known names is a marketing strategy for developers, who can earn a premium on sales associated with big brands. Read more here.
LEGAL — Developer In Menendez Scandal Sentenced (TRD): Federal prosecutors accused Sen. Bob Menendez of taking bribes from Edgewater’s Fred Daibes in return for arranging an investment from the Qatari government. Daibes has been sentenced to seven years in prison. Read more here.
PEOPLE — CBRE Hires Mindy Berman As EVP Of Healthcare Capital Markets (CBRE): Prior to joining CBRE, Berman founded and led JLL’s healthcare capital markets practice, overseeing sales, finance and equity placement for various healthcare properties. Read more here.
LEGAL — Aby Rosen Loses Chrysler Building Battle (TRD): A judge ruled Wednesday that RFR’s ground lease at the skyscraper is terminated and ordered Rosen’s company removed from the property. Read more here.
| | | | | | | | Google Maps | | | | | | | | OFFICE — BXP Writes Down Over $340M On 3 Office Properties (Bisnow): BXP wrote down $169M on the Colorado Center in the LA area, $121 on Gateway Commons in the Bay Area and all of its $47M in equity it had in Seattle property Safeco Plaza. The landlord executed 83 leases totaling more than 2.3M SF in Q4. Read more here.
INDUSTRIAL — Goldman Sachs Expands Warehouse Holdings (CO): Goldman Sachs has purchased a portfolio of 21 industrial buildings from Blackstone for $293M. The buildings are in Ohio, Pennsylvania, Texas and Nevada. Read more here and here.
M&A — Third Point Challenges Ron Burkle’s Soho House Bid (WSJ): After expansion, the chain counted over 42 clubs in 2023, but members complained of overcrowding and the club stopped accepting applications in some cities. The $9-a-share bid backed by billionaire Ron Burkle was a significant premium to the stock's price, but Third Point is pushing the board to consider outside bidders. Read more here.
FINANCE — Closinglock Raises $34M Series B To Secure Real Estate Transactions (Closinglock): The fintech and fraud prevention company has seen annual revenues grow by 25x over the past three years. Read more here.
DATA — CBRE Analyzes Real Estate Fallout From LA Tragedy (CBRE): CBRE’s Geographic Information Systems team procured map layers for the fire perimeter, evacuation zone and the evacuation warning zone, overlayed these layers onto a base map of LA and integrated commercial building data from its proprietary database. Read more here.
CONSTRUCTION — Construction Tech Funding Stabilizes (Construction Dive): Investors and startups in the sector completed 325 deals in 2024, compared to 236 deals in 2023. Read more here.
LEGAL — Cushman & Wakefield Seeks To Dismiss Lawsuit (Bisnow): The brokerage is asking a judge to dismiss defamation allegations of a woman-owned real estate firm, JRT Realty. Cushman is also accused of seeking to cut the company out of NYC government contracts they were partners on. Read more here.
ESG — Boston Passes Net-Zero Building Requirement (Bisnow): The controversial proposal, in effect July 1, requires developments 20K SF or larger and multifamily buildings with 15 or more units to meet net-zero carbon emissions standards by the time they open. Additions 50K SF or more will also have to follow the code. If not, they will face fines. Some buildings are exempt, including hospital, general manufacturing facilities and lab buildings. Read more here.
PROPERTY MANAGEMENT — Cheap AI Could Benefit Real Estate (CoStar): “There is almost no scenario where a proof of concept like DeepSeek that makes AI more tangible, accessible, and cheaper to a wider audience is a bad thing,” said Gina Szymanski, real estate investment trust portfolio manager for AEW Capital Management. Read more here.
| | | | | | | | Unsplash/Idean Azad | | | | | | | | STUDIOS — Actors Launch Initiative To Incentivize Texas TV, Film Production (Bisnow): Matthew McConaughey, Dennis Quaid, Renee Zellweger and Woody Harrelson are among the A-List actors who asked Texas Legislature to offer more incentives to bring movies and TV productions, as well as investment, to Texas. The actors launched the True to Texas initiative with a promo video, True Detective-style. Read more here.
HOUSING — Class-B Apartments Surpass Class C For First Time (Globe Street): Class B stock, about half the U.S. apartment inventory, drove a lot of the occupancy rebound in 2024 to become the tightest asset class. Read more here.
LIFE SCIENCES — Sector Sees Renewed Funding Interest (Cushman & Wakefield): The funding slowdown in life sciences softened fundamentals in CRE in 2024, but increased activity in 2025 could signal the start of a CRE recovery. Read more here.
INVESTMENT — Regulatory Moves On Climate-Related Financial Risks (Moody’s): More real estate assets are likely to face higher scrutiny and see tenants and owners more engaged due to reporting requirements on emissions and physical risks. Read more here. *** So You’ve Come For An Answer The 10-year Treasury peaked at 15.68% in September 1981 during the savings and loan crisis. The Fed’s decision to hold interest rates steady yesterday probably won’t provide relief for long-term borrowers (like CRE investors) who have seen the 10-year Treasury yield rise about 100 bps since the first rate cut last year. Fed Chair Jerome Powell acknowledged yesterday that mortgage rates may stay elevated, holding back the housing market in particular. 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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