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The TreppWire Podcast: A Commercial Real Estate Show
373. Separating Risk From Noise in 2026: Digesting Major Policy Shifts, Distress Early Indicators, Major Office Transactions & Moves
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Foreign.
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Welcome to the Tripwire podcast, the show where commercial real estate needs data and insights. This is our Week in Review for the week ending January 9, 2026. I'm Hayley Keem 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 marks the first full week of trading in 2026, and there's already a lot moving across markets. Investors are weighing uncertainty around energy, fresh labor data and federal debt, all shaping interest rate expectations alongside geopolitical developments, including events in Venezuela and what they could mean for oil and risk sentiment. On the policy front, President Trump announced plans to restrict large institutional investors from buying more single family homes. We also saw mortgage demand slip to close out 2025 despite lower rates and treasury commentary suggesting that further Fed cuts could be the missing ingredient for a stronger economy. On today's show, we'll also dig into what stress looks like before it becomes a default, and how early loan level data helps flag issues long before they make news. And in commercial real estate news specifically, we we're seeing some meaningful movement From ATT shifting its headquarters and office transactions in New York, San Francisco and Austin. There are a lot of early signals of how capital and demand are repositioning. So Stephen, as we head into the 2026 year, what indicators are you watching that separate the real risk from the noise?
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For me, the way to separate real risk from headline risk is to watch what's happening in three lay the price of money, the availability of money, and the early deterioration signals at the asset and loan levels. So let's cover first the price of money. I'm watching the treasury curve and the SOFR forward path, not just where Fed cuts are priced, but whether the long end stays sticky if long rates remain elevated. That's what keeps cap rates under pressure and makes refinancing harder even if short term data prints look calmer. Also watching inflation expectations and energy volatility because higher utility costs and operating costs quietly bleed into NOI and you won't see that in a single CPI headline. Second, availability of money credit is the tell. I'm watching CMBS and cre, Cielo spreads, bid lists and lender behavior where leverage is clearing, what debt yields lenders are insisting on, and whether banks are tightening standards. When headlines get louder but spreads and liquidity don't bulge, that's often noise. When spreads widen despite calm headlines, that's usually real. Third, beneath the surface loan and property signals stress shows up before default, so rising concessions, weaker leasing spreads, occupancy drift. And at the loan level, you'll see DSCR pressure, reserve draws, appraisal reductions, maturity extensions and watch list or special servicing migration. Roll rates matter who's moving from fine to fraying, not just who's already delinquent. And on policy headlines like the proposal to restrict large institutional investors from buying more single family homes, I'm less focused on the sound bites and more on what it signals about regulatory risk and investor behavior. Does it change underwriting assumptions, capital flows, or exit liquidity? If yes, it's real. If not, it's just chatter. When all three layers deteriorate together, that's the signal.
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C
Yeah, I agree with you, Steven. I think Haley did a good job on the lead in just highlighting some of these headlines. And listen, for the first week plus of 2026, we've had some doozies already. I mean, the announcements from Trump's administration yesterday on the institutional investors not being able to buy single family homes, that sends shockwaves through. My Twitter timeline Lew up. My LinkedIn timeline blew up. The national news picked up on it. And I think to your point, a lot of that is sound bite. I mean, look, I mean, just to dissect the headline, how are they going to define institutional investor? Is this someone that owns 10 houses, 100 houses, a thousand houses? Do they have to be publicly traded? They have to have a certain market cap. Like what, what is an institutional investor? And you know, the, the mantra or the, the tagline of, you know, corporations don't live in houses, people do. Well, that sounds cool in a press briefing, but the reality is people that are renting those homes are living in those homes. And so there's, there's pros and cons, there's pluses and minuses. It doesn't address any of the core issue of affordability in my mind. And if you look at the percentages, depending on how you define institutional, we're talking about less than 3% of the overall investor inventory and less than 1% of the overall housing stock is owned by, quote, unquote, institutional investors. And so this is not something that moves the needle from an affordability perspective. I think from the Trump administration's perspective, this is something that a lot of the Democrats had been advocating for during the previous administration. So I think it puts them in a spot where they're going to have to at some level support this, because this was something they were trying to get past that the Republicans had blocked but in terms of like actual affordability or housing relief, we have a supply side issue. That's what drives prices. This doesn't address that. And the reality is at the federal level, there's not a whole lot they can do to address the supply side. Because we're a country that has a lot of local control. And so local municipalities, cities, counties, townships, they determine who gets to get a building permit and what gets built. Not the federal government. You know, the federal government's tried to intervene here with opportunity zones and doing some other things to incentivize development, but outside of that, I think their powers are somewhat limited. So to your point, Stephen, I mean, really, this is something we're going to be watching. I don't think it's something that actually moves the needle for cre. Obviously it impacted the stocks of those publicly traded kind of institutional investors yesterday. We'll see if that persists. And I think honestly some of these build to rents. Those probably are going to be okay because those are purpose built, effectively just horizontal, multifamily. They're not the traditional, what people have kind of grasped onto of these large institutions coming in and buying detached single family homes and neighborhoods. And so it's, it's an interesting dynamic. Like I, in my brokerage business in the heyday of 21 early 22, I sold several homes to these large institutions. And what people don't want to, you know, acknowledge here is that they, they were not grossly overpaying, at least in my experience. They were not grossly overpaying for the properties. What they were doing is they were providing a much more frictionless transaction than dealing with an individual buyer who had inspections and repair requests and other things. These institutional folks were basically saying, you know, we have certain criteria. Three bedroom, two bath, two car garage, no solar panels, no swimming pools, no septic system. If a house, you know, fits the criteria without having those things, we'll pay up to a certain price. 21 day, cash close, no inspection, no repairs. So for a seller's perspective, it was a really easy way to transact. But it's not like they were paying 2x what other buyers were paying to drive up prices.
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Yeah, I wonder. I didn't look at say like Opendoor's stock price after this announcement, but I'd be curious what it means for them because they're not in the game for rental. They're a liquidity provider. Right. They're a reseller. And so hopefully this doesn't completely implode their business model as an unintended consequence because they are not the problem. If anything, they're part of the liquidity solution. And back to the stats on what percentage of single family homes do institutional investors account for? Well, let's just carve out the sub segment of rental homes only. Blackstone put out a statistic in 2025 that institutional players only accounted for 3% of market share in just that rental home segment. And that's a drop in the bucket. I think that works out too. They said it was like 0.3% of all single family transactions and that's down 90% from the prior year. So it's to me, like you said, Lonnie, this is really more of a soundbite than anything material. And I also question, will they go so far as to carve out land plays? Right. Because a big chunk of getting scale in this market had shifted from buying existing stock to build build to own to rent.
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Yeah, I think those have to be carved out because if you're going to say you can't do that, I mean, like who's to say that you can't build apartment complexes? I mean you have garden style apartment, you have mid rise, high rise apartments. You have in this case some of these single family detached, but they operate just like apartments when they're built to rent. So I think those have to be carved out. I think this is just, you know, it's politics at play. I understand why they're making the announcements and they're trying to move the needle. I suspect we're going to see significantly more housing initiatives come out over the next couple of weeks. I think from a publicity standpoint, from the reasons I mentioned earlier, where you have the, the other side of the aisle that had already pushed this, this is going to force some buy in on that side and I think you'll see some more substantive housing reforms coming out over the next couple of weeks. You know, you and I have spoken about if they wanted to actually make an impact. It's like let people assume current in place interest rates much more freely and easily across the spectrum or transfer their interest rates, carry them to the new property. Those are some things that could actually move the needle if you're not going to add significant supply. But at the end of the day, this is a supply challenge. I mean like it comes back to there's not enough optionality for that entry level starter home. And it's, you know, it's unfortunate for young people that are trying to, you know, start out their lives and buy a property. Like it is very difficult for them to do that in major cities and hopefully we'll get some relief there. But this is not going to provide it. I mean, it is what it is. At least we're having a discussion around it. I mean, I think that's a positive thing because hopefully that'll get some momentum. But at some level, some of these elected officials are going to have to actually care enough to try to resolve the problem and not just provide sound bites.
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Yeah, I mean, I'm a bigger proponent of let's just try and stabilize the market, not try and necessarily fix all of what's broken. And instead there's another way to kind of grow through this problem and that's just to grow incomes. And we have a much better chance of success if we focus on that problem of trying to grow the economy and grow real incomes than we do trying to fix a very segmented and hyperlocal real estate problem.
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Yeah, so I don't know, like on the, on the other headline front, the Venezuela stuff, pretty significant happening this week. I mean, obviously the capture of their president, or whatever you want to call him, leader is kind of its own thing. Obviously. It's a reminder that I think we should all be thankful we live in the usa. Our military capabilities are second to none. Not going to get in the political side of this, but it does have ripple effects around just energy markets, what this means for oil broadly, how oil impacts the US economy. Like it's kind of a double edged sword at some level. Like we need cheap oil because that creates cheaper cost for a lot of things in the US but for economies that are dependent on oil production in the US local production, you know, when you start getting oil trading at, you know, less than $55 a barrel or 50 bucks a barrel, like they start shutting wells off and that creates some negative pressure for that sector in the US economy. So it's, it's going to be interesting just to see how this evolves. Obviously none of us know exactly what the plan is here. It feels like based on what we saw yesterday in the announcements that Venezuela is going to be giving the US some oil, which should have some positive impacts on the cost side at some level. We'll see if that negatively impacts an already fragile labor market.
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Yeah, this was a very interesting headline. And we didn't get into geopolitical predictions. That's really not our place on this podcast. But if we had in our 2026 predictions, Venezuela was not on the chessboard for me. I was thinking Taiwan maybe would come to a head in 2016, not Venezuela. And that still could come to play because this ultimately was a pretty big loss or knock to China because of how much they've invested in Venezuela. So this definitely shakes things up from an international standpoint. Gosh. Now it's a matter of, I guess, what happens with Greenland.
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Well, yeah, I mean, that's the part that's been backfilling some of the headline space here. And I think we'll get hopefully to some sort of reasonable strategy, logical plan, some sort of purchase agreement or partnership or something. You know, it's, it's kind of weird like you mentioned for us to even be talking about some of these things because at face value, you would say this is like so not connected to real estate. But the reality is these things do have implications for the CRE markets and for the money supply and other things that you mentioned in the lead in. It's that geopolitical component that's kind of evolved and become, you know, an issue. Like I was watching Bloomberg yesterday and they were saying, you know, every major company has a geopolitical consultant on staff because they're assessing business risk at this level all of the time. And so, you know, you know that these large CRE players are also looking at these as potential risk and or opportunities. Obviously there's a lot of people online talking about the arbitrage of going and buying some Venezuelan land and, or improved properties there for really cheap right now because they think if there's a regime shift, those prices are going to go up and skyrocket because it's such a nice country, you know, so it, it's interesting. I don't know, Steven, if you saw some of the labor stuff, I know we're recording before the, the report on Friday, but it feels like, you know, we're kind of in this continuation of a softening market. It doesn't feel like we're in a crisis mode at this point, but it definitely feels like the data starting to suggest a labor market that's, that's definitely cooling at a level that's now measurable.
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Yeah, the, the jolts number this week I think was one of the more interesting ones for me outside of the non farm payrolls on Friday. So that jolts number came in at 7.146 million as compared to a previous and Revised number of 7.449 million. And that 7.146 was a pretty big miss to the downside. We had actually, collectively, economists had expected an increase in job openings here, but they actually decreased. Now granted, this is still Very stale data that we're looking at. I think this goes back to November. So we're still playing some catch up with the data. But the bottom line is like you said Lonnie, this clearly shows a good bit of cooling and it's continuation of the trend that we've seen over the last few months. Just on the heels of that jolts number, we also got continuing jobless claims that just printed this morning. Those came in on the high side of estimates. So again continuing with the cooling trend. So all eyes will be on this Friday's non farm labor print as that really could move the needle one way or another. And I'm really interested to see what happens with the unemployment number because Steven Myron was on Bloomberg this morning and they were really grilling him on what would happen to his dot plot if that unemployment number comes in and significantly less than what everyone is expecting. What does that mean for his conditional forecast?
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Did he say 50 basis point rate cut? 50 basis point rate cut?
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No. Yeah, he was all in on 125 basis points of cuts for 26, even though he basically was saying that current inflation is more or less right at neutral. And so it's all about the unemployment situation right now where he said basically we're 60 basis points above where the unemployment rates could be, perhaps should be, in his opinion. And so cutting rates will help stimulate that part of the economy and get us back to basically full capacity.
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C
I want to push back and challenge this narrative of uncertainty in cre. I've been seeing a lot of stuff, a lot of people put stuff out over the last couple of weeks talking about 2026 and the uncertainty around CRE. And the more I read those things and see those things, I'm actually kind of pushing back and saying all things relative. All things considered, I think we have a lot more certainty heading into 2026 than we've had over the last several years. And quite honestly the maturity wall and some of these things that we thought could disrupt the industry have proven to be non starters. Now the geopolitical stuff is always out there, but my point is that's there all the time. Like that's not a 2026 issue. Like that level of uncertainty is there all of the time. Like I think even with some of these, you know, talking points around interest rates, labor markets, inflation, whatever, like we have a clearer picture today, I think around all of those in each of those components than we have over the last three to five years.
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Oh yeah, agree. Like our starting point with rates right now is much more attractive compared to where we were the last two years, I think. And that's where I think, you know, we're going to see a really healthy conduit pipeline. I haven't seen what the SASB predictions are, but the chatter around new issue conduits for the first quarter and 26 are very healthy, which to your point, Lonnie, just points to more confidence and conviction than uncertainty.
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Yeah, I mean, we already had a deal price on 5 January, which is generally unheard of given the start of the new year. So I think we should be pushing this narrative of it's not uncertainty. In fact, I think 2026 is going to be the year of transaction. I think it's going to be the year. I think it's going to be the year of deal making because people have finally come to terms with some of those what were previously uncertain components. So I'm feeling pretty optimistic just given where we are. I mean, I think we have started the year now maybe Friday. If we get some really bad print, it changes the dynamic. But even then I think we're set up to deal with that. And I think you'll see the markets react in a positive manner.
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So I think that's a nice segue. Lonnie, into our next segment today where we want to talk about what stress really looks like before a default, kind of an advanced CRE101. So while we are feeling certain about the commercial real estate market, we want to make sure that our listeners and the market understands how to assess headlines. And if you're seeing defaults in the headlines or if you're not, how can you really understand what's happening at properties and at the loans that are backed by properties. So maybe today we can talk a little bit about not what will happen, but explain how problems might show up before they become news and how to address these issues or help the market make sense of what they're seeing with different metrics around loans or property performance.
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C
So I think there's a lot of things that we can talk about here as it pertains to kind of the early warning signs and what people can do to interpret this. I mean, we track a lot of this data, obviously at trap, we put out a lot of commentary, research day to day around extensions, modifications, appraisal, reductions, all of these things. We talk about them obviously on the podcast. You know, I think it's interesting, the headlines tell us where to look, you know, when you start surveilling the market and looking through the data that tells you when to move. And as we've discussed on the podcast, defaults are effectively a lagging indicator. They're telling you what's already happened. So if you're waiting for defaults to take place to try to make decisions on a go forward basis, you're already at some level behind the eight ball. So, you know, extensions have been kind of the preference of lenders and borrowers at this point. We've seen a lot of extensions. It's important for people to understand extensions don't actually change the dynamics. They're not giving lower interest rates or fixing lease rollover, any of the other exposure components that maybe have prevented that property from refinancing initially. If we're seeing additional repeat extensions, obviously that increases the risk of default and other things. But I mean, at some level, and we're going to do a deeper dive on some of the headline stuff and kind of how to interpret them more, more directly over the next couple of weeks. But you have to get into the data, like you have to look at the property. And so Stephen mentioned this earlier around the hyperlocal nature of commercial real estate. You can almost talk about that at a deal. By deal level, I mean, who are the tenants? What is the rollover schedule? What is the financing makeup of this? Is this an interest? Only in a balloon does this have some amortization component? Are there forbearance options? Are there extension options? Are there cash sweep triggers? Are there lockbox provisions? Like what are part of the deal? And if you don't have that data, it's very hard to kind of interpret this in a way that actually allows you to make decisions. Obviously, we provide all of that insight and information. We try to do our best to cover that on the podcast as best we can. But our raw data and our product data actually does this at scale. So, Stephen, I don't know about you, but it feels like, you know, if you look at the delinquency numbers, year over year, obviously delinquency was up. The headlines have shifted from, you know, doom and gloom to, I think, a much more rosy optimistic outlook. And I think as we talked in our predictions episode, I'm feeling pretty bullish around just kind of where we're at, given the headlines. It doesn't mean that you're not going to see negative headlines. We're going to see a bunch of negative headlines because there's a lot of properties that have extended, that haven't fixed the root cause and they're going to have to work through that. And we're actually going to maybe start seeing some of those play out.
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Yes, but fortunately rates have come down and the refinancing market right now is a lot healthier. There's much more liquidity out there than there was say over the last 18 months ago. When we really saw the acceleration in the delinquency rate, I think that was maybe the steepest part of the acceleration in new delinquencies and that's leveled off here in recent months. And we've seen a much steadier trend sideways in the delinquency rate through a combination of factors. First, and importantly, we've had a ton of new issue supply that's helped at least keep our denominator steady and in some cases grow it. And then in the numerator, you've seen some of those outstanding delinquent loans actually get resolved in some way, shape or form. You've had a number of matured loans that have been extended and that's probably been one of the biggest contributors to that decrease in the numerator is loans that are getting modified and pulled out of the numerator. So we'll be looking for that trend to continue in 2026. And importantly, I'll be curious to see if and how servicer requirements for modification change here in the coming year. It's been. I don't really expect it to change much because we've seen servicers take a hard line on cash upfront. I don't think that's going to change really much at all. The question will be, are sponsors getting tapped out on their equity? Have they already committed that capital to previous deals that have need to be worked out? And will we start to see kind of the unfortunate tale of that liquidity drain? Personally, I expect not. I think there's really too much rescue capital ready and waiting in the wings to help resolve some of these deals.
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You know, I think at CREF C this week, obviously we'll hear from a lot of servicers. We'll be meeting with them, plus they'll be on panels. So I'm going to be keen to find out kind of to your point, like, where are they seeing 2026 from a requirements perspective when working with some of these sponsors? You know, the, the downstream part of this, even, which I don't think we've, we've delved into too much, is just. Do we think leasing velocity. Let's just assume some of these deals trade out and they take the loss and someone comes in, you know, for a while. We've seen significantly Increased capex cost. We've seen concessions and abated rent and other things significantly increase to get tenants in. I mean on some of these longer term office deals, on a 10 year term you might have, you know, the, the property owner not even getting any rent until year three or four of a ten year lease because of all that build out costs and other things, you know. So do we think that those have been remedied at some level to a point where there's some upside for some of these folks to come in and take a building that's 60% occupied and actually get it to 80 and not have to hold it for five years to, to realize the benefit of that? Or do we think that those kind of downstream, you know, just having the contractors that will actually come do the work. I mean there for a while with some of the new administration, immigration policies, there was challenges on just getting people that could do the work. So how do we feel generally about some of those things outside of just the context of sponsor servicer, et cetera?
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I think the labor aspect is an incredibly important one to focus on because I fully expect there to be continuing labor supply shortages in this market or at least certainly certain markets. Certain markets have been much more levered to the segment of the labor force that has been negatively impacted by this regime change. So yeah, I'm curious to see combination of timeline and cost. How does that knock on effect, impact cre?
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It's almost like the workout. Whether you get that resolved or it sells, that's just the first, first cog in the, in the process. I mean there's all these other things that then have to take shape and I think for the office sector that's the one where you're going to be watching because I definitely feel in our discussions with clients and people in the market is people are much more optimistic about acquiring some of these class B office assets at an attractive basis. I guess for me the question is just is there enough demand and is there enough ability for them to deliver what's needed in the marketplace for this to be viable in the near term? I think medium to long term, obviously people are going back to the office and that's something we haven't really spent a lot of time on since we're just in the first week of this new year. But there's an overwhelming majority of companies now that are requiring at least three or four days a week in the office. So I think that that's taking shape, that's going to bolster the market at some level. But for those listening, if any of these terms are things that maybe are foreign to you, forbearance, cash sweep, you know, IO periods, whatever, send us an email. We'll be happy to give you a response. And if there's enough questions about a certain topic, we'll do a one on one segment on some of those because we know we didn't even talk about the appraisal, reduction amounts or any of the other components that we track. And then if you understand what those are and you need insight into that data, you should give us a shout. We'll be more than happy to walk you through some of our tools and highlight how you can get that information real time.
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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 I think this is a good time for us to jump into our property type stories of the week. We have a lot of interesting moves, deals and stories to cover here. One of the headlines we saw in Bloomberg this week is that AT&T is moving their headquarters to the suburbs from their downtown Dallas office tower. So walk us through what this relocation means.
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Yeah, this is a big one because AT&T's headquarters in downtown Dallas was, I mean, a staple, you know, a massive employment draw. This is just your quintessential Fortune 500 headquarters campus. So AT&T is relocating its global headquarters from downtown Dallas to a new 54 acre campus in Plano, Texas. The new development will span 54 acres, about 22 hectares, and consolidate AT&T's DFW office footprint. The timeline is scheduled to begin in the second half of 2028. The current footprint for AT&T has roughly 6,000 workers at its current downtown headquarters. So I mean, that is a significant employment draw. Other major companies like Wells Fargo, Caterpillar and Toyota have already built large suburban campuses. Well, Dallas has attracted projects like Goldman Sachs $500 million Victory park campus for 5,000 employees. But AT&T's downtown campus, that's, that's a huge chunk of space that's going to be potentially challenging to backfill. So I'm curious to get your thoughts on it, Lonnie, because this is, this is in your Backyard.
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C
Yeah. This is another blow for downtown Dallas. I mean, there's no way around it. They have been a staple in the city for a while, a very long while. It's kind of synonymous with downtown Dallas. The fact that they're moving to Plano, it's a great win for Plano. And I think that, you know, we're calling kind of suburb market at this point. Plano, Frisco, McKinney, they're almost effectively creating their own downtowns, right. That are, that are at scale at this point. So, I mean, yes, there's a suburban location relative to downtown Dallas, but each of those markets respectively have kind of garnered some national significant tenant. I mean, McKinney has the Toyota, you know, headquarters, big, big facility there. There's a lot of, of new development in each of those respective locations. Frisco has the Cowboys, etc. Etc. Downtown Dallas is just, you know, I don't know, I don't know what the deal is. They have really struggled to one get new tenants and to keep existing tenants. And it's going to be a blow for them. I mean, the Goldman stuff is great, but Dallas has had a history of. In the urban core, downtown, central business district. I mean, I think occupancies there have been, you know, mid-70s, low-80s for basically the last couple of decades. You now have uptown, you have all these other markets that are just challenging that CBD for tenants. And people like the amenities, they like the proximity to shopping and other things that some of these other locations provide. And so we'll see how they recover from this. It feels like at some level they've kind of tossed in the towel. Like there's not really a strategic plan on how they're going to combat this going forward and how they're going to backfill this space. To be quite honest.
- [31:55]
A
Yeah. If you look at the back and forth in this Bloomberg article between ATT and just general employer employee commentary versus Citi, there's a lot of complaints about safety, quality of life, the homeless rate is fairly high. And the failure of the city to address these problems in a timely and decisive manner really is. It doesn't look good in the eyes of the employer and the employees and doesn't give them a whole lot of motivation to negotiate to stay.
- [32:26]
C
Well, if you, if you look at some other moves. So just just to put some data behind this, Downtown Dallas office vacancies about 30% right now. It was 27% in 2024 class A towers. Right. Which we've said across the country Class A has been the bifurcation. The side of the bifurcation that's seen positive absorption and significant upside. In downtown Dallas, they've had negative absorption in their Class a towers for 10 consecutive quarters. I mean, that's a pretty daunting stat. And if you look at some of the other relocations, Comerica bank moved its operations to Plano and Energy Transfer consolidated outside of the crb, crb, cpd. So suburban submarkets, you know, let Legacy, Plano, far north Dallas, their vacancy rates right now are sitting about 18%. So much more attractive market. So listen, Dallas on the whole, I think is doing fine because you have the uptown market and you have some other things, but it's just that downtown core that's really struggled. And it's, it's unfortunate because we have such an iconic skyline. It's not New York, it's not Chicago, but I mean, downtown Dallas has a really nice iconic skyline. There's, there's been good history there. The office component and the kind of ground floor retail, for the reasons you mentioned, Stephen, has just always struggled. And a lot of people don't know, but there's actually an underground tunnel system in Dallas in the CBD doesn't get a lot of national publicity. It's not a subway or anything, but it is effectively the same thing with the tunnels going to all the buildings and in the 110°, 112° summertime heat, a lot of people don't even want to be street level, so they want to go underground, which has negatively impacted that street level retail for a very long time.
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A
So I've never walked it. Is there some commerce, like some small shops?
- [34:22]
C
Yeah, it's just, it's just like the subway tunnels. It's, you know, or the train. You, you have some shoe shiners, you have some small restaurants, you have a little convenience setups. I mean, it's, it's not as robust, but yeah, there's definitely some optionality downstairs and it's air conditioned and it's a little bit cleaner and you don't have to deal with some of the, the challenges with, with vagrants and others that you see surface side. So it's something that I think if they were to go back in the planning phase, they'd have to really consider is this a net positive for the, the built environment? Because I think it definitely has had negative consequence for at least the ground floor retail, if not some of the other office components that require foot traffic and just more of a viable, you know, downtown feel.
- [35:09]
A
So next up on our office stories we have. SL Green has sold 100 Park Avenue at least a stake in 100 Park Avenue to Rock Point. ESLO Grain has kicked off its plan to unload 2.5 billion in assets. The REIT sold a minority interest in the office tower at 100 Park Avenue to Rock Point in a deal valuing the property at 425 million, according to the Real Deal. In December 2024, the Mark Holliday led firm acquired Prudential's 49% stake in the 900,000 square foot building for 360 million, then added equity before flipping the interest to Rock Point ahead of the new year. The 1940s era property located just south of Grand Central is nearly fully leased at 95% occupancy. Both partners will contribute additional funds for leasing costs, including expenses tied to Alvarez and Marsal's recent 220,000 square foot lease. After factoring in new capital, the building's basis is expected to reach 500 million. Representatives for SL Green and Rockpoint declined to comment. Newmark's Adam Spies led the sale. The transaction underscores renewed strength in Manhattan's office market, which is projected to have its best year since 2019 as companies return to in person work. SL Green highlighted the trend at its recent investor conference, announcing plans to sell 2.5 billion in assets to counter higher interest rates. To quote the cfo, he says, we're selling assets and sacrificing income to fight against rates that are too high. The company also plans about $1 billion in acquisitions through 2026. Meanwhile, Boston based Rockpoint, led by co CEOs Tom Gilbane and Eric Shalev, recently agreed to sell its 1 Dag Hammershold Plaza tower to David Warner for $270 million.
- [37:02]
C
I think this is an interesting story, Stephen, because it has the both sides of the equation. I mean, they're trying to divest of about two and a half billion, but they're also saying they're going to invest another billion. So you know, maybe there are pressures on the interest rate side to, to try to get out, but you know, you would assume that those in place deals have favorable interest rates relative to what they already requiring today. But maybe they just got to trade out because they, they have some, some cash flow pressure. So it'll be interesting to see. This is a pretty big story. I mean, this is a significant deal and it's not the first time we've seen one of these minority interest, you know, sales. Over the last couple of months we've seen a couple of these here in New York. So again, I think this kind of trails with us seeing more activity, even if it's creative activity in 2026.
- [37:55]
A
And then next up we have a Chicago investors picked up a San Francisco office tower in a half off sale. This news coming to us from the San Francisco Standard. Callahan Capital Partners, a real estate private equity firm based in Chicago, has bought a 22 story office tower at 101 Mission street in the Financial district in San Francisco. Sources familiar with the deal said Callahan partnered with local real estate firm Probus Strategic Solutions to pay roughly 82 million for the building, which was constructed in 1985. The deal is a deed in lieu of foreclosure, meaning it was sold by lenders who had foreclosed on the debt tied to the building. New York based Van Barten Group purchased 101 Mission street for 163 million in 2018 before defaulting on a $93 million mortgage. Van Barten sunk more than 30 million in upgrades in common areas and tenant spaces. In July, activist investor Elliot Investment Management acquired the debt for an undisclosed amount, according to public documents before marketing the property for sale. David Downey, managing partner of Probus, a real estate advisory firm with a registered address in Portola Valley, said the transaction was spur by the San Francisco office market showing, quote, meaningful signs of recovery driven by AI oriented companies.
- [39:13]
C
You know, I wonder, do they put like a 50% off banner on these buildings when they take them to market? You know, it's kind of like when you walk into a retail store and you're looking for the sale rack. You know, they don't, but it's, it's good to see this transaction. I think San Francisco is seeing a little bit of an uptick. We want to see that. And you know, at some level, if we went back and listened to our podcast from four plus years ago, you would hear us saying for these office buildings there has to be a reset in basis. Like that's, that's the trick. And nobody wanted to do that. But now you're starting to see this play out. What will happen here is because of some of those AI leases and some of this other, you know, demand side pressure at this new basis, people will be able to reinvest in the building and they'll make these suitable for those types of tenants and you're going to start seeing San Francisco come back. I mean, it's still got a long road to go, but San Francisco is definitely on the uptick from where it's been the last couple of years. And it's important for us as a CRE ecosystem to have a vibrant San Francisco. So I don't know, Stephen, if you saw, we talked a little bit about Dallas a moment ago, but if we go down to Austin, you know, Google finally moved into their $521 million sale tower. For those that don't know if you Google this, it's interesting. They designed a building that looks like a large sale. It's pretty nice actually aesthetically. But it's been empty effectively for three years and they finally have moved into it officially. So this was, you know, purpose built. Google took the entire tower, 35 story cell tower. They, they started moving in in 2025. It had sat dark since 2022. They were paying $53 million a year, about $145,000 a day to leave the 804,000 square foot tower empty while leasing other Austin offices. So it's interesting and we've, we've had some back and forth on this when these really large tech deals in Austin are playing out. I mean, we had a couple million square feet over a period of about six months a few years ago where they were signing these large scale leases and we were not sure if they were going to be able to fulfill, you know, fill up the space or use them. And obviously it's taken some time for them to, to pull the trigger here, but it looks like they're committed at this point. The lease runs through 2038. If you remember, we talked about this property back in December of 2024 when Cousins Properties bought this office tower. They were kind of the first ones to go back into that Austin office market. And they made a really attractive purchase at 521 million back in December of 24. And I think for them this is a great sign. Obviously Google was paying the rent prior to this, but having them fully occupying the building is a much better play for Cousins. And so, you know, there's been a lot of talk back and forth online. Stephen, I'm sure you've seen some of this around. Is Austin a viable tech hub outside of San Francisco? And people have varying opinions on that. I think this is for those that say, yes, that it is the Silicon Hills, that this is a pretty strong statement for those in favor of it being a viable second option. We'll see what happens if they remain in there, whatever. But I think all things considered, this has got to be a really positive day for that Austin office market.
- [42:29]
A
Yeah, I mean, I think if ultimately you're bullish on Wall street south and the new Texas based Exchange. This seems like a no brainer to me to bet on the long term viability of this space and the quantitative finance aspect of it. Not to say that that's the only path to success for this property, but that certainly helps bolster demand. I think there's just too much of a winning narrative to think that, you know, this thing is going to go back to dirt. So interesting at this building, Google has been listing for sublease the top six floors. So I'll be curious to see if we do get a tenant to sign on for those and what the terms will be for that sublease. That'll be a really interesting tell on what demand for office top tier office space looks like in Austin right now.
- [43:18]
C
Yeah, this building is cutting edge and it's got a great location right on the water, great views. I mean this would be for someone that wanted to come in and take those top six floors. It would be prime office space for that market. So yeah, it'll be interesting to see how that plays out. But I think they've had that space available for a while with no takers to date. But potentially having them occupy the space maybe makes it a little bit more attractive for somebody to come, come in at this point.
- [43:44]
A
All right, so one last office story here. 5 Times Square begins a 1,250 unit office to residential conversion in midtown Manhattan. Work has begun to transform 5 Times Square, a 38 story Midtown skyscraper, from office space to residential units. The 575 foot tower will be converted into 1250 rental apartments, including 313 permanently affordable units for household households earning up to 80% of the adjusted median income. In terms of construction progress, crews are installing a hoist and removing sections of the glass facade to facilitate interior renovations while retail spaces remain open. This project is backed by a $1.3 billion loan. The project is expected to create about 1400 construction jobs and 830 permanent positions. This project is part of the Manhattan plan to add $100,000 homes over the next decade. The first phase of the conversion is slated for completion in 2027.
- [44:45]
C
This is a very interesting story. We've talked about this one before they started the work on it. It's good to see that it's the work has begun, but how appealing is it going to be? We're like, oh, look at this amazing view of Times Square. If you look real close, you can see the guy selling weed on the corner. And oh, by the way, the lights are on 247 and it's crazy noisy and you have to walk through crazy crowds all day. The time that may be challenging. Maybe not. I don't know.
- [45:12]
B
Yeah. So let's continue on the topic of, of New York City and multifamily and the rental market. There was a headline this week that we didn't get to get into, but I want us to talk about it and then maybe we can dig into it further next week. But we've been talking about what the naming of the new New York City Mayor Mamdani's housing policies could do to the market. And this week we saw some headlines talking about New York City's intervention in a bankruptcy case to delay a Chapter 11 auction of Pinnacle Groups rent stabilized apartments. They cited a need for more time to evaluate a proposed deal and explore alternatives. So talk about the details of this story and then some of the reactions we saw online and what you guys feel this might do to the market.
- [46:02]
C
So, Haley, this, this was a very significant happening this week in New York. And I think the ripple effects were national. I mean, immediately. So the new mayor's office in a, in a filing, a court filing effectively pushed back on this, this foreclosure sale, saying that with the current rent in place due to the rent stabilization program, that this property could not cover the operating expenses at that purchase price. And once they filed that motion, the Internet picked it up and it's gone fairly viral. And saying that this is kind of the smoking gun of the government acknowledging that rent stabilization is a taking and that when these properties can no longer viably exist where rents produced are higher than expenses required, that, that by definition it's a government taking. So it's been rampant online. I know, Stephen, you've probably seen a lot of this chatter. Whether this really moves the needle in terms of the Supreme Court challenge that they have, who knows? But I think if you're, if you're an owner, operator, landlord, you're feeling pretty good that you now have this on record in a public filing that you can use to say, this is exactly what we've been arguing from the last five plus years. Now it's being publicly acknowledged by the folks that implemented this at some level.
- [47:31]
A
Yeah, this is going to come to a head in a really interesting way. This has essentially been an unavoidable issue here.
- [47:38]
C
Right.
- [47:39]
A
Of government control in private real estate markets, equating to basically taking, outright taking. This is eminent domain. Maybe not in the most classic definition, but to most of us out here, that's exactly what this looks like.
- [47:53]
C
It's Just eminent domain without the just compensation component. That's the part that's missing. Right. And so the government does have the right to condemn property, take property for public good through imminent domain. But the component that makes that whole for the owner is that they're entitled to just compensation. And in this case, since it's not met the definition, at least to date, of a formal taking, there's been no just compensation to the owners. But at this point, with what they put out in the market this week, I mean, it's going to be really hard for them to walk that back. And it's, you know, again, there's so much administrative and bureaucratic component to this. It's a slow moving train. So this by itself is not going to expedite something. But I think to your point, Stephen, it definitely gets us closer to this getting to a boiling point where somebody has to make a decision that that changes this. I mean, like, this is just not sustainable at some level. Just take the politics out of this. This is just a math equation. If the government's going to set rents, they have to set rents at a level that allow the owner to viably operate the building full stop. If the rents don't allow that, it doesn't work. It doesn't matter. The politics aside, like, it just doesn't. The math doesn't math. It's the same thing as these offices that are trying to refinance that are three and a half percent coupon going to a seven. For a lot of them, the math just doesn't work. And so we're seeing this real time in the multifamily space now. Just leave it at that. I think, I think there'll be a lot more to come over the coming weeks and months. The new mayor's office has announced a bunch of other very direct attack type of, of messaging around property owners and landlords. They're going to be setting up meetings where people can come and discuss their displeasure with the current rental environment and rates. And they've already done some videos of the down units that people have not, you know, renovated, trying to showcase that owners don't care. This is going to be played out in the media back and forth for the foreseeable future.
- [49:51]
A
Yeah, hopefully somebody's going to be sending some nice care packages to the office administrator that's handling all of that inbound traffic. Heaven knows they're going to need some love.
- [50:00]
B
All right. We had a lot to cover this week and there were a lot of other stories we had on our lists that we covered in Tripwire and our daily CRE rundown. If you're not subscribed to those newsletters, reach out to us and we will let you know how to do so in other programming notes we are excited to announce a few upcoming webinars at TREP for our clients of Trep cre, our commercial real estate offering. We have our first targeted training of the year taking place on Tuesday, January 20th at 2pm Eastern. We will showcase our latest data enhancements that are designed to give you deeper market insights and strengthen your analysis. And we have some updates to our economic unit data model, so there's a lot that we'll be covering on this session. If you're a current client and you want a refresher, you want to see and make sure you're using the product to its full extent, reach out to us and we'll get you the link to sign up. If you're not a client and you're curious to see the platform or learn more about how others, your competitors, your neighbors, your people in the market are using our tools, reach out to us and we'd be happy to walk you through it or give you a link to sign up for the webinar. We also will be sending out an invite shortly for our January Market Pulse webinar, so stay tuned for more information about that that is open to the public and we have so many of our podcast listeners join that webinar every month. We still have some early Bird rates for for our Trep Connect in New York City conference that's taking place May 6th through 7th, 2026. This is our annual event that TREP hosts. We bring together clients, experts from across the industry, past podcast guests, and so many of our podcast listeners to enjoy two days of panels, networking, deep dives, and full access to the TREP team to learn from our data insights and learn from others in the market. We've had a lot of you reach out already and sign up, so send us a note if you want early bird access, we can even offer you a special discount rate. As a listener of the podcast, we'd love to have you there and meet in person and as we roll out more details, agenda announcements and speaker information, we will be sure to share that here. Turning to Shout Outs, we heard from our friend Chris M. Who wanted to take a moment to thank us at the end of the year. We've worked with him and his team members on several guest podcasts this year and we have a lot more that we might look to do with this team in 2026, so we really appreciated the nice year end message and are excited to continue working with you. Blake M listens to our podcast and said he appreciates the information and he was looking to sign up for our 2026 conference. So we got you that discount code and we're really excited to have you there Blake and meet you in person. Brad M. Was interested in sponsorship, advertising and other opportunities that Trep has. If you are looking to get your name out there, your campaign out there, deal information out there, or help promote yourself as a leader or one of the executives on your team, reach out to us. We work with companies across the space. We have advertisements on our podcast, as you've heard. We have chances to sponsor an exhibit at our Trep Connect conference. We have newsletters, website ads and so much more. So we'd love to work with other people in the industry to help them get their name out there. Jonathan O shared our multifamily delinquency data on LinkedIn. Michael A wished a Happy New Year to everyone at Tripp, so thank you. Michael Ross T wished us a Happy New Year and has been listening to the podcast for about three years and tunes in every week. And he was interested in our conference in May, so we hope to see you there. And then Ellie B was interested in our latest CMBS Delinquency Report. So Happy New Year to all. I think this might be the one show we can say that because after the first or second week in January we have to stop wishing everyone a Happy New Year. But we hope everyone has a great start to the year. We hope to see more momentum in commercial real estate and we will see you on next week's show. With that we'll close. Thanks to our producer Mariana Cebrana. 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. All right.