The TreppWire Podcast: A Commercial Real Estate Show

Episode 373: Separating Risk From Noise in 2026: Digesting Major Policy Shifts, Distress Early Indicators, Major Office Transactions & Moves
Date: January 9, 2026
Hosts: Hayley Keem (Trep), Lonnie Hendry (Chief Product Officer), Steven Bushbaum (Research Director)

Episode Overview

This episode tackles how to discern genuine risk from market "noise" as 2026 begins, leveraging Trepp's proprietary data analyses of the commercial real estate (CRE), structured finance, and banking sectors. The hosts dissect early indicators of stress in the CRE market, policy shifts such as the Trump Administration’s proposal to limit institutional single-family home purchases, headline office transactions, and market implications of global and domestic developments. With a focus on separating headline-driven narrative from meaningful CRE risk, the conversation also delves into how loan-level and property-level data flag emerging issues before they materialize as news.

Key Discussion Points & Insights

1. Separating Real Risk from Noise in 2026

• Steven outlines his risk framework (01:49):
  • Three Layers:
    1. Price of Money: Monitoring treasury yields, SOFR forward path, and whether long-term rates remain elevated. Persistent high long rates put pressure on cap rates and impede refinancing, regardless of positive short-term data.
    2. Availability of Money: Observing CMBS and CRE CLO spreads, lender behavior, and whether credit tightens. When spreads widen even as headlines remain calm, that's a red flag.
    3. Early Stress Signals: Asset and loan-level deterioration such as rising concessions, occupancy drift, DSCR pressure, reserve draws, and special servicing migration happen before defaults hit headlines.
  • Policy Risks: Importance lies in whether policies shift capital flows, underwriting, or exit liquidity, not in the soundbites.
  • Quote: “When all three layers deteriorate together, that’s the signal.” (A/Steven, 03:31)

2. Trump Administration’s Single-Family Investor Ban Proposal (03:50)

• Lonnie’s Analysis:
  • The proposal dominated media and social feeds, but real impact on affordability is minimal as true institutional investors represent a tiny fraction (<1%) of total housing stock.
  • Key Issues:
    • Definition ambiguity: Who qualifies as "institutional investor"?
    • No real solution for core supply-side issues; local ordinances, not federal policy, control new housing.
    • Build-to-Rent projects likely unaffected and may be carved out.
  • Quote: “This is not something that moves the needle from an affordability perspective. We have a supply side issue. This doesn't address that.” (C/Lonnie, 05:28)
  • Opendoor/Market Impacts: Unintended consequences could disrupt liquidity providers rather than rental investors. Cites Blackstone data - institutional investors accounted for only ~0.3% of single-family transactions, down 90% from last year. (A/Steven, 07:53)
  • Politics at play: Expecting more housing initiatives, but real progress requires elected officials to tackle supply bottlenecks, not just issue soundbites. (C/Lonnie, 09:12 to 11:00)

3. Macro/Geopolitics: Venezuela Events & Energy Markets (11:26)

• AT&T’s move, labor data, and Venezuela’s upheaval frame market uncertainty.
• Geopolitical Risk: Direct implications for US energy prices and labor market fragility. US likely to benefit from incoming Venezuelan oil, dampening utility and transport cost inflation.
  • “It does have ripple effects around just energy markets, what this means for oil broadly, how oil impacts the US economy.” (C/Lonnie, 11:26)
  • Large CRE players and corporates now have geopolitical risk consultants—shows increased interlinkage of global events and real estate. (C/Lonnie, 13:28)
• Labor Market Indicators:
  • Notably, the JOLTS report surprised with a drop to 7.146 million (vs. expected increase), indicating labor market cooling.
  • “This clearly shows a good bit of cooling and it's a continuation of the trend that we've seen over the last few months.” (A/Steven, 15:13)
  • Economist Steven Myron (cited from Bloomberg) sees “125bps of rate cuts for ’26,” premised on current inflation neutrality and an unemployment gap. (A/Steven, 16:41)

4. 2026 CRE Market Certainty & Transaction Environment (17:12)

• Pushback on negative “uncertainty” narrative: Relative to prior years, the market has more clarity on rates, inflation, and maturities.
  • “I think we have a lot more certainty heading into 2026 than we've had over the last several years.” (C/Lonnie, 17:12)
• Strong CMBS/CRE CLO new-issue pipeline; first new conduit deal priced January 5th—a sign of normalization. (C/Lonnie & A/Steven, 18:16–18:42)

5. Early Indicators of CRE Distress: Not Waiting for Defaults (19:25)

• Extensions, Modifications, and Early Warning Signs:
  • Defaults are lagging indicators; risk emerges earlier via loan modifications, repeat extensions, appraisal reductions, cash sweeps, forbearance provisions, and migration to special servicing.
    • “If you're waiting for defaults to try to make decisions... you're already at some level behind the eight ball.” (C/Lonnie, 20:16)
  • Robust data surveillance is necessary to move ahead of the headline cycle.
• Loan Performance Trends:
  • Delinquency increases have plateaued as modification/extension activity rises. Servicers remain strict—require cash upfront for mods; rescue capital is still plentiful to cushion liquidity needs. (A/Steven, 22:58–24:32)
• Office Redevelopment Hurdles:
  • Concerns about ongoing labor shortages, construction costs, and the feasibility of value-add strategies in office.
    • Majority of companies now require at least 3-4 days/week in office, fueling optimism for office demand long-term. (C/Lonnie, 26:34–27:44)

Market Stories & Notable Transactions

AT&T Headquarters Move – Dallas to Plano, TX (29:03)

• AT&T is relocating its global HQ from downtown Dallas (6,000+ workers) to a 54-acre Plano campus (move set for 2028).
  • Impact: Blow to downtown Dallas; reflects broader trend of suburban strongholds attracting major employers. Suburban vacancy at 18%, vs. downtown’s ~30%. (C/Lonnie, 30:13–32:26)
  • Urban Struggles: Safety, quality-of-life, and high homelessness deter retention.
  • Quote: “Downtown Dallas office vacancies about 30% right now … negative absorption in their Class A towers for 10 consecutive quarters.” (C/Lonnie, 32:26)

SL Green Sells 100 Park Ave Stake to Rock Point (35:09)

• SL Green sells minority interest in fully-leased Manhattan office tower (valued $425M) to Rock Point—a move to divest $2.5B in assets, offsetting high rates with $1B in planned acquisitions.
  • Significance: Underscores Manhattan office recovery; strategic rebalancing by major REITs.
  • Quote: “We’re selling assets and sacrificing income to fight against rates that are too high.” (A/Steven quoting SLG CFO, 36:59)

San Francisco: 101 Mission Street Trades at 50% Discount (37:55)

• Callahan Capital Partners acquires 101 Mission for $82M (deed-in-lieu), half of 2018 value; reflects ongoing price resets and opportunity for basis resets as AI tenants drive renewed demand.
  • “For these office buildings there has to be a reset in basis … now you’re starting to see this play out.” (C/Lonnie, 39:12)

Google Moves into Austin’s “Sail Tower” (41:57)

• Google finally occupies $521M purpose-built tower after years of inactivity. Lease runs to 2038, but top 6 floors remain sublease availabilities—a demand test for Austin office market.
  • “Having them fully occupying the building is a much better play … this has got to be a really positive day for that Austin office market.” (C/Lonnie, 41:57–43:18)

Midtown Manhattan: 5 Times Square Office-to-Residential Conversion (43:43)

• 5 Times Square begins converting vacant office to 1,250 rental units (313 affordable). Massive $1.3B project, part of city’s push for 100,000 new homes.
  • Conversion challenges: Will noisy, congested Times Square appeal to renters?
  • “Maybe not. I don’t know.” (C/Lonnie, 44:44)

New York City Multifamily: Rent Stabilization Showdown (45:12)

• NYC government intervenes in Chapter 11 auction, asserting rent regs render properties economically unviable—the first tacit government admission of “regulatory taking.”
  • “This is kind of the smoking gun ... government acknowledging that rent stabilization is a taking.” (C/Lonnie, 46:02)
  • “This is just not sustainable at some level. Just take the politics out of this. This is just a math equation.” (C/Lonnie, 47:52)

Memorable Quotes & Moments

• Steven: “When all three layers deteriorate together, that’s the signal.” (03:31)
• Lonnie: “This is not something that moves the needle from an affordability perspective. We have a supply side issue. This doesn't address that.” (05:28)
• Steven: “Institutional players only accounted for 3%... that’s a drop in the bucket.” (07:53)
• Lonnie: “Texas cities like Plano, Frisco, McKinney are building their own downtowns.” (30:13)
• Lonnie: “Defaults are lagging indicators ... you're already behind the eight ball.” (20:16)
• SLG CFO (quoted): “We’re selling assets and sacrificing income to fight against rates that are too high.” (36:59)
• Lonnie: “For these office buildings there has to be a reset in basis. That’s the trick. And nobody wanted to do that. But now you’re starting to see this play out.” (39:12)
• Lonnie: “This is kind of the smoking gun ... government acknowledging that rent stabilization is a taking.” (46:02)
• Lonnie: “The math doesn’t math. If the government’s gonna set rents, they have to set rents at a level ... to viably operate the building full stop.” (47:52)

Timestamps for Important Segments

• Risk framework for 2026: 01:49–03:50
• Trump’s single-family proposal dissected: 03:50–11:00
• Global macro/labor/energy market context: 11:26–17:12
• CRE market certainty, pipeline, 2026 outlook: 17:12–19:25
• Early loan stress indicators: 19:25–22:58
• Loan workout, refinancing: modifications, liquidity: 22:58–26:34
• Office conversion/redevelopment hurdles & labor: 26:34–28:04
• AT&T HQ move & Dallas suburban migration: 29:03–34:16
• SL Green 100 Park Ave sale & NYC office market: 35:09–37:55
• San Francisco 101 Mission St half-off sale: 37:55–41:57
• Austin: Google occupies ‘Sail Tower’: 41:57–43:43
• 5 Times Square office-to-resi conversion: 43:43–45:12
• NYC rent stabilization court fight: 45:12–49:51

Tone & Takeaways

The conversation is deeply analytical, confident, data-driven, and candid—blending market skepticism with optimism. Hosts express clear-eyed realism about political soundbites, emphasize the primacy of data over headlines, and exhibit cautious optimism for 2026 CRE, arguing that the biggest risks now are more visible and manageable than in prior years.

Final Notes

The episode arms CRE professionals and market observers with frameworks for separating true risk from the daily news churn. Key takeaways reinforce the importance of early indicators, loan-level analysis, and hyper-local market data, as well as vigilance for policy changes that alter underlying capital flows, not just headlines.