The TreppWire Podcast: A Commercial Real Estate Show

Episode 364: "Reading the Commercial Real Estate Room: Office Bifurcation, Retail Divergence, & SASB Reality Checks"
Date: November 21, 2025
Hosts: Hayley Keene (A), Lonnie Hendry (C), Steven Bushbaum (B)

Episode Overview

This episode explores the ongoing uncertainty in commercial real estate (CRE) markets as the Fed remains divided on future policy, leading to a "widened distribution of outcomes." The hosts focus on the "bifurcation" in the office sector, trends and performance in retail, and fresh data on SASB (Single Asset, Single Borrower) deals—backed by Trepp's rich datasets and recent trading alerts. The theme: understanding granular, asset-level risks and opportunities in a market increasingly shaped by dispersion of outcomes rather than blanket narratives.

Key Discussion Points & Insights

1. Macro Landscape & Fed Uncertainty (00:21–04:28)

• Fed Still Split:

  • October FOMC minutes revealed a divided Fed on potential cuts in December; markets now price in a much lower chance of a near-term rate move.

• Takeaway for CRE:

  • Owners and lenders can't underwrite to a single interest rate path ("higher for longer, but maybe not that much longer").
  • Need to remain "honest about both tail stickier inflation and higher for longer on one side and a growth scare or labor market weakness on the other.”
    — Steven (02:38)

• Risk for 2026:

  • Office market isn't monolithic; "genuine opportunity is in high quality, well located assets...there’s still a lot of structural risk in B and C assets."
  • 2026 will be a "stock picker’s market" for properties and loans—asset-by-asset and market-by-market analysis is crucial.

Quote:

"Don't anchor on a single headline or a single Fed sound bite going into 2026. The risk is in ignoring dispersion. The opportunity is in doing the granular work asset by asset."
— Steven (03:54)

2. Office Bifurcation: Winners vs. Losers (04:28–11:30)

• Narrative Split:

  • Headlines show optimism in office lending (especially for trophy assets), but it's misleading to generalize this to "office as a whole.”
  • "The really high end, well-amenitized Class A stuff is not just doing better, it's doing incredible... but there's still a whole lot of that B and C stuff that's just sitting out there."
    — Lonnie (05:18)

• Trigger Events:

  • Resolution for troubled B/C offices usually contingent on maturity/default or anchor tenant loss; could take 5–10 years for full market digestion.
    — Steven (07:02–07:15)

• Deep Dive – SASB Deals with Interest Shortfalls:

  • Many large SASB office deals (e.g., Atlanta’s Peachtree Center) show sustained distress.
  • "I don't see the light at the end of the tunnel for some of these assets...Peachtree Center...has failed in CMBS two or three times now."
    — Steven (07:56)

3. CRE Lending & Interest Rate Developments (09:01–11:30)

• Rate Cut Probabilities:
  • CME FedWatch tool: rate cut expectations for December have "plummeted," with probability of hold now around 2/3.
• Consumer Inflation:
  • Persistent inflation in daily expenses has not receded as fast as expected, causing real pain on the lower end of the income spectrum.
• Potential Negative Cycle:
  • Rising delinquencies and foreclosures in consumer credit—"Once this kind of creeps up a little bit more in the socioeconomic spectrum, we can have a vicious cycle here."
    — Steven (11:14)

4. Retail Divergence: Head-to-Head Earnings (12:32–16:25)

• Retailer Results:
  • Home Depot & Lowe’s: Both cautious due to slow home sales, storms, and consumer uncertainty. Lowe’s performs better via contractor (Pro) focus.
  • Target vs TJ Maxx: Target posts weak comps and guides low; TJ Maxx beats on strong “treasure hunt” value shopping model.

Quote:

"The Target love has really moved to TJ Maxx Treasure Hunt. So the CRE takeaway: off-price retail is thriving as consumers trade down.”
— Steven (15:51)

• Investor Implications:
  • Demand for off-price retail and grocery-anchored centers remains robust. Cautious growth and remodels dominate for big-box.

5. Office Lending Spreads & Market Sentiment (21:12–27:47)

• TREP Data Insight:
  • Office CRE loan spreads (low leverage) hit 2025 lows, suggesting "growing lender confidence," at least for lower-risk assets.
  • Spread tightening reflects “lender optimism,” especially at strong locations and low LTV.

Quote:

“This trend suggests growing lender confidence in office properties, particularly at the lower risk end of the capital stack.”
— Steven (22:50)

• Key Market Stats:

  • CBRE reports Q3 office vacancy fell for the first time since 2020, led by strong leasing in tech and finance. Top-tier office performance diverges with ~11% vacancy in top 10% of buildings versus 18%+ market-wide.

• Operator POV:

  • Boston Properties CEO expects “market hit bottom in 2024,” with optimism for trophy assets and a reset in deal “basis.” Still, overbuilt segment and challenges for B/C class remain.

6. SASB Reality Checks: Office Loan Distress (28:24–37:57)

• SASB Deep Dive:
  • Office SASBs, even trophy assets, are seeing mounting interest shortfalls (examples: CXP 2022-CXP1, JPMCC 2020-MKST, Bfld 2020-EYP).
  • Senior tranches in some deals downgraded from AAA to CCC.
  • Underwriting optimism regarding capex and tenant improvements has been problematic in “turnaround” plans.

Memorable Analogy:

“Every time...the business plan will work this time, the demand's out there when really we're fooling ourselves. Demand has reset lower, period, for some of these assets.”
— Steven (37:57)

7. Market Intelligence – New Debt & Transaction Insights (41:02–47:28)

• Major Trading Alerts:
  • Manhattan: 650 Madison Ave: Appraisal cut by 20% since 2019, now in special servicing (41:41)
  • Chicago: 300 S. Riverside Plaza: Sent to special servicing, ARD triggers higher rates (43:22)
  • Baltimore: 100 East Pratt: Appraisal slashed 80%; major tenant departure, friendly foreclosure likely (45:55)

Quote:

"[100 East Pratt] tenant [T. Rowe Price] had been in place since this building was constructed in 1975... that's a fantastic headquarters run."
— Steven (46:49)

8. Retail: Struggles and Bright Spots (48:13–56:00)

• Starwood Regional Mall Portfolio:
  • $488.7M loan in special servicing due to imminent default; frequent past delinquencies, large value write-downs, occupancy at 82% (48:25)
• Lubbock, TX South Plains Mall:
  • 1.25M sf property now in special servicing, but high DSCR (1.75x), lower occupancy (80%). Strong regional draw, borrower seeking extension. (52:39)
• Market Meadows, Naperville, IL:
  • Bearings pays $54.5M ($365/sf) for nearly fully leased grocery-anchored center—robust demand persists for top-tier retail. (54:33)

Notable Quotes & Memorable Moments

• Steven on Analytical Approach:

  "Our flow state is like when you’re just in the data and you’re finding some nuance or some patterns or some things — it’s hard to go to sleep." (34:09)

• Lonnie’s Take on Office Reset:

  "These offices are viable at 50, 60% of their previous basis. They can operate at 70% occupancy and still cash flow...Class B and C offices...cannot." (36:38)

• Hayley on Industry Events:

  “Kurland...said bank appetite for New York City office hasn’t existed since pre-COVID. It’s always great to hear from people on the front lines.” (35:08)

• Lonnie on Retail’s “Renaissance”

  “It’s nice to see...an avenue for people to have access to capital and funding for some of these [high-end office] assets.” (39:32)

Additional Highlights & Listener Engagement

• Programming Notes:

  • Special Guest Episode: Interview with John Santora, CEO of WeWork, discussing the reinvention of coworking and the cyclical nature of CRE (56:00).
  • TREP Futures CRE Leaders program: Extended deadline for December 2025 grads. (56:00)
  • Custom Data and Dashboard Offerings: Listeners invited to request special dashboards, reports, or classroom resources.

• Shoutouts:

  • Trevor D. for using Trepp's data in a presentation.
  • Commendations for Spinoso Real Estate Group’s continued partnership and innovation in the mall sector.

Timestamps – Key Segments

• 00:21 – Macro/Fed Uncertainty and Impact on CRE
• 04:28 – Office Bifurcation & Market Fragmentation
• 07:02 – Timeline to Resolution for B/C Office
• 12:32 – Retail Earnings: Home Depot/Lowe’s, Target/TJ Maxx
• 21:44 – Office Lending Spread Trends & TREP Data
• 28:24 – SASB Deep Dive: Interest Shortfalls, Specific Case Studies
• 41:41 – Manhattan Office Appraisal Trigger Event
• 48:25 – Starwood Regional Mall Portfolio Loan Special Servicing
• 54:33 – Market Meadows Retail Trade
• 56:00 – Trepp Programs, Guest Podcast with WeWork CEO
• 59:32 – Reflections on Year-End & Outlook
• 62:06 – Shoutouts & Partnership News

Takeaways for Investors and CRE Stakeholders

• The commercial real estate market in late 2025 is defined by uncertainty, fragmentation, and the necessity of “granular” property-by-property risk assessment.
• Office sector optimism is largely confined to best-in-class assets and reset deals; B and C properties face a long, drawn-out resolution period.
• Retail remains split, with off-price and necessity/grocery-anchored retail strong, while malls continue to see stress and periodic loan defaults.
• Lenders and market participants must remain agile, using transparent, real-time data and benchmarking to make informed decisions in an ever-shifting market.

Listener Invitation

• Share your 2026 catchphrase: The hosts invite creative submissions for the best 2026 CRE market tagline. Send suggestions to podcastrep.com for a chance to be “podcast famous.” (61:39)
• Connect with Trepp for Custom Data, Insights, and Partnership Opportunities.

For more data and coverage, reach out to Trepp or explore the episode’s special guest interview with John Santora (WeWork) available on all major platforms.