Podcast Summary

Podcast: The TreppWire Podcast: A Commercial Real Estate Show
Episode: 369. Before Circling Back: Jobs Data, Fed Policy, CRE Strategy Featuring Ground Leases, Data Centers, Investor Trends & More
Date: December 19, 2025
Hosts/Guests: Hayley Keene, Lonnie Hendry, Steven Buschbaum (Trepp team)

Episode Overview

This episode dives into the big questions facing commercial real estate (CRE) as we close out 2025: What do the Fed’s recent rate cuts mean for financing and deal flow? How are jobs and inflation data shaping macro sentiment? The team examines investor strategies around CRE fundamentals, spotlights concerns in emerging asset classes (like data centers), and provides a timely 101 on rent concessions and economic vacancy. Rounding out the show are deal alerts—retail, office, and mall loans facing refinancing pain and value write-downs.

Key Discussion Points & Insights

1. Macro Backdrop: Fed Cuts, Jobs Data, and Market Mood

Timestamps: [00:06]–[13:35]

• “The setup right now is cautious optimism, but with a big asterisk around the data.” – Steven [01:49]
  The show opens by assessing market reaction after a third consecutive 25bp Fed funds rate cut. With rate volatility narrowing, attention is shifting to the actual effectiveness—can stable policy help unlock CRE lending and deals?

• Jobs data headline: Payrolls up by 64,000 (vs. a drop of 105,000 in October), besting expectations but with unemployment ticking up to 4.6%—the highest since Sept 2021. Healthcare drove most job gains, signaling sector-specific strength. [04:47]

• Labor data is “neutral,” but Powell’s warning of potential revisions increases uncertainty. Even small headline moves can mask larger realities.

  • “The Unrounded unemployment change, I think was an increase of 0.13%, but the way it flows through makes it look like a 20 basis point increase.” – Steven [07:20]

• Fed leadership transition, “dot plot” debate, and narrative shift toward 2026. Speculation is already building about the next Fed Chair’s policy leanings. [08:12]

• CRE translation: Narrower rate volatility is helping, but lenders remain selective. Most recent CMBS office issuance is concentrated in prime, Grade A assets. For real momentum, need “bid-ask gaps to close,” which is tied to certainty of property income (not just policy rates). [01:49]

2. Retail Sales, Consumer Behavior & CRE Implications

Timestamps: [12:13]–[14:04]

• Retail sales print is flat: Slowing since earlier in 2024, but store foot traffic, anecdotal shopping activity, and e-commerce sales appear robust during the extended Black Friday/holiday season.

  • Hayley on anecdotal strength: “Feels like all of the stores are still very busy... parking lots are full... Black Friday craze is now a month-long phenomenon.” [12:13]

• Discrepancy between “softer consumer spending” in headline data and boots-on-the-ground shopping. Ongoing question: Is demand really falling or just shifting channels/timing?

3. Alternative Asset Class Spotlight: Data Centers & Life Sciences

Timestamps: [14:04]–[23:51]

• CNBC article triggers debate: “Billionaire Real Estate Developer Waves Red Flag over Data Centers” – Market legend Fernando de Leon warns of unproven exits, rapid hardware obsolescence, and opaque lease structures. [14:49]

• Paraphrased key warning: “We haven’t seen true cycle-tested exits at scale on mega data centers. Until we do, we can’t price the exits, and with rapid tech shifts, the risk of obsolescence is real.” – Steven [14:49]

• “It’s not just the four walls and a roof that make this real estate unique. It’s what’s inside of it… really, this is maybe less about real estate and more about an infrastructure play.” – Steven [15:40]

• Big risks highlighted:

  • FOMO-driven overdevelopment, fragile funding pipelines (Oracle’s stalled $10B Michigan center), and “Swiss cheese” lease clauses giving tenants more exit-outs amid power shortages and technological shifts.
  • “If you think office or residential conversion is difficult, try converting a data center to something that’s usable outside of being a data center. It's not possible.” – Lonnie [20:02]

• Parallel to the mall ‘big box’ collapse: Technical lease clauses (like guaranteed power throughput) could unravel occupancy just like co-tenancy clauses did in retail.

  • “If you're promised a certain power load that can't be delivered, you effectively have a pretty nice out if and when that happens…” – Lonnie [22:37]

• Industry identity crisis: Is this a real estate play or an infrastructure play? The market hasn't decided.

4. Educational Segment: Rent Concessions & Economic Vacancy 101

Timestamps: [23:51]–[33:13]

• Generational gap in CRE: Many professionals have never seen a true downturn or the return of “rent concessions.” Time for a refresher.

• Definition: Concessions are incentives for tenants—free rent, reduced deposits—to lure/retain them in weak markets.

  • “I frame them as the hidden signal… by definition, they’re incentives offered to tenants… to attract or retain occupancy. They really mask rent growth.” – Lonnie [24:40]

• The math of ‘effective rent’ versus ‘market rent’:

  • If market rent is $2,000 but the tenant pays $1,850 after concessions, real rent (effective rent) is $1,850. Underwriting on false rent can blow up valuations and DSCRs.

• Economic occupancy vs. physical occupancy:

  • Even if a building is 100% physically occupied, months of free rent on new leases create “economic vacancy.” Must underwrite to actual rent received, not just space occupied.
    • “If you have market rents that are 20% higher than net effective, you’re not going to get a good NOI… Heavy concessions erode NOI and increases default risk.” – Lonnie [24:40]

• Multifamily in focus: Huge supply wave → more concessions → absorption delays.

  • “In order to entice people to lease, they’re offering them free rent or a concession. And it helps with the physical occupancy, but it doesn’t necessarily help with their economic occupancy.” – Lonnie [29:30]

• Duration and burn-off critical: Burn-off of concessions signals market equilibrium is near; some markets may need until 2027 to fully stabilize. [29:30]

• Lease negotiation advice: “I always want to take the spread out over the full year because that gives me a better starting point for renegotiation upon renewal.” – Lonnie [30:30]

• Psychology of concessions: Tenants want to “feel” they are getting a deal; sometimes ‘fake’ higher market rents with concessions net owners more than straight low rents.

5. Industry Updates & Programming Notes

Timestamps: [33:13]–[34:12], [43:37]–[50:13]

• Announcement of Trepp Connect Conference in NYC, May 6–7, 2026. Emphasis on data-driven panels and networking. [43:37]
• Shout-outs to podcast listeners with creative slogan suggestions for 2026 (e.g., “stay in the mix in 26”), Spotify Wrapped shares, and thank-yous.
• Banter on corporate “let’s circle back after the new year” clichés. [49:11]

6. Deals & Data Segment: Trading Alerts & Case Studies

Timestamps: [34:12]–[43:37]

a. Retail: Penn Square Mall Loan (Oklahoma City)

• $310M SASB mall loan has transferred to special servicing ahead of balloon maturity (Jan 2026).

• Strong net cash flow (DSCR 2.06x, occupancy 89%)—yet borrower unable to refinance. Highlights persistent liquidity gap for even performing retail assets.

• Unique ground lease: Expiring 2060, with a rent structure based on CPI or a percentage of tenant sales/rents—a rare and highly technical agreement. [34:12]

• Cash-out refi history: Of the $310M refinance in 2016, over $215M was returned to equity—a sharp contrast to current valuation challenges. [37:54]

b. Retail: Pearlridge Center Loan (Hawaii)

• $225M loan collateral’s value has been reappraised to $176.5M from $427.5M at origination.

• Nonperforming, matured balloon loan; receiver in place. Highlights dramatic value resets even for high-occupancy, cash-flowing malls. [38:40]

• Additional Hawaii news: Blackstone & DivcoWest buying Alexander & Baldwin for $2.3B—privatizing a legacy landowner. [40:16]

c. Office: 32 Avenue of the Americas (Manhattan)

• $425M office loan’s value cut from $770M (2015) to $340M (2025).
• Current, but in special servicing after an imminent balloon maturity default. Borrower extended loan by two years in exchange for new equity, tighter controls.
• Unique property angle: A key fiber-optic “meet-me room” hub; bullish long-term infrastructure value, but still not immune to near-term value writedowns. [41:05]

Notable Quotes & Memorable Moments

• On “Cautious Optimism” and Sentiment Fatigue:
  “Cautious optimism is really how we kicked off 2025… it’s time to put that one to bed and move on to something else in 2026. Maybe ‘restrained confidence’ or ‘constructive but cautious’?” – Steven [01:49]
• On Fed Uncertainty:
  “As soon as that's formally announced, you’re going to see an entire narrative created around what people's expectations are… all that will shift as soon as they know who the Fed chair is.” – Lonnie [08:12]
• On Data Center Risks:
  “If you think office or residential conversion is difficult, try converting a data center to something that’s usable outside of being a data center. It's not possible.” – Lonnie [20:02]
• On Rent Concessions:
  “They really mask rent growth. ... the more concessions in a market generally means there's an oversupply or there's softening demand, or there's competitive pressure that forces prices down.” – Lonnie [24:40]
• On Lease Structure Geekery:
  “This is when I wish that our podcast was video because you would see Steven's face light up like he just got a puppy handed to him when he's reading through the ground lease details here.” – Lonnie [36:36]

Key Timestamps for Segments

• Fed Cuts, Market Mood: [00:06]–[08:12]
• Jobs & Labor Data: [04:47]–[08:12]
• CRE Market & Lending Themes: [08:12]–[13:35]
• Retail Sales & Consumer Trends: [12:13]–[14:04]
• Data Center Debate: [14:04]–[23:51]
• Rent Concessions & Economic Vacancy 101: [23:51]–[33:13]
• Deals & Trading Alerts: [34:12]–[43:37]
• Listener Shout-Outs & Year-End Banter: [43:37]–[50:13]

Original Tone

Conversational, data-driven, sometimes irreverent: The hosts blend deep market knowledge with light banter (shots for saying “cautious optimism,” references to data nerd excitement, and playful pokes at corporate clichés).

Takeaways for CRE Professionals

• Rate cuts are only part of the solution for CRE: true deal flow requires clarity on income and tighter bid-ask spreads.
• Leverage effective rent, concessions, and economic vacancy in underwriting, especially during periods of excess supply.
• Scrutinize alternative asset classes: data centers may have hidden risks—think asset obsolescence, lease ‘outs,’ and limited reuse potential.
• Be alert to major value write-downs and refinancing risk even in healthy cash-flowing properties. Watch legacy cash-out refis and know your collateral history.
• The market continues to recalibrate, but 2026 may begin to see a ‘broadening out’ beyond prime assets to secondary markets.

For More

Visit Trepp’s website for data insights, attend the May 2026 Trepp Connect Conference in NYC, or listen to recent guest episodes (like the Mike Comparato interview) for deeper dives on specific asset classes. Questions, comments, or clever new optimism slogans? Email podcast@trepp.com.