CRE Financing Stalled as Rate Cuts Remain Elusive

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Good morning. CRE investors hoping for a financing rebound in 2025 are still waiting. Despite Fed talk of cuts, volatile Treasury yields and political uncertainty have kept deal flow sluggish and capital on the sidelines.

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• Cut coming: With payrolls stalling, unemployment at 4.3%, and job openings down to a 1:1 ratio, a September Fed rate cut looks nearly certain.

• Equity engine: Extell secured $1.2B from a hedge fund to back nine projects, including a 1.8M SF Disney campus redevelopment and major Manhattan towers.

• Performance gap: CRE’s structural reset, driven by high rates and shifting fundamentals, is creating record dispersion and rewarding nimble, well-positioned investors. 

• Cap rate crossroads: Investors are gravitating toward residential and industrial assets with stable, low cap rates, while office and senior housing struggle under operational and structural pressure. 

• Clause control: The FTC dropped its nationwide ban, opting for case-by-case enforcement and leaving CRE’s noncompete practices largely intact.

• Cooling continues: U.S. apartment rents fell again in August, with national averages down for the second straight month as supply pressures and seasonal cooling continue to drag on rent growth.

• Outlier markets: While most U.S. apartment markets are seeing a construction cooldown, just 10 metros are defying the trend with increased supply expected in 2026. 

• Empty impact: Airbnb crackdown eased tourist traffic in NYC apartments, but rents and housing shortages remain unchanged.  

• NIMBY nation: A proposed six-story apartment building in Fairfax, CA, has ignited fierce backlash, highlighting tensions between small-town identity and state-mandated housing development. 

• High watermark: Greystar acquired Modera Glendale for $126M in LA County’s biggest multifamily deal of 2025 so far. 

• Modular mandate: A pending bill could raise costs by requiring out-of-state modular builders on NY public projects to pay local wages, sparking concern over housing affordability.

• Debt deal: Merit Hill Capital and Centerbridge secured $425M to refinance a 78-property, 32,000-unit self-storage portfolio, reflecting the ongoing strength and expansion in the sector.

• Power surge: AI-fueled data center growth is driving up electric bills, prompting a federal study on grid strain and consumer costs.

• Unlikely alliance: Bipartisan opposition is growing against data centers as communities unite over local environmental and quality-of-life concerns.

• Construction catalyst: Graybar is rolling out STAR Centers to boost logistics and support major construction projects nationwide.

• Consumer caution: Mall traffic softened in August as consumers pulled back on discretionary spending, with shorter visit durations and muted Labor Day traffic. 

• Closures ahead: Noodles & Company is exploring a possible sale and other strategic options amid declining revenues and plans to close up to 49 locations through 2026.

• THC truce: Texas lawmakers failed to pass a THC ban in a special session, allowing thousands of hemp retailers and farmers to keep operating and preserving billions in retail real estate revenue. 

• Clinical capital: Chicago’s medical office market is booming as health systems expand, tenants stay put, and adaptive reuse keeps supply growing. 

• Desk demand: Western metros like San Francisco and Seattle are seeing the fastest growth in office-focused jobs, signaling renewed demand for knowledge workers. 

• Profit priorities: BXP trimmed its quarterly dividend by 29% to free up $50M/quarter for projects and debt reduction in a strategic reset.

• Fire sale: Aztec Fund unloaded suburban D.C. offices at deep discounts as part of its bankruptcy liquidation to repay Bank of America. 

• Creative collapse: Members-only coworking brand NeueHouse abruptly shut all locations and plans liquidation after a decade serving Hollywood and New York creatives.

• Land reset: GoPro’s former San Mateo campus will be razed for 225 homes as offices give way to housing demand. 

• Campus tradeoff: Simmons is swapping land rights for a new dorm as Skanska readies a lab-focused project in Boston’s Longwood district.

• Fizzling forecast: Hotel revenue managers are dialing back 2025 forecasts as government layoffs, weak international arrivals, and sluggish business travel cut into group demand and dampen early-year optimism.

A MESSAGE FROM GREYSTEEL

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