Dorian

According to CBRE, U.S. real estate markets enter 2025 with momentum gaining across sectors, as commercial investment volume is forecast to rise despite 10-year Treasury yields holding above 4%. Office markets show early signs of recovery, with prime space shortages emerging by year-end 2025. This trend appears strongest in downtown locations, building on momentum that began in late 2024. Retail vacancy sits at sector-wide lows entering 2025, with expanding demand concentrated in suburban and Sun Belt markets. Industrial leasing activity is normalizing to pre-pandemic levels while maintaining elevated vacancy in older properties. The multifamily sector expects declining vacancy rates despite recent record completions, supported by robust rental demand and high homeownership costs. Data center demand continues to surge, driven by AI adoption and cloud computing growth. While power infrastructure constraints pose challenges, increasing nuclear power integration is expected to support continued development activity. These improvements come amid shifting economic conditions, including new federal policies and ongoing workforce changes. Key risks include potential impacts from the U.S. fiscal deficit and China's economic challenges, though consumer spending remains a bright spot supporting broader market stability.

AVAIO Digital Partners has committed to a $3 billion data center investment in Appomattox County, Virginia, one of the largest digital infrastructure projects in the region. The 452-acre development will feature substantial onsite green power generation and has secured 300 MW of utility power from CVEC and Dominion Energy. The project strengthens Virginia's position as a leading data center market, with the state already hosting over 35 million square feet of operational data center space. Appomattox County, traditionally known for its historical significance, now enters the digital economy with a major footprint. Power infrastructure is a critical component of the development, with AVAIO securing 1.2 GW of total utility commitments across its national portfolio. The company's focus on green power aligns with industry trends, as data center operators face increasing pressure to reduce carbon emissions while expanding capacity. The investment comes amid sustained demand for data center capacity in the U.S. market, driven by artificial intelligence computing requirements and cloud service growth. Industry analysts project data center investment to exceed $200 billion globally in 2024, with the U.S. capturing approximately 40% of total investment. This transaction is a continued expansion of data center development beyond traditional markets like Northern Virginia's "Data Center Alley." Rural locations with strong power infrastructure and available land are increasingly attractive for hyperscale facilities, offering both operational advantages and economic development opportunities for local communities.

@ErnieBrownII 👊

@ClarenceWongCRE @jefffeldman Right. Also, if you look back since Sept, it is down about ~70 bps

@CREdebtDorian 10bps variance w/ in the last month. Not too bad. @jefffeldman

SOFR last month

Financial firms plan to boost technology spending in real estate, with 67% increasing their commercial property tech investments by 2030. The push comes as banks seek data analysts, AI specialists, and software engineers to expand their workforces. JLL's "Financial Services Real Estate Trends" report shows 65% of firms have active AI strategies for property management. Office automation will extend across daily operations by 2030, with 62% of firms targeting tech enabled workspaces. The changes affect occupancy planning, workplace design, construction management, and lease administration. Wealth management real estate faces restructuring as $84 billion in assets move from baby boomers to millennials by 2045. Firms are opening hybrid digital-physical spaces in urban and suburban locations, including standalone street-level offices and retail branch integrations. Commercial real estate leaders now report closer to operations and HR teams, moving beyond facility management. The shift places property decisions in line with broader business goals and talent strategies. Property demand will rise through 2030 as financial firms expand their workforces. Limited space in traditional financial hubs pushes companies toward emerging markets for high-quality office space.

Industrial rents across the U.S. reached $8.22 per square foot in October, a 6.8% increase over the past year and a $0.06 gain from September. Miami emerged as the nation's leader in rent growth at 11.0%, breaking Southern California's long-standing dominance in the sector. The Southeast region demonstrated particular strength, with Atlanta and Nashville posting robust gains of 9.0% and 8.7% respectively. Miami's surge was driven by 15 million square feet of new premium space delivered since 2022, pushing average rates higher as tenants absorbed higher-quality properties. National vacancy rates continued their upward trajectory, reaching 7.2% in September, a 20-basis-point increase from August. This is a big shift from the roughly 4% vacancy rates that characterized the market in recent years, reflecting the combined impact of new supply and moderating demand. The gap between new and existing lease rates reveals evolving market dynamics. New leases averaged $10.30 per square foot, commanding a $2.08 premium over existing rates. Miami showed the widest spread at $5.25 per square foot for new leases, highlighting the market's robust demand for premium space. Southern California's cooling trend persists despite higher-than-average rate spreads. The Inland Empire's new-to-existing lease spread contracted significantly from $9.32 to $3.17 per square foot year-over-year, while Los Angeles saw its spread narrow from $6.99 to $2.59, indicating softening demand in these traditionally strong markets.

A look at 10 yr bond yields globally

@DailyDrip3 Nope

@CREdebtDorian Yeah, at $500/m it’s not even worth trying out.

Most don’t know you can get pretty far with: - Replit: $20/m - Perplexity: $20/m - Claude: $20/m

Happy hump day

US 30 year fixed mortgage rates decreased to 6.67% (week ending Dec 6), reaching a 7 week low and third consecutive decline. Rates had risen sharply in early November alongside Treasury yields.

@Tmac4real1 @AdamKleinROI The full article here forbes.com/advisor/busine…

@AdamKleinROI @CREdebtDorian Well I've heard there's very little MF supply which drives some of highest rent in US both in terms of $ & growth rate The fact that it also has sizable # of remote workers exacerbates the issue IMO it would be situation where remote workers may be paying more than in home city

Remote work data shows Austin leads top 30 US metros with 28% of its workforce remote (374k+ workers), driven by tech industry growth & quality of life. While NY and LA each have 1M+ remote workers, they represent lower shares at 16.3% and 17.2% of total workforce respectively

@AdamKleinROI Yea I was surprised by that too

@CREdebtDorian Interesting to see Miami with the low WFH count…woulda guessed higher given all the northeastern implants

CMCT has secured a $92.2 million floating-rate mortgage loan on its Sheraton Grand Sacramento Hotel property, including the attached parking garage. The loan provides an initial $84.3 million advance with up to $7.9 million in additional funding available for renovations. The non-recourse financing carries an interest-only payment structure through its December 2026 maturity date. The loan terms include three one-year extension options subject to standard conditions, potentially extending the maturity to 2029. The initial advance will refinance existing corporate credit facility debt and fund ongoing renovations to the hotel's 505 guest rooms and suites. CMCT began the renovation program earlier this year and expects completion by the end of 2024. This transaction is a shift from corporate level to property-specific debt for CMCT. The structure provides dedicated funding for property improvements while potentially reducing the company's overall borrowing costs through non-recourse terms. The deal shows continued lender appetite for well-located hospitality assets in major markets, despite broader commercial real estate financing challenges. This capital allocation aligns with strong RevPAR growth in the Sacramento market through 2024, particularly in the upper-upscale segment where the Sheraton Grand competes.