← The TreppWire Podcast: A Commercial Real Estate Show
The TreppWire Podcast: A Commercial Real Estate Show
358. Beige Book Insights, CMBS Lending Leaders, Data Center Risks, Walmart’s AI Move & NYC’s Office Comeback
00:49:13
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- [00:00]
A
Foreign welcome to the Tripwire Podcast, the show where commercial real estate meets data and insights. This is our Week in Review for the week ending October 17, 2025. I'm Haley Keen with Trep, a data modeling and analytics firm for the CMBS commercial real estate and CLO markets. I'm with Lonnie Hendry, Chief Product Officer, and Steven Bushbaum, Research Director. This week, as the government shutdown drags on, markets are still flying a bit blind, navigating without fresh economic data while trying to gauge what is happening with inflation, growth and policy. But despite the data drought, the Fed's Beige Book, along with the start of Q3 bank earnings provided some color. The beige book revealed that the US Economy has lost some momentum over the past couple of months, with several regions reporting flat or even slowing activity. Also on today's show, we'll dig deeper into our TREP CMBS issuance projections and share which lenders are topping the chart so far in 2025. We'll also touch on the intersection of tech and retail with Walmart's integration with OpenAI's ChatGPT. And then we'll get into the growing national security debate around concentrated data center infrastructure. We'll also share some more big news out of New York City, with SL Green's acquisition of Park Avenue Tower marking another one of the year's biggest CRE deals. So let's jump right in. Steven, how are you navigating and reading the market when the data has gone dark?
- [01:34]
B
Very carefully. You're looking for any flashlight you can find and fortunately we had the Fed Beige Book come out, which gave us a little bit of read on the labor market. If you listen to the Fed speak, that's come out over the last week, and if I had to highlight just one member in particular outside of the Fed chair, it would be Chris Waller, and I'll explain why in just a minute. Waller in general has highlighted that the labor market is not looking particularly strong at the moment. It's not like it's about to go over a cliff, but you're seeing lots of commentary and signs that CEOs firms are really not looking to hire en masse. They're holding off, they're delaying, they're being very selective. And if you look on the demand side of the labor equation, you're hearing lots of folks talk about how much longer it's taking to find a job. It just doesn't look all that positive right now. Not to say that it's negative, but it's not as positive as it was say a year ago. And so the labor aspect is really what the Fed is going to be particularly focused on for their next, call it two rate decisions. And I think is why there's broad consensus that you should likely see them cut two more times across their next two meetings, despite some concerns about re acceleration in the economy and potentially some inflationary concerns, especially given what you've seen come out of the US China trade negotiations and in particular last week with Trump threatening 100% tariff. And it basically seems like a re escalation ahead of the Trump and Xi Jinping meeting that should be coming up here. I think it's within the next month or so. So while that's very concerning on the inflation side, the labor mandate still seems to be taking a front seat. Now I don't know Lonnie, if you've looked at the Fed Speak calendar and noticed who showed up the most over the last three or four days. But Waller has been all over the news and I have a sneaking suspicion that they've narrowed it down to the top five individuals vying to replace Powell. And I'm going to go out on a limb here and guess that Waller is perhaps the front runner at this particular moment. I think he's incredibly well positioned to take over the Fed. He is a broad consensus builder. He has some wins notched in his belt with respect to forward looking projections. In particular, what he was saying about the labor market and soft landing in 2022 held true and he held his ground despite some pushback. So I think that plays very well with what Trump and Besant want to see from the next Fed governor. More forward looking, less backward looking, data dependent and you know, a confident and consensus building individual. So I think he is very much one of the front runners, if not the front runner. But curious to hear what you think.
- [04:26]
C
Yeah. So Stephen, I don't know if you saw this week they Trump actually said he's narrowed it down to three front runners. It was Kevin Hassett, Kevin Warsh and Christopher Waller. I think to your point, Waller definitely is the front runner. He's definitely seen as more dovish. He wants lower rates. He has a good reputation in the market. I like the frame you used as a consensus builder. I think he's definitely the front runner. Hassett is maybe the dark horse in the sense that he also favors lower interest rates and he's been pretty critical of the recent Federal Reserve policies. So maybe doesn't have the cachet as Waller does in terms of speaking and so forth. You know, in the Most recent couple of weeks, but certainly is aligned in the, in the sense that he, he's more like Trump and his criticism of the current administration on the Federal Reserve and kind of what they've decided to do. So I think if I were, you know, wagering, I'm probably putting some money on Waller. I think he's the logical choice here. He's, he's been through this current cycle with Jerome Powell. He's been supportive when needed. He's also kind of branched out on his own when he felt strongly that things need to be going a different direction. And interestingly, over the last couple of weeks, he's really softened his position some. I saw some stuff today where he was actually saying given the softening of the labor market, we need to approach this from a very conservative rate cut methodology. He's advocating for 25 basis point rate cuts, you know, at a time, versus Myron's request for more chunkier, you know, reductions in the, in the federal funds rate. So, you know, we'll see what happens with Waller. I think he is the logical choice and I think, you know, the markets will react to him basically knowing what's on the horizon if he's put in the role like you're going to see, you know, maybe not Powell's higher for longer, but maybe lower for longer. I don't think he's as concerned with inflation as his Powell is. Obviously you talked a little bit about the, the Beige Book and you know, Haley on the lead and talked about, you know, things going dark. That's interesting. You know, the Beige Book came out and I think the overarching talk track here was just that the US Economy has lost momentum over the last couple of months. And so, you know, only three of the 12 district banks reported expanding activity in their regions. And Waller, as you mentioned, was, was on the speaking track this week. He was actually quoted as saying it's not like everything's rosy and booming. He said that a quarter point rate cut at the Fed's October meeting is the right thing to do. Consumer spending inched down in recent weeks. You know, there were a run up in electric vehicle sales because of the federal tax credit which expired September 30th. So I don't know how much stock you put into that because even though there was a run up to try to take advantage of the tax credit, there was a big article this week about GM and all the money they've lost on their electric vehicle unit and how that's been a real disaster for them. And now that the Tax credits are gone. They're, they're very, very nervous about what's going to happen. I do think the Beige Book Report has taken on more importance this month because of the data drought caused by the shutdown. So you know, there's a lot of stuff in here, Steve. I don't know if you want to jump into some of this. And then there were some interesting comments from the head of the IMF around some of the private credit and some of the non bank lending as well.
- [07:44]
B
Yes, the IMF managing director Kristalina Georgieva has acknowledged that the mounting risks in the non bank lending markets are a major source of concern for her. Speaking at the IMF's annual meeting in Washington D.C. she urged governors to pay closer attention to the private credit market following the collapse of of subprime auto lender Tricolor and auto parts maker First Brands. She warned that the global financial system could face serious trouble as more financing shifts from traditional banks to non bank financial institutions or NBFIs, which are subject to far lighter regulation. Now just stepping back from this a little bit, there's been a lot of talk this past, call it, one, two weeks about whether Tricolor and First Brands represent, you know, kind of a broader theme that we should expect to see going forward or if this is just the typical pockets of, you know, distress in particular related to fraud that you typically get with, you know, a strong credit cycle, you start to get some, some bubbliness. And if we, you know, look back to say like the, going into the dot com crisis you had Enron, like, you know, that sort of fraud is obviously going to bubble its head up when you have completely opaque markets like you have with these non bank financial institutions and the growth and markets. It's surprising to me to some level that the people that are investing in these debt instruments had no idea just how complex the capital stack was for these companies. And the fact that they were basically double pledging collateral for loans, it's absolutely amazing to me. But that shows just how much demand there is for yield right now. I mean you have lots of investors in particular like pensions and some insurance companies that really need to close the gap on the yield. They need to be booking, playing catch up pensions in particular, that's like a perpetual funding gap stressor that has been in the News for like 20 years. So anyways, the demand for yield in the current environment tends to drive investors to overlook or just turn a blind eye to these sort of issues. So we'll definitely get some more insight as bank earnings season continues to plow through. We'll find out exactly where this debt was held. You're saying like I think Citi had to write off a little bit related to one of those two bankruptcies and I'll be curious just how much you see bleed into regional banks or if a lot of this was held in private fund space and largely is not going to impact banks by and large.
- [10:10]
C
This is an interesting take from her perspective in the sense that we've seen a couple of pretty notable, as you mentioned, Tricolor and first brands having some issues. But on the whole this sector has performed exceptionally well. I mean the private credit markets have been a huge lifeline not just for cre, but just broadly. And I think some of the general concern around the non regulatory environment of this has been, you know, pushed to the side at some level because you haven't seen widespread issue across the markets. Now if you see two or three more of these types are at size or scale, then I think it's warranted potentially. But I think at this point still probably a little early to be like sounding the alarm bells. It is interesting though. I mean I think and I think they have a branding or marketing problem at some level when you're referring to yourself as a non bank lender because you're inviting this talk track of why you should have stricter regulation imposed on you. Right? So if you listen to some of the things that she's saying, you know, it says this is why we're calling for greater oversight of non bank financial institutions. That's just a talk track that I think you're going to see as long as these folks align themselves with effectively filling a void for from banks. But without the regulation, if you're a bank, you don't feel good about the fact that you're losing business or market share to somebody that can offer very similar solutions but without the regulatory oversight. And so they're going to take any and all opportunities if and when there's some distress in this market to really jump on top of that and say look, look, see why you need more regulation. But you know, I thought Jamie Dimon's quotes this week were kind of interesting. He, he did say that the sector's recent trouble is similar to spotting cockroaches and you know, implying there may be more hidden problems that could surface. So I think for me I'm still a wait and see here. I definitely think these first brand, some of the stuff like you're talking about, the complex structures, double pledging of things, not great. But on the whole I don't see a cause for concern yet here that raises any alarm bells for me.
- [12:12]
B
Yeah, same until we start seeing default rates tick up and or credit spreads blow out, which would indicate investor concerns about potentially rising default rates. It's early in the game, exactly like you say. Unfortunately we haven't seen more of these, so credit spreads continue to be incredibly conducive to issuance. Just one more point here. The public private delineation line, it seems like has gotten incredibly blurred over the last 10 years. You have non bank or private lenders that are tapping public markets, they say, specifically the CLO market to help offload some of this debt. And so I suspect we're going to have a really difficult time agreeing on exactly how we regulate or monitor these private institutions given this blurring of the public private aspect. And to some degree we're almost relying on the fact that if they are tapping public debt markets to offload some of this debt, the public markets will impose a certain at least minimum level of monitoring and due diligence for this debt, which I see is a strong positive and mitigate the potential for broader fraud or weakness.
- [13:18]
C
Yeah, I mean I think you're seeing just an organic convergence of the two which actually creates more highly efficient markets. It actually allows for more liquid investment and more opportunities for funds and other institutional players to tap into both public and private opportunities. And I think on the whole this is a net positive. And if you just look at the growth of the private credit markets over the last five years, I mean they've exploded and in a few forecast out what they look like over the next five to 10 years. BlackRock and others are expecting significant growth in these markets. And so again I think this is positive. I welcome the talk track of you need to have some minimum competency level of transparency reporting and those things you have to have some, maybe if you don't call it regulation, you just need to have some standardization and transparency. The complete opaqueness is not good for anybody. You know, if you're, if you're someone that's a gp, you should have some reporting requirements to your LP type of structure that's visible and transparent and people can understand. But I'm pretty bullish on this sector, to be honest with you. I'm really bullish on this, honestly. Not pretty bullish. I'm very bullish and I think, you know, at some level even these two that went bad just brings more visibility to the marketplace. And I think that actually bodes well for people that play in the space like it's going to bring private credit to the forefront where it's top of mind for people and you're going to see people being more strategic in how and where they deploy capital and what type of structure they use. And so we're seeing this pervasive across the CRE market. I mean you look at CRE Cielo issuance up this year, we're going to cross over 30 billion by the end of the year. Another really, really strong year compared to, you know, previous high water marks. So yeah, I think she has some valid points, but I'm not as bearish as she is at this point.
- [15:13]
B
So since we were talking about tight credit spreads and demand for yield and just how hungry fixed income investors are, this seems like a good time to revisit the issuance CMBS issuance that we talked about last week. Because since then we've actually published a good bit of research about who the top book runners are and what the year to date issuance looks like across all products. So that's the conduit deals, SASB Large loan and then separately CRE CLOS. So through the quarter end third quarter 2025 issuance has stayed healthy and broadly investor supported domestic private label volume has hit 32.3 billion in the third quarter, which brings year to date volume to 92.5 billion through September. At this pace, 2025 is on track to top 120 billion like we mentioned last week, which would be an extremely strong issuance year, the strongest since 2007. If we set aside 2021 since that was a bit of a catch up year with some 2020 issuance bleeding over to the next year. So what was really standout for this story is that single asset, single borrower deals or SASB deals have just absolutely dominated issuance. In Q3 alone we saw 39 SASB transactions totaling 23.5 billion. Year. To date that's 97 deals totaling 67.5 billion with 20 deals over 1 billion. The largest was the $2.65 billion Hudson Yards deal that was backed by the Spiral in Manhattan. Office interestingly was a standout which accounted for approximately 27% of SASB volume with industrial next accounting for 19%. On the conduit side we had 10 deals totaling 7.2 billion that priced in third quarter year to date conduits sit at 31 deals totaling 23.4 billion, which is roughly flat relative to the same period last year. On a dollar basis, structures skew heavily to the five year side, accounting for roughly 70% of conduit issuance and underwriting metrics remain disciplined at 57% weighted average LTV with weighted average DSCR at 1.8 and debt yield at 12.7%. Pricing tells you demand has held up. AAA conduit spreads have hung in around 80 basis points, widened briefly to about 108 during the liberation Day blowout, but have retrenched and now sit in the high 70s, low 80s point. Now turning to the top issuers, we call these the league tables. Wells Fargo is the lead book runner with 19% share, followed by Citi with 13% and Goldman at 11.7%. Series CLOs have re accelerated. We had 22 deals totaling 22.7 billion year to date. Lonnie, that's a nearly 4x over last year's volume for that same window 4x. I mean if we look at only one metric to highlight just how much demand there is for yield, for spread and fixed income, it's that cre cielo issuance. @ least for me, that one stands out. So curious to hear what your take is on this.
- [18:24]
C
Yeah, I think the CRE closo stuff, we've been talking about this for some time now, but if you look at 2023, it was 8.7 billion in issuance for the full year. 2024 was 8.6 billion in issuance for the full year. We've far exceeded those numbers. Now this is about half of the high water mark in 2021 which hit about 45 billion. But I think that's somewhat of an anomaly. You obviously you mentioned two weeks ago on the podcast that you have to put an asterisk behind anything in 2021 pertaining to issuance because you had Covid in 2020, you had government intervention and then basically a year and a half's worth of issuance in one year. So 2025 is going to be a really significant year if you go beyond the high water mark of 45 billion. The previous high water mark was right around 20 billion plus, plus or minus. So we're exceeding that already in October and we have a couple of months left. I think the general take on that is it makes me feel like the market, both lenders and borrowers have a sense of optimism around these value add reposition story loans that they just obviously didn't have the last two years. So even in the higher interest rate environment, I think now that the multifamily stuff, the last time I checked about 68.8% of that 20 plus billion was allocated to multifamily on the CRE solo market. And I think it speaks to the fact that the new supply delivery has been absorbed in the marketplace and people feel like there's some upside in these value add reposition multiplays again, which I think bodes well for us as a CRE economy. Like it's, it's needed. You need those class C properties being lifted up to B minus or C plus. And so we'll see how this plays out. I'm optimistic. I think it's great the sasb stuff we've highlighted. It's really, really significant. I mean it's we've not seen this type of prolific change from conduit to SASB in a very long time, if ever at this percentage. We thought maybe the last year and a half was somewhat of an outlier, but I think it's proven in 2025 that SASB's here to stay, at least in the short term.
- [20:21]
B
So I just wanted to throw out the individual names for the top 10 book runners for the first nine months of 2025, just to give our listeners a sense of who all is out there and is active in CMBS space. So as I mentioned, the top three are Wells Fargo, Citi and Goldman Sachs. Then coming in behind them you have Morgan Stanley, JP Morgan, bank of America, Deutsche Bank, Barclays bank of Montreal, and SocGen. So just to give you a sense of how dominant those top 10 names are, the top 10 issuers account for 91% of issuance in the space. So if you're interested in seeing this full list, reach out to us@podcastrepp.com and we'll send you links to all of the articles that we have been mentioned in because it's shown up on TREP'S website, CRE Direct, Real Deal, and I'm sure it's been picked up by a few other outlets as well. So happy to share those with our.
- [21:14]
A
Listeners and I'll give another plug here for another TREP report that we released this week, which was our special servicing report for September. And we reported that the rate reached a new 12 year high in September. The special servicing rate rose 36 basis points to reach 10.65%, which is the highest level seen since May 2013, when the rate was 10.67%. So if you want to understand what the special servicing rate means and dig into the rates across major property types and see some of the largest loans that moved to special servicing, you can find that in our report, send us an email to podcastrep.com we'll send it to you or find it on our social media pages or our Research and Insights section on our website. This episode is brought to you by Resilience Insurance analytics, insurance risk consulting and transaction management services. Designed to close the deal as the go to advisor for commercial real estate lenders, Resilience provides tailored solutions and supports over 100 of the nation's largest lending institutions with expert insight into structural risk, insurance costs and market expectations. Drawing on insights from 200,000 successful closings, resilience Insurance analytics consultants turn complexity into confidence so you can close every loan. Learn more and connect with a consultant today at resil-ins.com that's resil-ins.com so let's transition here to another topic that we've been talking about for a while, and that's data centers. But I think we have a little bit of a shift in what we wanted to cover today, and that's really looking at the clustering of these data centers and if that's raising any concerns outside of traditional cre.
- [23:14]
C
Yeah, we saw some talk track about this this week, Hayley Online, and so we added it to the outline. I think it's important to stress that this is not a new phenomenon like the data centers generally have been built in a clustered form for a very long time. I think what has changed is our reliance on data and connectedness and Internet traffic compared to maybe what it was in the 80s and 90s and the proliferation of people's understanding and awareness of data centers broadly. I mean, data centers by definition have existed for a very long time and we've had data centers going back decades. But the current form of data centers has definitely become much more attractive to investors, has gotten a lot more publicity in the market, has definitely taken some headline share away from some of the other asset classes. And when you look just on a map at how closely aligned these centers are in some of the clusters across the U.S. i think it does deserve a discussion around Are there some other challenges beyond just the known electrical and water power of just national security and safety? I mean, are there going to be a need? Is there a need for, you know, some sort of drone coverage or protection or no fly zones or having some sort of additional tax that creates improvement districts or other things that allow for these to be monitored at a level that just traditional CRE is not? Because they're becoming a critical part of US Infrastructure? And when you see them just plotted on a map real time, it kind of brings home. At least it did for me. I think it does pose a risk at some level that maybe we didn't have in previous decades. So what are your thoughts, Steven?
- [24:56]
B
Well, first let me toss out some data points so that our listeners can get an appreciation for just how critically important this geographic area is for global Internet and data center demand and traffic. So in particular, the cluster that we're referring to is in Northern Virginia. That's the one that is the most concerning. It's in Loudoun county specifically. This is known as Data Center Alley. So let's start with global Internet traffic. Pop quiz here, Lonnie. And I don't know, quick disclaimer. I don't know how accurate this statistic is, but it is been printed on a believable website here. So percentage of global Internet traffic do you think passes through Loudoun, Fairfax and Prince William counties?
- [25:41]
C
I mean, I literally have zero idea here, but I would say let's just say 38%, 70%. Wow. Yeah.
- [25:49]
B
Now, I don't know exactly, you know, how that statistic has been crafted, but it's obviously a critically important share. Now, more importantly to data centers, what percentage of global capacity do you think this Northern Virginia area accounts for? So, percent of global capacity.
- [26:05]
C
I'm going to have to up my answer. I would have said in the 30 or 40%, but based on the last answer, I'm going to say 65%.
- [26:10]
A
Okay.
- [26:11]
B
Fortunately, we're not there yet. It's only 13%.
- [26:13]
C
Oh, okay.
- [26:14]
B
And it accounts for 25. It's one quarter of our capacity in the U.S. i mean, it's a quarter. That's, that's massive. So yeah, I mean, to your point here and why this is, I think going to be a topic we'll see focused on more and more over the next couple of years. 25% of American compute capacity in data centers located in just one to three counties in northern Northern Virginia. That's a concern. Now how exactly we fund this? You know, whether this falls as kind of a public good and falls under federal purview, or maybe demands more of a private market solution, I'll be interested to see how this actually plays out. If I had to guess what might be, one of the more appropriate solutions is we would create something like an improvement district that would encompass all of these data centers. And then effectively the security and monitoring tax would get passed on to each of the individual players so that it's appropriately priced and the incentives are, are well aligned. But given the scale of this, you could easily see this falling under a federal protection mandate and scaled up to that level, but, you know, the best solution to be determined. Will we hear more about this? Absolutely.
- [27:22]
C
Yeah. I think that was, that was the, the hope of this segment was just to kind of bring some awareness. I'd love to hear from people that are maybe a little closer to, as I would say, data centers. Maybe we should do a poll. Haley. Steven is definitely team data. I'm team data. So I don't know. We've talked about it in previous shows on how and why people say it a certain way, but Steven does have a PhD.
- [27:43]
A
I will.
- [27:43]
C
Oh, here we go. Here we go.
- [27:46]
A
I say data, too, but.
- [27:50]
C
All right, data. We'd love to hear from some folks in the data center space that are closer to that, that maybe have some understanding or insider, have done some development work in those markets and can just share with us kind of what if we're. Are we worried about something that shouldn't be worried about, or are there already some rumblings about how and, and what they would do to kind of protect this infrastructure? Because I think it's an interesting topic and it's not going away with the, the insatiable demand that we've seen for this sector.
- [28:18]
B
No. And you see the advances in drone technology, and I think there's, you know, there should be serious concern about what technology we implement near term because, yeah, just the threats are getting more sophisticated, more capable, and if somebody really wanted to be a disruptor, I mean, this, this is an easy target. So hopefully we're not doing ourselves a disservice by mentioning on the podcast, but I think it is something that, you know, needs to be addressed very, very soon.
- [28:48]
A
So one other headline that caught our eye this week was featured in the Wall Street Journal, and the headline was that OpenAI will soon let you shop at Walmart in Chatgpt. So walk us through what this means and why it matters.
- [29:01]
B
Yes, this was reported last week in the Wall Street Journal noting that Walmart is teaming up with OpenAI. So that, yeah, as you mentioned, consumers can buy products directly through ChatGPT. Now, we didn't get any sort of a cost associated with this deal. We don't know what Walmart is paying OpenAI, but obviously the amount of retail volume that Walmart does, this could be a very significant revenue generator for OpenAI, who desperately needs revenue to plug some of their forward commitments for compute power. So instead of browsing through traditional search bars and product lists, users will soon be able to make purchases instantly within ChatGPT, a feature called Instant Checkout. The integration will include nearly all Items from Walmart's website, excluding fresh food. And Walmart plus members will still receive their usual benefits like free shipping. Now this move signals Walmart's push to become the go to retail partner in an AI driven shopping future and is really consistent with the tech push that Walmart has made over the last couple of years. I mean they have invested heavily on the tech side and I think importantly for OpenAI they will gain insights into consumer behavior through transactions made through ChatGPT and like all things AI enabled in the stock market these days, Walmart Stock jumped nearly 5% following the announcement, a hefty lift from that OpenAI announcement. So really interested to see what kind of synergies get created here, what kind of a lift this provides to Walmart's earnings and what kind of a compute and modeling advantage this gives to OpenAI relative to some of their peers.
- [30:37]
C
Yeah, I mean the future is here Steven. We're, we're seeing it real time now. It is kind of funny with the OpenAI stuff and chatgpt like I think in the last couple of weeks they've made like 50 partnership announcements, right. And they don't disclose any type of revenue structure or if it's you know, a rev share or there's some sort of licensing agreement or whatever. It's, it's almost like an Oprah episode but with, with partnerships for CHAT GPT. But if you play this out a little bit and you just kind of walk through how this could impact shoppers experience and how people would leverage this, I think this is one that makes sense. And I think if you look at Walmart, I've noticed in my local neighborhoods you're starting to see a fleet of Walmart trucks delivering things just like Amazon does. So their trucks actually look, they're electric, they look and feel just like the Amazon delivery trucks. For the last couple of years Walmart's basically been using independent contractors to do their grocery store deliveries and other things. And it looks like they've started to scale some of their own in house solutions for this. They clearly are frontrunners with Amazon on the drone delivery and if they can continue to push themselves into this tech enabled type of shopping experience, I think you could see Walmart reinventing itself as you know, a titan of this new tech enabled industry like they did, you know, call it 50 plus years ago. What would be really interesting is they have such a huge footprint advantage over all of these other folks trying to get that last mile distribution. If they can figure out a way to leverage their existing store Footprint as last mile distribution centers. For some of these autonomous or semi autonomous delivery mechanisms, they're going to have a huge competitive advantage. I mean they, they bought land and built buildings at basis that you cannot even dream of doing today if you're someone that's a new entrant and you know Amazon, we started to see some significant pushback on neighborhoods and others not wanting their fulfillment centers any closer to the neighborhoods and schools. I think Walmart has an intrinsic advantage here. So I'm, I'm actually pretty bullish on Walmart going forward. I think they've, they've done a great job of taking a legacy business that could very easily have gone the way of Kmart or some of these other large legacy retailers. And they've really invested in technology and online and they've at least to date figured out a way to kind of manage those things concurrently. And I think you're starting to see tech maybe pull out in the lead a little bit and I think if they double down on that, you're going to see some, some outsized growth from Walmart on the go forward.
- [32:58]
B
Now just to play devil's advocate here or take a counter view on, on this news and in particular just questioning the 5% jump in Walma stock price, I gotta ask, is this really going to be all that useful? Like I, I just gotta ask like you personally Lonnie, would you ever buy anything from Walmart through ChatGPT?
- [33:19]
C
Yeah, I think so. Like listen, I, I was at an conference yesterday. We had the gentleman there doing an a workshop on AI. He had his Claude GPT connected to his Outlook email connected to his Zoom and he literally went into Claude and said can you find so and so's contact information? It searches his email, finds the contact info, he then says would you please send a thank you email for to him on behalf of me and schedule a Zoom follow up meeting so we can discuss the results of this meeting for Tuesday at 4 o' clock or whatever. So while he's doing the presentation in the background Claude is writing an email. So it found the contact information. It inferred from that email where his contact information was found that he was talking about the conference that we were presenting at yesterday. Creates a draft email message that goes directly to his inbox, his drafts in his email and says thank you so much for allowing me to present at this conference while he was actually presenting at the conference. He never told the LLM that he was at the conference. He never told the he just one simple prompt that creates the draft it sends the zoom invite and it tells him the draft is ready for his review. So imagine overlaying that into shopping where you literally say I need to, when was the last time I bought laundry detergent? Instead of having to go and look in the pantry or whatever in the closet, wash closet, you, you have it tell you when the last time you bought. It basically is like RSS feeds or subscriptions that we have now on steroids. In my mind, I'm pretty bullish on this, honestly.
- [34:51]
B
Well, you highlight the important aspect of this interaction and I think will probably see weak adoption at first like this. This partnership will probably only benefit, I'm going to guess like 1 to 3% of Walmart's customers who A have the membership, B, shop regularly enough and C, are tech focused or tech savvy individuals that have the willingness to participate. You know, I think when you, you keep narrowing that filter down, you'll see, you know, some customers absolutely love it. But a broad base, the consumers say like I don't get it, like how do I use this? So I think it really has to be for this to be a revenue generating, successful product, like you said, it needs to be really leveraging access to individual accounts and prompting them to say, you know, here are the products that we think you might need. Can we help you?
- [35:38]
C
Well, so I don't disagree with you, I agree with you for, from the tech perspective, like we talk about things on our podcast and it's funny, we all see this and we talk offline about the things we talk about are not maybe even on the radar of 90% of the people in the US like they're, it's just not something they talk about, you know, and technology is one of those things where there's just a lot of people that just the concept, if you said LLM to them or GPT or AI, like they wouldn't have any construct of what that actually means for them on a day to day. But I do think they don't need a huge percentage if they could just keep 1 to 3, 5% of their shoppers out of the store because they're leveraging some interactive GPT to do their shopping that creates that opportunity for them to turn a certain percentage of that footprint into a distribution center. And so it might create synergies for them just by keeping the tech savvy folks out of the store but allowing for that increased distribution footprint within the storefront. So you know, I think as we're like grasping for realistic, practical uses of AI, this is one where I can see a fairly significant practical use for it. I mean, if we go back trying to do this for the last 25 or 30 years with reward memberships. So they used to give you a little card you would scan when you bought your groceries and they would track what items you bought. Then they would mail you paper flyers with coupons or whatever. Then Target has now gone to like digital coupons that you actually get while you're in the store. This just takes that and elevates it another couple levels in my mind, so it'll be interesting to see. It maybe doesn't justify the significant jump in the stock price today, but I think this is the stuff that's here to stay. I mean, I, after what I saw yesterday, and it's not the first time I've seen that, but like starting to see people that are not software engineers or not super techy on their own leveraging these tools in their business or their workflows, I think that trickle down is going to happen faster than what we might estimate.
- [37:30]
B
Yeah, I mean, I agree. I think there's massive opportunity for algorithm improvement. I'm sure I'm not the only one out there who's incredibly frustrated by Amazon's push notifications saying, hey, we found a product you might be interested in. Like, yeah, I only need one of those in my life and I already bought it, so stop prompting me to buy another tire inflator. Like, you know, maybe ask me if I need tires or some sports equipment that could benefit from the new inflator. So, yeah, I'm, I'm excited to see some dramatic improvements in shopping suggestions. And I think this, you know, positions Walmart very, very well relative to their peers, being an early adopter and getting some of those insights back from, from OpenAI.
- [38:08]
A
So let's talk about the New York City office market. We saw two stories this week in the Wall Street Journal that I think are interesting. We've been covering this market for a while and talking about a resurgence in interest and in issuance in the market, too. So this first story covers a new CBRE analysis that talks about how New York City's office market is seeing its biggest boom in nearly two decades. And companies have leased 23.2 million square feet of Manhattan office space in the first nine months of 2025. This is actually the highest volume for the period in 19 years. So talk to us about the market and some of what this analysis showed.
- [38:46]
B
Yeah, this is a great piece from our friend Peter Grant over at the Wall Street Journal. And he noted that this incredible boom in office space demand, as you mentioned, Haley, this is the highest volume that we've had in 19 years. According to the CBRE analysis, the rebound is driven by financial firms, tech companies and a steady return to office trend. Major deals include Deloitte's lease of nearly three quarters of a new Hudson Yards tower and Amazon's expansion with a 5th Avenue purchase and a 330,000 square foot lease. Manhattan leasing has now surpassed pre pandemic levels with nationwide office leasing remaining 11% below its 2019 average. So a, a huge tale of, you know, two different worlds, Manhattan versus the rest of the country. Demand for premium space is so strong that tenants often have to choose between location or quality. Developers are responding with a wave of new projects and record lease rates. With 143 leases signed over a hundred dollars per square foot so far this year. 143 leases over $100 a square foot. Amazing. Even older buildings are seeing a comeback which is very welcome as we've talked many times in this podcast about concern for that lower tier office space. So many of these older properties are being converted into residential units, making one of the most active office to housing shifts in decades. So despite a 14.8% vacancy rate, new York City's strategic location, strong transit access and appeal to younger workers are fueling optimism. As one developer put it, every neighborhood in New York is becoming a mixed use neighborhood.
- [40:24]
C
Yeah, this is a great story, Steven, and it just, it kind of falls in line with what we've talked about, I think for all of 2025, and does a great job of outlining some of the central themes that we've seen. And I think it creates some optimism. I mean, we're getting close to the end of the year where we can start looking and projecting out on 2026. But I think we all got to feel pretty good about where things are today and where things are headed over the next couple of quarters as well.
- [40:48]
B
So our friend Peter Grant has been quite busy this week as he had another story that came out. It mentioned SL Green is buying New York City's Park Avenue Tower in one of the year's biggest deals. So SL Green Realty has agreed to purchase park avenue Tower for 730 million. The 36 story Midtown building located near Park Avenue is over 95% leased and marks one of the largest office sales of this year. The deal comes as SL Green is expected to report strong third quarter earnings and reflects growing confidence in Manhattan's office recovery. Earlier this year, RRXR completed a $1.1 billion acquisition of 590 Madison Avenue, the first New York City office sale that topped 1 billion in nearly three years. While office values have dropped sharply since the pandemic, lower prices and improving fundamentals are clearly bringing back buyers. Manhattan office prices are down 45% from pre pandemic peaks, but leasing activity is picking up and investor interest is returning. SL Green also announced the sale of a 5% stake in One Vanderbilt to Japan's Mori Building, valuing the property at 4.7 billion, the same valuation used in Maury's earlier 11% stake purchase. So grain retains a 55% ownership in the landmark development.
- [42:02]
C
And this has been the year of SASB issuance. It's also been the year of really big trophy deals, it seems like. And so you know, Peter Grant's been on fire the last week or so, as you mentioned, Steven. It's great to see this type of commentary and it's great for us that track this market pretty extensively to see these types of deals taking place. And so, so, you know, even though prices are lower and if you're an existing owner, that's maybe not great. It's nice to see things like improving fundamentals or bringing buyers back. It seems like we've kind of passed the trough here and there's definitely a lot of optimism around this market in particular. And if you look at the origination volume, about 21 billion worth of CMBS issuance year to date is accounted for by office, and over 14 billion of that is in the New York City metro. And so a lot of really positive stories coming out of New York. And I wouldn't be surprised if the next two or three years we see the same type of activity in Chicago, Louisiana and San Francisco. I think these markets are prime for a rebound.
- [42:57]
A
All right, so we mentioned a lot of trip data and trip reports this week. Reach out to us@podcastrep.com if you'd like some of those, but we have a lot of other events and happenings coming up. On Tuesday, October 21st at 2pm Eastern, we are hosting another client only exclusive webinar. If you are a client of our Trep CRE platform, we will be walking you through the latest updates from our product team. We'll look at some enhancements to pro forma attribution, we'll dig into some new data enhancements and we'll give you a walkthrough to make sure that you're using the tool to its full potential. The next day we'll have a lending webinar that is going to to dig into our TRIP Loan valuation tools. So if you are interested in understanding shifts in credit spreads and risks and you would like a demonstration of our TRIP loan valuation tool, reach out to us@podcastrep.com and we will get you access to that webinar that's open to the public. And then of course we will have our Market Pulse webinar this month. On Thursday, October 30th at 2pm Eastern, we we will assess what's happening with the shutdown. At that point we'll dig in further into our issuance data and we'll also cover the CRE mortgage universe and look at different debt sources and walk through the mortgage financing in those areas. So stay tuned for that. Send us an email to podcastrep.com and you can join that webinar as well. Turning to Shout Out Joel M. Was interested in our Delinquency report. David S. Said he really enjoys our podcast and wanted to see the latest anonymized bank report. And then Lonnie, you spoke about how you were at a conference this week in Ohio. We met a lot of podcast listeners at that event, so I'll give some shout outs here. That came from my colleague Callie who was there representing trep. Bob F. Is going to be a new listener to this podcast, so this might be his first time hearing a shout out. Thank you Bob for giving us a shot. Becky said she's a huge fan of the podcast and was excited to meet our teams. Greg L. Is going to be tuning into our show, so welcome Greg. Matt G. Said he has clients that read all of our research and reports and he's interested in signing up for the rundown and learning more about our podcast. Dave D. Wanted to find out more about the podcast. Noah B. Is a huge fan of the podcast and said he he reads our daily CRE Rundown newsletter every day. He said it's his favorite CRE newsletter because of our data integrity and is going to be working with us in the future. So we're excited to meet you Noah and appreciate your support.
- [45:37]
C
So as you mentioned, Haley, I was in Canton, Ohio. It was a really great conference. It was actually hosted at the Pro Football hall of Fame, which was very cool and so we talked about this a bit last week, but we got the invite from our friend Alec P. From NAI Pleasant Valley. Been a friend of the show, friend of mine for the last couple of years and he actually is the one that introduced me to Bo Baron who we've had on Our podcast, and I've been on his podcast a few times. And so it was great to be there with both of them. It was great to see Beau present myself present kind of back to back. And just a good time was had by everyone. You know, it's amazing. I do enough of these across the country to kind of pick up on some central themes. And in Ohio, the groups that were there was mostly Midwest and AI groups, but there was a real sense of optimism about where we're at in the marketplace. I felt like they really feel like the market has turned a corner. And, you know, there was a lot of deal talk, there was a lot of transaction talk. And, you know, the days of going to a presentation where people were, you know, only focused on delinquency or they wanted to know how bad the market was. Like, that hasn't happened for me in a while. I mean, people really want to know what does all this new origination volume actually mean? And they want to talk about deals that they have under contract or Lois, that they're working. And so from that perspective, it's refreshing to see that what we're seeing nationally and what we're talking about on the podcast in terms of the market kind of rebounding is actually playing out in most of these markets that I've been to, which are not the New York, the San Francisco, the la. These are the small, you know, Midwest markets where, you know, workforce housing type of communities where, you know, you would think the downward pressure from inflation and others might be putting some real distress forces on the CRE market. It doesn't appear to be the case. And so a lot of redevelopment talk. A lot of people bought some office buildings at discounts. We're going to replace, position them. So all in all, it was a great conference. I love going to those because I get some real perspective from people that are actually doing deals every day as a living. And they share those insights with us, which we then can bring to our audience. So shout out to the guys at NAI Alec and shout out to Bose, Gracie, and both you guys appreciate the opportunity.
- [47:34]
A
And one last shout out here. We have so many students who listen to this podcast and who may have started with this podcast and then ended up having a career in commercial real estate. We do a lot to support students and share data with them, get the data into their classrooms. But something that we just announced recently was the opening of our December 2025 Future Leaders Program. So if you are a student or, you know, a student that's in the commercial, real estate or commercial real estate finance industry and is graduating in December 2025. Tell them to reach out to to us. We have a program where we highlight stars in commercial real estate who are looking to make an impact upon graduating, and we always have a great cohort of students who win the award and it's really cool to watch their careers grow. And then they end up becoming TRAP clients and doing big things in the industry. So you still have time to submit your application for that program if you are interested. And with that, we'll close. Thanks to our producer, Mariana Sobrana. Join us next week as we look at what's happened during the week and how it may be impacting you. If you have a question or just a comment, send an email to podcastrep.com and subscribe to the TRPW Podcast with your favorite provider. Thank you for listening and stay well.
- [48:51]
C
All right.
- [49:02]
A
Sam.