CRE Prices Post Best Annual Gain Since 2022

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Good morning. Commercial real estate prices bounced back in August, delivering their strongest annual growth in nearly three years thanks to broad sector gains and monetary policy tailwinds.

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🎙️This week on No Cap: Kevin Heras, CEO of InvestNext, talks Detroit roots, fixing real estate’s “last mile,” and how streamlining capital flows boosts outcomes for sponsors and investors.

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• Global shifts: Global real estate funds are tilting toward the Americas and growth sectors like data centers and health care, while cutting back on office and Asia Pacific. 

• Rate reality: For CRE, it’s long-term Treasury yields—not the Fed’s rate cuts—that will shape valuations, returns, and financing conditions in the next cycle. 

• Optimism ebbs: Deloitte’s 2025 CRE survey shows optimism dipping, with capital concerns rising, though new lending and discounted office deals offer bright spots. 

• Wage gap: Women in CRE have nearly closed the base salary gap, but men still pull ahead with bigger bonuses and commissions. 

• Private upswing: Private markets advanced in Q2, led by private equity (+4.2%) and credit (+3.4%), while real estate managed a modest 1.3% gain. 

• Credit-to-equity: Private credit giants like Blackstone are fueling jumbo infrastructure deals by blending debt with equity, reshaping how multi-billion-dollar projects get financed.

• Build backlog: NMHC’s Q3 survey shows fewer material and labor issues, but nearly half of projects face permitting delays, and two-thirds see repricing. 

• Foundation gift: JBG SMITH is donating land for 88 affordable apartments by Wesley Housing near the new Metro station in Alexandria. 

• Rate sensitivity: Lower mortgage rates are set to boost demand most in the West and Northeast, while older, debt-free owners see little effect.

• Rent burdened: Los Angeles, San Diego, and Riverside now rank as California’s least affordable rental markets, where households spend over 30% of their income on rent.

• Industrial edge: Industrial is rebounding with solid NOI growth and a shrinking supply pipeline, creating selective development opportunities by 2026–27. 

• Secondary markets: As primary hubs face land and power shortages, data center growth is shifting to secondary markets with better incentives and infrastructure. 

• Class B Baltimore: Class B move-outs drove -1.68M SF of Q2 negative absorption and a vacancy jump to 9% in Baltimore industrial. 

• Storage merger: SmartStop REIT is acquiring Argus to launch third-party management with flexible branding and lending options. 

• Asset sale: Westcore sold 663K SF of Denver and Salt Lake City industrial space to Hyde Development and Mortenson amid steady sector investment.

• Aggressive expansion: AutoZone added 304 new stores last year, including 15 mega-hubs, as it accelerates expansion in the U.S., Mexico, and Brazil. 

• Suburb gains: Long-term retail landlords in fast-growing suburbs could see big rent gains at renewal, despite slower growth from higher costs and weaker sales. 

• Muscle in malls: Gyms like Equinox and Gold’s are seizing bigger retail spaces in LA as fitness demand helps landlords backfill vacancies.

• Empty desks: Office buildings remain underused as hybrid work keeps physical occupancy low, Yardi Matrix reports.

• Flight to quality: Office investment surged 42% in early 2025 as investors flocked to top-tier assets.

• Medical strength: Over the past decade, office revenues rose but real growth was mostly limited to medical and government buildings. 

• Perk pullback: New York office landlords are reigning in over-the-top perks as tenants prioritize basics like transit access and food over gyms and golf simulators. 

• Reston rebuild: Fairfax planners approved BXP’s Phase 2 Reston Town Center plan with more offices, housing, retail, and a new arts center site. 

• Private to public: Joss Realty REIT has filed for an IPO with three mostly leased office properties, aiming to grow its portfolio of boutique, value-add assets in top U.S. metros.

• Rollercoaster ride: Investor Land & Buildings is urging Six Flags to spin off or sell its real estate, valued up to $6B, after shares plunged 55% this year. 

• Hotel refi: Blackstone and Starwood are packaging $1.94B in CMBS debt backed by 220 Extended Stay America hotels across 33 states. 

• Tender trap: Host Hotels told investors to reject MacKenzie Capital’s $10.55 offer, saying it undervalues OP Units worth about $17.74.

📈 CHART OF THE DAY