Five Things the Market Did Last Week—Bonds, Housing, AI, Office, and Retail

Martha, Manus, and Dianne break down the latest twists that impacted the commercial real estate market this week, from bond yields and the flipping yield curve to the drop in consumer confidence to the lowest pending home sales reading in over 25 years—all signaling a bumpy road ahead. The team asks: are we stuck in the mud? The retail sector is facing its own turbulence, with store closures and layoffs, but some positive signs as REITs predict a rollicking 2025 for retail investment. Meanwhile, the reality is sinking in about the GSA lease terminations as details emerge on which properties are on the chopping block—pulling the rug out from under parts of the D.C. (and other!) office markets—just as some were starting to show signs of life. And amid all the uncertainty, NVIDIA’s earnings were a modest beat but more importantly, offered insight into strong drivers of demand for data centers and related AI infrastructure for CRE investors and operators.

00:19 Economic Data Highlights 

01:03 Tariff Announcements and Market Reactions 

02:09 Consumer Confidence and Market Sentiment 

04:52 Housing Market Concerns 

09:40 Recession Indicators and Bond Markets 

13:33 Impact of AI and Tech Earnings 

16:15 Federal Lease Terminations and Office Market Impact 

24:53 Retail Market Updates 

36:20 Listener Comments and Final Thoughts 

Have question for the pod team? Send them to podcast@lightboxre.com.

www.lightboxre.com

Transcript

The CRE Weekly Digest by LightBox

Episode 35: Five Things the Market Did Last Week—Bonds, Housing, AI, Office, and Retail

[00:00:00] Martha Coacher: This is the CRE Weekly Digest by LightBox, a firm transforming the commercial real estate landscape by connecting every step of the CRE process with comprehensive tools and data. I'm Martha Coacher with our experts, Manus Clancy and Dianne Crocker, for the week of February 24th to the 28th. With a raft of economic data releases this week, investors keyed on some specific points.

[00:00:25] Consumer confidence, which dropped the most in four years. Another tariff scare as Trump announces duties on EU imports and NVIDIA earnings as a bellwether for the AI economy. Manus, tomorrow we have the inflation report that the Fed closely watches, and we've seen treasury yields come off recent lows as investors wait for that data print.

[00:00:44] Manus Clancy: It was a lot to peel back this week, I have to say, and a lot of the things that we're peeling back or will peel back over the next 45 minutes or so don't lend themselves I don't think too strong or confident opinions about the future. And let me get into that. The announcement from the White House that the tariffs were going to go into effect on Mexico and Canada on March 4th, I believe.

[00:01:14] I think that was also going to be another uptick in tariffs on China and perhaps new things on the EU as well. And when you look at that in isolation, it's very easy to say. Tariff's bad inflation up and so forth. But the real wild card here is how long they last. And it's so hard to make a prediction about where we're going with inflation, with interest rates, with GDP.

[00:01:42] With housing with supply costs and everything else when you don't have any sense of whether or not this is going to be resolved in 30 days or 6 months or a year. And I think that makes it very hard. In addition, there was a lot of what I would call soft data this week, which you don't know if it's really soft or if it's soft because we have all this uncertainty around us.

[00:02:09] So when you talk about things like consumer confidence, Consumer confidence is a measure of people's thoughts about what's coming down the pike. And if they're really concerned because they see tariffs as unsettling, or they see the federal layoffs as morphing into a higher unemployment rate, maybe wearing on office values, wearing on housing values in areas where there's an abundance of federal workers.

[00:02:39] And that's driving down the sentiment. You just don't know. And I think that's going to make the next three or four months very hard for both prognosticators and commercial real estate types to maintain their sea legs when making decisions. 

[00:02:54] Dianne Crocker: I think you hit the nail on the head there, Manus. You know, there was one headline that jumped out at me this week by Bloomberg, and it was that the economic red flags are starting to fly this week.

[00:03:05] And they're flying for a lot of the reasons that you said. But our market hates uncertainty, and there's certainly plenty of uncertainty in terms of the impact of the tariffs and how extensive they are and what the duration will be, how much higher prices will go. You mentioned the conference board's latest consumer confidence survey, which fell further than forecast.

[00:03:27] It came in at 98. 3 in February, and that was down from 105. 3 last month. And that was for all the things you said. You know, expectations for income, how they feel about business and the economy, the impacts of the layoffs on, on the labor market. You know, those, those are all falling, and I think it's making people worried.

[00:03:47] But to your point, should they really be worried or is it just the uncertainty, you know, rather than some kind of measurable cause? So, the these are soft reads from the market, but I think coming so quickly Um this week is really kind of driving the headlines like Bloomberg’s but the problem with those headlines about red flags is that that can spiral.

[00:04:10] You know, if sentiment is already going down, it could be worse just because of the doomsday headlines, even if the data doesn't support it. So, we're definitely in for, I think, a bumpy ride the next couple of months until we get more certainty, um, in all of these areas. 

[00:04:25] Manus Clancy: There's certainly the risk, and I think this is what you're saying, of us talking ourselves into a recession or a more challenging economy.

[00:04:35] Those headlines do have an impact, and I agree that that's not out of the question. I wanted to peel back on a lot of different things in this open today, so let's go through them kind of one by one, and I'll get your reactions, Martha and Dianne, by category. But let's start with housing. A lot of really negative.

[00:04:56] Housing news this week, including one that came out only a few moments ago. And by the way, we're recording on the morning of Thursday, February 27th, a little earlier than usual. The CNBC headline that came through just a few moments ago, pending home sales dropped to the lowest level on record in January.

[00:05:19] So this is a measure which goes back to 2001. So, the lowest pending home sales print sales. In about 25 years a little over 25 years That's negative headline number one pulling from a report from KBRA which came out a couple days ago The annual new rate of home sales slipped to a three month low in January Leading us to believe that there's a real slowdown in both residential construction and in mortgage origination.

[00:05:51] Housing starts fell sharply at the beginning of the year with the annual new rate down 9.3 percent in January. That's the steepest drop in 10 months. So, a lot going on there and I'll go back to my original thought which is you see these headlines in Washington D. C. Federal workers being laid off, homes being put on the market hand over fist in places like Virginia.

[00:06:17] Maryland, nearby suburbs of Washington, D. C. This may expand to other cities with big federal housing factors, numbers of employees, etc. And you wonder if this is part of what will weigh on the market for the ensuing months. People saying, I can't buy a house now because things are going to fall as more inventory is added to the listings by federal employees.

[00:06:40] I'm going to sit on the sidelines and wait. And then home builders say I don't want to build right now because if we're on a downward spiral I want to wait until I have more exit price certainty. What do you think about this? 

[00:06:52] Dianne Crocker: Yeah, I mean when you look at those three trends that you just highlighted all together, you know and you start thinking why are these important should we be worried?

[00:07:00] You know, the obvious concern is, are these early signs that we're heading into recessionary conditions this year? And they all point to growing uncertainty, as you said, on the part of buyers. If someone's going to lose their job, you know, maybe it's not the best time to buy a house. If housing prices are at their highest levels in years, you know, maybe it's not the best time to buy a house.

[00:07:20] Um, you mentioned builder confidence and they also have to be worrying about the potential impact of tariffs on building materials. You know, which take a 40 to 60 percent chunk of project costs. So, if those are going up, then builders are starting to second guess decisions about new housing developments.

[00:07:38] So, you know, these are all important things to watch. 

[00:07:41] Martha Coacher: We just did an analysis, uh, on home builders and their sentiment and some of the data coming from earnings calls. Interestingly, some of the builders are trying to take risk off. So, somebody like Toll Brothers and others are looking at transitioning to land options over outright ownership as a way to take some of the risk away from what they're doing.

[00:08:05] And land has become one of the costliest parts of their equation that includes construction and labor and some of the uncertainty that is tied to that with some of the policy changes that we haven't yet seen unfold. 

[00:08:19] Manus Clancy: I think when you add this all together, I think these homebuilders are really a potential canary in the coal mine.

[00:08:25] If they're feeling this way and the data is showing this, you have to think they're seeing things that us commoners, as I like to refer to myself as, uh, don't see. So, we did have a story this week where in Hoffman Estates, Illinois, there was a planned residential community on this slate. It has now been trumped for a data center sale.

[00:08:49] And we talked about this late last year with Spencer Levy. And he was of the belief that hopefully the two remain independent. They're zoned separately. Data centers are in industrial areas. Housing are more, you know, residential in nature. They may not cross over. The impact may not be felt by home builders, but in this particular case, at least in Illinois.

[00:09:11] You had a data center crowding out a would be planned community. And if that continues, you know, what you're going to see is higher and higher pressure on land values and probably a crowding out of people like, uh, Lenar and told brothers and others that that's definitely a, a possibility, but pivoting to another topic that talks about these recessionary pressures.

[00:09:36] One of the things I'm always watching for. Real validation of whether or not we are headed for a recession, whether the economy is getting too overheated or is really running into quicksand is the bond markets. I spent much of my career in the CMBS market, talking to bond traders every day, money managers every day.

[00:10:00] And I always felt that the data that they saw, and the reaction of the bond markets was the best finger on the pulse for me. To watch and we had a couple of things happening this week that I think were worthy of notes one is the yield curve has reinverted. We are now seeing the three-month treasury yield above slightly the 10 year treasury that in the past has been used as a foreboding that a recession is coming the joke is that The inverted yield curve has predicted 14 of the last five recessions, right?

[00:10:36] It's not the most reliable thing, But it is evidence that some people believe a recession is coming and we did see that Really steep decline in the 10 year this week from 480 a couple weeks ago down to as low as 420 A few days ago now back up to 430. That is not an indicator that the u. s economy is on fire If you see that kind of precipitous drop people are starting to think that we may be stuck in the mud 

[00:11:04] Dianne Crocker: Could be and the other thing that's back into the conversation this week that I saw Manus was interest rate cuts Being back on the table and now the market is forecasting two cuts this year, one in June and one in December.

[00:11:17] And it's like that scene from Karate Kid, like wax on, wax off, you know, rate cuts on, rate cuts off. And I think that speaks to just the. You know, the reports that are coming out of late and the concerns about recession or no recession is the labor market getting stronger or weaker. Our prices going up or coming down.

[00:11:35] Like I said, it's, you know, the barometers are going to fluctuate back and forth until we get more certainty on a lot of the things that we've been talking about here today. 

[00:11:44] Manus Clancy: You know, we're on the path of a really good podcast when you bring up a 1980s feel good movie with Ralph Macchio. I think that, uh, this might be one of our better ones.

[00:11:55] And while we're on the topic, uh, rest in peace, Gene Hackman today, the star of what I consider the greatest, uh, sports movie of all time with Hoosiers. So. Uh, I could watch that every day. My kids mock me putting down the remote every time it comes on, but two more data points. I want to bring up that came up this morning that are also a little bit troubling and lead us down this stuck in the mud thought.

[00:12:23] And I'd love your thoughts. Martha, you're in the northeast every day, just like Dianne and what you're seeing. And if it feels like things are slowing down, but GDP today, the second revision, 2. 3%. I know the Trump administration wants to get it up to 3%. It was in line with expectations, but nobody's doing a dance over a 2.3 GDP. We're hoping for better. And we saw first time unemployment claims tick up today, came in higher than expected. So, two more data points that, you know, may take us from what is nervous laughter to more unease in the next couple of weeks. 

[00:13:01] Martha Coacher: Yeah, I think to the point we made some of the investor worry that we're seeing and some of the consumer worries that we're saying, maybe our front running the data a bit with seeing data.

[00:13:12] That doesn't look horrible. It looks pretty solid for now. I'll be it's in the rear-view mirror so that we have to consider that, but the confidence that we see from consumers, the sentiment we're seeing from home builders. Some of the other investor concern that we're seeing is definitely out in front of the data points.

[00:13:31] Obviously, we have PCE tomorrow. So that will give us another data point that's very critical, but another data point people watching was this whole A. I. Economy and where NVIDIA ended up with their earnings, which ended up being pretty solid in the commercial real estate industry is carefully watching.

[00:13:49] Manus Clancy: There was a big sigh of relief with those Nvidia earnings. They beat on the top line and the bottom line. After the DeepSeek announcement a few weeks ago, I think there was a little bit of panic there. And as you said, Martha, this panic can extend beyond just the tech industry. People are counting on AI being a driver of new jobs, of new office space absorption in various cities.

[00:14:15] We've seen it already in San Francisco. So if that narrative took a downturn today with NVIDIA earnings, I think there would have been real panic just as the internet was a big driver in the aughts from 2000 to 2010 and e commerce was a big driver of office demand, tech demand, employee growth for the 10 years between 2010 and 2020.

[00:14:39] Hopefully AI will be that driver going forward. 

[00:14:42] Dianne Crocker: Yeah, I think so, especially for any investors that have data centers in their crosshairs and coupled with that news about NVIDIA's earnings, man, as Apple just announced a 500 billion U. S. investment, which includes a 250, 000 square foot. AI server manufacturing facility in Houston.

[00:15:02] So, you know, industrial developers, investors, operators, you have to think they're, they're definitely taking note of that and thinking about what that means for, um, building opportunities in Houston, which is already a very hot commercial real estate market. 

[00:15:16] Manus Clancy: It's, it's a very interesting thing because chip computing.

[00:15:20] Doubles every 18 months, right? The efficiency you get and the prices that these big tech firms are paying for land to develop data centers is so astronomically high. It's like they're never counting on the benefit of future advances in technology to drive down that cost or improve their productivity when you spend 500 billion on this stuff.

[00:15:43] It seems like you're in it for the long haul in a way that we are going to be spending money hand over fist on this forever. I think time will tell. I'm a little bit on the side of perhaps this is getting a little frothy when I see people spending nine or ten figures on data centers week after week. I just wonder if we will someday.

[00:16:01] Uh, have some remorse in this, in this area, uh, time will tell. 

[00:16:05] Martha Coacher: So, we talked to last week about the Doge GSA lease terminations. We've seen more data come out looking at the impact to the commercial real estate market. 

[00:16:15] Dianne Crocker: Yeah. There was an interesting story this week, Martha, and the wall street journal specifically about what the lease terminations means for the DC office market.

[00:16:25] Clearly that market is in the bullseye. They will bear the brunt. Of this, there are 11 leases totaling 1.4 million square feet. And vacancies in D. C. We're already at 23 percent last year, and they actually were just starting to stabilize in the fourth quarter. So, you know, I'm wondering what these terminations mean in terms of putting new pressure on the market.

[00:16:47] Analysts did say this week that the least terminations will more than offset. It's a great question. And I think it's important to understand that we're seeing a lot of people upset about the positive impact of the Trump administration's requirement that more workers return to the office. We'll see if that, you know, if that really plays out.

[00:17:01] But I mean, we have government agencies that will now be moving out of buildings. And if you're If you're an office building owner, you know, it might not be easy to find similar tenants. You've had these tenants in your buildings, you know, maybe for decades, and you may own an older building. So, you know, I think the challenges are really going to ramp up.

[00:17:21] And then additionally, outside of D. C., the two largest federal buildings that have been designated by DOJ as non-core assets and earmarked for sale are in San Francisco. Two of the buildings that were mentioned as specifically being affected here, where one was a 640, 000 square foot downtown office.

[00:17:40] It's at 97th Street. Interestingly, it was renamed last year as the Speaker Nancy Pelosi Federal Building. And another one is 360, 000 square feet at 50 United Nations Plaza. So, it'll be really interesting, I think, to see what happens with those. Before I turn this over to you, Manus, you know, I used to work in one of those old tire DC office buildings in my job right out of college with the US EPA.

[00:18:06] And I mean, they're old, like they don't see a lot of natural light. There certainly are a lot of properties that should be redeveloped and upgraded. So, you know, glass half full, I think we'll probably see some developers come in and reimagine these spaces and give them a much-needed makeover, but it's still discouraging in terms of what it would mean for the DC.

[00:18:25] the office market, which was just starting to kind of pull its way out of the hole. 

[00:18:30] Manus Clancy: Yeah, I think this is a real disaster. And I think it went from the theoretical to the real over the last week or so. When we started talking about this, the numbers were 7, 300 leases that were going to be terminated. And you really didn't know what we were talking about here.

[00:18:46] We are talking about small social security offices in tertiary markets. Were you talking about post offices or were you talking about big inner-city Landmarks, even though they're class b or class c. They've been there forever and now we're finding out it's the latter. I've seen headlines Chicago, two major federal buildings up for sale.

[00:19:08] Now that will put more inventory on the market. If people want to buy those on the cheap for conversion purposes, they will compete with other buildings that. Developers have been looking for conversion opportunities. We saw San Francisco. As you mentioned, we saw a couple in Denver, many in Washington, D.C. And I think this is a rug pull. This is pulling the rug out from under. Some markets for which we had started to see a bottom build for which transactions were ticking up and for which developers were starting to put money to work in converting properties. Now, if you're a developer and you've said, okay, I think we're at the bottom.

[00:19:51] I'm going to buy; I'm going to buy at 75 a square foot in Chicago. I'm going to put a lot of money into this thing. You're going to convert office to high end residential. And now you're seeing these headlines of more inventory coming on. You have to say to yourself. Did I pull the trigger too early? Is there another leg down?

[00:20:09] And are other developers who are thinking about this strategy saying, I got to wait until I see how everything plays out. This is a real threat to the market. I think KBRA said 15 billion in CRA loans at risk at this point. That's not chump change. And I do think that I don't think there's any undoing this I think it's already been the terminations have been put in and I do think it will Kick several developers in the shins as this plays out.

[00:20:37] What do you guys think? 

[00:20:38] Dianne Crocker: You know, it's interesting man If there was a report this week that you may have seen by Yardi and they were reporting sales of office buildings last year That dropped by 11 So in light of what you're saying, oh and they also use the term massive value destruction Which you know sounds a little bit sensational You know, and they pointed out that office values may at least have bottomed out.

[00:20:59] But in light of what you're saying, you know, is that 11 percent as far as they go? Or will this really kind of put pressure on prices to drop further if we have this new influx of inventory? 

[00:21:12] Manus Clancy: One thing that has been quite true of this office process over the last three years has been this divergence of B and C versus A quality offices.

[00:21:25] We've seen in New York, San Francisco, and Chicago that class A offices that are highly amenitized have held their value While B's and C's have really collapsed and have been made obsolete. I think what this does is it drives an even bigger wedge between the two because on the one hand you have JP Morgan Insisting that their employees come back, but they're not coming back to B and C class offices.

[00:21:52] They're coming back to class A space in midtown Manhattan or Hudson yards or other class a locations. Same with the hedge fund market, private equity and so forth that are forcing their employees back. And then you have the BNC for which layoffs are plentiful leases are being terminated. So, I think this gulf becomes enormous between the two.

[00:22:16] And I think when I'm talking about this leg lower, I do think that some of these troughs that we thought we saw in major us markets for BNC offices. May be a false front, and it may be another 20 percent lower once this federal inventory really becomes front and center in the narrative. 

[00:22:37] Dianne Crocker: Right now, the national vacancy rate is at 19.

[00:22:40] 7. And, you know, it's kind of interesting to think about the two forces you just mentioned, Manus, which could potentially leave us to a situation where we have an undersupply of Class A and an oversupply of properties at the other end of the spectrum. 

[00:22:57] Manus Clancy: Well, one thing that the commercial real estate market is known for is creative destruction.

[00:23:02] And we will see a lot of that over the next 10 years. But to your point a few minutes ago, this is, you know, the term they use for federal offices is brutalist, right? It looks brutal from the outside and it's probably brutal to work for from the inside. You're talking cubicles and dark space. And if you have a choice between converting something that is a B minus building with lots of windows on.

[00:23:27] Park Avenue versus something that is a brutalist building in lower Manhattan. I think you're going to say it's a lighter lift doing that window centric building to convert it to housing or a hotel. So, uh, we will see, I do think. You know, the cat's out of the bag at this point, or the horse is out of the barn, the fox is out of the hen house.

[00:23:48] I don't know. What is the, what is the metaphor there, but, or the fox is in the hen house. It's, it's, it's, it's all happened, right? This has happened. There's no turning back and, and. We now have to see how the, the cookie crumbles. How's that for a handful of metaphors within 30 seconds. 

[00:24:05] Dianne Crocker: You need to stop course out of the barn, Fox, Fox guarding the hen house.

[00:24:09] And by the way, man, it's nice. Uh, nice mention of the brutalist, which is one of the best picture nominees at the Sunday's Oscars. 

[00:24:18] Manus Clancy: I did not see that. I haven't seen a movie in a long time, although there's many I'd like to see. I want to see the Bob Dylan movie. And there's a, um, Documentary on the early years of Led Zeppelin, which was recently released.

[00:24:32] I'd like to see both of those before too long, but I'm not much of a movie guy, more of a put down the remote and watch Hoosiers over and over and over again. 

[00:24:42] Martha Coacher: And man, as we talked about the dropping office values, this is making opportunities for investors and they're picking up these offices at a pretty deep discount.

[00:24:53] And I'm thinking specifically of one that has a history of doing this in the mall space. 

[00:24:58] Manus Clancy: We're talking about NAMDAR. Yes, they were really a bottom fisher in the mall space, taking malls that might have once been worth 200 million and buying them for 20 million. In most cases, they did not invest in those malls.

[00:25:12] They just pocketed the cash flow that they could on a lower basis until such time as the cash flow became, uh, No longer positive, and then often they just let the mall just continue to degrade. So, um, and now they're moving into office and doing the same thing, buying nine figure priced offices or not the ones that were nine figures at one point for.

[00:25:37] A fifth or a sixth of what they were worth years ago, and we'll see how that works out for them. Um, they're not going to be the only ones out there. They were one of the few in the mall space them Hull, Hull Properties and Cohan were three that really bought malls at deep discounts. Here they'll have more competition as other vultures circle what are obsolete offices looking for opportunities.

[00:26:00] We've seen a lot of them in New York already. There's probably at least a dozen that have been acquired and have plans on the drawing board to convert both downtown and midtown. And I think that that will continue whether they have the same free reign that they had in malls, I don't think. 

[00:26:18] Martha Coacher: So, while we're still talking about office, we saw a couple of other interesting stories that are worth noting.

[00:26:24] Manus Clancy: Yeah, they really run the gamut of what the office market is today and how widely dispersed the outcomes are at this point. The first story. You are referring to takes us to lower Manhattan, or I guess the kind of the, the N. Y. U. area. I guess you call that Union Square where a 200 million dollar CMBS loan on the Prince building was restructured. If I'm not mistaken, this is the third restructuring for this 350, 000 square foot. asset near NYU. The loan was set to mature last year. It's been in CMBS purgatory for about six months now. And now there's an extension of the loan, which seems to be about, I don't know, uh, 20, 30 percent of the outcomes with these offices.

[00:27:20] I say, let's call it trifurcated for one third of the time, give or take these office loans. Result in some kind of workout, a modification with an equity infusion or a soft modification, which we often call extend and pretend. Let this thing remain unresolved but not let's not enforce a true foreclosure and seizing of the property right away.

[00:27:46] Then you have the other third, which get to get to be refinanced, right? That they are low enough basis. They have a long enough tenant lease life. They're class a, they don't have lease expirations forthcoming. Those get paid off. And then you have a third, which cut into that throwing in the towel category that we are going to either go deed in lieu, short sale or judicial foreclosure rate and the Aurora in this case, they fell into that first category.

[00:28:17] Which is, you know, a workout, uh, other stories. We saw this week. This is quasi office. This is more life center centric. This is a positive one. Sutter paid 450 million for a Blackstone owned campus in Emeryville, California. This is 1.3 million square feet. Sutter Health is going to redevelop this into hospital and medical space.

[00:28:43] That was a more upbeat story. And then a negative story here. This comes from the real deal as did the Sutter story. Forever 21 is going to shut its office space in a Brookfield property at the California market center. This is at 100 East 9th Street in the fashion district in downtown L. A. And so, this goes to show that for every JP Morgan, which is forcing their employees back to the office is a Forever 21, which is saying we don't need this office anymore.

[00:29:11] And we're going to shed it and put more inventory on the market. Los Angeles, very hard hit over the last year or two. This is another downward hit 165,000 square feet for Forever 21. 

[00:29:24] Dianne Crocker: And not just closing their headquarters, Manus. They're expected to shutter all of their stores as a result. So, anyone who's like me, a parent of a teen, who's very disappointed because Forever 21 was always a stop on our mall visits.

[00:29:37] But it's interesting because she's already starting to maybe mirror the overall trend of the target market for Forever 21 by pivoting and stepping up e commerce spending on companies like Shein and Temu, which compete with Forever 21. 

[00:29:54] Manus Clancy: What is the upper end of when you can stop wearing Forever 21 clothing?

[00:30:00] Is it 30, 35, 40? Can a guy like me go in there and pull it off? 

[00:30:05] Martha Coacher: I'm going to say no, I'm going to say no, but while we're on the topic of retail, we saw a couple of stories that probably weren't terribly shocking. Starbucks had some layoffs at their corporate employee locations and Joanne Fabrics, which I'm pretty sure all of us have been to on a late night when a kid says they need a school project tomorrow.

[00:30:27] And, uh, you're shuttling off to buy some diorama. They're going to be shut down completely. 

[00:30:32] Manus Clancy: There's a special place in hell for the inventor of the idea that kids should do dioramas. That is just absolutely evil. And, you know, I had five kids and every time the diorama came home, my blood pressure would just completely spike.

[00:30:50] But I do want to talk about three very quick positive stories in retail. I feel like Has been a lot more negative than positive today in our, in our podcast, but I will come up with a couple of stories. This first one comes from Vicentiu Fusea of Commercial Property Executive. She reports that American Assets Trust has sold the Del Monte shopping center in Monterey.

[00:31:13] This is a 670 5K retail property, which sold for 123 million. Why did this catch my attention? AAT acquired this property in 2004 for, uh, $115 million. So, a small uptick in value during their holding period, not something you see every day. Um, you know, I know that a 20 year hold for only $8 million in profit.

[00:31:38] Uh, is not, um, groundbreaking news, but it sure beats the alternative, which we saw over and over again over the last 10 years, 115 million asset being sold for 50. So good on American Asset for seeing their, uh, property hold value. This one from Shopping Center Business, Global Net Lease has entered an agreement to buy 100 properties from RCG Ventures.

[00:32:02] That sales price 1.8 billion. Uh, why did this catch my attention? Probably because of this parenthetical in the story, the deal was done at an 8.4 percent cash cap rate, which would have been higher than I would have expected for retail at this point, 8. 4 percent a pretty healthy cap rate for an acquisition that size 1.8 billion. And lastly, JH real estate partners. But Village Walk Center in Pico Rivera. This is a 133 square foot mall Sales price there 37 million dollars that comes from the real deal. 

[00:32:40] Dianne Crocker: Another headline man is that caught my eye and Listen to this alliteration retail reets Predict a rollicking 2025 and the story was about publicly traded REITs like Simon Property, Kimco, Regency, Federal Realty that, um, they're all looking at leasing activity that was at or near record highs, delivering high occupancy rates and, and rank growth.

[00:33:04] So they're, uh, they're very, very bullish and Federal Realty in particular had a record-breaking quarter. They had unprecedented levels of leasing. They did a hundred. Deals during the quarter, they wrapped up leases totaling 2.4 million square feet for the year. So, there's certainly a lot of optimism in, in retail, despite the headlines about poor forever 21 and Joanne's 

[00:33:29] Martha Coacher: and in our light box data dive, we're going to look at some of the information we covered in our webinar this week.

[00:33:36] Dianne Crocker: Yeah, it's there was a story this week about C. B. R. E. that released their investor intentions report and many of the metros that they ranked high on investors lists of targets are already driving the strongest growth in environmental due diligence, which is something that we track here at light box, and we featured it on our Q four and early 2025 webinar on Tuesday.

[00:34:00] Um, what we showed was a map, and it looked at phase one environmental studies. site assessment data for 2024 versus 2023 and the big metros that are driving a lot of early investment and developing and lender activity where Atlanta was first, um, Dallas was third, Miami was fourth. Those were all on CBRE's list and I think it's, it's really the, the Sunbelt metros day to shine.

[00:34:27] That's certainly where, um, investors are focused. 

[00:34:31] Martha Coacher: And our did you know for the week is a question total number of nine-digit deals over the past eight months. 

[00:34:38] Dianne Crocker: Yeah, January's total for nine-digit deals brought that overall eight month total to 350. There were 43 in January, which was just a little bit below the prior seven-month average.

[00:34:51] But listings were low in December as well. We saw a sharp uptick in property listings in January. So, I'm thinking that will likely drive even higher transaction levels for this month and, and even in March. 

[00:35:04] Manus Clancy: Two parentheticals about the nine figure property sales, both on the positive side, the first is during the late in the cycle when things were really desultory in CRE.

[00:35:18] So I'm talking like. April May last year before we started getting to rate cuts before the market started picking up a little bit and we saw more economic activity. We could see 25 or 30 or 35 of these 9 figure sales. Not a ton. Now we're seeing more regularly 45, 50, 60 sometimes. And that's a great. Turn to the market people deploying capital in big numbers.

[00:35:44] The second part I would say is the diversity of buyers This is not just Blackstone link logistics prologist coming in and dominating the market with big sales Almost every month we're seeing very few repeat names Among the 40 or 50 buyers that are paying more than 100 million dollars on a sale and I think It shows that the pool of buyers is getting bigger, it's deep, it's liquid, and the market is showing more resilience than it had, let's say, 10 months ago.

[00:36:19] That's a good thing. 

[00:36:20] Martha Coacher: And some listener comments, Robin L., who's an attorney in commercial real estate in New Jersey, reached out and reported on multifamily development in Jersey City saying it's popping there. We did some analysis and looked and she's absolutely right. Jersey City leads New Jersey in housing development with its housing inventory increasing by 43 percent since 2005.

[00:36:42] So interesting comments on the ground from one of our listeners. If you have something you want to share with us, feel free to. Send us a note and we'll try to validate it for you. 

[00:36:51] Manus Clancy: Yes, I did see in Commercial Observer that, um, our old friends at Bank OZK, Bank of the Ozarks, put out a 143 million construction loan to finance a new build in Jersey City that's going to be a 500 unit complex in that market.

[00:37:08] So it just goes to show that the market is on fire there and capital is available for those that need it to develop new properties. 

[00:37:15] Martha Coacher: And under the category of be careful what you wish for, a recent survey by FDI Consulting found that 70 percent of U. S. workers who are currently remote or hybrid would look for a new job if their employer required them to return to the office.

[00:37:30] Dianne Crocker: Well, based on Jamie Dimon's colorful quote last week, I don't think that he cares. So, we'll see how, how that shakes out. 

[00:37:38] Manus Clancy: It will be a good measure of how strong the labor market is. People in this category can easily pivot from a job with that kind of requirement to something which allows for hybrid or complete remote work, then we'll know that the market.

[00:37:52] It is really still quite strong. This will be telling as more and more employers go down the Jamie Dimon route, we'll find out just how strong it is. 

[00:38:03] Martha Coacher: Stay tuned. That's it for this week. Thanks for our producer, Josh Bruning. Please join us every week as our LightBox team shares CRE news and data in context.

[00:38:12] You can listen on any of your favorite podcast channels and send your comments or questions to podcast@lightboxre.com. Thank you for listening and have a great week.