This is Deal Junkie. I’m Michael, it is 8:30 AM Eastern on Tuesday, November 11, 2025. Here’s what we’re covering today: the latest on national commercial real estate as interest rates finally ease up, how that’s affecting lending and refinancing across the country, which property sectors are showing distress versus recovery, and a spotlight on New York City’s market amid a major political change.
Let’s start with the big picture. Nationally, commercial real estate is showing early signs of a rebound after a tough couple of years. A major factor is the interest rate environment. Remember the rapid rate hikes of 2022 and 2023? Those pushed borrowing costs way up and put the brakes on deal activity. Now, in late 2025, the tide has turned slightly: the Federal Reserve has cut rates twice in recent months, bringing its benchmark down to around 3.75% to 4.0%. Financing today is broadly cheaper than it was a year ago, and that’s welcome news for anyone looking to buy, refinance, or restructure a property loan. However, the Fed has hinted that we might not see additional cuts for a while – they’re proceeding cautiously with inflation still running a bit above their 2% goal. Long-term interest rates have also been volatile. Even as short-term rates came down, 10-year Treasury yields spiked earlier this year on inflation fears and are now hovering just above 4%. That means mortgage rates, while off their peak, haven’t collapsed; debt is more affordable than it was at the height of the tightening cycle, but it’s not the ultra-cheap money of the pre-2022 era. The result is that investors are tiptoeing back in, but they’re still keeping an eye on those long-term rates. In fact, the yield curve has shifted – with long rates staying higher relative to short rates – and that’s forcing everyone to rethink strategy. If you’re a buyer or lender, you’re more sensitive to duration risk now. Deals are getting done, but underwriters are favoring steady cash flows and more conservative assumptions, knowing that if cap rates drift upward with higher long yields, you don’t want to overpay today.
That said, market confidence is notably improving. Commercial property sales volumes are up from the lows of last year. Through the third quarter of 2025, investment sales nationally rose roughly 20% year-over-year. We’re still not back to the blockbuster deal levels seen before the pandemic – transaction volumes are estimated to be about 10% below 2019’s pace – but the direction is encouraging. Importantly, the ice has begun to thaw in segments that were practically frozen a year ago. Buyers and sellers are finding some middle ground on pricing now that interest rates appear to have stabilized a bit. There’s still a valuation gap in some cases – many deals happening lately are smaller, under $100 million, where financing and price expectations are easier to align. But overall, we’re seeing more properties trade hands than we did in 2024, which suggests the market is moving again. In fact, one forecast from a major brokerage expects double-digit percentage growth in transaction volume by the end of this year and continuing into 2026. Some in the industry are cautiously optimistic that 2025 may mark the turning point toward a broader recovery for CRE.
A big part of that story is lending and capital availability. Let’s talk about the lending and refinancing environment, because this is the lifeblood of real estate deals. A year ago, borrowing was extremely challenging – banks were pulling back, and those that were lending offered tough terms: lower leverage, higher spreads, you name it. But now, debt markets are showing real signs of life. According to new data, commercial lending activity has surged to its highest level since 2018. Both traditional and alternative lenders have ramped up significantly. Banks, in particular, have re-entered the scene in a big way after sitting on the sidelines. Many banks had been wary due to economic uncertainty and regulatory pressures, but as interest rates began to ease and the outlook stabilized, they’ve grown more comfortable extending credit again. Year-over-year, bank lending for commercial real estate is up sharply – we’re talking on the order of tens of billions more in originations than last year.
It’s not just banks, either. Debt funds and private credit providers are busy too, continuing the role they played when banks were scarce. In the last quarter, alternative lenders (like mortgage REITs, private equity debt funds, etc.) captured a sizable chunk of new loan originations – even more than they did a year ago – as they compete to fill the financing needs in the market. We’ve even seen CMBS (commercial mortgage-backed securities) issuance make a comeback. After a very quiet period, Wall Street is again packaging loans into CMBS, especially through single-asset deals for large properties. This indicates investors have an appetite for commercial real estate debt now that interest rate volatility is calming down.
One of the strongest drivers of this lending rebound has been refinancing activity. 2025 has long been flagged as a year of a “maturity wall” – a huge volume of commercial mortgages taken out during the low-rate years were set to mature now. Many of those loans, on offices, apartments, and other properties, would have been very hard to refinance at the interest rates we saw a year ago. Owners were staring down the possibility of much higher debt service or even default. But with the recent rate cuts, the window opened to refinance at slightly lower costs. And so, we’re seeing a wave of refis. In fact, more than half of all commercial mortgage originations this year have been refinancings of existing loans. Lenders are working with borrowers to extend loan terms or provide new loans that replace maturing debt – often at higher rates than the original loan, yes, but not as punitive as they would have been before the Fed eased policy. This refinancing wave is helping defuse some of the pressure from that wall of maturities, especially in the multifamily and office sectors where distress was most acute. It’s still a challenge – some deals simply don’t pencil and will require owners to put in more equity or sell – but for many, refinancing is now at least viable.
Crucially, loan terms are becoming a bit more borrower-friendly as competition among lenders heats up. We hear that credit spreads on loans have tightened a bit, meaning lenders aren’t charging as large a premium over benchmarks as they did when the outlook was gloomier. Loan constants – essentially the debt service requirements – have dipped slightly, reflecting those lower rates and spreads. And lenders are inching up leverage again: where last year they might have only loaned 55-60% of a property’s value, now loan-to-value ratios in the low-to-mid 60s percent are more common on safer deals. That shows a modest easing of the very tight credit standards we saw in 2023. It’s not a return to the loose lending of a decade ago by any means – lenders remain careful, and weaker deals with poor cash flow are still going to struggle to find funding. But the overall picture is that capital is becoming more available. Even the government-sponsored lenders like Fannie Mae and Freddie Mac are stepping up: they significantly increased their multifamily loan purchases this fall, offering slightly better rates to borrowers, which is propping up apartment financing. All of this has led one industry insider to say that “risk appetite is returning” in the debt markets. Lenders and investors are finding ways to get deals done again, as the worst fears of runaway inflation and spiking rates have abated. It bodes well for rolling into 2026 with more liquidity in the system, which is something the commercial real estate market absolutely needs for a sustained recovery.
Now, that doesn’t mean everything is rosy across the board. We should take a tour of how the key commercial real estate sectors are faring, because the story is very mixed – some property types are showing hopeful signs, while others are still feeling pain and distress.
First up, the office sector, which has been the problem child of CRE since the pandemic. Office landlords have been wrestling with vacancy rates at generational highs, as remote and hybrid work reduce demand for space. The value of office buildings in many markets fell dramatically over the last couple of years – 20%, 30%, even 40% drops in some extreme cases – and that led to a lot of debt distress. The bad news is that office distress is still very real. We’re seeing record levels of office loans falling into special servicing or even default. To put a number on it, as of last month roughly 17% of office loans in CMBS (that’s a measure of securitized mortgages) are now in special servicing because the borrowers can’t meet the terms or need major relief. That is the highest level ever recorded for office loan trouble. It tells you that many office owners – especially of older, less-occupied buildings – are handing the keys back to lenders or trying to restructure their mortgages. We’ve even seen some famous office towers in New York and elsewhere end up in distress, their values hammered by higher cap rates and half-empty floors. And it’s not just offices: loans on large mixed-use properties (think big complexes that combine office, retail, maybe apartments) have also hit trouble, with special servicing rates spiking for those as well.
However, there is a silver lining for offices: prices may be bottoming out and opportunistic investors are wading back in. After a free-fall in 2023, office property values in top central business districts have actually shown hints of stabilization. One index showed that prime office prices in big city downtowns edged up a couple percent year-over-year this summer – a small gain, but remarkable considering they were down roughly 25% the year before. What’s happening is that as prices have reset to more affordable levels, some buyers see value. We’re hearing that institutional investors – the big private equity firms, pension funds, etc. – are selectively returning to the office market to snap up high-quality buildings at a discount. In New York and San Francisco, for example, institutional capital was largely absent last year, but this year nearly 40% of office building purchases in those cities have involved institutional buyers (up from virtually nothing before). That’s a vote of confidence that there’s a future for offices, at least the well-located, modern ones. It doesn’t solve the fundamental challenges – many offices are still struggling to fill space and justify their old valuations – but it suggests that the worst of the price capitulation might be behind us. And outside the gateway cities, it’s worth noting some positive momentum in the Sun Belt: cities like Dallas, Atlanta, and Charlotte are seeing office leasing perk up, thanks to companies relocating to lower-cost areas. Landlords in those growth markets are reporting decent activity, a stark contrast to more stagnant markets elsewhere. So, the office picture is still challenging, but it’s no longer uniformly bleak. It’s a bifurcated story: trouble continues for older and less competitive buildings, while higher-quality offices and business-friendly markets are beginning to find their footing.
Moving on to retail real estate – the shopping centers, malls, and storefronts. Retail had its reckoning early, during the 2010s, with e-commerce competition, and then the pandemic delivered another blow. Coming into this year, though, retail was surprisingly resilient. Consumers returned to stores once lockdowns ended, and many retailers expanded in suburban markets that thrived during COVID. In 2025, retail has been performing moderately well overall. We’ve seen a healthy uptick in retail property sales and lending. In fact, retail loan originations and sales volumes are up significantly this year – some of the highest growth among property types, which might surprise people. Part of that is because retail had been so beaten down that investors now sense some stability and even upside, especially in open-air shopping centers anchored by grocery stores or essential services. Those types of centers have low vacancy and solid tenant sales, so lenders are comfortable with them again. Even some well-located malls have managed to refinance loans or find buyers, though that’s more case-by-case. Crucially, the distress in retail has actually eased a bit – unlike office, the percentage of troubled retail loans has declined recently. So out of the major sectors, retail is the one where special servicing rates have come down, which indicates fewer new defaults.
That said, the retail sector isn’t uniform either. While necessity-based shopping centers are thriving, a lot of older malls and big-box retail properties are still struggling or being repurposed. We just heard about a suburban mall in Philadelphia that missed its loan payoff and is likely heading to foreclosure – that’s a reminder that weak properties will still face consequences. And many national retail chains are consolidating or shifting strategies: for instance, retailers are cautious on hiring, with retail among the hardest-hit sectors for job cuts this year, as companies optimize their operations. So, the retail recovery is selective – good assets in good locations are doing great (some investors have driven retail CRE investment up over 40% in the last quarter, focusing on those strengths), but marginal retail properties remain at risk. On the whole, though, retail real estate’s trajectory in 2025 has been more positive than negative, contributing to the broader market’s healing.
Now let’s talk industrial and logistics – the warehouses, distribution centers, and manufacturing facilities that were the darlings of real estate during the pandemic. For years, industrial real estate couldn’t miss: vacancies were near zero, rents soared, and every institutional investor wanted a piece of the warehouse boom fueled by e-commerce and supply chain retooling. By late 2024 and into 2025, this sector has come off that boil just a bit. We’ve seen industrial vacancies tick up from rock-bottom levels as a huge amount of new supply – millions of square feet of new warehouses – has been coming online across the country. At the same time, e-commerce growth has normalized somewhat from the frantic pace of 2020-2021, and some companies that overexpanded their logistics networks have subleased or given back space. The result is an industrial market that’s cooling from white-hot to merely warm. Landlords in some big warehouse hubs report that tenants now have a few more options and rent growth isn’t as crazy as it was; in a few places, rents even plateaued or slipped as the market absorbed all the new buildings.
However, cooling off is not the same as freezing. The industrial sector remains fundamentally strong. Demand is still out there – especially from large e-commerce players and companies reconfiguring their supply chains closer to the U.S. (think reshoring or nearshoring impacts). In fact, the third quarter data suggests an inflection point: after a brief slowdown, leasing activity is picking up again with big logistics users leading the way. Industry insiders call Q3 a potential turning point, with the large occupiers active despite the ongoing trade and economic uncertainties. So industrial real estate might be through the worst of its post-boom hangover. We should also mention data centers here, since they often fall under “industrial” or specialty – data centers are on fire (in a good way). The explosion of cloud computing and AI applications has created voracious demand for server space, and that’s fueling construction and leasing of data center facilities at an unprecedented rate. Many institutional investors are pouring money into data centers and related infrastructure, drawn by strong returns. The only headwinds there are things like power availability and local moratoriums (some communities have pushed back due to noise or energy usage), but economically, it’s a booming niche. So, broadly, warehouse and industrial properties are still one of the healthier segments of CRE – just transitioning from hyper-growth to a more sustainable growth path.
Switching over to multifamily housing – apartments – which is typically the favorite asset class of many real estate investors. Apartments weathered the pandemic relatively well and saw huge rent increases in 2021 and 2022 in many cities. But in 2023 and 2024, the landscape got trickier: a lot of new apartment supply hit the market (developers have been very busy, especially in Sun Belt metros), and at the same time, some demand dynamics shifted. By late 2024 and into 2025, rent growth not only cooled off, in some places rents actually started dropping modestly because of softening occupancy. As we sit here in Q4 2025, U.S. apartment rents have fallen for several months in a row on average. It’s nothing like a crash – the declines are in the low single-digits percent – but it’s a notable change from the booming landlord market we saw earlier. The weakness is most pronounced in certain regions that had a big run-up: the South and the West, where many new projects opened and are now competing for tenants, have seen the biggest rent concessions. Essentially, supply caught up to demand in spots like Austin, Phoenix, and parts of Florida, leading to rent stagnation or dips this year. Occupancy rates nationally are a bit lower than a year ago as well, confirming that renters finally have a little more leverage and choice.
Yet, it’s far from doom and gloom for multifamily. Underneath the short-term cycle, the fundamentals still favor apartments, and in many markets demand remains strong. A key reason is the high cost of buying a home: with mortgage rates still relatively high and housing prices elevated, a lot of people (especially younger households) simply can’t afford to purchase a house. That keeps them in the rental market. We saw evidence of this earlier in the year – by mid-2025, over 725,000 apartment units were absorbed (rented) in the U.S., which actually exceeded expectations. That kind of leasing volume is impressive and shows that if you build quality rental housing, people will take it, provided the pricing is fair. The big wave of new construction is getting absorbed, just maybe not quite at the rents owners had originally projected. So multifamily is going through a bit of a reset – landlords are adjusting to a more competitive environment by offering slight discounts or incentives – but it’s still broadly considered one of the safest bets in real estate. Lenders like agencies (Fannie Mae and Freddie Mac) are very active in multifamily right now, often giving better loan terms than you’d get on other property types, precisely because they also believe the long-term outlook is solid. And investors are still acquiring apartments, though they’re more selective: they want either high-growth markets or some distress they can capitalize on (we’ve even seen new investment funds forming to scoop up “mismanaged” or underperforming apartment complexes, aiming to fix them up and ride the next upswing). In summary, the apartment sector is in a period of digestion – absorbing new supply and dealing with an affordability squeeze on tenants – but it’s expected to regain momentum. In fact, some forecasts are already calling for rents to start rising again modestly in 2026 once the current supply glut is behind us.
Finally, a quick note on hospitality – hotels. The hotel industry had a rough 2020 but came roaring back once vaccines and travel normalization happened. By 2024 and into 2025, many leisure destinations were seeing record-high room rates and occupancy on weekends. So how is it now? It’s a mixed bag. Leisure travel is still quite strong; people are prioritizing vacations, and international tourism to the U.S. is improving. But certain hotel markets are hitting a bit of a plateau. Business travel – big conferences, corporate trips – is still only a fraction of what it was pre-pandemic, and that particularly hurts big city hotels that rely on conventions and corporate clients. We’ve seen some softening in revenue for hotels in cities like San Francisco or Chicago, where the return of office workers and business travel has lagged. Notably, the stress is starting to show in loan performance: hotel loans in special servicing have jumped somewhat in recent months (now a little over 10% of securitized hotel loans are in trouble). That uptick suggests that a few hotel owners are struggling, perhaps because their cash flow hasn’t fully recovered or costs (like labor) have gone up. Still, investors remain interested in hospitality assets. A noteworthy signal: a major investment firm is on the verge of buying a landmark luxury hotel in San Francisco, betting that the city will bounce back. And in Southern California, we just saw a boutique hotel trade at an eye-popping price per room, a record for that market – indicating confidence in high-end leisure travel. So while some hospitality metrics have cooled compared to the post-pandemic surge, the sector overall is in recovery mode, just not uniformly. Resorts and drive-to vacation spots are doing great; some urban hotels are rebuilding more slowly. The expectation is that as the economy stabilizes and if more companies resume in-person events, hotels will continue to claw their way back. In the meantime, hotel owners are getting creative – focusing on special events, doing renovations to attract guests, and exploring new concepts – all to bolster performance until the next upcycle firmly takes hold.
Alright, for our Regional Market Spotlight today, we’re zeroing in on New York City, which finds itself at an interesting crossroads of real estate and politics. New York is the largest CRE market in the country, and it often sets the tone for trends – but this week it’s making headlines not just for market stats, but for a major change in leadership. If you haven’t heard, New York City voters have elected a new mayor, Zohran Mamdani, and his impending administration could herald a very different approach to real estate in the city. Mamdani’s win came as something of a shock to the establishment. He’s a progressive figure who campaigned on a platform that made many in the property industry sit up and say, “Uh-oh, this is new.” We’re talking rent freezes, aggressive affordable housing mandates, and higher taxes on the table. One of his headline proposals is to implement a rent freeze on rent-stabilized apartments – essentially pausing annual rent increases to give relief to tenants. For a city with over a million regulated units, that’s a big deal and not exactly music to landlords’ ears. He’s also pushing for an ambitious affordable housing program – on the order of 200,000 new units – using measures like fast-tracking developments that include affordable components, tapping city-owned land for housing, and possibly investing public funds into new construction. And on the fiscal side, Mamdani floated ideas about raising taxes on high earners and large corporations to fund public programs, which of course has businesses concerned and could indirectly affect commercial real estate if companies rethink locating in NYC.
Now, before anyone panics, it’s important to note that campaign promises don’t always translate cleanly into policy. There are checks and balances – for instance, freezing rents on stabilized apartments would involve the city’s Rent Guidelines Board and perhaps state laws. Mamdani won’t even have control of the Rent Guidelines Board until some current members’ terms expire, so immediate drastic action isn’t guaranteed. And any major tax hikes would require approval in Albany at the state level, where the governor has already signaled skepticism about those ideas. So there’s a good chance that while the rhetoric is bold, the reality might be more moderate or phased-in. In fact, some industry veterans are saying, “We’ve seen progressive mayors come in before with big talk; the sky didn’t fall then, and it likely won’t now.” There’s even speculation that Mamdani might turn out more pragmatic than expected once he’s governing – focusing on achievable housing reforms and working with developers rather than against them, especially since he’ll want to show results.
Still, the uncertainty has some investors on edge. New York’s real estate community is definitely paying close attention, trying to gauge what this new political climate means. In the days after the election, we already heard of at least one prominent real estate CEO musing about possibly scaling back their New York portfolio because of the policy direction. It’s an open question how much of Mamdani’s agenda will come to fruition – but at minimum, we anticipate tighter regulations on landlords and a strong push for more housing affordability measures. For developers, the silver lining is that part of his agenda is to “fast-track” housing construction – and interestingly, voters just approved several ballot measures that align with that. Those measures will streamline the zoning and approval process for new housing in the city and curb the ability of individual City Council members to block projects in their districts. That could actually be a boon for development because one of the biggest hurdles in NYC has long been the red tape and political roadblocks. With these changes, if effectively implemented, we might see more shovels in the ground, not fewer, especially for projects that include affordable units.
In the meantime, New York’s commercial real estate market itself is doing its balancing act. Office leasing in NYC is still slow overall – companies have been downsizing space or relocating to newer, high-quality buildings, leaving older offices in Midtown and Downtown with high vacancy. Rents for Class B offices have slid, and as we discussed earlier, a number of Manhattan office properties are in distress with their loans. However, on the investment side, those very challenges are presenting opportunities. Some savvy investors are buying New York office buildings at hefty discounts, betting on the city’s enduring appeal. And they’re not alone: remember, institutional buyers have jumped back into office acquisitions here, signaling faith that New York isn’t “over” despite the work-from-home trend. The city’s fundamentals – a massive workforce, diverse economy, and desirability – are long-term strengths that these investors are looking at beyond the current slump.
New York’s multifamily sector remains a bit of a paradox. On one hand, it’s extremely tight – vacancy for market-rate rentals is very low and rents are near record highs for new leases – because New York simply hasn’t built enough housing for all the demand. On the other hand, if the new mayor freezes regulated rents, that could pinch the profitability of a large portion of the rental stock. Many rent-stabilized building owners in NYC were already under strain from a 2019 state law that limited rent increases and how they can recover costs of improvements. A further freeze could make some landlords defer maintenance or consider selling. But who would buy? Possibly non-profits or affordable housing groups, if the city facilitates it. Alternatively, it may encourage landlords to convert some buildings to condos if they can’t get rental growth – though that too is limited by regulations. It’s a complex situation. The hope among housing advocates is that a combination of tenant protections and new construction will ease New York’s housing crunch without scaring away too much private investment. We’ll have to watch how Mamdani navigates that tightrope.
One more bright spot in New York: the retail and hospitality scenes here are rebounding. Tourists are back in Times Square, foot traffic on Fifth Avenue is improving, and even in the financial district, shops and eateries are slowly coming back as office occupancy inches up. Some high-profile retail deals – like a luxury Japanese department store planning to open in Manhattan, or a flagship store redevelopment partnership by a major mall operator – show confidence in New York’s retail market. Meanwhile, hotels in New York have been enjoying weekends near full capacity thanks to leisure travel, even if weekday business travel is middling. And investors like Blackstone making moves to acquire big hotels in the city is a vote of confidence. So despite the headlines about policy shifts, New York’s real estate market is showing resilience where it counts: people still want to live, work, and play in the city, and capital is still ready to invest when the price is right.
So, in our New York spotlight, the takeaway is this: the city is entering a new chapter. The commercial real estate industry will be adapting to a changing political landscape that emphasizes affordability and social goals more than in the recent past. There may be new regulations and cost pressures to absorb. Yet at the same time, New York’s sheer magnetism and the post-pandemic recovery of urban life provide reasons for optimism. If housing development truly accelerates under the new policies, that could ironically open fresh opportunities for builders and investors (who have long complained about the city’s bureaucracy). And if the broader economy stays solid, New York’s offices and stores will, over time, refill – maybe not exactly as before, but in new ways. For example, we could see office buildings repurposed into apartments or other uses, a trend already underway that might gain support from City Hall. The bottom line: keep an eye on New York as a bellwether. It’s a market where distress and innovation are going hand in hand right now, and how it evolves under Mayor Mamdani will undoubtedly provide lessons for urban real estate in other parts of the country as well.
That’s all for now, but we’ll be back tomorrow. Don’t forget to hit follow or subscribe and leave a review to help others discover the show. I’m Michael—until next time!