A Turnabout on Trade and Fed Talk? Plus the Housing Slump & First CRE Draft—A Market on Edge

Markets may be uncertain, but the LightBox team is keeping it grounded—with some perspective and invoking the classic Gimme Shelter. As investors brace for tariff fallout, Manus, Dianne, and Martha break down the latest headline fatigue, a housing market under pressure, and the question of whether the lending engine will keep running. The team dives into a stalled $778M securitization deal, a funding $17B pipeline on pause, and why “a dead battery, not a blown engine,” might be the best metaphor for today’s economic environment. Plus, the LightBox Appraisal Index shows lenders are still engaged—at least for now. And with the NFL Draft underway, the team hosts the first-ever, all-in-good-fun LightBox CRE Investment Draft, naming key picks (grocery-anchored retail, multifamily, data centers), sleepers (strip malls, medical office), and a bust (luxury hotels). As for wild cards, the team has it covered with converted offices and a surprise bet on San Francisco’s AI alley. It’s a packed episode filled with data, debate, and some pretty sharp team names. Let the CRE Draft smack talk begin.

02:57 Economic Data Roundup

06:20 Housing Market Slump

09:16 Assessing the Trade War Impact

12:19 Lending Market Signals

19:59 LightBox Data Dive and Appraisal Snapshot

27:49 Loan Modifications Rise in March

32:57 The NFL Draft: CRE Investment Picks

Have questions for the pod team? Send them to Podcast@LightBoxRE.com.

www.lightboxre.com

Transcript

The CRE Weekly Digest by LightBox

Episode 43: A Turnabout on Trade and Fed Talk? Plus the Housing Slump & First CRE Draft—A Market on Edge

April 25, 2025

Martha Coacher: This is the CRE Weekly Digest by LightBox a firm transforming the commercial real estate landscape by connecting every step of the CRE process with comprehensive tools and data. I'm Martha Coacher with our experts Manus Clancy and Dianne Crocker. For the week of April 21st to the 25th, investors got a bit of a breather as Washington appears to be recalibrating its approach to both monetary and trade policy.

President Trump walked back earlier rhetoric about removing Federal Reserve Chair Jerome Powell before his term expires and the US China tough talk seems to have eased. Manus in this day-to-day headline frenzy it's hard to keep up. Are investors getting headline fatigue? 

Manus Clancy: I certainly am. There's no doubt about that. Honestly, with the headlines that go through and people saying, we're making progress on tariffs, we're not making progress on tariffs, interest rates going higher, interest rates going lower, stocks whipsawing by three percentage points up as they were yesterday, and another 2% up today versus four or 5% down as they were a couple times over the last few weeks. It's really hard to keep up. I keep coming back in my head and this goes to a conversation I had with a trader about 10 days ago when stocks were at their trough. He invoked the rolling. Stone song, gimme Shelter. We're just a shot away, if you remember. That's the chorus over and over and over again.

And he kept reminding me, we're just a tweet away. He goes, one positive tweet, and the markets are gonna be back up 5%. And sure enough, really that's what's been happening, that every time the market sells off, the White House comes out and says, no, no, no, we're close on trade deals or no, no, no, we're not gonna fire the Fed share.

And I just thought that that trader's perspective was excellent, that everything could turn on a dime based on something that's posted on social media at 11 o'clock at night. And it's a hard way to live if you live and die with the markets like so many of our listeners do. 

Dianne Crocker: But what a great song reference.

I was coming back from vacation Manus on Monday, and I have to say I felt a little bit like Rip Van Winkle because normally on vacation I check the news now and then, or my emails, but I was just so drained so I didn't touch it for a week. And you know, I came back to the name calling and more of the tariff, tug of war and the treasury volatility, which was a lot of the same as.

What we had seen in prior weeks, and it kind of reminded me of this chestnut that we say in New England, if you don't like the weather, wait an hour. And that's kind of like how it is in the market. 

Manus Clancy: It is exhausting I have to say, I find myself turning on the Bloomberg at night and watching, Haslinda Amin, right? Tell us about what's happening in India and China and Singapore and Australia and this is the time for NHL Hockey Playoffs. This is the time. If you're gonna stay up late, you wanna watch that West Coast game, Edmonton and Los Angeles, or Dallas and Colorado. You don't wanna be watching that Bloomberg ticker at 11 o'clock at night. It's a sign that something's wrong, and I'm watching that Bloomberg Station way too often these days. 

Martha Coacher: We did have several data points for the market to react to, and they were a little bit all over the map. We saw durable goods come in with a surge, mostly due to airplane orders and in housing. Home sales last month dropped to the slowest March pace since 2009, and the Fed Beige Book commentary, which summarizes current economic conditions across 12 fed reserve districts.

Its qualitative information gathered by each district, and it provides a snapshot. Of what's going on in the districts. There were no big surprises there. But it's interesting because it does inform the Fed on policy and essentially the message was that things are relatively stable. If you look at the commentary specifically about commercial real estate, there was nothing that was alarming, most of it wasn't surprising. There were a couple of regions that had some softening of conditions. But mostly things seem to be stable. 

Manus Clancy: Well, there's a lot to peel back there. There's a lot of data to look at, and I think there's a lot going on. Let's start with the housing side, which I think stands on its own with two different things. Stimulating or destimulating, maybe is the word, the housing market. We saw interest rates go up in the second half of last year, starting in about November. So, after seeing rates really fall in September after the first rate cut, it's been a steady climb since then. Higher rates will always mean lower sales. It's a little surprising that we've seen the lowest existing sales numbers since 2009, but it goes par and parcel with higher interest rates. So that really has nothing to do with tariffs per se. When you are talking about the DOGE cuts that happened in the first part of the year, you also have the impact of people having this sense that layoffs are coming, the economy's gonna get weaker, inflation's gonna get worse, and therefore there may be another leg down in housing prices that may be keeping people on the sideline. So those two things are probably combining to make sense of what is happening in the housing market.

That's part of, you know, what's happening in the economy these days. On the rest of it, I harken back to a presentation I made on Tuesday that talks about the data we're seeing right now, and it's interesting, it came in the context of corporate earnings and I said, corporate earnings right now don't matter. Rarely is that the case. Rarely do you say it doesn't matter what a company did in Q1 or Q4 or Q3, right. I said, it doesn't matter what they've posted because the world changed on April 2nd. Whatever they did in the first quarter was baked. They had cost certainty then, they had solid sales, they didn't have supply chain issues. All you're looking for with these corporate earnings is what are they saying about the consumer? What are they saying about supply chains? What are they saying about the future? That's really the tell right now, and I think that this is a very long-winded way of me taking it back to the data you talked about the Beige Book data and so forth. It almost doesn't matter. All that matters right now is if we have a long trade war, how impactful is it? How much does the economy slow? How much does that impact retailers in this country, sellers of materials from Thailand, China, and other places? And if it's short, how much damage did it do in the first couple weeks of April? How much did it cause the economy to slow? Nothing matters more than that. Is it long, is it short, and how deep is the damage?

Dianne Crocker: Yeah it's interesting Manus, I think part of coming back from break and reading all of the news at once kind of put me in, I think a more pessimistic position than I typically am.

And it was making me think about the Lego movie. I don't know if our listeners are familiar with it, but my my kids were little when it came out and Liam Neeson was the voice of the good cop, bad cop. And for bad cop, he would swing the little yellow head around and take a bad cop stance.

So when I processed all the things that I read this week that happened in the market, kind of my take on a bad cop side, the things that kind of worry me hit on a lot of the things that you just mentioned. One is this whole tariff whiplash. My concern is that it's deflating the positive mojo that we had coming into 2025, and we are starting to see that in the earnings reports that just came out. Forecasters are starting to revise their outlooks downward. The odds of a mild recession are starting to rise and a slower growth scenario is suddenly the new consensus after some pretty bullish forecast back in January. So I do worry that lenders could pull back their horns a bit into that risk averse, that defensive posture that we saw over the past two years, and they're already uber cautious because they don't know where this is headed. So, I worry about that if the dust doesn't settle quickly, if the tariff wars continue, and then we suddenly have less liquidity just when banks were starting to reengage and then valuations drop and there's rising distress from maturing loans that could face serious refi challenges. So I do worry that if the tariff uncertainty drags on for months and months, certainly businesses that rely on imports face higher costs. They start reducing production or investment, and that's a drain on the economic bathtub. You know, and it ties in with a report that came out this week from the International Monetary Fund, which lowered its US GDP Growth forecast already down from 2.7% to 1.8%, and they also forecast that inflation could rise closer to 3%. So what does that do? It pushes the timing of the rate cuts that our industry wants and needs further out on the timeline.

Prices go up, consumers start reducing their spending. Then of course, retailers take a big hit, and I think in an uncertain climate, businesses get more cautious. Companies delay investment, they delay expansion, they delay hiring. Maybe they even lay folks off and that takes the winds outta the sails just when I felt like things were starting to gain steam as our CRE activity index has been showing over the past three months. So those are the things that concern me the most, and reading them all on one fell swoop makes it seem dire, but it all just kind of hit me at once as I reviewed the news this week.

Manus Clancy: Yeah, our listeners tend to know that. I do see the glass half full. Martha and I have been at this for more than five years, cutting podcasts. I like to tell people not just what I think, but what I'm doing on a personal level. I think the last time I did this was in 2023 when banks were failing and I said, this is a great time to be picking up risk assets especially debt. At the time, treasury yields were high and spreads on, for example, triple-B-minus CMBS were about a thousand basis points, 1100 over the curve, so we were getting 13, 14, 15, 16% returns and it turned out that that was great. What we saw was spreads collapsed over the following year or so, and you know, we're cut in half. It wasn't a good time to buy. Why do I bring that up? Not to pat myself on the back, but more to say, right now I'm more inclined to put money to risk than at any time in the recent future. Why do I feel this way? Let's kind of pull back the lens a little bit, right? You could have car trouble tomorrow, and the car trouble can come in one of two ways. You could have a failed battery, which is easily solved. You get some jumper cables out, you recharge the battery and you're back to work. It costs you 20 minutes of time. You could need a new engine and that may mean you have to get a new car. That could cost you somewhere between $5,000 for a new engine or $50,000 for a new car. Where I think we are because of these tariffs is a dead battery. It's a little bit self-inflicted, we left the lights on overnight, the battery died. That's what the tariff news is. But it's very quickly rectified if we wanna rectify it. We get out the jumper cables, we cut trade deals, we get back to work and it'll be risk on, and that's how I feel this will end. I could be wrong, we could see this go on for months and months and months. I don't think the American people have the patience for it, even though I think that the White House and President Trump can be very stubborn, I do think at some point there will be tariff fatigue, that people will want a deal to be done. We will get a deal done. And then I think, to your point, Dianne, we're back to early 2025 where we're feeling good about things. That's my opinion. I certainly could be wrong. I hope I'm not wrong, but that's where I lean these days. 

Martha Coacher: Is there anything that would make you feel less optimistic Manus? 

Manus Clancy: The thing I'm watching is the lending market. We've seen the lending market seize up in the past. In the early 1990s, no banks lent, we were in a deep recession. During and after the great financial crisis we saw an ice age of lending. People may have forgotten about this, but in late 2015, early 2016, during the oil bust, when oil went from $125 a barrel down to 40 people were very, very concerned about exposure to oil and gas lenders, right? C&I Lenders or even real estate in Houston. There was a pullback for about 60 days then. We saw a 30 day pullback in early Covid. We saw a tapping of the breaks when Silicon Valley Bank failed. So that's always the risk. The risk is that banks get so nervous, trust disappears to what Tyler Wiggers were saying on our podcast last week. Trust is erased and banks stop making loans. That's the biggest fear right now, and there's conflicting evidence right now, which is a little dicey. We're seeing some negative and we're seeing some positive. I'll let Dianne get into a little bit of that in a moment, but as long as the lending markets function, I will remain cautiously optimistic.

Dianne Crocker: One example of a deal going sideways of late came in the news this week, Progress Residential, which is a subsidiary of Pretium. They had proposed a $778.5 million offering, it was backed by 2,020 single family rental units, and now that deal's not expected to proceed. And it was newsworthy because it really would be the first identified mortgage backed deal to do so since the Trump administration imposed tariffs that have really kind of rocked the market. The bond rating firm, KBRA said that there were several transactions that it was also in the process of rating, which totaled about 17.5 billion. These are deals that are now placed on hold as markets are really weighing the effect of the administration's actions. So that's a recent real world example of deals really kind of being on pause because of what's happening. 

Manus Clancy: Yes, in the securitization market, the lenders really can't survive in volatile markets. They lend warehouse and securitize with the expectation that they will lend at x, they will securitize at x minus some level, 25 basis points, 50 basis points, and they'll arbitrage the profits. If markets go haywire and they lose that arbitrage, they pull back. And that's really what I was talking about earlier and what we're seeing right now, and this was an excellent example, Dianne. Pretium Partners pulling this nearly $800 million deal is evidence that the markets are too haywire for them to profit off using the securitization markets. If this morphs into other people not lending because they do not have exit price certainty, this would mean lenders will pull back, especially in the securitization market, and that would make me very, very concerned.

Martha Coacher: Let's move to the LightBox data dive. This week we're gonna do the LightBox Appraisal snapshot report, which was just released. 

Dianne Crocker: It was, so this measures lender driven demand for commercial appraisals. So the index in the first quarter advanced to 59.8, and that was a 5% increase from 56.9 in Q4, and it was 6% higher than it was one year ago. So my read on this was that the increased signals grow in confidence, despite the headwinds that we've been talking about here today. Total appraisal award volume, measured in dollar terms that went up by 15% year over year, and 10% quarter over quarter. Retail was the top spot for lender driven appraisal projects. Accounting for 22% of all of Q1's activity, and then industrial and multifamily rounded out the top three. I will say Martha and Manus, it's worth noting that the uptick in the appraisal index in Q1 brought the index closer to levels that we haven't seen since the second quarter of 2023 when it peaked at 63.1 just before elevated interest rates led to subdued lending activity. So, this uptick was after two pretty slow years, so I found that very encouraging. And I noticed too that the volumes on an average daily basis in March were stronger than February, even as market volatility ramped up. So what we've learned in April and just talked about is that a lot can change quickly. And the big question of course is, will the momentum in our Q1 data continue or will it wane? April, believe it or not, closes next Wednesday, so our CRE activity index will really be our first read on how the market is reacting to all of the whiplash that we've been talking about. 

Manus Clancy: Well, if I didn't go full nerd in talking about watching Bloomberg at midnight and catching up on what Haslinda Amin has to say about the Asian markets, I will go there now. In addition to watching Bloomberg at midnight, I do watch every single day, who's refinancing, who's putting capital to work? I'm looking every single day for are we seeing signs of inactivity? And I think the good news is, and I hope that this will be underscored when we release our index in about 10 days or so, that the tariff news did not do nearly as much damage as was feared. I did have a couple of headlines this week that were really, really both full nerd and encouraging. I saw Affinius refied, a construction loan in downtown San Diego, that was $150 million deal. Peachtree put out a $70 million loan on a Seattle hotel. Seagis nabbed a $90 million refinancing on an industrial portfolio, that loan made by State Farm. All of this allows me to sleep easier at night. When I see the fact that these loans are not getting pulled, that they're getting over the finish line, we're now three weeks post the tariff announcement, every time I see one of these, I just get a little bit more confident that the markets are functioning and that makes me feel good. What's that line out of Trading Places? Feeling good Louis? Feeling good Billy Ray. 

Martha Coacher: While you're in a good mood, let's talk loan modifications. 

Manus Clancy: Yes, I saw a publication, I think it was Credit IQ that put out a nice chart about where modifications have gone. People can look at modifications one of two ways. I'd like to hear Dianne's thought about this. For some people it's extend and pretend it's just kind of varying losses to be endured later. It's taking advantage of hiding trouble under a guise of a modification. I tend to not look at this this way. I think that if you've given up on a property, you let it go into foreclosure, you send back the keys and you throw in the towel. If you get a modification, it's because you believe in a property. It's more of a vote of confidence than it is something untoward. And so when I see modifications get done, I think this is lenders and borrowers believing enough in an asset to work something out, which often is tricky. I look at it that way. Dianne, I don't know how you look at it. 

Dianne Crocker: I think so. I agree with you and my read is that it reflects kind of a collaboration between lenders and borrowers. You know, kind of looking at the lessons that they learned from past downturns and figuring out, okay, let's look at the asset, let's figure out a way to adjust the loan terms in a way that's flexible that we can both agree to, versus immediate resolution that might not put the borrower in a good place. So, I do view that as a positive to see the loan modifications going up. 

Manus Clancy: But the good news is you don't need to trust us. In a shameless plug, I'm gonna tell you that next week we're gonna have experts on. The Henley group who for years have been experts in navigating on behalf of borrowers, the modification and loan workout process. They're gonna be guests of our podcast next week. So, don't rely on us, listen to them next week and get a sense of what it really means as these modifications take place, what is happening and where rubber is really meeting the road in that part of the market. 

Martha Coacher: I'm also reminded by our podcast with Rick Jones that we had a couple of weeks ago who works on some of these deals as an attorney, and his comment was, while the extend and pretend is a pejorative term used in the industry, he refers to it as Extend and Repair, which gives you a different view of how he approaches these deals.

Dianne Crocker: Yeah, and I think that continues the same line of reasoning, Martha is, you know, finding a way to make these properties work. Some of them, are troubled and if there's a way that lenders and borrowers can work together to get it in better shape, whether it's through investment or better financial terms, I think that's good for everybody, especially if it avoids foreclosures, which I don't think anybody benefits from.

Manus Clancy: The mention of Rick Jones is a great segue. We did get a comment on that visit that he made to our studios, our virtual studios here. We did an interview with him, I guess two or three weeks ago. And Andrew wrote in to say that he really enjoyed both the interview as well as Rick's thought about the market evolving to have multi borrower CRE CLOs. He thought that that was a great idea. Thank you Andrew for listening to that. I too thought it was a great idea. I think bigger CRE CLOs will help add even more liquidity to the market while taking away some of the concentration risk for people who invest in those securities. So thank you again for listening, and I hope to have Rick back here one of these days. It was a great interview. 

Martha Coacher: Manus, I think you said multi borrower. Andrew, I believe said multi seller, and I think that is a great idea. The 2025 NFL draft is happening right now from April 24th to the 26th in Green Bay, Wisconsin, and today we are running a draft style segment, the 2025 CRE investment draft. If you had the first pick in this year's commercial real estate market, which asset type would you be putting on your team? I think we'll start with Manus. 

Manus Clancy: Wow. Can I trade the pick and pick up three more assets on a cornerback in the third round? I don't know. I'm glad to be here in South Carolina doing this draft and not in Green Bay, but here goes with my first pick in the 2025 First Annual LightBox CRE Draft. I am gonna go a little bit contrarian. I'm gonna take grocery anchored retail. You might be surprised that anybody would take retail in the first round given how hard retail has been hit over the last decade, how many losses have been taken by shopping malls and the fact that retailers are exposed to supply chain issues with regard to inventory coming from South America, the far east, and so forth. Why am I taking grocery anchored retail? We saw during Covid that that segment was undentable. People need to eat. That's reason number one. Reason number two, if the US consumer is dented, if he sees his pocketbook squeezed, he is going to trade down from going out to Outback to cooking at home, will benefit the grocery anchored retailer. Lastly, if they really trade down and stop getting Tostito's brand salsa, that they start getting store named inventory, grocers actually make a lot more profit on privately labeled inventory of their own then brand names. They make 35% margins on Piggly Wiggly brand salsa versus 26% on national brands. Another tailwind, mark me down for grocery angled retail with the first pick. 

Martha Coacher: I like that pick Manus and I actually had it on my draft pick list, but you took it from me, so Dianne, I'm gonna let you go next. Who's your franchise pick? 

Dianne Crocker: Well, I find this really challenging, almost as hard as my NCAA picks because the market's so nuanced, so it's hard to generalize, but I think my franchise pick is multi-family and just hear me out. This is kind of my flight to safety because multi-family, I think right now is benefiting from a trifecta. One is the sharp rise in house prices means people can't afford to buy. Number two is the housing crisis that we have, there's not enough housing to meet demand. And three, the tariffs will make it more expensive to build. So slowing new construction will set the stage for rent growth and that makes existing stock more valuable. And I've watched so many here in my area in Connecticut, so many multi-family developments go up near me. The parking lots are full months later, so I would definitely pick submarkets selectively and with balloon loans maturing under still high rates, I'd be looking for opportunities in strong markets to come in low and maybe add some appealing amenities and energy efficient upgrades and make some money. So that's my franchise pick. 

Manus Clancy: Love that pick. 

Martha Coacher: It's a good one. My franchise pick is data centers. And the reason I picked it is 'cause you guys took my other two picks, so that's unfortunate for me. But I do think data centers are a pretty solid pick. Power capacity is now more important than square footage. That's my Patrick Mahomes pick for you football fans out there. There's record construction still for data centers. We've had some really big deals in the last several weeks, in the last years. Wren House and BlackRock formed a $1.2 billion joint venture with QTS to acquire majority stake in three stabilized data centers in Northern Virginia, and everybody knows Northern Virginia is the hotspot for data centers. I think the news about tariffs obviously has hurt tech temporarily, but I do think AI is here. It's not going away, and it is absolutely what is powering the need for data centers. So I'm feeling pretty good about that one. We're now into round two with our strong contenders, Manus, who's your pick? 

Manus Clancy: I'm gonna stay with my theme that if you could survive Covid or even thrive during Covid, you are worthy of my money during a tariff induced downturn. My next pick is student housing. I thought at the beginning of Covid student housing was toast. I said no parent would ever pay a thousand or $1,500 a month to have their student order DoorDash and watch TikTok for a year while taking classes remotely. Boy was I wrong. I'm not gonna make that same mistake twice. This is the one non-negotiable budget item it appears for parents even if their own personal wallets remain tight, they will pay for their kids to go to college and pay for student housing, private student housing. That's my pick number two. 

Dianne Crocker: That's a good one, Manus. I'll tell you, I've been visiting colleges with my son and some of them look like prison cells and some of them look like four star hotels, so there's a very wide range.

Martha Coacher: Who's your strong contender pick dianne? 

Dianne Crocker: I kind of went with a nonconventional choice here. I looked to manufacturing because I think there's a play here to leverage the made in the USA push that's going to create new demand for space and already is. Demand for building manufacturing sites, demand for owning them. The reassuring trend was already underway and tariffs will only reinforce it. So Johnson & Johnson is one example, they committed over $55 billion to build new manufacturing plants over the next four years to bolster their domestic pharmaceutical production. And huge investments like that really tend to ripple out and spur demand for other types of real estate. So they give rise to new communities to house employees, places for them to shop, offices for ancillary businesses. So on mine, I would look to assets in the Midwest, the Southeast and Texas that I think are all strong contenders for investing in manufacturing. 

Martha Coacher: Well, you took my strong contender for multifamily, so I'm gonna have to dig deep into my draft pick roster. Go for cold storage. The unsung hero of the supply chain, underserved and underbuilt. They have had tenant stickiness and limited obsolescence. The tariffs may throw a wrench in some of this, but a Collier's report that said most recently, that despite short-term challenges, the long-term outlook for cold storage remains strong and the market is valued at 159 billion last year, expected to grow at 18.1% CAGR reaching 427 billion by 2030. So to me, while it's highly specialized and capital intensive, it is something that looks intriguing. Moving on to our sleeper category. This is the category where you may not put 'em at the top of your roster, but they might have a breakout.

Manus Clancy: For me, it's strip malls. It's unanchored strip malls. You probably follow if you're in commercial real estate StripMallGuy on Twitter or sometimes on LinkedIn, he's a real prolific poster. I think he nailed it over the last couple of years that people will never stop getting their nails done, getting their hair cut, doing those little things that fill up strip malls. And I thought we saw great resilience for that segment of the market during the great or not so great Covid era. I do think that that is a very reliable place to put your money right now. Those types of things are immune to tariffs. They don't use supplies, right? You're not getting supplies to get your hair cut or your nails done and I think that will continue to outperform in the near term. 

Dianne Crocker: That's a good one. And he is a good follow on Twitter. I'll second that. So for my sleeper, I went with medical office. Not as sexy as data centers or industrial and no one's really talking about it like they are with office and retail, but healthcare demand is non-cyclical. We get sick in downturns, we get sick in upturns. Our populations aging and care is also shifting from hospitals to outpatient settings, which is going up all over near where I live. And these tenants, you know, they sign long-term leases. They invest in customizing space, so they're sticky and less likely to move. So I see that as a potentially high yield growth play in a shaky market. So that's my sleeper pick. 

Manus Clancy: So you don't think the removal of petroleum products from our food as suggested by the FDA this week is gonna make an immediate impact on the general health of Americans? Is that the thesis?

Dianne Crocker: I don't believe that. I think RFK might have a different opinion though. 

Martha Coacher: What about the microplastics? 

Manus Clancy: Yum. 

Martha Coacher: My sleeper pick is something we've talked about a lot on this podcast, so perhaps it's not truly a sleeper, and that's converted office to resi projects. This is clearly a long play. Adaptive reuse of obsolete office buildings into apartments or mixed use spaces is tricky, but if you get the zoning, funding and design right, it's got some upside in places like Chicago, DC, Philly, and other places. So we've seen a number of stories on this and efforts to add to affordable housing, for example, with office to resi conversion. So some of it has been successful, some of it obviously on hold with a variety of complications there. In our last category, I've got the wild card, but Manus, as per usual, gives us a curve ball with his pick. You don't have a wild car, you've got a bust. 

Manus Clancy: I got a bust. Every draft has that one player that as a fan you're saying, please don't let my team draft this guy, he's gonna be a bust, he's overrated, he's slow, he is got short arms, right? Anything that, you know, if you don't like a guy, you find a reason to not want him. In my category for bust right now, it would be luxury hotels. Hotels that serve either high-end business travelers or international travel. I think there's two headwinds right now. I think that because of business uncertainty, as we saw in Covid, the first thing that gets cut is business travel. I could see CFOs everywhere licking their chops to say, we are cutting down on business travel untill we have more certainty on the tariff front. That's one headwind, but I do think a bigger headwind is as you see anti-American sentiment as foreigners say, we don't like the fact that the White House is talking about Canada making us the 51st state. As we see people in Europe and Asia say, we don't like that you're slapping our businesses with tariffs. I think that that will weigh on the international traveler that spends a lot of money in New York City, San Francisco, Hawaii, et cetera. If they can go to Paris instead of New York City, that may be the choice they make in 2025, and that will accrue to the detriment of hoteliers at the high end in 2025. That's my bust. 

Martha Coacher: And Dianne, did you stick to the wild card? 

Dianne Crocker: I did. I followed your directions, Martha. And my wild card is I got very specific and I picked San Francisco's office market. San Francisco clearly was the poster child for office distress. When its vacancy rate rose from the lowest in the US to the highest after Covid. But I picked it as my wild card because it's in the crosshairs now of big tech. Leasing volumes reached their highest levels over the past six months, then since early 2022, and just this week an empty 25 floor office building sold for $111 million in one of the biggest deals that they've seen since Covid, and this was an investor Blackstone joining forces with developer DivcoWest, and they're betting big on the AI boom to rescue the city's beleaguer office market. So I picked San Fran office as a wild card. An opportunity to acquire assets at a steep discount. And specifically, they're labeling a street there as AI Alley in downtown San Fran because they have high hopes of it renovating the office sector in San Francisco. 

Martha Coacher: And my wild card is someone who's been demoted from a first round draft pick to wild card, and that's industrial. For the last few years, industrial especially last mile delivery has been the MVP of CRE with e-commerce, tailwinds, tight supply, major metros and AI driven buying and acquiring but tariffs and global trade have really put a damper on the enthusiasm for this sector in the short term with a lot of concern over China, Canada, Mexico, delaying some leasing decisions and if you read some of the Beige Book notes, you hear about leases that have been put on hold. And Prologis tempered its outlook for the forecast for development starts but I still think there's positive potential. And if trade deals get done sooner than later, that could renew enthusiasm for this sector. So that's my wild card pick. 

Manus Clancy: That's very interesting, both of you picking out industrial to lean in on during our draft. I'm not sure I'm there with you guys, but I hope it works out. It would be good for our onshoring, it would be good for our investor clients, and I hope it comes to pass. So, both of you are of like mind there. 

Martha Coacher: Well, I'm sure just like in your fantasy drafts, we'll get grades from people. So we welcome any grades that you wanna offer us on our draft picks. And as a last note, what's your team name Manus? 

Manus Clancy: Mine is going to be in honor of the Giants four Super Bowl wins, The Lombardi Trophy Assets. 

Dianne Crocker: I love that. I think I'm gonna go with Asset Class Acts. 

Martha Coacher: Love that. And I'm gonna go with Cap Rate Crusher, seems appropriate. If you wanna let us know what you think of our picks, head over to LinkedIn and vote on what you think, we'd really be interested in your thoughts.

Thanks to our producer Josh Bruyning. Please join us every week as our LightBox team shares CRE News and Data in Context. You can listen on any of your favorite podcasts channels, and send your comments or questions to podcast@LightBoxre.com. Thank you for listening and have a great week. 

Manus Clancy: Let's go.