NYC’s Office Bond Market Is Back

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Good morning. After two years on ice, investors are piling back into office-backed bonds—at least for Manhattan’s trophy towers. February saw over $4.5B in office CMBS sales, the highest in five years, but lower-tier buildings are stuck in distress.

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🎙️ This week on NO CAP podcast Jack and Alex sit down with Michael Levy, CEO of Crow Holdings, a powerhouse in real estate investment and development with 75 years of history and $33B AUM.

Market Snapshot

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• Ditch outdated CRE tools: Nuvos provides valuation, deal management, and AI solutions so users can model faster, manage deals more efficiently, and automate tedious tasks. (sponsored)

• Inflation Nation: The Fed’s preferred inflation gauge, core PCE, rose 2.6% annually in January, matching expectations and reinforcing a wait-and-see approach on rate cuts.

• Federal cuts: Reston-based ICF International anticipates up to a $202 million revenue loss in 2025 due to Trump administration spending cuts, particularly affecting USAID contracts.

• Not so fast: Eastdil Secured hired BDT & MSD Partners for growth strategy while offering $1M retention bonuses to senior brokers. Yet, the firm claims it is not for sale.

• Back on offense: Bain Capital Real Estate is aggressively targeting life sciences, data centers, and distressed assets, betting on long-term demand and shifting investment back toward equity.

• Section 8 Cuts? A proposed budget shortfall could leave 283,000 households without Section 8 housing assistance, as funding falls short of rising rental costs.

• Sector outlook: US multifamily could face more headwinds in 1H25, according to the National Association of Home Builders (NAHB).

• Texas expansion: AvalonBay is acquiring eight multifamily properties in Dallas-Fort Worth and Austin for $618.5 million, doubling its Texas portfolio amid favorable market conditions.

• Oversupply: The small Texas town of Seguin is struggling with a 24% apartment vacancy rate after a surge in multifamily development outpaced demand.

• AI race: Meta could soon secure roughly $35B in financing for a large-scale data center project in the US from a group of investors led by Apollo.

• 3PL surge: Asian-based third-party logistics providers are leasing large warehouses in the Inland Empire to prepare for potential U.S. tariffs, driving demand in an oversupplied market.

• Deal of the day: Blackstone secured a $2.8B CMBS loan to finance its $4B acquisition of grocery-anchored REIT Retail Opportunity Investments Corporation.

• Vegas is back: Las Vegas retail sales surged to $245M in Q4 2024, the highest since 2022, as vacancy rates dropped to 4.2% and investor interest remained strong.

• Lease cuts: DOGE has already cut over $170M in federal office leases, and up to $5B in annual reductions are expected.

• Office to data: 601W is exploring converting its $265M Canal Station redevelopment in Chicago into a data center.

• Leading the way: Law firm leasing hit a record 10.2 MSF in Q4 2024, signaling a strong rebound and a shift toward longer-term, flexible leases.

• Carlyle surrenders: The Carlyle Group has transferred 29 office condo units at 866 U.N. Plaza to lender AllianceBernstein for $61M after failing to secure a buyer through auction.

• Leaving a void: As NYC phases out migrant shelter contracts, thousands of hotel rooms will return to the market, raising questions about occupancy, renovation costs, and future demand.

📈 CHART OF THE DAY