Navigating CRE Lending Amid Economic Uncertainty with Eastern Bank's Matthew Osborne

How are regional banks navigating today’s choppy economic and federal policy waters? The LightBox team gets an inside look when they talk to Matthew Osborne, EVP and Chief Credit Officer at Eastern Bank – a regional bank in the Boston MSA.  Matt explains why Boston’s chronic housing shortage is helping multifamily remain a magnet for capital, even as affordability pressures rise, and how a VC-fueled life sciences boom led to today’s glut of vacant lab space. His detailed breakdown of venture funding cycles, tenant demand, and submarket saturation is a must-listen for anyone tracking the life sciences and lab asset space. He also weighs in on why the market feels different this time, how lenders are stress-testing capital stacks, and what Boston’s biggest distressed office sale signals about future valuations. Plus, a black swan watch, a musical cameo, and why Here Comes the Sun might just be the theme song for 2025 lending.

01:10 Key Concerns in CRE Lending

03:22 Industry Sentiment and Market Cycles

08:48 Boston's Multifamily Market and Housing Shortage

14:58 Office to Residential Conversions in Boston

23:13 Life Sciences and Lab Space in Boston

33:46 Industrial Sector Insights

Have questions for the pod team? Send them to Podcast@LightBoxRE.com. 

www.lightboxre.com

Transcript

The CRE Weekly Digest by LightBox

Episode 47: Navigating CRE Lending Amid Economic Uncertainty with Eastern Bank's Matthew Osborne

May 23, 2025

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 Manus Clancy and Dianne Crocker. In today's episode, we're diving into CRE lending. We're talking to Matthew Osborne, Executive Vice President and Chief Credit Officer at Eastern Bank. With more than 25 years experience in commercial banking, Matthew's been instrumental in shaping Eastern Bank's credit strategies and policies. Eastern serves greater Boston, New Hampshire, Rhode Island, and Connecticut. We're going to discuss how Eastern is navigating the current environment, identifying opportunities, and we'll get a perspective on the outlook in commercial real estate. Today's conversation will take us to key property sectors, trends in the Boston MSA and the pivotal role regional banks play in CRE lending. Welcome, Matt. 

Matthew Osborne: Good afternoon. Good to see all of you. Appreciate being here. 

Martha Coacher: It's going to be good. We've got a lot of very rich content we can cover. There's a lot happening on the macro front. We see the news on a daily basis with lots of headlines. Given the broader economic and policy trends, what key concerns do you have as a credit officer? 

Matthew Osborne: Wow. Not starting, you know, with any softballs today coming right with the federal policy questions. I appreciate it. So again, thank you for having me today. So obviously there's a lot going on on the federal policy front and you know, the federal policy actions cause a lot of uncertainty and while we can't control it, we are managing through it. Your question was about what the key concerns are. My answer might seem a little obvious, but the key concerns are clearly the impact of tariffs and the cuts in federal funding, and how they may impact businesses and nonprofits. Ultimately, it's the macroeconomic impact of these factors on unemployment and consumer confidence in what happens there. These issues have a much more immediate impact on businesses and tenants within commercial real estate properties. From a CRE perspective, it may sound a little simplistic, but ultimately it comes down to at these properties, are they maintaining their occupancy and are their tenants paying their rent? And whether or not these issues will jeopardize that. What does make these issues a bit challenging is that there's severity and how they impact everyone. It differs from industry to industry and from customer to customer. And this is where relationship banking really comes in and it's something that we pride ourselves on. This is where open and continual communication on a customer by customer basis with their relationship managers is key. And it has to be continual because things are changing so fast. At Eastern Bank, like our model and philosophy, has always been to have a high level of contact with our customers and be their trusted advisors through all cycles, not just this one. And that really helps us to meet all the individual needs as they arise. 

Dianne Crocker: First of all, I want to mention that you were on the inaugural LightBox Capital Markets Advisory Council. Your first term just ended, and I want our listeners to know that you have the distinction of generously offering to sign on for a second term. So I want to ask you about industry sentiment. We're now, believe it or not, five years post COVID or two years past Silicon Valley's collapse. We're still pretty much at the early stages of a fragile economic recovery. Rates haven't moved since December. The tariff tug of war is making waves. Seems like a lot of growth forecasts from January are being revised downward, but there's still a lot of debt and equity looking for opportunity. So you've seen the market through a lot of cycles now. I wonder how you view today's situation as different and how you're seeing investors and lenders views of the market changing, given all the uncertainty.

Matthew Osborne: I think that overall investors and lenders today have a very realistic view of the world. All of us have been through periods where there are periods of euphoria, where maybe future projections and outlooks are rosy, people have very optimistic views of growth and where things are going. Right now I don't think that's one of those times. I think right now there are realistic expectations, there's prudent underwriting and overall a good balance between growth objectives and being mindful of risk. So I'd say, you know, probably though the most meaningful change right now is people's view of interest rates. As we know the past few years saw some of the lowest interest rates on record. And that can help support deals that may not otherwise be supportable. And even during those times and rates were low, investors were asking, how long can these low interest rates continue? Will this go on forever? Things like that. We're now through that and deals today are being sized based on interest rates today. I don't think anyone's taking a view that we're going to return to that period of very low interest rates again. And deals are being sized appropriately and I think that's very healthy. 

Manus Clancy: So in times like this, Matt, we hear situations or we hear the word liquidity thrown around a lot right after COVID, in the early days of COVID, is there liquidity? Are people lending? Are people coming back? Same thing in 2023. You're really where rubber hits the road. You're competing with other banks trying to deploy capital, trying to put money to work. Have you seen any hints since April 2nd that some of your competitors are pulling back, that you're seeing less competition, or are people looking at the tariff announcement and just for now, shrugging it off and it's business as usual? 

Matthew Osborne: Well, I wouldn't say it's business as usual because there's so many things you have to contend with and you know, kind of new federal policy things to consider. But in terms of your question on liquidity. I think that there continues to be a lot of liquidity in the market. And liquidity takes different forms, right? It's not just bank financing, it's Mez financing, it's money available from debt funds, it's equity that's out there. Those are all different forms of equity, liquidity rather, that come together. And, you know, maybe there's shifts in some of the sources sometimes in different cycles. But overall, I think that between all those sources, if the deal works, it is financeable or investible. And you know, maybe the cost is a bit higher at different levels in the capital stack, but I think there's adequate liquidity out there for almost any investment. You may have to pay for it, particularly if it's a higher risk or reposition or something like that, but it's there.

Manus Clancy: And why do you think this time is slightly different? We did see some turtling, if you will in 2023. Right. We saw people get very nervous. What was once maybe 30 bids for debt, you know, went down to five bids or three bids, especially when you get into things like construction lending. Certainly after COVID started, that was the case. Why do you think this time people are a little bit more unconcerned, if that's the word? Or at least not pulling their horns in. 

Matthew Osborne: Yeah so, people are always concerned, but I think the periods where liquidity dries up a little bit, and this is just my view, it's usually right after some black swan event. And that's where this massive amount of just like uncertainty with like the rules have changed and no one knows how the rules have changed. And so whether it was long-term capital management back in 1998, Bear Stearns in '08, the housing crisis in '08, COVID, SVB, those things, they kind of come out of nowhere in a short period of time people weren't expecting. And when that happens, people say, okay, I know the rules of the game of change, but I don't know what they are and if I don't know what they are, I don't want to play. Today in our hypermedia, you know, communication that we have, there's no secret in what the federal policy actions are. Yes, they change, but I think people have a feeling of the direction they're in. There's a lot of folks in the Fed, people have a sense of interest rates, and so, because I think people feel like they have, they know what the guardrails are around the rules, they're looking to make investments around that. That's probably the one thing that I always, if you ever said like, what do you worry about? I worry about that black swan event that no one can foresee coming that all of a sudden just kind of shakes everyone's confidence for a short period of time. What history has shown though, is that if, for those examples I just cited, is that we all do seem to overcome it eventually. 

Dianne Crocker: That old word resilience that seems to be so overused now is exactly what you're hitting on. 

Matthew Osborne: That's right. That's right. 

Dianne Crocker: So Matt, your accent tells everybody that you're from Boston, which is a very hot commercial real estate market.

Matthew Osborne: You know, I try, I came into this call saying, pronounce my Rs, and I clearly have not been successful in doing so, but that's okay. 

Dianne Crocker: But we want to really drill into getting a picture of the opportunities that are out there and the challenges by property type and Boston's such a unique market. It's one of the oldest cities in the U.S. It's very land constrained. I don't live too far from there and I've seen how development has really reshaped the Seaport District. It's reshaped South Boston. So let's start with multifamily. Greater Boston has a housing shortage. Young people out of college want to live and work there, which is great, but how is the housing shortage driving interest in multifamily investment there? 

Matthew Osborne: Sure. We certainly do have a housing shortage. Earlier this year, the governor's office, they released a statewide housing plan, and the headline of that was that Massachusetts needs another 220,000 more housing units by 2035 to stay competitive. That is an astronomical number. On top of that, we don't have enough affordable housing to meet the needs of the affordable community. There is a strong desire and push to create more housing in our state at all levels. We are just not building enough to keep pace with demand. You know, at Eastern Bank, I can tell you we are very engaged in providing construction loans for affordable housing projects. I mean, it's good business and it also meets the needs of the communities that we serve. From an investor and a lender standpoint, when you have such strong demand and low supply, it's obviously a very attractive place to be. The returns might be a little bit lower, but that is reflective of the lower risk and the stability of this space. And with such a shortage of supply, investors and lenders generally feel comfortable that this segment is it's not only strong today, but you know, it'll continue to be strong. Obviously though there's two sides of every coin and while it might be good from an investor standpoint, the downside is that there's an increasing challenge when it comes to affordability issues. I mean, it's just very expensive to rent and it puts pressure on families budgets. You add to on top of that, that single family sales activity which is, you know, that's the ultimate to rent renting, right? Buy a house. It's very limited. You guys have talked about this on your podcast before. Housing supply is limited to begin with, and when you lay on top of that, that most people that have mortgages at a 4% or less interest rate, there's not a lot of incentive to move and there's just not a lot of inventory at any given time, you know, on the market. And so, while the rent to population continues to increase all helping multifamily and it attracts a lot of capital because of that, it does continue to put pressures on affordability. But you know, from a lending and investment standpoint, very strong place to be. 

Manus Clancy: Nationally, Matt, you've seen the headlines, places like Texas, the Southeast, Arizona, a lot of acquisition, a lot of value add syndicators buying at the peak of the market using floating rate debt. You've seen the headlines about people getting over their skis. Was the Northeast able to sidestep that because of the lack of supply? Did it come out better than other regions because there was less frothiness in the market during those years? 

Matthew Osborne: Unquestionably. I mean, there really hasn't been any stress in the multifamily market in terms of property or loan performance in the Northeast, and it is, we're just so constrained. It takes so long to get things permitted and built in our area and we're just not building enough. And so the extreme supply demand imbalance has really kind of protected against that. One of the amazing things I saw was when they started increasing interest rates, two years ago, I think it was. Naturally you think there'll be a softening in single family home and condo prices, and we just didn't see it. Maybe there's pockets here and there, but as a general rule, we didn't see it because the supply was just so constrained that it was almost quasi insulated from increasing costs of interest rates. But to your headlines comment about other parts of the country, we're not active in those other markets that have had some of those headlines. I do think it's a combination though, of not just additional supply and anticipation of populations moving into there, it's also just a capital stack problem. And I think when we look at any property that is having a loan issue, you got to take a step back and say, is this a property performance issue. Is the property not competitive? Is it having occupancy challenges? Or is it just simply a capital stack issue, which is you know code for it's over financed. And that gets back to, I think we talked about a moment ago about views of interest rates. Today, people have very realistic views of interest rates and reality is if you borrowed on a sulfur floater back in, you know, 2021, 2022, that's not your friend these days.

Manus Clancy: I put out a brief research piece on LinkedIn on Friday. I've never seen anything like this in terms of the reaction I got often through private messages. My thesis was we're now three years past the origination of these bad capital stack loans, that if you had one of these things, your day of reckoning has already come and gone. You had to do a capital call or you've lost the property already, or you've run out of cash. My thesis was that we should start seeing a leveling off or a downturn nationally, because we're three years into the cycle. You could almost plot it on a map depending on where the lender was writing it to me from. If they were from Texas or the Southeast, they would say, we have so much further to go. If they were from the Northeast. Southern California did pretty well, even some of the upper Midwest. It was more like, yeah, we're getting there. We're ready to start playing offense again, not defense. So, I do think different parts of the country really reacted differently in the last five years. And you guys were among those, you know, among the winners these last couple years. 

Dianne Crocker: I do want to get your thoughts on office Matt, and maybe a good way to segue to that since we're just finishing up the multifamily discussion, is, are you seeing much work in the office to resi conversion in Boston?

Matthew Osborne: There's a high level of interest for sure. Not as much as we'd like to see, or certainly as much as we need. You know, office obviously continues to be a challenge in the broader market. I think we still have a ways to go on it. Our availability rate in Boston is about 23% these days according to market reports. And that's a blend of direct vacancy and sublease space. Not surprisingly there's not much new development coming along, but as far as office to residential conversions, it seems like a natural thing, right? We have too much office space with a 23% availability rate, and we have, not enough housing and so why wouldn't we just simply start converting as much as we can? This has been a widely talked about and covered topic and there's a lot of investor interest. Some have happened. But the pace have been slow. Some are moving forward now some are in the process, and if they move forward, that'll create, you know, seven to 800 new apartments, which is great. We need it. But seven to 800 we need a lot more a lot, a lot more happening. One of the challenges that even at, you know, reduced office values, because, you know, we've seen that these office buildings are trading at 50% or less than what they were at pre pandemic pricing. Even at the basis, these buildings is still too high to make a lot of these residential conversions financially feasible. You know, construction costs, higher interest rate costs, environmental compliance, affordability requirements, all of these have to be taken into consideration for a new project. And the, you know, the equity coming in has to get that return that they're looking for in the face of those costs. And right now those factors are tough to overcome. The thing that has to continue to be reset is the basis in the building. And right now a lot of the basis is still too high to make these projects financially feasible, but there is a lot of interest for it, and no question there's a need. 

Manus Clancy: We've seen some cities taking steps to make these transitions easier, right? Tax abatements and other things. Is Boston in that group? Would Boston be in the category of taking steps to make it easier for developers to convert from office to resi at this point? 

Matthew Osborne: They're absolutely working towards that. What makes it hard for anyone in the position trying to think about how to accelerate this is that there's no roadmap, no historical preference that you can look at and say, this is how we do it. And so probably about two years ago, maybe longer, you know, Boston came out with some programs to help incent it through tax incentives and such, and then they will spend time talking with developers, people that actually do this and say what works, what doesn't. But as you can imagine, you know, government is designed to move slow and so it just takes time to bring this together. But they are trying to pull together programs to support this while balancing the needs of allotted constituents. One thing though, I will say that you know, we obviously with the issues in office, people look for convergence to other uses. But one opportunity we've seen that I think has been pretty good is we've seen some small businesses and nonprofits purchase buildings for owner occupancy. We've seen a number of these transactions and it's great to see organizations secure their futures by becoming owners of buildings and not just remaining tenants. This is more prevalent around, you know, smaller and midsize office buildings where businesses can purchase them and either fully occupy them or partially occupy them and rent out some of the space. You know, for small businesses if they qualify, they can even utilize the SBA program for attractive financing terms to make this happen. I mean, if you're a small business out there right now, given where prices are and some of the financing options that are available, and you're thinking about moving from a tenant to own a building, now's a time when you might want to give some consideration to that. We also see it with a few nonprofits where they have maybe multiple locations around the city and they buy one building and consolidate to not only secure their future, but also to create some operational efficiencies. So that's been kind of a nice thing to see for, maybe some companies and small business, nonprofits that might not otherwise be able to own their own properties.

Manus Clancy: When you talk about the office market, you start to see glimmers of hopeful signs in places like New York and San Francisco. Vornado had an earnings call last week with expected an uptick in lease rates in the foreseeable future. What's the vibe in Boston right now? Are we you know past that trough in terms of office demand? Are we bumping along along the bottom? Any green shoots that we can kind of latch onto in the Boston market. 

Matthew Osborne: Yeah, I feel like we are at the bottom from a fundamental standpoint. And that's kind of supported by, if you look at the total availability rate, it's plateaued, you know, for a period of time. And I think people have realistic expectations on valuations, realistic expectations on, you know, TI expenses and the like. And rent levels, they've pretty much flatlined. Sometimes they'll advertise that they've grown a little bit, but that information's always a little murky because you never get to see through all the way to the concessions and the TI allowances that, you know, are being given behind it. But I'd say overall they're relatively flat. I wouldn't say they're falling or racing up or anything like that. What takes time though is really to work through all of the resetting of the basis in these properties. And you know, if a property is financed, the owner wants to carry on as much as they can and try to live to fight another day. And if a tenant's, if they've got 80% occupancy versus 50, that's the difference between being able to continue on for another three years versus maybe one year. And it's very case by case. And there's a lot of buildings and a lot of very unique situations. We've seen summary settings in Boston as we have in other cities, but I do think that there's a couple more years to go on it. We actually, about two months ago, Boston had what I believe is its largest distressed office sale in its history. And this is all public, so you can look it up. The Boston Globe did a pretty good coverage on it. Back in March, there was a 36 story office tower in Boston that sold at auction. What's incredible. So 36 stories, right? Pretty big building. This was a true old school auction where an auctioneer showed up and there's a crowd of people and they have to spend their time reading, you know, the legal announcements and actually go through the building. Let's start at 500 million. Do I hear four, you know, 300, all that stuff. It's very, very unique. This was a, I shouldn't say unique, I should say it's more uncommon for a building of that size. This building was about 20, was built about 20 years ago as a single tenant building for State Street. They moved out, you know occupancy challenges since that time. That building was probably valued at north of $1 billion at its height, and its sold at auction at 400 million. But the notable thing was that there was only one bidder and the bidder was the lender. And I've looked at a few distressed sales of larger buildings in the market. And you know, the common theme that I see, it's not just Boston. I see, you know, I've looked at this in other cities as well, is that trades of larger buildings all seem to happen when the lender continues its involvement to some degree, maybe buying it like they did in this case, or maybe providing financing to help facilitate a sale. You know, whereas I said smaller buildings get picked up by nonprofits and opportunistic converters. These larger buildings, the overall size of them, the sheer size and capital it takes to buy them, carry them, the TI, the CapEx, it's just so large that the buyer market is very, very thin and it's got to be helped along with other sources of liquidity and capital.

Dianne Crocker: Alright Matt, so that's office. Let's jump over to life sciences. It seems like, you know, just two, three years ago, labs in the Boston MSA, that was the hot asset type. It was fueled by a lot of VC funding. I know I have a close broker friend in life sciences in Cambridge, and she told me then, you know, the market was so hot and as soon as something popped up, her phone would explode. There were multiple bidders even before the listings went public. So what are you seeing now the current situation is with life sciences and lab space in Boston? 

Matthew Osborne: Yeah, so great topic. I mean, Boston and Cambridge are the destination for life sciences and lab. Kendall Square and Cambridge in particular is ground zero for life science uses. But I'll tell you, the environment for life sciences today is very different from what you just described a few years ago. With vacancies now at their highest point, really in over a decade, total availability right now between direct vacancy and sublease, I recently read it was 18%. That number's doubled in the last 12 months. And in some submarkets it's 20% or much higher. And adding to that challenge is new supply, particularly in the suburbs where there's been a good amount of development over the last, few years. Much of it on a spec basis, where folks are building these buildings without having a tenant in hand. You mentioned a couple years ago when the market was really hot. Well, since 2021, more than 12 million square feet have been delivered, and that's about a 33% increase into the total supply. I mean, it's pretty significant. And there's more coming with another, you know, I read there's about another 17 million square feet or so under construction. There's actually even more beyond that, that's in the permitting and planning phase, but I highly doubt that'll, you know, move forward anytime soon. Much of the space is not leased. Part of that is more than half the space that's been delivered since 2021 was through conversion projects. We talked about how office, everyone knew kind of the challenges that we're going to face office, you know, post COVID. And so office buildings started being converted to lab and life sciences to try to capture some of that hot market that you just talked about a moment ago. All this would be okay if the demand was increasing at a faster rate, but unfortunately that's not the case. Demand, as we know, comes in the form of tenants leasing space. And when we think about tenants in this space we think about them in kind of three broad categories. The first being, you know, mature companies that are profitable. The second being companies that are revenue generating but not profitable. And then third, early stage companies that are not generating revenue and obviously by definition are not profitable. So two of those three tenant types, the ones that are not profitable, rely on outside funding, typically in the form of venture capital. And one of the things that fueled all the lab development in Greater Boston the past several years, has been that Massachusetts has been one of the top recipients of venture capital funding in the life sciences space. According to Mass Bio in 2024, Massachusetts received about 28% of all bio farmer venture capital funding, second only to California at 41%. New York was third on the list at 7%. And so that just goes to show that two places, California and Massachusetts are receiving the lion's share of that. While Massachusetts remains a leader in this area, the simple fact is that venture capital funding, which drives all that development in that hot market you just talked about, it's just not as strong as the level as it was in 2021. Just to give you a sense, in 2020 and then 2022, 2023, venture capital money coming into Massachusetts was always about $8 billion a year. In 2021 when things really went really got hot, it was over $13 billion, you know, the year after COVID. Almost twice what the last couple years has been. And 85% of that money amazingly went into four communities in Boston. Boston, Cambridge, Watertown, and Waltham. Watertown and Waltham both being suburbs that are very close to the city. And it's funny, when I think about it, you take a step back and you say, it's pretty amazing, I think of Massachusetts is the second largest recipient of venture capital funding in life sciences. And all of the, and 85% of that is going into four communities. And so taking a guess where all the new development has been the last couple of years, right? It's right in those four communities. But with all that VC money flowing in, how do we get so ahead of ourselves on the supply side? Why do we have this availability rate that's pushing 20% plus minus? Well, if you go back to kind of the 2015, 2016, 2017 range, you know, VC funding in during that time, it was four to 5 billion a year. And then in 2019 it all of a sudden jumps to 8 billion, and then in 2021 it jumps to 13 billion. So it was much lower until right around, you know, 2020 and 2021, and it was like a hockey stick up at that point. Huge increase in a short period of time. There is a direct correlation between venture capital funding and new lease requirements that drives lease and demand, and ultimately new development. You know, on average a company that receives a round a VC funding, they're looking for additional space within six to nine months after they get that money. It makes perfect sense when you think about it, right? An early stage company has an idea, they pitch it, it gets greenlit, they raise a lot of money. Well, now they got to deliver on that idea and they need space to invest in and do the work to deliver it. And so back in 2021, when you had an $8 billion a year and a $13 billion a year, which again was much larger, it's, I'm not exaggerating, vacancy fell to something like 1.3% during those years. And that's, you know, Dianne, to your point when your friend said that her phone would explode, that's why, right? I mean, 1.3 percent's, that's ridiculously low. And what happened was companies that were getting money that like they can't wait two years for a bill to suit, they need space now. And so whatever landlord had space available, that's what they were going to lease. And as a result many developers were building lab buildings, life science buildings on a spec basis without a tenant in hand with the anticipation that when that building is done, there's going to be some company out there that just got around to funding and they're going to need space, and that landlord will be in the position to capture that tenant. In retrospect, you know, the view that that level of VC funding was going to continue at that outside level was probably a little too optimistic. Clearly it was optimistic. You add onto that the office building challenges, traditional office, adding new supply by converting, you know, to life science buildings to try to compete. All of this has just resulted in a lot of space being built and not as much venture capital driving the growth of these companies. And so just less tenant demand. The bottom line is just like we saw with office space in the 1980s and the .com space in the late 1990s, there was a lot of space built in anticipation of demand in the life sciences sector that just has not appeared. And as a result over the last five years, we've seen availability rates go from small single digit number to something in the mid teens up to the 20% range. And though it'll take time to work through all this supply, you know, I don't want to lose sight of the fact that Massachusetts along with California is still a recipient of very strong capital investment in this space. And Massachusetts has a tremendous infrastructure of educational, healthcare and scientific organizations that support this. And so, bottom line, we went from undersupplied to oversupplied, and now we're just searching for that equilibrium. Probably will take a couple years to get there, but we'll get there.

Manus Clancy: So Matt, you see when a market goes from not hot to hot, it's not just the core segment that gets hot, it kind of morphs into everything getting hot, right? You see more restaurants, you see more multifamily housing, you see more creative office being built and so forth, not just life science building. So I imagine that's what happened in Cambridge and people were plowing money into that in other alternative asset classes as well. Now that it's not as hot, do you see that capital being harder to deploy? Or maybe to put it more bluntly, would you be more nervous about that market now as a lender than you were five years ago? 

Matthew Osborne: About Cambridge itself? No, I mean, Cambridge is incredibly well located. It has an incredibly diversified economy and has a, you could argue a global reputation between its educational facilities, its life sciences, the eclectic nature of its art community and everything. I think Cambridge and Boston are great places to be. This is just a particular asset class. And to take a step back that, I could have this wrong, but I don't think I'm too far off. I mean, the Kendall Square area, you know, yes it had a effectively 1% vacancy rate in the height, I think it's like seven or 8% now. You know, this, it's like anything it, during the high times it morphed out into the suburbs, and now it's just going to probably contract a little bit back into the core area. So I think Cambridge is a wonderful area. 

Martha Coacher: But clearly we all recall what was happening in 2020 that was fueling a lot of this enthusiasm for life sciences. There was a pandemic and anyone who was racing toward vaccine development or other health services was in the crosshairs of opportunity.

Matthew Osborne: That's that black swan event we talked about that just causes people to shift direction. 

Dianne Crocker: What I'm hearing from you thus far, Matt, is developers in office and life might not be as busy given this oversupply issues that you talked about, but there's a lot of work happening on multifamily and affordable housing in Boston. But the one kind of major food group that we haven't hit on yet is industrial. And I wonder, with all the uncertainty around trade policy, what are your thoughts on the industrial sector in Boston? 

Matthew Osborne: I think industrialist is a very good place to be. I think it's a good example of a market moving towards equilibrium that may have gotten a little bit ahead of itself, but not too much. As we know, for many years, you know, decades ago really, we were taking industrial use properties out of circulation. You know, converting them to other uses and not building more of it because it's just they were higher and better uses 'cause of land values. But with the rise in e-commerce and certainly in the wake of COVID, we all know there's been an increasing need for distribution and industrial space. In greater Boston there was some new development in some spec construction that occurred the last couple years, but not a ton and not to the degree that I think we saw in the life sciences space as a comparison. The overall industrial vacancy rate, was probably a low point of five or 6% in our region, you know, just after COVID when it was a really hot product type. You know, vacancies now probably 10 to 11%. Absorption has been negative the last couple of quarters, but to me the market never got so far ahead of itself like say life sciences did. You know it's a market that will continue to be driven by e-commerce. I mean, whatever level of e-commerce sales we have today, it's gonna be more tomorrow and more the next day. Right? At least that's what I think anyway. This will continue to be an area of increasing demand, and right now I just think the industrial real estate market is just catching up with the supply that was added in the last couple of years. And while one could argue, correctly, that the vacancy rate has doubled from five to 10%, 10% over the last few years. 10 percent's probably a healthy number anyway. Five percent's pretty low. And I'll add that lenders, appraisers and investors, we underwrite at seven to 10% vacancy rates and collection loss rates anyway. So to me, the market is just reflecting, what I think prudent lenders and investors underwrite to anyway, you know, for the most part. Unlike, I mean in office and lab, in good times, no one underwrites to the 20% or 23% occupancy or vacancy rates we're seeing today. I mean, that's an outlier, but we do underwrite to these seven and 10. So I do feel like industrial is a good place to be. I think the future is one where e-commerce and improved distribution chains, there's absolutely a need here. 

Manus Clancy: Matt, you used a term black swan several times during the last half hour or so. Is there something out there that keeps you up at night that you say, I can't believe I'm seeing this and nobody else is seeing this, or I become very defensive if this happens? Is there something happening that keeps you a little bit nervous, a little edgy? Is it tariffs? Is it the consumer, consumer confidence, the potential recession? Is there any one of those things that you think we're not putting enough weight on the possibility of this right now? 

Matthew Osborne: I don't see anything obvious out there. What I do look at is when I look at, so COVID was a health issue, right? So put that one aside. But when I look at long-term capital management and the single family housing crisis of 2008, and even though the real estate recession that we experienced in the early 1990s, the three things I see all of those having in common is excessive leverage and optimistic viewpoints. You know, thinking things will only continue, values only still to go up, things are only going to get better and better without hedging the downside risk. And right now in the worlds that I operate, underwriting is prudent. Equity is operating like equity. Debt is operating like debt. I don't have visibility into debt funds, and if you ask me, the one thing I'm a little happily surprised about is with the change in interest rates, I was kind of waiting for some debt fund to kind of pop up and be the next kind of black swan type of thing, because they were too highly leveraged with, you know, borrowing money at a high cost, lending it out on the other side with adjustable rates and all of that. That hasn't happened and I find that very encouraging. But I don't actually have the firsthand visibility into the financials of debt funds for me to tell you I feel like there'll never be an issue there. 

Manus Clancy: I have to agree with you. I think that, and it's not just the whipsawing of interest rates, it's the whipsawing of equity prices, oil prices. The fact that this hasn't blown somebody up who is over levered so far remains both encouraging to use your word, but also a mystery at this point. So, I'm with you a hundred percent. So I have to tell our audience, we've interviewed Oz before. He's always great. He comes on, we talk about things. When we're not talking lending commercial real estate, we do talk music. He's an accomplished musician, performer. He's performed for us actually on previous podcasts. So I don't want to put words in your mouth right now Oz, but I will say this, it sounds like where you're a little bit, Here Comes the Sun by George Harrison, not After Midnight by Eric Clapton. Is that fair? 

Matthew Osborne: That's fair. I love it. I love it. Yes, that's certainly my passion. I still gig, still play in bands. The band name now is called Misfit Toys. We do a lot of nineties songs and it's a great outlet. My son plays drums and I've been able to play with him a few times and it I mean, really it's a wonderful hobby to have. And actually I had a really cool experience a few weeks ago, if we have a few extra minutes here. So about three weeks ago, my wife and I were in Nashville just you know for vacation. And she went up and tipped the band, and they leaned over and said, would you like to hear a song? And she said, well, actually, my husband in the audience would love to get up stage and play with you. And I didn't know anything about this 'cause I'm sitting way back in the bar. And so he asked his name and she says he goes by Oz. So he gets up on the mic, unbeknownst to me and says the wonderful thing, ladies and gentlemen, the wonderful thing about being in Nashville is you never know who might be in the audience. Well, tonight in the audience, we have four time Grammy Award winner, Dr. Oz. Can we get him upstage on here to play a song and the place that's going crazy and my wife's walking back, she's pointing at me. I said, me? And so I got to go up on stage in Nashville and play a song with a band. And so if anyone goes to Nashville and you want to check out the Tim Andrews band, they're a great show.

Manus Clancy: That is great. We have to make a road trip, Martha and Dianne, one of these days to go see The Misfit Toys. It's long overdue, a trip up to the Boston area to hear some great nineties music. 

Martha Coacher: That's funny. And you know, you still have to record our opening with your guitar. So we'll have to arrange that at some future date. Thank you, Matt, for joining us today on The CRE Weekly Digest, and thanks to our producer, Josh Bruyning. Please join us every week as our LightBox team shares CRE News and Data in Context. You can listen and subscribe 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. 

Manus Clancy: Let's go.