← The TreppWire Podcast: A Commercial Real Estate Show
The TreppWire Podcast: A Commercial Real Estate Show
370. Unwrapping Commercial Real Estate Property Types in 2025: Market Surprises, Year-End Takeaways & More
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Foreign.
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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 December 26, 2025. I'm Hayley 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 we're recording and releasing this episode a little early ahead of the holiday and we hope all our listeners are getting some well deserved time with family and friends. As always, thank you for making us a part of your week, even during the busiest stretch of the season. On today's episode we're zooming out and doing a year end property type check in, looking at the biggest headlines, surprises and storylines across commercial real estate and some of the largest property sectors. We'll talk through what we saw in office, multifamily, retail and beyond and where momentum showed up in places that people may not have expected. So Steven, as we wrap up the year and look across the different property types, what themes are standing out most to you right now?
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A
Well, it really does feel like we're heading into year end with a market that's still pretty bifurcated. And honestly that's the word that I think we keep coming back to across property types and and that may have even been one of the words that we re projected would be one of the themes of the year from the end of last year. So on the holding up side, you've still got pockets of strength where fundamentals are doing a lot of the heavy lifting. So industrial demand is steadier than people expected. Multifamily looks like it's rebalancing in a healthier way after a supply wave. And parts of retail continue to surprise especially well located necessity based centers where tenant sales and leasing demand remain solid. But the softness is getting harder to ignore in a few places. And I wouldn't even say that we've been ignoring it. Maybe just trying to keep the positive more in the front of our minds. And it's not always about occupancy as much as it's about capital markets. Math higher for longer rates have really changed the refi conversation, and you can feel that pressure building in sectors where cash flow can't easily grow out of it. Office is the clearest example, but you're seeing similar stress show up in certain lodging pockets and in assets with near term rollover risk or big capex needs. If we think about some of the common threads that we See from our refi delinquency headlines from this year, near term rollover risk was probably one of the most common hurdles that these properties faced. The other big theme is that distress is becoming more idiosyncratic. It's less about this entire sector is broken and more about this specific asset in this market where with this sponsor and this basis is in trouble. And that's why delinquency and cure stories matter so much right now. It's not just the totals, but where the new problems are coming from and what's actually working when loans do get resolved. So heading into 2026, I'm watching two things closely. First, which sectors can keep producing durable noi growth versus just treading water? And second, how quickly will the market clear around valuations refinancing? Because that's what's going to determine whether we stay in this slow grind or if it turns into something more abrupt in certain sector.
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C
Yeah, I think those are all valid points, Steven. And I would argue that that's not too dissimilar than what we would see in kind of a normal market cycle at this point. I mean, I think if you remove all the headlines and you look at just what's taken place thus far in 2025, you have a higher interest rate environment. It puts downward pressure on valuations, puts more pressure on rent growth. I mean we saw a lot of multifamily deals trade at negative leverage on the going in cap rate expense pressure has been immense. And so growing in OI has been a challenge, especially when top line rent growth has been muted. But it does still create opportunities. As you mentioned, there's been some very resilient property sectors. There's been this more clearly defined delineation across the haves and the have nots. And for the haves you could argue they've had. I mean if you look at the Class A office, we're going to talk about it at some point today in these major markets, I mean they're pushing rents at some of these locations to record setting rental rates. From their perspective, 2025 has been a banner year. If you're in the have nots, the refi risk, the rollover, the maturities, all of those things are problematic. I think there's a higher percentage of properties that fall into that category now than maybe in a regular cycle. But on the whole it's not like I think this is how the market functions at a place where new buyers can come in with opportunistic outlooks and try to reposition some of these assets. So I'm actually optimistic that we survived 25 the way that we did. And we'll talk again a little bit about issuance. We've been laboring on that for a while. There were a lot of really positive takeaways for 2025 that I think set us up for a fruitful 2026 despite some of the challenges. You know, and it's, this is all under the backdrop. You know, we've seen the Fed take their action, we've talked about that, we've seen what's happened with trickle down effects from that. But I don't know if you saw this latest third quarter GDP print that came in, that came in at 4.3% annualized, which is well above the 3.3% economists had forecast. It's interesting this, this upside surprise, bad signals, stronger economy with a backdrop that's heading into the year that's favorable. You know, markets I think reacted fairly swift, swiftly. Treasury yields pushed up and futures trimmed expectations for near term Fed cuts. If you look at January, Fed cut percentage is in the mid teens for cre. It's a classic what we would call double edged sword. You know, the robust growth supports tenant demand, occupancy and cash flow stability and especially across some of these sectors that you mentioned, industrial, retail, multifamily. On the other hand, you know, the pressures that you outline, the higher for longer rate environment keeps refinancing risk elevated and continues to put downward pressure on valuation as we approach 2026. So elevated borrowing costs continue to challenge, you know, properties that are highly leveraged. It widens the bid ask spread even as fundamentals potentially improve across some of those segments. So you know, I think the takeaways for me heading into 26 based on some of this GDP print that we got was there's going to be a selective strength and resilient sectors. And this fits the theme we've talked about in this year. Logistics data centers, grocery anchored retail probably set up for continued growth. You know, capital discipline. Steven, you've been harping on this for the last two or three months in your intros. Pretty much every week remains critical. Floating rate borrowers face the most stress and then I think you have to watch for this uptick in distress driven opportunities as these continued refinancing windows tighten. So I would maybe, I know we're going to do some predictions next week, but just maybe tease something out there. I think the CRE distress that we've all talked about since 2020 actually starts to take shape here in 2026 and I think for the reasons you outlined, coupled with the fact that there are a lot of investors sitting on the sidelines, hungry, hungry to deploy capital, we actually start to see the logjam break and some of these opportunistic deals start to take shape.
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Yeah, in particular, I'd be really interested to see what happens in the banking sector. We've only seen really what I would call very selective loan sales take place. So far, not nearly as many as we had thought could happen in 2025. So I'll be curious to see if this continues to play out where we see kind of stubbornness in the banking sector to let go and more of a selective sale or maybe if you see a broadening out, I don't know, I feel like it's probably going to to trend toward the same as 2025, but only time will tell.
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C
You know, it's interesting, we had Mike C. On a couple of weeks ago for one of our guest podcast even. He was talking about how they had a very small concentration in office lending on their books. And I know you did an analysis about a year ago, maybe, maybe 15 months ago at this point on the top 100 bank holding companies and their composition and it was around 20% or so was office. And then of that 20% I think there was maybe 20 or 25% that were non performing. So it's just really interesting like you know, maybe these private lenders are holding some of these bad office deals because it feels like if you look at the publicly traded, you know, banks, they've pretty much cleaned up their office exposure. But we know that there's still a lot of office in that and that have not category that are going to have to be dealt with. So you know, you've definitely seen the REITs maybe take a little more aggressive position on some of their assets. But some of these non traditional lender types might be where you start seeing some real movement. I think in 2026 in the outline.
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You just shared what I saw and this is just off the top of my head, but outside of the top, call it 10 to 15 largest banks. A majority of bank office exposure really was in suburban and medical office. You didn't see too much of it in the urban sector. And if you think of it in part, once you get outside of those large banks, some of those larger urban office loans probably are too large for these banks to take down as an individual loan exp exposure. And then when you think about, okay, who's winning that business syndicating those Larger urban office loans may not make sense or be as competitive of a loan offer as say, some of the larger insurance companies who also have fairly sizable Siri books. So if I had to take a stab in the dark at where some of the non CMBS urban office loans are hiding, like whose balance sheets are they on? I suspect a decent percentage of them might be on life insurer portfolios.
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C
Yeah, I think you're right with that. The, the one saving grace there is that that typical loan profile is, you know, at an LTV that you'd have to see, you know, more than the type of decline in value that we've seen for those life codes to be in a position where they'd have to, you know, make some sort of loss decision. It feels like, you know, they're ultra conservative relative to the other lending sources in most cases. But you know, I think this is definitely something that we haven't seen play out yet amidst all the headlines. It's ripe for something to kind of poke its head out in 2026 and for us to see like, you know, what is the temperature check here? I agree with you. I think given the muted nature of non performing loan sales in 25, you know, given where we're at in the macro, 2026 sets itself up for some really great opportunities. And listen, you and I both know we talk to clients all the time. People have been so hungry for these non performing deals and they've gotten frustrated that they haven't been able to transact because nobody's been willing to kind of pull the trigger yet. And I think, you know, hopefully the dam breaks a little here and we start to see a little bit more activity in this regard because it does feel like, listen, if you've extended and pretended twice at this point, I mean the current constraints are probably not going to change to a level where that office goes under the current, current, you know, loan terms or agreement or with the current lender. I'm hopeful that the natural part of this cycle gets to play itself out. We start seeing some deals increase and I think that's actually what's probably necessary to create a smaller divide and the bifurcation. Because once you get some of these assets to trade at a new basis, then they put the capex into them and they do the things they need to do to get them into the halves category.
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Yeah, one thing I suspect we'll see a lot of in 2026 will be creativity. Creativity and capital structure and business plan. Ultimately in this sort of a scenario, I mean, this is really where the deep thinkers can shine.
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C
Right.
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And I'm hoping that like you said, Lonnie, these life insurers that have some of these full up office loans on their books or whoever holds them, that they've underwritten them to maybe like a 60% occupancy break even basis so that they're not cash flow negative in many cases, but they're certainly not going to refi out. And so once we can, like you said, set a new basis in the property, finally we can start on the next growth cycle.
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So let's talk about some of the property types specifically. We know the office had another year of big headlines in 2025, but maybe you guys can walk through some of the stories that surprised you this year, the trends or maybe the markets that you saw activity in that was surprising for the narrative around office.
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C
Yeah. So Stephen, I'll jump in on this one if you don't mind. Let me throw out a couple of these markets and you give me your perspective and then I'll tell you what I was able to pull up, given what we've talked about this year. So if I were to say New York City office 2025, give me your thoughts.
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Creme de la creme. Gold star.
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C
That's what the data says. Yeah, yeah. Double A, right? Double diamond gold star. We had definite uptick in activity in New York. This is probably the biggest market where you have the haves and the have nots. And you saw an incredible amount of leasing transaction activity. You saw an incredible amount of sales transaction activity. We saw our first billion dollar trade in three years. If you look at overall sales volumes, they're basically at pre pandemic levels. You had Scott Rechler's rxr, which, you know, had been, you know, feeling a lot of pressure on the, on the downside, take some pretty swift action, recapitalize multiple buildings, make a lot of different deals. You know, a lot of really positive activity. You saw $1.4 billion CMBS loan for 11 Madison SL Green. And PJM closed a $1.4 billion CMBS refinancing of that, of that building in the Flatiron District. You had Tishman Spire with the Spiral. And we could go on and on. I mean there were, you know, almost 20 billion, I think, worth of office originations, refinance or, you know, deals in New York City in the CMBS market alone. So creme de la creme, I think is a really apt banner and I think we're set up for continuation there. I mean, I'VE seen all the pictures over the last couple of weeks online of people talking about how the city is back. I mean, it looks like the sidewalks are packed, even the high street retail feels like it's made a pretty strong comeback. And it feels like New York City has definitely turned the corner.
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A
Yeah, absolutely. And that's, that's what we want to see because ultimately you have so many decision makers and so much capital deployed from that city that when the environment itself has turned a corner and is feeling more positive, that really does make a difference in people's mindset.
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C
Yeah, I agree with you. It's a barometer for just the broader marketplace. So let's, let's throw a little trickier one out there. That was maybe a little softball question, you know, right down the middle here. Let's see if I can give you a little change up here. What about San Francisco office?
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Well, if I was in 24, I would have grimaced. But if I think back to what we had said at the end of 2024 about where some of the upside was going to lie, I'm, I'm optimistic, but hit me with the stats.
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C
Yep. So let's see. San Francisco, driven predominantly by AI, saw a huge resurgence in the tech boom. So unexpected leasing momentum to the positive. We saw the best year in office leasing in 2025, since 2019. And so you saw about 10.2 million square feet of leases signed. Now, when I say tech AI firms drove 25% of all deals and accounted for over 80% of newly leased space. One of the notable space deals was a 257,000 square foot lease with Sierra AI as the year's largest lease transaction. That came from San Francisco Chronicle. So they, they brought a new mayor in. You know, we talked at some level about the surprise. They had the highest level multifamily delinquency, but they also had the highest rent growth in the nation. I don't know if they still hold that banner today, but they're, they're definitely in the positive territory on multifamily due to some quality of life changes that they've started implementing, which has translated to guess what? Stronger office appeal. And you know, I think the AI boom, we've, we spent a lot of time talking about data centers and all of the stuff related to that, but these folks also need office space and they, they've been taking it down to pretty large clips. And so I think for San Francisco, I don't think we should sugarcoat it in the sense that like San Francisco is back to pre pandemic as a, as a market, because there's still a lot of things that need to get worked out in San Francisco. But to your point, given where we were a couple years ago, compared to where we're at today, San Francisco is definitely back on the upward trajectory.
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Yeah, let me just highlight that stat again, because the skewness in this data and the leasing data is nuts. So think about this for a second. 25% of all deals, so on a deal count basis, AI was 25% of volume, but on a leased square footage basis, over 80%. I mean, the skewness in that is massive. Absolutely phenomenal.
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C
Yeah, that's. It's. And it's funny because I think Back to like 2020, 2021, when we started seeing Facebook and Google and all these people just like taking down massive amounts of space. And we didn't understand why they were leasing when everyone was working from home. And for a lot of them, it turned out to be negative. They had to sublease the space or they walked away from leases or whatever. And then as we kind of come out of some of these downturn components of the cycle, you're seeing tech play such a huge role again. I mean, I think for me, our economy almost is at some level bifurcated. Right. I mean, you have the magnificent seven that are kind of driving the overall economy, and that definitely has some direct trickle down into the CRE space. To your point. I mean, when you're seeing 80% of this space, you know, being part of an AI firm or whatever, it's pretty incredible. Now, that definitely creates concentration, risk. San Francisco's, you know, very well versed in that. They're, they're part of that ecosystem like we've seen in Houston and other markets where you have kind of a single economic driver. But I think for them, the future looks pretty bright if they can continue to kind of clean up some of the stuff that was, you know, preventing retailers from operating and preventing people from feeling safe. A couple of the larger hotels that went into foreclosure this year, I think have come back on the market. They're trying to get them off the books. I saw a listing for them just this last week. So you get those to trade out, you get some people to put some capital back in, you maybe get some of these retailers, Whole Foods and others that vacated those, those markets to come back. And here in the next couple of years, San Francisco comes back looking like San Francisco that we're all accustomed to.
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Let's hope so, because the international travel. If you think about like how leisure hospitality is performed, that that has got to be really rough. But at the same time, I mean you get back to basis and there were some players that were kind of optimistic about, you know, where they could position themselves for the next 10 years. Buying up some heavily stressed or distressed lodging properties, repositioning them and you know, getting in a low enough basis that you can weather the say three to five years, which is ultimately what it's going to take.
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C
You know, I think we're finally at that point where the well capitalized long term hold investors are going to make these once in a lifetime investments in some of these cities. You know, we talk about CRE from a week to week perspective and week to week sometimes the narrative doesn't change that much or it's hard to kind of see through the fog. But at the end of the day I'm not betting against New York, San Francisco, Chicago, full stop. And I think we've both been on record saying the same and it feels like you started seeing enough green shoots out of some of these markets that the time is now. If you wait too much longer, you're going to be past the, too far past the trough and you're not going to be getting the lifetime bargain stuff that you're getting today. So let's transition to the last market we wanted to cover, which I think you know, is just as integral and as important to our overall, you know, CRE ecosystem. That's Chicago. And I think this is the one for me maybe is not quite as clear cut. I mean I think New York is obviously positive. San Francisco I would say overall neutral, but a lot of really positive signs. Chicago, there's been a few things that maybe start showing themselves as positive but on the whole I don't think we're quite there yet. But I want to get your perspective.
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A
Yeah, if I'm thinking Chicago, I'm dipping a toe and kind of squinting one eye.
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C
So let's talk a little bit about some of the, the deals, you know, we've started to see similar to San Francisco, that some of these office deals have finally, you know, I guess we could call it thawed in 2025. You know, we saw noteworthy amount of leases and sales in 25. So let me give you a couple of the transactions here Stephen, that kind of highlight the, the narrative. So you saw 600 West Chicago trade first quarter, 88.6 million, 1.6 million square foot building. You saw 190 South LaSalle, South LaSalle, a trade at 55 million in Q4. That was Namdar Realty Group. Beacon Capital Partners was the seller. We've highlighted that one. This one was a huge, you know, noteworthy story in the sense that the discount on this one was significant. I mean, it was about 167.5 million. What the lenders had as the appraised value. It traded for 55 million. Here's another office, Stephen. 125 South Wacker. 51.5 million. Q4 transaction. Monash Properties was the buyer. 640,000 square foot. Interesting. This was the second Chicago office buy in many years. So CEO Jordan Monash had told BizNow at the time that he sees the market improving as well as opportunity to capture market share with an aggressive focus on spec suites. So I think that's an example of where we're saying there's some positive stories coming out. But in Chicago, much like what we've seen in New York, I mean, that office market and retail market is so large that you need more than, you know, 10 or 15 anecdotal deals to kind of see the momentum shift. So it's positive in the sense that we have enough documented transaction data to say, yes, 2025 was certainly a turning point. What I think we're missing is the inertia to get to critical mass here to say that 2025 kind of has set Chicago up for, you know, continued growth. I think we're still in that kind of iffy phase where, you know, you might see a couple more distressed deals not being able to trade. You're going to see a lot of additional offices not be able to refinance. They still have, unlike New York, the, you know, ground floor retail has not come back in Chicago like it has in New York. So there's a lot more to kind of work. There's a lot of political unrest. It feels like in Chicago. I would give this one kind of a neutral, with maybe a slight bend towards positive in the LATTER Part of 2026, if we were looking at a little bit.
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A
Yeah, I mean, Chicago, I'm going to be very, very cautious on this one, just to be perfectly honest, because the budget projections for the shortfall in 2026 make me very, very nervous. If I'm an institutional investor, I think it's over a $1 billion shortfall projected for 26. So what that could mean on the tax side, there's just some headwinds here that you want to be cognizant of and very strategic and planning around, you.
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C
Know, you did you see that story where they, they like sold off their parking revenue like it was either the parking meter or the parking ticket or something like billions of dollars. They like during COVID I guess they were also on a similar budget constraint, so they went ahead and like sold that for a lump sum. And then effectively, like the annual revenue from those sources, like, is almost equivalent to what they were paid for the entire thing. And it' some of these cities, it's, you know, we talk about this in our classes, Stephen and I kind of belabor the point at some level with the students that as much as real estate operators, as much as lenders, as much as practitioners in the space want real estate to be just about the bricks and the sticks, they just want real estate to be about the fundamentals, the supply and demand imbalance, the, the economics that drive value. There are so many other things that actually positively or negatively impact a local marketplace. So, you know, there's this concept of pegs, you know, an acronym you, we love our acronym. So physical, economic, government and social that can impact value. The G for government also can be part of police power, right? Which is effectively zoning. And that's the one that everyone uses in their classes. And that's the one everyone understands like, okay, well how does the government impact valuation directly or supply and demand? Well, it's through zoning. But this is an example of another government action that puts immense pressure on the budget, which puts immense pressure on CRE operators. Because guess who generally is the largest taxpayer across most municipal government budgets. Commercial real estate owners.
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While the market chases the next digital trend, smart investors are rediscovering opportunity in something real. Cash flowing assets built for scale and durability. Spinoso Real Estate Group is the nation's leading privately held operator of enclosed shopping malls, partnering with institutional and family office investors to acquire undervalued centers and unlock alpha through data, precision leasing and operational excellence. Spinoso Real Estate Group Investing in performance, not perception. Visit spinoso reg.com to learn more. So talk to me about the multifamily and apartment market. We know housing has been a big topic in the year of 2025. There are new policies, there's new discussions about rent and affordable housing. So walk us through what the year looked like for the apartment market.
- [24:59]
A
Yeah, we entered 2025 with probably one of the most common headlines we all have seen is home affordability. Both from the rental side and from the owner occupant side. Housing costs have been absolutely breaking the back of so many Americans. But to counter that cost, we've also seen a record AM amount of multifamily supply coming online. And ultimately that's what's been really kind of dominating the headlines throughout 2025 is for, you know, one reason or another, we're continuing to see housing affordability, right size, not to say it's right sized yet, but the scales are shifting back in favor of owners and renters. Of course that comes to the detriment of others oftentimes. So While we enter 2025 with a firmer footing than in prior years, rental housing operators have continued to report ongoing uncertainty and challenges tied to elevated interest rates, continued operating cost pressure, and countering that supply wave that we've seen being added to markets on the owner occupant side, high mortgage rates and shifts in Fed policy have continued to drive more Americans toward renting instead of buying, influencing apartment demand, long term multifamily fundamentals. However, we're also seeing some regulation being enacted that maybe will help to counter some of that cost pressure. So the Road to Housing act is a comprehensive housing bill that's combining market based tools with government programs that's aiming to boost housing supply, including rental units. Though its final passage and impact are still being debated. And then on a micro market basis, one of probably the most talked about headlines this year has been the New York City narrative and that New York real estate leaders are actively responding to of incoming Mayor Mamdani's proposed rent freeze for 2026 by reshaping the city's rent guidelines board, a move with big implications for rent stabilized multifamily properties and investor returns. So that's going to be certainly one of the major markets that we'll continue to watch in 2026 to see how this policy is actually shaping the rent growth projections and valuations. Because heaven knows we need more affordable housing in New York City. The big question is how best do we achieve that without impairing the greater good?
- [27:27]
C
I can tell you how we don't achieve that. Rent control, rent stabilization failed a hundred times, maybe a thousand times, maybe it fails every time. All that does is create an incentive, a disincentive to continue to build new units. I mean, affordability is driven by availability and availability is driven by supply. I mean, that's what we've seen. We've documented multiple times just how incredibly strong rent growth was in the multifamily sector, leading to, you know, 1.3, 1.4 million new units delivered in about a three year period. And guess what happened to rent growth? It abated pretty much across the nation and rents came down and made them, you know, still elevated, but more affordable. I think, you know, I get super nervous and it goes back to my discussion just a moment ago with the Chicago revenue deficit or budget deficit is, you know, the government can't fix some of these things through these broad brush initiatives. And I think this will be a story as we continue to monitor multifamily that's going to really shape to shape the next 20 years of US multifamily development and construction. If some of these rent stabilized, rent control regulation statutes, whatever you want to call them, start being implemented more broadly across the US it's going to have negative consequences for us. On the flip side, you have a new presidential administration that said here in the first part of 2026 that housing affordability was going to be their number one or number one focused item. They haven't really given any color on what they're planning to do to address it. But I'm hoping, you know, in President Trump's first term, they created the opportunity zones. They've got those as permanent structures in law. At this point, you're starting to see a lot of uptake in opportunity zone development, including a lot of multifamily. Our friend Barrett L. In Dallas has really mastered this. So if you want to know how or what opportunity zone investing looks like, especially in multifamily, you should give him a follow on Twitter because he has kind of written the roadmap for how to do this. But I think you'll see something similar to that, or I'm hoping we'll see something similar to that that actually spurs development. Now, the challenge with those types of initiatives is we have local control in most places and it's really hard to kind of overtake local control. And if they don't want new development, they don't have new development. And so, so I think this is a topic that will continue to get people elected for a very long time because they all, you know, spout solutions, but none of them actually enact anything that creates affordability. But at some level, we've hit critical mass with, you know, going back to our word of the day, it feels like bifurcation. You have people that have owned property that are in a very good position because of the zero interest rate policy for five years. They've seen huge increases in their equity in their properties. And then you have others that are kind of priced out at this point, and even renting for them has become unaffordable in most major cities. So I, I'm hopeful we can get some reconciliation here because we have to. Now for large scale operators, it's not been all negative for them. I mean you saw Cortland, they, they bought out ELM Communities about $1.6 billion transaction, 5,800 unit portfolio this year, one of the largest portfolio trades of the year. It had multiple markets. I think this is a really strong sign for capital confidence. And like bulk multifamily acquisitions. You had Naftali Group out of New York city with a $810 million purchase that was the largest single deal in Q3 of 25. They bought 800 Fifth Avenue in Manhattan for about 810 million, which Stephen, get this equates to nearly 3.9 million per unit. High end multifamily is a land of its own. I mean it's, it's, there's no limit to what people are willing to pay on the high end side in the New York City marketplace. It's really remarkable to see, especially as someone that, you know, you and I are similar, that we have this like Sunbelt, Georgia, Texas perspective. You know, as we approach some of these things. 3.9 million per unit is just. My brain has a hard time fathoming that. And then you had JLL brokering a national multifamily portfolio for 1.1 billion. It was a 15 property portfolio transaction, which again was one of the largest deals in 2025. I think what this shows is just that people are doing a couple of things. They want to get some geographic diversification, I think for some of this downside risk of rent control and some of these other governmental overreach. At the same time, they know, as our friend Sam Tenenbaum said when he joined us on the podcast, multifamily is the only needs based asset. And as such, regardless of how difficult it may get, there's always going to be some level of demand that's predicated just because people have to have a place to live.
- [31:58]
A
That's right. Let us not forget that occupancy rates increased following the 2008 crisis.
- [32:04]
C
Yeah. And you're going to continue to see that. Especially if what we're suggesting with some of these non performing deals and other things actually start trading out and people take losses. That negative pressure, even if it's not someone invested in a, in a residential deal puts a squeeze on what they can spend and you start seeing foreclosures increase on the residential side. We haven't talked in the last couple of weeks around residential, but listen, just go to go to any of the residential listing sites and pull up a major market zip code and look at how many properties are listed for sale and look at how many properties have had a price cut and look at how many properties have been on the market longer than 100 days. I think people are underestimating how challenged the residential real estate market actually is. And as soon as you start seeing some foreclosures go up, now this is still against the backdrop of GDP at 4 plus percent. So I mean, it's like my eyes are seeing one thing, I'm reading other things and it's just really hard to connect the dots at some level. But if and when the shoe drops on some of this residential stuff, it's going to force people into rentership. And, and you're going to see, as you said, after 08 occupancies went up and I think you'll see the same thing here, even with really high rental rates.
- [33:11]
A
Yeah, and this is what really stretches my brain is do you think about the way the Fed measures inflation? I mean, regardless of what benchmark we're going to use, really what we're probably seeing in the numbers is more to do with housing costs in 2023 than housing costs in 2025, let alone what that should mean for policy in 2026. So if our measure for inflation is overstating inflation to a pretty strong degree because we've so badly mismeasured housing inflation, which we all know is dramatically lower today than what our inflation numbers are telling us, that means that real GDP is even higher. Right. So that means that US growth in real terms is ultimately stronger than even what this already strong headline tells us. And you know, when you think about what is that, well then what should that mean for policy and rates going forward? Man, we have a very messy situation on our hands.
- [34:06]
C
Yeah, it's, there's certain times in life where you're excited about the position you're in and that's kind of where I'm at here. I like talking about all these challenges and I like talking about what the data tells us. I'm thankful I don't have to be in the decision making seat on some of these things because there are complex challenges with multiple inputs suggesting multiple different outcomes. And so rectifying or reconciling that is going to be a challenging task for all involved. But again, it's, it's, it's just really interesting to see the dynamics here in the multifamily sector in terms of there's still a very strong bull you know, perspective on the sector. But there are some huge storm clouds brewing and we have documented examples of where, you know, over reliance on government intervention really negatively impacts the marketplace. And so, you know, if I was looking at 2026 for New York again, this would be something we probably discuss next week. But the city council just passed the COPPA regulation, which we talked about on one of our Market Pulse webinars with our friend Seth Glasser, which effectively means if you want to sell your multifamily property, you have to take it out to market and give the local nonprofits the ability to purchase the property first. They have a, basically a right of first refusal. And then even once you get an offer that's maybe free market, I believe you have to take it back to them and see if they want to transact at that price. So it's, it adds a layer of complexity, it adds a layer of delay, it adds a whole lot of nuance to transacting on New York multifamily in the upcoming year. So we'll see how those impositions like really impact the, the market viability. Because if you're an investor, why wouldn't you just go, you know, across the river to the next market and maybe buy a property where people commute into the city anyways? You still have some rent driver capabilities like push rents. You don't get all the headaches that come with being in the city.
- [35:55]
B
Okay, let's move over here to retail. We had a lot of headlines in that sector this year from shifting consumer interest demand, AI tools popping up in E commerce. Are people going to the mall. Walk us through what you guys have taken away from the retail market in 2025.
- [36:17]
A
Yeah, the retail sector has continued to show both some signs of stress and distress with some retail bankruptcies and closures, but also insatiable demand for the well located, heavy foot traffic core end demand segments. So as an example of just how much capital has flowed in to some of the better performing sectors, Big 5 Property Group and Equity Street Capital announced a $1.2 billion retail property investment fund that bundles open air shopping centers across multiple Sunbelt states. Supported by 765 million in financing. These kinds of institutional retail funds show strategic allocation into the sector, not just opportunistic deals. And then private equity real estate had a headline about why Ares Goldman and Blackstone are charging back into retail real estate. In early 2025, Ares Management and Goldman Sachs Asset Management backed a massive $1.8 billion portfolio acquisition of about 100 U.S. shopping originally owned by publicly traded Global Net Lease. That wasn't a small roll up. It's a national portfolio of neighborhood retail and grocery anchored centers. The deal is being executed through retail specialist RCG Ventures. Showing private capital isn't just buying isolated trophy malls, but core neighborhood assets at scale. And that signals institutional conviction that certain retail formats, especially necessity anchored centers and community shopping, remain resilient and investable after years of capital flight. But as I mentioned just a moment ago, there's been also a wave of retail bankruptcies and closures that shows it's not all rosy and healthy consumer spending. This year we've seen a number of bankruptcies and closures. We had Joanne Fabrics, who filed for Chapter 11 for the second time back in January and fully liquidated by May, closing approximately 800 stores. We had Forever 21 who filed in March and shuttered over 300 US stores, citing fierce competition from E commerce players like Shen. Then you also had Rite Aid, grappling with macro pressures, filed its second bankruptcy back in May and has since closed all remaining locations. And then you also had some chains like Claire's at Home and Party City, who also entered bankruptcy in 2025, triggering widespread store liquidations or closures. Now, at the macro scale, this stat shocked me. Lonnie industry Tracker Coresight projected 15,000 US store closures in 2025 with only 5,800 openings, highlighting a net reduction and accelerating structural decline in brick and mortar retail. So, I mean, we've really seen on a dollar weighted basis, more of the positive headlines. But underneath the surface, it's hard to deny that stat. And it takes me back to a comment you made about one of the, the C suite executives at Amazon projecting that 80% of all retail commerce would be conducted online at some point in the future.
- [39:31]
C
Yeah, I'm, I'm still bullish on the brick and mortar though. Like I, I know that headline in that stat, you know, should it actually play out that way, is, is a net negative. But it feels like the party city, the Joanne fabric in every instance, the bed bath. And beyond those spaces, the big lots of bankruptcy, like they all backfilled almost immediately now in terrible locations where retail probably isn't the highest and best use at this point. There might be some demographic shifts or some traffic pattern shifts or things that drive, you know, retail to being less of a highest and best use. Sure, those, those sites are still sitting vacant, but you know, I've seen just in my local market, you know, big lots go out and Planet Fitness backfill the space almost Immediately Party City go out. Boot Barn, backfill the space almost immediately. Bed, Bath and Beyond go out. And Burlington Code Factory backfill the space almost immediately. So it feels like you're still seeing a lot of new openings. Maybe not net new buildings, but just new tenants in older spaces being reconfigured to their needs. You're also seeing things like Barnes and Noble opening new stores. So I, I think you're always going to have. We've seen this with office now for the last five years. Like we're over office in the U.S. i think we're still probably at some level over retailed in the US on the whole. But it feels like there's for every one of these fledgling companies that files bankruptcy and is no longer viable, there's been someone able to backfill those spaces and grow their portfolio and footprint. I did want to highlight one major story in the retail sector, Steven. I don't know if you saw this one. It got some pretty big buzz here in Texas because of what it is. But the North park center mall nodded in 2025 maybe.
- [41:09]
A
I saw that one. Refresh me on that one.
- [41:11]
C
$900 million loans. So for those that don't know, North park center is probably like the nicest shopping mall. It definitely is the nicest shopping mall in the North Texas region. It's probably North park center and maybe Houston Galleria. If you were to look at the two side by side in terms of just impact to the local economy and kind of tenant mix, et cetera, et cetera. North park center is in, you know, the very high income, high net worth locations in the, the Dallas metro. It's a double A Mall, has over 10.4 million annual visits and it's incredible. Let me just throw a couple of stats out here for maybe those that don't know. For the super high end, you know, luxury retail mall. Steven, what do you think inline sales per square foot would, would be?
- [41:55]
A
There's going to be something ridiculous like 1700.
- [41:58]
C
They're actually really close. This comes in just around $1600 a square foot. Hey.
- [42:03]
B
Oh.
- [42:04]
C
Which is unheard of. I mean this is one of the, a very small number of retailers that actually have annual sales in excess of a billion dollars every year going back to 2014, with the only exception being 2020 with COVID You want to talk about strong anchor tenants. Neiman Marcus, Nordstrom, Macy's, Dillard's, eataly. There's a 15 screen AMC. All of those, you know, produce significant sales per square foot. So we have A lot of details. There's a lot of information on this. I could spend, we could spend an entire episode on this. But if you wanted to look at it, you know, appraised value on this property, it's 1.9 million square feet at time of origination was 1, just over 1.6 billion. And you know what's interesting about that is it equates to a loan to value on this asset at about 74% with an appraised value per square foot of just under $900 per square foot. So given what you just talked about with retail on the whole, is this just an anomaly based on geographic location and the, you know, the demographics that surround them all and what drive the optimism? Or does even this super high end asset cause some concern when you see it being financed at a 74% LTV?
- [43:23]
A
I don't know. For me, this highlights part of my, my core rationale for pushing back on that 80% E commerce stat from AM I say we're social human beings. We have this drive, this want to get out and socialize and be around other people. Maybe not all the time, but at least on occasion. And when we do so, we want to visit the nice places like this.
- [43:44]
C
Right.
- [43:45]
A
If I'm going out to eat, I want to do something that I can't get at home, like go to Italy. So yeah, I mean, I can get behind some of these numbers, but gosh, at 1700 in sales and a 74, 75% LTV, the bear in me comes out to play. And I think there's maybe more downside than upside for this type of a deal. But I still get the numbers. I understand it, it makes sense.
- [44:12]
C
Yeah. You know, and it's, look on the, on the, the $900 million first mortgage, it's about a 55% LTV. But when you add in the mez pieces, that's where you get to total, you know, encumbered LTV at about 74%. So, you know, this has a couple of additional mass pieces. You know, sponsors put in about 55 million in equity on this deal. So it's kind of an interesting one of one. I, I agree with you. I think if you look at this, this, this location is, it's something that will survive. I mean, the tenant roster, the people that shop there. I've been out there a few times. I, I definitely don't fit in. When I go to this mall. I've only been there maybe three or four times in my life. But you walk in and they're like, what's this Fort Worth boy doing out here in Dallas? Like, I don't really fit in. I don't shop at any of the shops. But it's a cool, you know, weekend thing. Take the kids out there and let them do a little bit of window shopping.
- [45:02]
A
Not in the market for some, you know, high end stingray cowboy boots?
- [45:07]
C
No, I. It's. I mean, Haley, like, do you. Not to put you on the spot, but kind of to put you on the spot. I mean, like these Neiman Marcus. You go to Neiman Marcus and buy some clothes in there. I mean, I went in there one time just like, like, I think I was trying to find the restroom, looked at a couple price tag. Do people actually pay that much for like a shirt and some pants?
- [45:29]
B
People do. I do not. But yes, people do.
- [45:33]
C
And then I went into that Italy one time, right? And so like, I, I will say, like, this is a limitation on just on me and like the person I am. Like, Italy is incredible, but it was, it's like so overkill for me. I'm like, do you have just like a chicken noodle soup or like just a ham and cheese sandwich with just bread? Ham and cheese only. And they have like all this, like, like gourmet cuisine. And these people are like mixing stuff up. It's like really awesome. But like, it has no value for me because I don't, I don't partake in any of that finer, finer foods.
- [45:59]
B
You're not a foodie?
- [46:01]
C
No.
- [46:02]
A
I can see Lonnie going up to the counter. Can I get that chicken soup without the shaved truffle? And the chef behind the counter looks at him with scorn. No soup for you.
- [46:14]
B
Okay, guys, so talk to me about lodging and hotels. I know, Lonnie, you make a lot of jokes about hotels because you're always on an airplane traveling. You've seen some this year that maybe didn't have the same amenities that you were expecting. We're seeing a shift in demand for leisure stays versus business stays. Walk us through a quick hit, guys, on what is happening in the hotel market and what we saw in 2025.
- [46:40]
A
Yeah, 2025 was more about sector balance rather than breakout growth. As you mentioned, steady fundamentals, tempered investment activity and uneven rec markets really shape the lodging narrative heading into 2026. So just at a high line, some of the themes we had were a recalibrating market where deal volume overall softened but smaller and mid market transactions showed some ongoing confidence. You had diverse performance by geography with some urban and leisure hubs outperforming while business travel recovery lagged in some secondary markets, you had some pricing resilience with ADRS and Revpar remaining above pre pandemic levels. In many areas though growth was modest. And then we had investor caution with opportunities. Capital was selective, chasing strong fundamentals, hotel repositioning plays and lifestyle or luxury gains. So here's some of the biggest headlines we had from 2025 Hyatt's $2.6 billion acquisition of Playa Hotels and Resorts Hyatt agreed to buy playa for 2.6 billion including debt to scale its all inclusive footprint in the Mexico and region. Next we had Hyatt flips Playa's own real estate in a $2 billion deal. Hyatt said it would sell Playa's real estate portfolio to Tortuga for 2 billion and keep long term management agreements Classic own less, manage more. Then we had a junk fee and total price transparency crackdown which hit lodging effective May 12, 2025, the FTC's rule on unfair or deceptive fees took effect for short term lodging targeting bait and switch total price practices. On a similar note, you had hidden fee enforcement got real money behind it. You had a Texas and Booking Holdings $9.5 million settlement hit. In August of 2025, Booking.com's parent agreed to pay 9.5 million, described as the largest such state settlement tied to alleged junk fee disclosures which signaled tougher compliance expectations across OTAs and hotels. And then finally capital markets plus a credit pulse 800 million Vegas preferred equity deal was struck while Lodging CMBS delinquencies ticked up. Realty Income agreed to a $800 million preferred equity investment in City Center's Aria Vidara, about 5,500 rooms plus major convention space, a marquee example of institutional capital still picking spots. At the same time our trip November CMBS data showed lodging delinquency rising to 6.17% which was up 10 basis points on a month over month basis even as the overall CMBS delinquency fell. So heading into 2026 what this will mean for us is that event driven demand and international travel will be looking for a re there as you have major global events, specifically the 2026 FIFA World cup and the US's 250th anniversary and resurgent international inbound travel are expected to buoy demand in key regions. So that'll be really an important theme to watch throughout 2026.
- [50:00]
C
I think the hotel sector as Hayley mentioned, I've had Some pretty direct thoughts on generally where I think this is heading. It's definitely been stronger than what I would have expected. The Vegas stuff is interesting. We could probably do a whole segment on this at some point in early part of 26. Just because we've seen such a pullback in travel to Vegas on the whole, I mean like people have really stopped. I'm not gonna be hyperbolic here and say they've stopped going, but if you just look at some of the habits that people have, whether it be smoking, drinking, gambling, whatever, like now that you have the ability to gamble on your smartphone in most states, like the allure of Vegas on the whole I think has been diminished. And so that's a market that'll be very interesting to kind of keep an eye on. But that experience can't be replicated unless you're there. And there's a lot of business conferences and everything there. So I think they're just kind of going through a typical cyclical kind of challenge. They're going to have to reinvent themselves at some level. But for some of these others it's, it's nice to see some, some large transactions. I mean, I think the Hyatt deal at 2.6 billion is a nice deal. And you know, again, bifurcation seems to be where it's at here. The, the super high end resort style lodging deals are still, you know, getting some traction in the market. Business traveler, limited service, select service, kind of, you know, courtyard, et cetera. I think those are on the demise and we'll see how that plays out in 2026.
- [51:17]
B
And finally, we didn't do this intentionally, but we'll close with your takes on the industrial market in 2025. Give us a quick run through what happened in industrial and warehousing. I know we've seen a shift towards AI and data center driven demand, some normalizing fundamentals. So walk us through some of the big headlines of 2025.
- [51:41]
A
Yes, 2025 was defined by continued strategic investment, especially in core logistics and tech infrastructure. A shift toward AI and data center driven demand as part of the broader industrial asset class and normalizing fundamentals as vacancy rose and supply built. Built into a more balanced cycle and stronger interest in modern specialized buildings over legacy warehouses. Those dynamics set the stage for how industrial will enter 2026 with data centers and modern logistics core to growth while macro headwinds and evolving occupier needs temper broader expectation. The largest deal was EQT Real Estate. Their sale of a 25 property 8.7 million square foot logistics portfolio. This portfolio spanned 25 modern logistics assets across major US distribution markets, including Atlanta, Chicago, New York, Phoenix and Texas. The transaction was reported as the largest US Industrial deal of the year by square footage and overall size.
- [52:42]
C
So, Stephen, on that headline that you gave us the overview of, it's interesting. There's been no disclosed price, at least that we can find online for this transaction. There were some financing terms made available that actually seemed really on the low end for a portfolio this size. So we'll continue to monitor that, that and see if and when they actually disclose, you know, what this transaction value was. I think on the whole though, for industrial, 2025 is, you know, industrial is still a very solid asset class. You saw a lot of interest, a lot of investment data centers are now taking over. We've spent, you know, the last four or five months really belaboring that point. So I won't go too deep on anything else. I think industrial has some real tailwinds still. Certain sectors are going to start facing some, some headwinds and we'll talk about that as we kick off 2026.
- [53:27]
B
Yes. So more to come on next week's episode, we'll dig into some data from the year and give our predictions for 2026. Before we close, I have some programming notes. As a reminder, we launched our Save the Date for our annual TripConnect in New York City conference. So if you missed that, the conference is taking place May 6th through 7th, 2026, and it's set to deliver even more insights, connections and innovation for professional across the CRE and lending landscape. If you haven't attended this conference in the past, make sure you check it out. You can get an early bird rate and if you send an email to podcastrep.com, we might even be able to get you an extra discount code. But you'll be able to take part in two days of expert LED panels and market discussions. We bring together people from across the industry who are doing big things, closing deals, lending, working through workouts. So you'll get to hear from people on the ground. We'll also weave in a lot of trep data there, so you'll get to hear some exclusive insights from our team. And there's a lot of chances to network, so we have networking receptions at exclusive venues in New York City, lunches, breakfast. So check it out. We'll be releasing more details and agenda announcements over the next few months. We'd love to have you there. We got to meet a lot of our clients and podcast listeners in person last year. We'd love to see you again and meet some new faces. And I mentioned last week, but we will be launching our Year End magazine in early January, so send us an email if you want access to all of the data and insights and trends that happened in 2025 in written form, we can send you a digital copy. And if you'll be at the CREF C Miami conference, we can give you a hard copy there as well. Speaking of CREF C, don't forget to reach out to us to book time in our meeting room or at the Golf simulator at the CREF C Conference. We'd love to meet you and chat about all of the work Trapp's doing, learn about what you're doing in your business and how we can help. And turning to shout outs, Nathaniel E. Told us he listens every week and gave us some suggestions in place of the term cautious optimism and said that his team recommends damn the torpedoes sort of half speed ahead or just sticking with plain old cautious optimism. He also gave some good color about data centers and what he's seeing in Michigan. So we will circle back to that note from you Nathaniel, and talk about it on another episode. But thank you for writing in and sharing some of your thoughts there. Randy E. Was interested in our distribution list that contains weekly spread information, so we reached back out to Randy and then we heard from our good friend John B. Aka Dr. Debt Yield, who is a loyal listener turned podcast guest. So if you haven't heard our episode with John B. Of Byline bank, go check that out. And John told us that he has a confession to make. It's been so cold in Chicago that he hasn't been able to go on a walk with his dog, so he hasn't been able to listen to our full show. And he said that once it warmed up in Chicago, he tuned in and realized how much he misses listening to us. So thank you John. He sent us a bunch of interesting color on concessions data centers and wanted to talk about being involved in the Trep Connect Conference. So we are excited and we will definitely have you there, but we will get back to you on all of your comments. We really appreciate all of your thoughtful insight and taking the time to reach back out to us.
- [57:07]
C
Haley on the theme of what are we going to do in 2026? One of our listeners, Derek T. Emailed through LinkedIn sent me a message and said that he's a big fan, appreciates the show. He also said that he thinks the Michael Comparato episode might be our best guest episode yet, he said no sugarcoating the realities of today's CRE landscape. Lots of forced sellers are in the market and his takeaway was buy bricks and sticks in 26. I kind of like that one. I think that's pretty good, he said. It resonates with those with capital to deploy. So, Derek, we appreciate you listening. Thanks for the message and I agree with you. I think for those that haven't listened to the the guest episode with Michael, you should check it out. It's a really great episode and he provides some unique perspective.
- [57:50]
B
And thank you to all our listeners for tuning in on a holiday week. We wish you all happy holidays and we will see you next week with an early episode right before New Year's Eve. So so thank you as always, for your support for tuning in. If you haven't rated us, reviewed us on Apple Podcasts, Spotify sent us a Tweet or a LinkedIn message this year, send it now. We'd love to hear from you, we'd love to hear your thoughts and we hope you all have a nice holiday and hopefully get some time off of work. So with that, we'll close. Thanks to our producer, Carly Sento. 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 Trepwire Podcast with your favorite provider. Thank you for listening and stay well.
- [58:42]
A
All right.