Understanding Real Estate Markets: Capitalize on Down Commercial Real Estate Markets

Summary

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Podcast Summary: Earn Your Leisure

Episode: Understanding Real Estate Markets: Capitalize on Down Commercial Real Estate Markets

Hosts: Rashad Bilal & Troy Millings (iHeartPodcasts)
Date: March 24, 2026

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Overview

In this insightful episode, the Earn Your Leisure hosts delve into the nuances of investing in commercial real estate during a down market. With the help of an experienced real estate expert, they explore actionable strategies for group investing, market analysis, structuring deals, and the complex developments behind major projects like Affirmation Tower. Listeners will gain both a foundational understanding and practical advice for navigating commercial, residential, and hospitality properties.

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Key Discussion Points & Insights

1. Evaluating Market Viability for Investment

(02:37 - 05:10)

• Market Health Indicators:
  The expert explains that assessing vacancy rates is crucial for determining market health.

  • Office spaces: Healthy markets have vacancy rates at or below 10%. "There are very few markets in the country where that's the case. Miami is probably one of them. Miami Beach is the second one..."
  • Apartment vacancies: Healthy at ~5% or less. In New York, it's "less than 2%," signaling strong demand.

• Analyzing Rental Rates:
  "Once you look at vacancy rates and you look at rental rates, and if the rental rates, you know, can support the acquisition and the conversion of a new building, then it makes sense to do..."

• Conversion Opportunities:
  The guest discusses converting office buildings to apartments or hotels as a lucrative strategy but warns:

  "These conversions are not for inexperienced people. So they've got to make sure that they get a contractor that understands conversions and architect that understands conversions." (04:50)

• Team Composition:
  Advises assembling a seasoned team, including a construction project manager with conversion experience.

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2. Financing and Structuring Large-Scale Developments

(05:10 - 06:26)

• Building Major Towers (e.g., NYC):
  The expert breaks down the numbers:

  • Example cost: "$3 billion" for a skyscraper in NYC.
  • Typical loan covers 60–70% ("senior loan"); remainder is equity.

• Equity Structure:

  • 70% loan → 30% equity = $900 million.
  • Of equity: 80% from institutional private equity funds, remaining 20% from the developer and partners.
  • Developers typically contribute $50–100 million, often with an institutional general partner.

• Quote:

  "And so our group would put that up. Most likely we would bring in an institutional general partner... The developers generally going to put in between 50 and $100 million." (05:50)

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3. Mixed-Use & Hospitality Projects: Affirmation Tower Case Study

(06:46 - 08:47)

• Project Composition:
  Affirmation Tower isn't just commercial offices—it's a blend:

  • Civil rights museum
  • Residential rentals (40% affordable housing)
  • Two hotels (boutique + ultra luxury)
  • Luxury condos
  • Observation deck

• Mixed-Use Benefits:
  "Consider a building being like a neighborhood almost... you’re going to have a mixture of uses in that building. And that, you know, helps drive the economics here." (07:36)

• Hospitality Development:

  "I wouldn't recommend building a hotel of any type... without a brand."
  Advice to partner with a major hotel brand for both recognition and management expertise.

• Hotel-Specific Complexity:

  • Need to choose a hotel operator/brand.
  • Added layer: Full furnishing, interior design, and brand standards compliance.

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Notable Quotes & Memorable Moments

• On Market Selection:

  "Vacancy rates at 10% or below mean that's a healthy office market… Miami is probably one of them. Miami Beach is the second one." (03:06–03:20)

• On Conversions:

  "These conversions are not for inexperienced people. So they've got to make sure that they get a contractor that understands conversions..." (04:50)

• On Structuring Equities:

  "Developer, our team, would have to put in 10%, which would be 90 million to 20, which is $180 million. And so our group would put that up." (05:40)

• On Mixed-Use Development:

  "Building of that size is, you know, like a neighborhood, you know, so you're going to have a mixture of uses in that building..." (07:36)

• On Hotel Development Advice:

  "I wouldn't recommend building a hotel of any type... without a brand." (08:10)

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Timestamps for Major Segments

• 02:37 — How to evaluate if a commercial real estate market is a buy opportunity
• 03:00 — Key market indicators: Office & apartment vacancy rates
• 04:20 — Conversion opportunities and team requirements
• 05:10 — Financing large-scale developments (NYC skyscraper example)
• 06:46 — Approach to mixed-use mega-projects (Affirmation Tower)
• 07:50 — Hotel and hospitality project considerations

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Tone & Style

The hosts and guest maintain a practical, educational, and detailed approach, seamlessly blending industry insights with relatable, real-world advice.

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This episode is a valuable resource for anyone considering commercial real estate investment, especially navigating market downturns and understanding the complexities of large, mixed-use developments. The advice is actionable, whether you’re eyeing apartments, office conversions, or breaking into hospitality.

Transcript

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Let's say if someone sees an opportunity in LA or Detroit and they want to get a group of investors together, what steps would you have them take to make sure that they are buying in the right area? And if that building will actually be a success and they won't go into debt by trying to acquire a property while the commercial real estate market is

[Real Estate Expert]

down, well, I think they got to look at what the other uses are. So for example, in a office building market, vacancy rates at 10% or below mean that's a healthy office market. There are very few markets in the country where that's the case. Miami is probably one of them. Miami beach is the second one. I think there are very few like that. So then you look at what are, what's the apartment vacancy rates and the apartment vacancy rates, what are they running? And if they're running, you know, vacancy rates on the apartment side, that is, you know, maybe somewhere in the neighborhood of, you know, 5% vacancies. And that's a healthy market. And in places like New York and D.C. and even Miami, to a degree, these vacancy rates are even less. So New York's vacancy rate is less than 2%. So that would mean it's very conducive to having new apartments. And then once you look at vacancy rates and you look at rental rates, and if the rental rates, you know, can support the acquisition and the conversion of a new building, then it makes sense to do because you've got strong rental rates that are supported financially and vacancy rates are low, which are showing a significant demand. And same thing with hotels. I mean, you can look at converting office buildings in the hotels as well. And so, but it's these conversions are not for inexperienced people. So they've got to make sure that they get a contractor that understands conversions and architect that understands conversions. And then if they're going to do something to scale themselves as a group, then they want to hire a seasoned construction project manager that works for the owner or the investment group and who has experience in conversions as well. So to, to build the skyscraper in New York, like estimate, how much would that cost? About $3 billion. Okay, so how do you, how do you go about securing financing for these large scale projects? Well, it's interesting. So the way you do this is you go to a, you know, a group of banks, normal, you know, the traditional banks of JP Morgan chases, the bank of America's, you know, the wealth banks and so forth. And you go to those banks to get senior financing and that's a senior loan. And normally you're going to borrow between 60 and 70%. So let's use just for simple math that you know you're going to borrow 70%. So 30% is going to be equity. And so 30% is $900 million. So by formation Tower, so then you're going to go to a large global institutional, you know, private equity fund and you're going to go to maybe a couple of them and they are going to put in somewhere between 80% or so of that, you know, $900 million. So that would mean that the developer, our team, would have to put in 10%, which would be 90 million to 20, which is $180 million. And so our group would put that up. Most likely we would bring in a institutional general partner. They would come in and they would put in half of that or a little more. And so the developers generally going to put in between 50 and $100 million. Between, between our group.

[Interviewer]

So when you're approaching, obviously Affirmation Tower is a huge project, but I know hospitality is something that you're well versed in as well. Last time we spoke with the uilu, you were talking about developing hospitality throughout maybe the Caribbean. What's the approach there? Because it's, it's, is it completely different when, when you're trying to develop in that space?

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[Real Estate Expert]

In fact, Affirmation Tower is going to be residential. We get to build it. It will be the civil rights museum and then it'll be two, it'll be residential rentals with affordable housing of 40%. Then it will have two hotels, you know, both a boutique hotel and an ultra luxury hotel. And then above that on the top floors, it'll have luxury condos and then an observation deck on the roof. So there's a big mixture of uses because the building's a very big building, you know, a few million square feet. And so mixing up the uses, it's like, consider a building being like a neighborhood almost. Building of that size is, you know, like a neighborhood, you know, so you're going to have a mixture of uses in that building. And that, you know, helps drive the economics here. If you're going to do a one off hotel, then there the process is different because the first thing you're going to need to do is determine who's going to operate the hotel, who's going to brand, who's going to operate it, it. And I wouldn't recommend building a hotel of any type, you know, from either a three star to a five star hotel. I wouldn't do it without a brand. And then given that, you know, normally it's a real estate entrepreneur who is building it, then you want the brand to be able to manage the hotel too, or to hire a third party. Hotel manager that specializes in managing hotels. So you get a a company that does that and then then after that the exercise is pretty much the same as building a, you know, apartment building or an office building. The only difference is, is that you have to furnish the hotel so you add another level of complexity because you're hiring an interior designer and, you know, a furniture purchasing agent and the like and the assembling of the furniture and the delivery of the furniture and all of that has to meet the brand standards of your hotel brand and operator

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