The TreppWire Podcast: A Commercial Real Estate Show

Episode 348: Office Origination, Stagflation, Job Data Misinformation & Retail Earnings Fluctuation
Date: August 22, 2025
Hosts/Panelists:

• Hayley Kean, Trepp
• Lonnie Hendry, Chief Product Officer
• Steven Bushbaum, Research Director

Episode Overview

This episode dissects the turbulent state of the commercial real estate (CRE) market against the backdrop of mixed economic signals. The team navigates through current concerns about stagflation, debates on job data quality, fluctuations in retail earnings, and signs of resilience in the office sector—especially New York City's showcase projects and new origination data. Listeners gain granular analysis of key macroeconomic trends, the reliability of industry data, and detailed market-driven stories from office and retail segments.

Key Discussion Points & Insights

1. Stagflation Fears and Economic Uncertainty

[00:00-07:27]

• The episode opens with conflicting economic signals: July's hotter-than-expected Producer Price Index (PPI) tempers hopes for a Fed rate cut, while consumer inflation seems contained and retail sales hold steady.
• Stagflation—persistent inflation and rising unemployment—looms as a central concern.
  • Steven: “Stagflation is the risk that has really unsettled my gut for a couple months now...we have anything but certainty in the market today.” [01:43]
• Steven delves into labor market data, focusing on the troubling increase in unemployment for the prime working age group (18-24), which he ties to AI displacing entry-level roles.
  • “If we have underemployment happening at the prime working age cohort...that is a very telling sign of just how difficult it is for our recent graduates to enter the workforce. And that’s not going to get any easier with AI.” [03:33]
• Lonnie adds cautious optimism, noting historical precedent for youth job challenges but underscores the uncertainty around tariffs and the timing of their impact.

2. The Fed, Yield Curve, and Market Reactions

[07:27-08:58]

• Interest rate outlook is volatile: market-implied probability of a Fed rate cut drops from 99% to 82.9% within days.
• Frustration expressed over the unclear direction of rates and the flattening/steepening of the yield curve.
• Creative strategies, such as collars for floating-rate loans, are discussed as ways to navigate ongoing CRE financing risks.

3. Data Quality Concerns: Jobs & Multifamily Starts

[08:58-14:25]

• Lonnie calls out inconsistencies in official multifamily housing starts data, arguing it’s increasingly divorced from real construction realities.
  • “If you were to read this report in a vacuum, you would effectively think that everything is on fire here...something that should be reasonably supported seems to just be significantly overstated.” [10:09]
• The panel highlights worries over potentially shifting the Bureau of Labor Statistics (BLS) jobs data releases from monthly to quarterly, which could undermine brokers’ ability to forecast demand and lease terms.
  • “That’s the last thing I want to see, is to throw a wrench in how leasing operations are modeled.” [11:57]
• Lonnie reflects on the broader reluctance of CRE to modernize data/reporting workflows.

4. Retail Earnings: Resilience Amid Uneven Consumer Environment

[15:29-19:43]

• Retail sales are robust: July saw total retail sales up 4.3% YoY and certain categories (apparel, furniture, home stores) surging.
  • “American consumer continues to remain healthy. There’s not been any demonstrated pullback in spending.” [15:32]
• Standouts in foot traffic: Hobby Lobby, Staples, and Ollie’s Bargain Outlet.
• Mixed retailer earnings: Home Depot and Lowe’s perform well, Target lags despite an earnings beat.
• CRE implications: Grocery-anchored retail portfolios (e.g., Urban Edge) stay strong with high occupancies (~97%) and resilience in retenanting after bankruptcies.
• Lighthearted exchange about repurposing Kohl’s and similar large box spaces (e.g., Spirit of Halloween, trampoline parks).

5. Office Market: Signs of Life in NYC and Nationwide

[20:15-31:14]

New York City’s Three-Billion-Dollar Bet

• The opening of JP Morgan’s new headquarters (270 Park Avenue) is highlighted as a bold “signal” of NYC’s office market revival.
• Notable Quote:
  • Catherine Wild, Partnership for NYC: “It’s a very big deal. It’s a statement about the future of New York City.” [Wall Street Journal via Steven, 21:37]
• NYC surpasses 2019 levels for office visits, the only major US city to do so in July.

Office-to-Residential Conversions

• NYC is set to convert a projected 40 million square feet of office into residential over the next 5–10 years, double forecasts from two years ago.
• Potential risks: Projects may stall mid-way due to high costs, need for massive tax abatements (notably, a 90% abatement post-conversion).
• Political landscape and public-private incentives are key determinants of success.

National Origination Data

• YTD office origination:
  • NYC leads with $11.4B (35 properties); California ($1.8B, 37 loans); notable activity in San Francisco, LA, San Diego.
  • DC ($1B), Illinois ($857M), Massachusetts ($650M), and Texas ($500M) also show increased activity.
• San Francisco multifamily rent growth is currently the strongest among major US metros.

6. Office and Retail Loan Special Servicing Cases

[32:54-42:54]

Austin, TX – 7700 Palmer Loan

• $177M loan transitioned to special servicing before maturity; occupancy dipped from 99% (2023) to 74% (2025) due to major tech tenants (Google, EA, eBay) downsizing or vacating.
• Lonnie: “This will be a pretty good bellwether of whether we’re seeing companies really pull back from that tech location in Austin, or if they’re able to backfill.” [34:22]

Boston, MA – One Channel Center

• $166M trophy office loan now in special servicing as sole tenant State Street plans to vacate ahead of lease expiration (2029), putting occupancy and rent at severe binary risk.
• Complicated by ground leases and Massachusetts tax structures, further complicating re-leasing efforts.

Manchester, NH – Mall of New Hampshire

• $150M loan transferred to special servicing after maturity default.
• 400,000 sq ft regional mall with anchor tenants; occupancy at 88%, DSCR 1.65x.

Notable Quotes & Memorable Moments

• Steven [01:43]: “Stagflation is the risk that has really unsettled my gut for a couple months now...we have anything but certainty in the market today.”
• Lonnie [10:09]: “If you were to read this report in a vacuum, you would effectively think that everything is on fire here...”
• Steven [11:57]: “That’s the last thing I want to see, is to throw a wrench in how leasing operations are modeled.”
• Catherine Wild via Steven [21:37]: “It’s a very big deal. It’s a statement about the future of New York City.”
• Lighthearted banter [19:43]:
  • B: “As soon as you get [Kohl’s] out, there’s one tenant in particular...Spirit of Halloween.”
  • C: “Yeah, we need to get a meme for this podcast for that.”
  • B: “It’s my favorite time of year. Pumpkin lattes and seasonal tenants.”

Timestamps for Major Segments

• Economic & Stagflation Concerns: 00:00–07:27
• Fed/Market Signals & Yield Curve: 07:27–08:58
• Data Quality Concerns: 08:58–15:29
• Retail Earnings & CRE Impact: 15:29–20:15
• NYC Office Revival & Conversions: 20:15–28:34
• National Origination/Office Market Stats: 29:04–31:14
• Office & Retail Loans in Special Servicing (Austin, Boston, Manchester): 32:54–42:54

Additional Segments

• Upcoming Trepp Data & Events: Multiyear office financial analysis coming soon, promotion of the Market Pulse webinar (August 28th, 2pm ET).
• Shoutouts & Listener Engagement: Thanks to active listeners and engagement with data/articles provided by the audience.
• Industry Events: Lonnie’s keynote at Colorado Real Estate Journal; Steven welcomes 190 Clemson students; Lonnie to appear on Coldwell Banker Commercial podcast.

Summary

This episode provides timely, data-driven commentary on the CRE landscape, warning against complacency in the face of stagflation risks while also spotlighting encouraging developments like rebounding office originations and robust retail sales. Caution abounds regarding the reliability of official statistics and experimental shifts in government reporting. The hosts skillfully combine serious analysis with lively asides, making for an engaging and illuminating listen for industry professionals and market watchers alike.