Federal Real Estate’s Roller Coaster Year: Chaos, Confusion & Course Corrections

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Good morning. It’s been a whirlwind year for federal real estate. Bold promises to slash the government’s office footprint gave way to reversals, leadership shakeups, and minimal real progress.

Today's issue is sponsored by 1031 Crowdfunding—helping investors access investment-grade real estate through tax-advantaged vehicles.

CRE Trivia 🧠

Which company is the largest industrial tenant in the U.S.?

(Answer at the bottom of the newsletter)

Market Snapshot

Federal Footprint

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• Mixed signals: Conflicting data on inflation, jobs, and spending are clouding the outlook, leaving analysts unsure where the U.S. economy is headed. 

• Soft landing: LightBox’s CRE Index saw a mild seasonal dip in November, signaling renewed stability and growing momentum as the market gears up for a stronger 2026. 

• Visa capital: Trump’s $1M Gold Card visa program could attract wealthy foreigners, but unlike EB-5, it doesn’t channel funds directly into CRE projects. 

• Library landed: A judge has cleared the path for Trump’s $67M presidential library site in Downtown Miami, reviving plans that could reshape a prime CRE parcel. 

• Valuation gap: Bluerock’s $3.6B CRE fund is listed at a 38% discount, revealing a sharp disconnect between private valuations and public market pricing. 

• Ground risk: A ticking ground lease at 1407 Broadway led to a 75% drop in value, exposing hidden risks in CRE deals. 

• Lender takeover: Sagamore and Goldman Sachs handed undeveloped land at Baltimore Peninsula to Bank OZK, while Hines takes over as asset manager.

• Stable spreads: Multifamily loan spreads remain stable, but record-high 7.2% vacancy and softening rents point to oversupply concerns heading into year-end. 

• Core waits: Multifamily deals are gaining momentum as private buyers fill the gap left by cautious core capital, with hopes for a stronger return in late 2026. 

• First dibs: NYC passed COPA and other housing bills despite CRE industry objections, granting nonprofits early-bid rights on distressed multifamily buildings. 

• Cautious rebound: The multifamily sector is expected to stabilize in 2026, with soft markets working through oversupply and investors shifting focus to value-add and workforce housing. 

• Policy sabotage: Outgoing NYC Mayor Eric Adams made last-minute appointments to the Rent Guidelines Board to thwart incoming Mayor Zohran Mamdani’s 2026 rent freeze plan. 

• Metropark move: Brooksville and Torchlight secured a $98M loan to acquire The Grande at MetroPark, a Class A multifamily in Northern NJ.

• Flex appeal: San Diego’s short-term rental market is thriving thanks to steady demand from remote workers, military personnel, and seasonal renters.

• Cooling gains: Self-storage saw increased investment in 2025, even as rent growth decelerated under continued supply pressure. 

• Mixed bag: Manufacturing investment rose in 2025, but policy shifts and EV slowdowns stalled many projects, while defense, energy, and AI-linked sectors led new growth.

• Rail expansion: Union Pacific is building a 2,000-acre industrial park near Houston with rail access and 20M SF potential. 

• Going postal: USPS will open access to 18,000 delivery units in 2026, allowing more shippers to tap its vast network. 

• Desert data: Eric Schmidt’s Bolt is teaming with Texas Pacific Land to build AI data centers in West Texas.  

• Digital expansion: Ares acquired two fully leased hyperscale data centers and a 314-acre development site in Northern Virginia.

• Pricing clarity: Single-tenant retail sales are rising, driven by private investors seeking stable returns amid high cap rates and improved pricing clarity. 

• Urban pioneer: Atlanta’s Atlantic Station continues to thrive as a model for mixed-use development, even as tenants like Publix and DSW exit and newer projects follow its blueprint. 

• Shopping spree: AlbaneseCormier acquired four open-air shopping centers across the Midwest and Southeast. 

• Coffee culture: Nespresso opened a 13,900 SF flagship in NYC’s Flatiron district, blending immersive coffee experiences with retail. 

• Experience economy:  California’s retail sector remains strong going into 2026, with investors focused on necessity-based and experiential properties.

• Delayed decisions: While 70% of companies plan to add office space in 2026—up from 56% in 2024—economic uncertainty is prompting many to delay those moves. 

• Golden exit: Paramount shareholders approved a $1.6B sale to Rithm Capital—while rejecting the CEO’s $34M exit package, which he’s set to receive anyway. 

• Legal leasing: Law firm office leasing is on track for a record year in 2025, driven by relocations, expansions, and a strong appetite for high-end, amenity-rich space. 

• Conversion craze: Chicago is leading a national boom in office-to-residential conversions, backed by city incentives and creative financing. 

• Class A: Bromley Companies secured a $163M refinance for 122 Fifth Avenue after a $107M renovation transformed it into a Class A office hub.

• Beachfront boost: Peachtree Group provided $85M in bridge financing to recapitalize two Hilton- and Marriott-branded hotels in Myrtle Beach. 

• Luxury refi: Ian Schrager secured a $310M refinance for his 367-key Public Hotel on Manhattan’s Lower East Side. 

• Music city refi: Virgin Hotels Nashville secured a $51M refinancing from Apollo to support its luxury lifestyle hotel. 

• Tourism trouble: U.S. hotel performance fell again in December, driven by weak demand and hurricane-impacted markets.

A MESSAGE FROM AIRGARAGE

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📈 CHART OF THE DAY

CRE Trivia (Answer)🧠

Amazon is the largest industrial real estate tenant in the U.S., occupying more than 400M SF of logistics space nationwide.