Market Resilience and Rising Optimism – CRE’s Quiet Comeback

Commercial real estate isn’t flinching. In this week’s LightBox CRE Weekly Digest, Manus Clancy and Dianne Crocker break down a market showing surprising steadiness as the federal shutdown drags on and another Fed rate decision looms. They dig into what’s really behind the “bad loan” headlines and reveal what the latest LightBox Environmental Due Diligence Market Advisory Council survey suggests about Q4 momentum (the rating might surprise you). 

Plus: a $2B LA warehouse transformation, record NYC office leasing led by finance and tech, a standout office-to-resi success, and retail capital still flowing from Annapolis to the West Coast. The episode wraps with a look at what’s keeping deals moving, and a personal milestone from Manus you won’t want to miss. 

02:10 Market Snapshot: Shutdown & Earnings
05:40 Tariffs, Trade Tensions & Corporate Confidence
09:00 Banking Sector & Fraud Watch
13:00 CRE Sentiment Turns Positive
17:30 Due Diligence & Lending Activity
24:00 NYC & LA: CRE Revival Stories
28:30 Office-to-Resi Success & Housing Momentum
33:30 Retail Strength & Selective Investor Demand

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

www.lightboxre.com

Transcript

The CRE Weekly Digest by LightBox

Episode 69: Market Resilience and Rising Optimism – CRE’s Quiet Comeback

October 24, 2025

Alyssa Lewis: 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 Alyssa Lewis with our experts Manus Clancy and Dianne Crocker. It's the week ending October 25th, and a few notables since our last episode.

This week, the federal shutdown became the second longest shutdown in modern history, passing the 21 day shutdown in 1995 to 96 and eclipse only by the 35 day shutdown during Trump's first term in late 2018 and into 2019, the shutdown delayed last week's monthly CPI report until this Friday, and if it comes out, it could offer clues about a rate cut.

At next week's fed meeting, a few more banks came out with promising Q3 earnings reports on the heels of last week's from Wells Fargo and JP Morgan Chase. And in corporate earnings, GM stock soared as the automaker beat earning expectations and raised its guidance for the year, saying it expected a smaller tariff impact than previously forecast.

Manus, what do you make of the latest headlines? 

Manus Clancy: It feels like a rerun, like a television show, rerun, that we're talking about the same things this week. We've been talking about for a couple of weeks, and in fact, in some cases a couple of months. So let's take them in order of probably newest to oldest, we saw more good bank earnings.

As you mentioned, Alyssa, that was a continuation of last week. Today, stocks are selling off. We're recording on Wednesday, October 22nd. Stocks are selling off today, but before today we saw several more stock market highs, which has been the name of the game. It was the name of the game last week. It was the name of the game really since June.

We also saw more saber rattling when it came to tariffs. So again, we have this disconnect. It's a rerun from last week tariff news coming into the forefront. Rattling investors just a little bit, but not really enough to take the shine off of equity prices. It's, it's very hard to get your arms around this, that these threats are real, these threats of tariffs.

We saw a trade disagreement in South America with Netflix yesterday cause them to miss earnings and for their stock to sell off 10%. So these. Global disputes, these trade wars, these tariff headlines that hit us, they are real, yet they don't really seem to take the wind out of the sails. That was kind of headline number two, and then headline number three.

Of course, the shutdown continues. Now we're into our, I guess we're at the beginning of a fourth week now in the shutdown, and it doesn't seem like there's any end of the road in sight. 

Dianne Crocker: I'll go in the reverse order. Manus, I think on the shutdown, I've read this week that Trump isn't planning on meeting with Democrats until after the election in November, so that means we might be on course for breaking the 35 day shutdown record, Alyssa, that you just mentioned.

And one impact of that, of course, is. The delay in getting the CPI data, which we may or may not get this Friday, I had read that on the labor data front. The Fed lost access recently to ADP's private data payroll feed ahead of the shutdown due to something like a federal official. Publicly referencing its use.

So A DP stopped sharing it, but that's one other data point that they're missing heading into next week's meeting. But you know, I was thinking Manus, even without the latest inflation data, even without any labor data, I don't think that it would change the fed's action next week. The market's already pricing in a 90% probability of a 25 basis point cut, and I would say it's very highly unlikely that they would go with a larger 50 basis point cut.

And then I wanted to say, you know, second what you said, some weeks it seems like the news is either mixed or mostly negative. And I have to say, I took some solace. In the latest earnings reports, 86% of the s and p 500 companies that reported their Q3 earnings. So far, beat analysts estimates 86%, and on the revenue side, about 84% reported better earnings than expected.

So yeah, I would say, you know, mostly positive results. I think. They definitely suggest that confidence is creeping back into corporate America, even though economic conditions remain mixed and, and all that. What you call Sabre rattling about tariffs really doesn't seem to be hitting company's confidence much at all, which is surprising, but I'll take it.

Manus Clancy: Well, I have severe dissonance between stock market highs and. The global tensions we see, there's no doubt about it. I've been talking about it since the summer. Perhaps even too much for some of our listeners tastes, but I got another piece of that. Dissonance this week. Alyssa referred to it a moment ago, those GM earnings, which came out of left field for me, that I was expecting car sellers to be impacted enormously by tariffs.

We saw this a couple months ago where Ford was saying they expected earnings to really topple because of what they were going to have to absorb in tariffs. And then what comes over the last couple days, GM coming out saying. Not only did they beat on earnings estimates, but they're raising guidance and their tariff impact, they expect it to be less than originally thought.

That just blew my mind, I have to say. That just took me by complete surprise and I'd love to hear what you guys think. I mean, I thought for sure one of these days the reckoning would come. We'd hear a big industrial company saying, our earnings have been shattered, our visibility is zero, and its stock would plummet. And this is the 180 degree opposite. 

Dianne Crocker: Yeah. I agree and I'll tell you on a personal note, Manus, I am guilty of playing into the tariff fears in the spring, and I rushed out faster than I normally would have to trade in my old Subaru, which was nearing 200,000 miles to get a newish car because I was afraid that tariffs were gonna drive up the prices.

And that has happened, you know, to a certain extent. But certainly I was surprised by the GM results as well. 

Manus Clancy: So as we talk about this week being a rerun week, there's one other thing I wanna bring up which started a week or two ago, but kinda reared its ugly head again this week. And that is. Bad credits.

A couple weeks ago we talked about Tri Calor subprime auto lender filing for bankruptcy over bad loans. We saw first brands an auto supplier follow the same route. People were saying this might be the canary in the coal mine. We might start seeing cracks, maybe. Lending hygiene really went out the door.

Over the last year. People were taking too much risks, not doing enough due diligence. And then this week we see a company called Cantor. Which has nothing to do with Cantor Fitzgerald being accused of pledging collateral for multiple loans, which is now coming back to haunt banks. Banks have commercial real estate loans that are all backed by the same pieces of collateral that led Jamie Diamond to come out and say.

When you see one of these, it's rare that you see just one. You see many. He used a cockroach reference. I think it's something he regretted using after the fact, but he's saying rarely do these lack of due diligence stories when they emerge. Rarely are they contained to just one story and we'll have to keep our eye out on this.

We now have three tri Calor first brands and cantor, which is different. It's fraud or so it appears that's. It'll be interesting to see if this remains contained or if this becomes something broader if people were really chasing yield over the last couple of years and not dotting their i's and crossing their T's.

Dianne Crocker: Yeah, and that, you know, along a similar vein, Manus, I was at the counselors of real estate meeting in Boston yesterday, and somebody in the audience asked me about the Zions Bank story, which we had talked about on the pod. Listeners might remember, Zion disclosed a $50 million charge off on two of their commercial loans.

You know, that event appears for now to be isolated. You mentioned a couple others that appear for now to be isolated, but these get everybody's attention because they, they touch on key vulnerabilities that are top of mind. You know, what's the risk exposure for bad loans? What's the risk exposure for, uh, loan quality decisions that maybe.

You know, weren't, weren't prudent. You know, what does it mean for balance sheet health and I, you know, a misstep, even if it's isolated, especially on a, on the bank front, can trigger kind of a broader risk off sentiment. So that's the risk. But you know, again, it's, it's been a handful, hopefully not a bunch of cockroaches to use that analogy, which I don't love, but certainly worth watching.

Manus Clancy: Fraud is one of those things. It's very hard to detect. I remember years ago I worked with a guy. In my mind, he was the bank whisperer, in my opinion, a guy named Matt Anderson. And he created bank models. And these bank models were meant to stress test bank balance sheets to figure out if they were on the verge of failing.

It was during the subprime crisis, and I remember at one point he accurately predicted something like 300. Of the 305 bank failures that took place right after the financial crisis, it was an uncanny ability to nail these statistics. Correct. But I believe the five he missed were all situations where there had been fraud, hard to detect people using duplicate titles and things like that.

So. Hopefully this is a one-off. Hopefully there's one or two bad characters. This is not Zion. So much. Missing a cue here as much as it is somebody taking advantage of being a bad actor in the whole thing. And, and if that's the case, we probably blow by this with minimal damage to the banking sector. If this is more systemic, if this is something where banks were really cutting corners, which I don't believe to be the case, but if it is, then it's probably a bigger problem for us.

Dianne Crocker: Agreed. You know, and I think we've read in so many sources over the past year, it's kind of a common refrain that there's a general sense that the banks learn their lessons from the great financial crisis, you know, and that that's what's really saving them in this round of the cycle. And that's what's keeping bank failures off the, you know, off the headlines.

So that's at least good news. And hopefully, like you said, these are instances that are few and far between. 

Manus Clancy: They're better capitalized now than 15 years ago. The, the government has insisted upon this. Banks have learned their lessons. I don't believe the lending hygiene has been terrible. I think where risks have been taken, they've been largely offloaded onto pe, private equity firms and not so much the banks themselves.

And accordingly, I think that's a good foundation for us as a, as a, an economy, as a financial services economy. And I'll go out on a limb here and I'll think that these Zions. Situations, Western Alliance, et cetera, uh, will be one offs. I don't think we're gonna see a rash of these going forward. 

Alyssa Lewis: Dianne, speaking of soft data, CREFC just released their new sentiment index.

What does that tell us about how the market's feeling right now? Yeah, so this 

Dianne Crocker: is a nice way to piggyback on our previous conversation, Manus. You know, I think in general the sentiment in lending is pretty positive, and that evidence came out this week just a few days ago when CREFC released its latest sentiment index for Q3.

Their index jumped to 122 point. Eight that was up 9% quarter on quarter, and the highest index since the fourth quarter of 2024. And it's an important read because what Kressley does for, for those of our listeners who might not be familiar, is they reach out to 50 senior executives. And those 50 governors firms collectively control about two thirds of all commercial real estate.

And the index is an aggregate of nine questions. That they ask these governors to capture forward views on things like rates on things like loan demand, uh, policy, how they feel about the overall business outlook. And what was interesting is that on the demand side, the responses were almost unanimous.

95% expect more borrowing over the next 12 months. 86% expect investor demand to rise, and that was a big uptick from only 65% last quarter. And then lastly, 46% see property fundamentals improving and only 14% see them deteriorating. So to me, the index read says that the psychology around. CRE finance is improving.

It says that the windows on lending are staying open, and I think the optimism, at least among these 50 governors, sounds like it's pretty broad, but not reckless. And I think Manus, a lot of the optimism is probably due in part to the start of the rate cutting cycle. 

Manus Clancy: I think that's spot on. I do think that rates coming down are a really important ingredient, and we had an internal meeting this week at LightBox and I mentioned.

We are now somewhat firmly, below 4%. I know a month ago we got to that 3.9995 level, so we ticked below 4% very briefly a month ago. But this, we got to 3 95, and I do think that that's gonna provide a really big. Psychological lift to the market. I do think that when you see these thresholds being crossed, when you see a three handle in front of the 10 year treasury yield, I think people are ready to jump in.

And I do expect that when we start putting out the light box activity indices in November and December, that this will come through, that we will see another surge in. Lending, lending in appraising, in due diligence reports and property sales. So I, I do think crossing that 4% will have add to the, add to the momentum we already have.

The other thought I have on this, and I'd love your, your opinion on this, is how narrowly contained the problems have been in the minds of investors. And let me kind of. Unravel this a little bit. We saw this week a huge loss being posted. It was on a mall loan, A-C-M-B-S loan on a mall in Rockland County, just over the Hudson River in New York.

The Palisades Mall. It's about 20 miles north of New York City, right by the Tapse Bridge, a $200 million loss. And that's not the only kind of mall loss we've seen. We've seen other things in San Francisco and other places, and we've had a similar refrain in the office space where we've seen 40, 50, 60, $70 million losses, sometimes nine digit losses, and yet in the past, that type of loss.

Would rattle the psyche of lenders across the entire CRE spectrum. We saw this in 2008 that a big loss in multifamily would send jitters through the whole capital markets. Spreads would blow out. People would panic. At the end is and near the. Now what we're seeing is people are being very, very distinguishing between losses that are on B and C class malls that are dated and have competition or offices that are down and out as a function of either quality of life issues or lack of need because of post COVID work from home.

It just doesn't seem like these big stories have the same impact that they did over the last 15 years. 

Dianne Crocker: Is that kind of a, been there, done that kind of attitude? Maybe the shock value has been diluted a little bit. Um, or maybe it's due to the fact that when we look at the deals, um, that your team tracks, when we looked at the ones for September, that closed of the ones where we had the, the prior price and the current price, 70% as I recall, sold at a higher price and something like 29% sold.

At, at a loss, you know, so maybe the, the appreciation overpowers the losses, so that allows them to maybe panic a little bit less. Um, and maybe it's the pace of it kind of working its way through slowly for reasons that have to do with shifting needs in the way that properties are used. 

Manus Clancy: I think that's certainly part of it.

There's no doubt about that. I also think that there's been a little bit over the last 15 years of the sky is falling, but it never really does, and investors are warming up to the idea that you can't limp, lump all retail into the shopping mall category. When you go back 10 years, you'll remember Carl Icahn took a big bet via.

CMBX through derivative trades expecting retail losses to explode. And they talked about the term retail apocalypse, that all retail was gonna blow up. And I think a lot of people bought into that 10 years ago that they thought, we are just gonna see an epic level of losses. This is going to result in enormous amounts of pain for investors and so forth.

And the truth is. On those malls, they took forever to play out. The losses didn't come immediately and people came to realize that grocery anchored is a lot different than strip mall is a lot different than big box. Which is a lot different from brand new mall Class A. And as a result, I think people got singed a little bit.

They bought into this negativity and now they're much more discriminating. They're much wiser now to say not all office is gonna blow up. Not all shopping malls are gonna be resolved with 50% losses anymore. And I think accordingly, they're kind of stiff arming the panic at this point. 

Dianne Crocker: Yeah, I agree. And I, you know, that's why resilience, I think is the word that's probably the most overused about our market is, you know, the market's learned after a number of big shocks over the past 10, 15 years to be resilient, you know, and that cycles change and property uses change, and within those changes and those shift.

And sand. There are new opportunities as, as properties get reinvented. And one thing that I think is unique about this stage of the cycle is that properties are so differentiated that you can't paint with a broad brush because as you said, not all malls are created equal. Not all shopping centers are created equal.

Not all office buildings are created equal. And that's, that's where the creativity comes in and that's where the flexibility and the, the resilience come in as investors weigh one asset from another and, and make hopefully some. Martyr decisions. And also I think you're right, that the forecast, especially with distress during downturns, is always really hyperbolic.

You know, this wave of distress is coming and it's gonna bowl over banks and there'll be billions of dollars in losses, and the reality just doesn't play out that way. 

Manus Clancy: While we're on the topic of not all offices being created equal, we have to tip our cap to Jamie Diamond this week for that monolith that opened near Grand Central Station, a $3 billion testament to capitalism if you ask me.

Uh, this has been in the works for several years. Just north of Grand Central Station. In fact, you could leave the JP Morgan Tower and go right into both Metro North and Long Island Railroad below it. It is an impressive structure. Dianne, I've never seen anything like this. They've had a, a ribbon cutting this week and kudos to Jamie Diamond when everybody was talking about smaller offices, not people coming back to work.

Maybe looking for places outside of New York to set up shop Texas and Florida. Here's Jamie Diamond going all Fountainhead on New York City building this property. And boy is it impressive. 

Dianne Crocker: That's really cool. I have to pay attention to that next time I'm in, uh, in Grand Central Station, it's, you know, it's like that old, was it a Warren Buffet quote, you know, to rush in when others are rushing out and vice versa.

Manus Clancy: Next to it is the old Bear Stearns Tower, and I gotta say. That was an impressive building when it opened. But you look at these two buildings, AER now and. The Bear Stearns building, which was state of the art at the time, now looks like a trailer park next to this thing. It is so big, this new office, I, I can't wait to go in and see what it's like.

I hope one of my buddies at JP Morgan will invite me in and, and show me all the amenities there it is. Impressive and, and good for Jamie Diamond for leaning in and expressing this enormous vote of confidence for, for the big apple. 

Alyssa Lewis: Dianne for this week's data dive, you just closed out the Q3 market Advisory Council survey for environmental due diligence. What are they saying? 

Dianne Crocker: I did. So the council is made up of a dozen environmental due diligence consultants. They're from firms across the US and I bug them at the end of every quarter to take their pulse on what they're seeing because they're the folks that are at the front lines in terms of, um, deals and lending on the underwriting that happens prior.

So the first question I always look at is on a scale from one to a hundred rate market conditions for environmental due diligence and. Q three's Average was 71, which was a nice improvement over 63 in Q2. In terms of trends, a few members noted a notable rise in due diligence for data center development and utility infrastructure.

That's work that is often fast tracked. It's often very, very complex. One did note that flat is the new good. He said the lack of change in itself is a sign of. Stability and he'll take it. And I think, you know, manage the recurring theme among our council members are those two words that we hear so often, caution and optimism.

Um, and then lastly, in terms of the forecast, none of the council members are expecting a slower Q4 than Q3, so I think that dovetails nicely with the 23% uptick that we saw in property listings in September because its properties being listed for sale that leads to interest from. Buyers, that leads to buyers engaging on environmental due diligence and appraisals and on other underwriting.

And there was about a 50 50 split between those, expecting more of the same in Q4 and those expecting slightly higher volume to close out the year. So we'll have those results. Alyssa, in our Q3 snapshot report, which is coming out in the next week or so. 

Manus Clancy: Is terrific news and it really dovetails with, I think, what we've been saying for the last couple months that things feel good.

Things feel like they're on the uptick. Transactions are happening, people are confident. They're not overconfident, they're not popping quirks just yet. It feels like the right level of optimism to serve as a foundation for the rest of 2025 and heading into 2026. It does feel good. My only concern right now I have to say is, and this is kind of far afield.

Should we see a real shock to the stock market? Should we see a sell off of 10 or 15%? Would that lead to a more risk off sentiment among CRE? It didn't in April, and hopefully it wouldn't in the fourth quarter, but that could happen and we'll find out, I guess over time. 

Dianne Crocker: We can't forget the shutdown. I mean, the longer that that drags on, the more likely, um, it would lead to steeper, um, adverse impact.

So that's certainly something that I think is on everybody's radar screen. Even if it's not coming into every conversation that I'm having with clients, I think it's kind of hanging over the market because that's a big area of uncertainty. 

Alyssa Lewis: All right, Dianne, let's transition to the did you know for the week.

Dianne Crocker: Also, uh, related to the environmental due diligence sector, I ran the top metros driving demand for phase one environmental site assessments, because that's often a sign of where investors are focused. So the big five metros in Q3 were New York City, Houston, Los Angeles. Dallas and Austin, each of which had quarter on quarter growth.

That ranged from 46% at the high end in New York to 19% in Austin. And I have to say, I was in Austin a few weeks ago for a crew convention and there were cranes everywhere, construction everywhere. So I was not surprised to see them in this top five list. And Manus, I know LA was one of the hotspots in Q3 and that you've got a development story that caught your eye this week.

Manus Clancy: Yes. We'll run into our, uh, stories for the week that pertain to CRE, and the first one is in Los Angeles. The planning commission in LA has given a green light to a $2 billion downtown LA development. This is proposed. On a 7.6 acre site reporting there from the real deals, Lauren Elk's Schram.

Interestingly, we talk a lot about development of new industrial properties here. The property would take over an existing industrial property that. Currently the space is occupied by Cold Storage Continuum Partners is planning to build almost 1600 residential units on that spot, 249 of which would be affordable, 400,000 square feet of creative office and almost 150,000 square feet of retail and restaurants.

So LA has been a little down and out where you've seen property values diminish. We haven't seen a lot of development. In that area, this is mountain sized, $2 billion, 1600 units creative office. Destinations in terms of retail and restaurants. I hope this is a huge success. LA could use it. 

Dianne Crocker: Yeah, that sounds good. I get excited about any kind of transformative redevelopment that converts legacy assets. I mean, I. This development would replace a warehouse that is 130 years old at the arts district. Little Tokyo Edge is the area and, and this one sounds like it checks all the boxes, you know, creative office space, whatever that is.

But it sounds promising. They're pairing it with retail, they're pairing it with places to eat and best of all, two acres of open space. So it sounds like it still has some approval hurdles, but I like it. It sounds very positive for Ally. 

Manus Clancy: So I'm gonna detour here for just a second because something about that last remark took me by surprise, and I'm trying to get my arms around it.

Cold storage, that's 130 years old. That would put it back to the 18 hundreds. Can you imagine what cold storage was like 130 years ago? What are they? Are they taking things from the polar, their ice caps, like shooting it down the Pacific Ocean and then. Putting it in a cold warehouse, like they didn't have a refrigeration back then.

That must have been a, a sight to be seen. 

Dianne Crocker: Yeah, that's right. Blocks of ice being brought in by horse and buggy. 

Manus Clancy: My father used to talk about that when I was young. How the iceman used to come with the picks. He would grab things of ice from a truck, walk it up the stairs, drop it in, what was known as the ice box back then because there wasn't a refrigeration and uh, I guess that's kind of a similar type of thing.

Yeah. What cold storage was in 1895. So end of detour everybody. I will go into a couple happy stories on the leasing front. Both of them coming in New York, the first one. Blackstone reached a tentative deal for almost 300,000 square feet for investment giant CV star to take space at 3 43 Madison Avenue.

This is right near Grand Central Station. Again, the Wall Street Journal with reporting, initial reporting on that particular story. Why do we bring that one up? We bring that up because leases of 200,000 square feet and up don't happen every day, and they don't happen. Every day, even less post COVID, we don't see these kind of numbers.

It used to be pre 2020, you'd see the 400 or 500 or 600,000 square foot ad agency or law firm lease. They don't happen that much anymore. So when you t see a 275,000 square foot. Lease being signed. You feel good about that. The second one in New York, this is at one Madison Avenue. This is in kind of the Madison Park, like 24th street in Manhattan, somewhere between lower Manhattan and Midtown.

This used to be the headquarters of Credit Suites. Uh, s Elk Greens signed Harvey AI Corp to a nearly 100,000 square foot lease there reporting by. Mark Hallam of Commercial Observer. Why did this one catch my attention? It comes on the heels of last week that we had one in San Francisco just like this, where a firm had taken 80,000 square feet of space for a fledgling AI company in San Francisco.

In fact, we saw another headline this week that there had been 8 million. Square feet of space up for grabs for AI companies in San Francisco over the last six months. It is a real tailwind for office right now. We know that it's kinda limited right now to New York and San Francisco, but we're keeping our fingers crossed that it expands to other tech.

Centric cities, places where there's big tech centers like Austin, research Triangle, Charlotte, et cetera. So let's, let's hope. 

Dianne Crocker: Yeah. It's interesting, Manus, you highlighted these two office leasing stories in New York City and there was an article in the Wall Street Journal this week by Peter Grant, who's an excellent reporter over there, and the headline was, the New York City office market is roaring back and it's pricier than ever.

And he noted that. Manhattan office space is leasing at a rate not seen since 2006, while office markets and other cities are still kind of plotting along. So as a total New York City's leasing activity hit 23 million square feet this year through September, and that puts it above where it was in 2018.

2019, but Nationwide Office Leasing is still 11% below where it was pre pandemic. You know, and you might remember early in the pandemic, people were writing off New York City office saying that companies would flee to the suburbs. And you know, they did a bit at first. But in line with what you were just mentioning with Jamie Diamond's vision, that narrative has clearly shifted and interest is on the rise with.

Leasing demand highest from the financial firms and tech firms, like in the stories that you just referenced. 

Manus Clancy: I have to say, I didn't see any of this coming. Honestly, it doesn't surprise me that people might step in and say, now is the time to lease, because rents are really low. Like in 20 23, 20 24. Take advantage of deals, get nicer space.

Get space closer to a commuter railroad hub, something like that. I get that. To see these numbers that you're quoting here just blows me away. I, I really have to say I am stunned by just how much the big apple has come back over the last year when it comes to office leasing. We need to have an expert come on here.

We need to get Scott Reckler on here or somebody else that can really scratch beneath the surface here, because as we've talked about before, not all office is created equal. I'd be curious to find out. A, is this being limited to just class A offices and are B and C being left behind? I'd love an opinion on that from somebody who really knows.

And I'd also love to know the impact of the inventory being taken out of commission because of conversions. Is that making a dent yet? And is that some of the reason that people are trying to get space now before we have a shortage of space as opposed to the glut we had two years ago? 

Dianne Crocker: Mm-hmm. 

Manus Clancy: But while we're talking about New York City, and we're talking about conversions. That's a terrific segue to another story that we had. That we could actually put an exclamation point on. Right now, most of these stories are only being written and in, in many cases, they're at chapter one or two, which means a new developer has come in, purchased a property, gotten construction funding.

They've yet to execute on converting this thing. The story I'm gonna tell you right now is a success story and it shows that it can be done. So the reporting here by Rich Bachman, he and I go way back. Great guy. He writes for the Real Deal. He noted that Van Barton Group got a nearly $300 million loan from Invesco to refinance.

Nine 86th Avenue. So what is this? Nine 86th Avenue was half residential, half office. The half office was WeWork space. We all know what happened at WeWork. Bankruptcy giving back space, hand over fist. Van Barton comes in, they get a construction loan, they have a business plan to convert the WeWork space into high-end residential, and they do.

And now that this is completed, they have turned what is expensive construction financing into permanent fixed rate, $300 million in. Permanent financing and you now can spike the football of Van Barton. You have done this. You have shown that it can be done. You can come in there, buy space, get construction funding, execute, sell, refinance, or lease refinance.

So good on them for doing this, and let's hope that everybody else who's taken the plunge over the last. 12 months has the same level of success. 

Dianne Crocker: Remember when the Office to Resi movement was just kind of getting underway? The articles that were behind the headlines took some criticism from making it seem like it was as easy as flipping a switch to just convert an office space to multi-family.

But fast forward to this year, Manhattan is having the B brist conversion year for office to resi space than it's ever had before. There's 4.1 million square feet of office space moving into housing just this year and another 8.8 million square feet proposed. So, you know, while conversions work in some cases and they don't, and others, you know, a lot of office towers, they're not built with.

Things like plumbing stacks or, or window lines that, that make sense for apartments. But I agree with you, you know, good on Van Barton for making a name for itself and setting an example for conversions that maybe other developers will follow. And I'll add Manus. I went to a crew New York event the week before last.

It was moderated by New Mark's Head of Leasing, Liz Hart. And the guests were Marianne T at CBRE. And Marianne Gilmar, a developer with Mag Partners, you know, and, and. Maryanne Gilmar said that for the first time in many years, the forces at the state and city level in Manhattan, despite all the volatility in DC, that forces are aligning around housing needs and efforts to support multifamily development.

So I think, you know, the more projects like this that we see and the more momentum from local agencies, the more headlines I think and the more projects that will get off the ground. 

Manus Clancy: This momentum behind New York City is very interesting because we have an important mayoral race coming up. The leader right now, and it seems like the presumptive winner right now, he's leading the polls by a lot, is a socialist who has promised big, big changes for New York.

We're not sure exactly what's gonna happen here. It looks likely that. That he will win. And it's funny to see all this momentum and optimism and change when there really is so much policy uncertainty looming. And it'll be interesting to see how this plays out. If he wins as expected, will we see this momentum stall?

Will these projects go through? Will all of a sudden development just slam on the brakes? It'll be a very, very interesting first six months of his term should he win. 

Alyssa Lewis: All right, Dianne, let's pivot over to retail. 

Dianne Crocker: Two interesting stories here that caught our eye this week. The first is from Commercial Observer from Nick Romola, and the story is that Federal Realty Investment Trust paid 187 million for the retail portion of the mixed use Annapolis Town Center.

It's a 480. Thousand square foot shopping center in Annapolis. It's anchored by Whole Foods and it's alongside tenants like Anthropology, Sephora, restoration Hardware, Williams, Sonoma. So, you know, those are pretty high-end retailers and you know, I think it's, it's another move for an investor who is.

Moving toward, uh, assets that are open air retail destinations with high-end retail names, which are performing very, very well right now across the us. And then the second one is a deal from. A New York based, retail focused real estate company looking to expand into the West Coast. This is a deal with DLC Management, who together with DRA advisors, is paying 625 million for a retail portfolio.

Six of the properties are in Southern California, and the rest I believe are in Seattle. 

Manus Clancy: That fourth story was an interesting one that Annapolis market quite hot, if I'm not mistaken. Six months ago we saw the multifamily portion of that community sell for about $160 million. So something good happening in Annapolis right now.

First we see a nine figure sale of apartments there and now the. The nearly $190 million sale of that open air market. It just goes to show what you said before, Dianne. There's good retail and there's bad retail. And for good retail, people will pay up and invest. And uh, that's what we see right here. 

Dianne Crocker: Yeah, agreed.

And the first one was open air, kind of high-end retail, and the second one was a little bit different. That was one of the largest grocery anchored retail trades of the year. So there's confidence both in the kind of high-end open air shopping experience, as well as in neighborhood retail centers that are grocery anchored, which are also doing really well, even while office remains choppy and multifamily is cooling a little bit.

Alyssa Lewis: Before we close, Manus, you told us this week you have a, a special event coming up. Wanna give us a little slice of life on what's going on? 

Manus Clancy: Yes, usually our slice of life. It's a tongue in cheek humorous. Look at what's happening in the world or in commercial real estate. A little bit of, uh, humor involved.

This one, no humor at all. This is a wonderful life event. My daughter, Theresa, getting married in South Carolina this weekend and excited is all get out to be taking part in this. It'll be the third of my five children to get married, but my first daughter to do so. So it's a little bit late to be working on my dance moves.

But I did pick out the song that she and I will dance to and I can't tell you how great this all feels that, you know, it all starts with, uh, you know, a baby crying in a hospital and then you're wondering, you know, when will they take their first steps and what will it be like when they go to elementary school and where will they go to college?

And through it all, one of the questions that goes through your head is if they do meet somebody, you really hope that this person is worthy of them. That they're kind and caring and dedicated and loyal and smart. And, uh, and then that's where I feel like I'm getting there with my daughter's fiance. And I do think that I would say the same for him, that, uh, my daughter has wound up as everything I'd hoped she'd be.

And that, uh, is something I'm looking forward to celebrating this weekend. 

Dianne Crocker: That's so wonderful. Manus, congratulations to her and to you. It sounds like a beautiful song. Picturing you like Steve Martin and Father of the Bride, lovable little tightly wound, equal parts, humor and heart. Do you think you're gonna get emotional?

Manus Clancy: Hard to say, I'm gonna work at not getting emotional, but um, no, I think I'm gonna hold it together. You never know, but. You know, if you see somebody blubbering on the sidewalk in South Carolina sometime this weekend, that might be me. 

Dianne Crocker: Keep a tissue in your pocket just in case. And congratulations. Congratulations to you and her. 

Alyssa Lewis: All right, and with that we'll close. Please join the LightBox team every week as they share CRE news and data in context. You can listen on any of your favorite podcast channels and send your comments or questions to podcast@lightboxre.com. As always, thank you for listening and have a great week.

Manus Clancy: Let's go.