Office Market Rebound Pushes CRE Giants Toward Record Profits

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Good morning. The largest players in CRE are capitalizing on renewed market momentum, with rising leasing activity and limited new supply driving earnings growth. For the first time in years, the outlook is firmly shifting to the upside.

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Market Momentum

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• Earnings report: Starwood posted $2.2B in liquidity and $1.4B in loan originations in Q3, with earnings slightly down due to a major $2.2B acquisition, but outlook remains strong. 

• Airspace race: Archer Aviation bought Hawthorne Municipal Airport for $126M to create a major air taxi hub ahead of the 2028 Olympics. 

• Bank exposure: Regional banks are weathering CRE stress, but office loan delinquencies remain high and loan-loss provisions are expected to rise in 2026.

• Liquidity crisis: Facing over $500M in maturing debt and investor lawsuits, Pacific Oak REIT is exploring a sale and offloading properties to address severe financial distress. 

• Leadership change: Kathleen McCarthy is stepping down as Blackstone’s global real estate co-head after 15 years, leaving Nadeem Meghji as sole leader. 

• Bank comeback: Bank lending to commercial real estate has surged back to 2019 levels, hitting $227B this year, with growing competition from debt funds and CMBS. 

• Term trap: The Trump administration is weighing a 50-year mortgage plan to lower monthly payments, though it could increase long-term debt and slow equity growth.

• Transaction trends: U.S. apartment sales hit $43.8B in Q3 —up 13% YoY—despite fewer properties trading. 

• Rent collusion: Four states are urging a judge to reject RealPage rent-fixing settlements, citing weak penalties and lack of safeguards. 

• Tenant justice: DC’s attorney general won a $41M judgment against Marbury Plaza’s former owners for severe housing violations, marking the largest tenant-related ruling in city history.

• Rent slump: Austin’s multifamily rents fell for the ninth straight quarter as demand lagged and supply slowed 

• Strategic expansion: Greysteel expanded its Southern California footprint by acquiring Nara Advisors, strengthening its multifamily and retail presence across key West Coast markets. 

• Housing inequity: A new report shows investors have driven up rents in low-income workforce housing by over 20% since 2021, more than twice the rate of higher-end housing.

• Digital debt: Blackstone is set to close a $3.5B CMBS deal to refinance 10 QTS data centers, marking the year’s largest data center securitization. 

• IOS investment: Morgan Stanley bought a 26-acre Fontana storage site for $92M in a net-lease deal with longtime tenant Oldcastle Infrastructure. 

• Location premiums: Recent industrial sales in Richmond and the Bay Area highlight how geography continues to outweigh scale and specs in driving pricing. 

• TIF for trucks: Schaumburg is proposing a $111M tax district to redevelop 70 acres of residential land into industrial space. 

• Power problem: Despite soaring demand, new data centers in Nvidia’s hometown of Santa Clara sit empty, stalled by utility delays and limited power infrastructure. 

• Rare parcel: Sagard acquired the 10-acre Farallon Industrial site in San Leandro, the largest Oakland industrial sale in five years.

• PNC push: PNC Bank is committing $2B to open 300+ new branches by 2030, focusing on Sun Belt expansion. 

• Leasing leaders: Convene and Equinox led NYC retail leasing in October with 50K SF deals at 261 11th Ave.

• Debt extension: Triple Five landed a four-year extension on its $1.4B Mall of America loan by adding equity and collateral amid ongoing debt challenges. 

• Unconventional anchors: Experiential concepts like pickleball courts, casinos, and shuffleboard clubs are redefining retail anchors. 

• Center scoop: JPMorgan bought a Coral Springs shopping center for $54M amid a wave of retail deals in the area.

• Tariff tolerance: Asian retailers are rapidly expanding into U.S. and European markets, unfazed by tariffs and aiming to open thousands of new stores.

• Sublease squeeze: Manhattan’s office sublease space has dropped below pre-pandemic levels as leasing activity surges. 

• Tribeca refi: Jack Resnick & Sons landed a $147M refinancing deal for its fully leased Chelsea office property at 255 Greenwich. 

• Tower greenlight: Vornado, Rudin, and Citadel are moving forward with a 62-story, 2M SF Park Avenue skyscraper, marking one of Midtown’s largest new office developments in years. 

• Lagging recovery: LA trails the national office recovery, with high vacancies and weak demand keeping the market stuck in post-pandemic limbo. 

• Foreclosure deal: First United Bank acquired Harwood No. 1 in a foreclosure auction, marking the second property loss this year for Harwood International.

• Sudden shutdown: Sonder’s sudden implosion follows Marriott’s exit from a troubled partnership, forcing an abrupt shutdown, guest evictions, and a Chapter 7 bankruptcy filing.

• Pricey preferences: Despite economic headwinds, wealthy Americans are fueling record-high rates and rising demand at luxury and ultraluxury hotels.

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