CRE 2025 Forecast – Rate Cuts, Resilience, and the Rise of AI with Economist Ryan Severino

We welcome back Ryan Severino, Managing Director, Chief Economist and Head of Research at BGO, for a sweeping conversation on the macroeconomic forces shaping commercial real estate in the back half of 2025. Fresh off being named one of PERE’s 100 most influential figures in global real estate, Ryan joins the LightBox team to unpack everything from the timing of potential rate cuts and labor market risks to the rise of AI-driven forecasting and why multifamily may be the ultimate outperformer in a high-tariff environment.

With his signature contrarian perspective, Ryan explains why he correctly predicted fewer, later rate cuts this year and why he sees more downside risk in the labor market than runaway inflation. He unpacks how trade policy shifts and tariff shocks are distorting Fed strategy, creating "triple whammy" risks for consumers, and slowing – but not halting – CRE recovery. You'll also hear why his firm, BGO is doubling down on AI-powered forecasting, how Gen Z is reshaping retail demand, and why office might finally be turning a corner.

From real-time data revisions to trillion-point predictive models, this episode is packed with timely insights on what's working, what’s wobbly, and what lies ahead for CRE. Don’t miss Ryan’s bold predictions and the one indicator he’s watching most closely.

01:29 Economic Predictions and Market Analysis

03:11 Impact of Recent Job Reports

06:08 Fed's Dual Mandate and Rate Cuts

17:52 Commercial Real Estate Market Sentiment

24:29 Sector-Specific Insights: Multifamily, Office, Industrial, and Retail

35:42 The Role of Technology in Forecasting

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

www.lightboxre.com

Transcript

The CRE Weekly Digest by LightBox

Episode 58: CRE 2025 Forecast – Rate Cuts, Resilience, & the Rise of AI with Economist Ryan Severino

August 8, 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. This week we're welcoming back Ryan Severino, Chief Economist and Head of Research at BGO and adjunct professor at Columbia University. If you follow macroeconomics and it's hard not to these days or commercial real estate, you've likely read Ryan's sharp commentary. Before we get into some of these macro signals that are keeping investors on their toes, let's start with some well earned recognition. Ryan, congratulations on being ranked among PEs 100 most influential figures in global real estate. 

Ryan Severino: Thanks, Martha. As a self-professed uber geek, I will take a little bit of pride in that. The handful of other economists on that list were either heads of central banks or like the Secretary of the Treasury, and so to somehow find myself on that list with, you know, other luminaries in the industry, I will say, I'm not one normally for those kinds of accolades, but I will embrace this a little bit just because when I look at a lot of the people on that list and I think, boy, how do I fit into this group?

Like I said, it's either like super hardcore. Technical government economists or, you know, visionary leaders like Sonny and John at BGO or people like that. So I will simply say thanks and I will be very appreciative that they deem me worthy to be on such a list. 

Martha Coacher: We have to say it, you called it Ryan, when we had you on several months ago, while much of the industry was anticipating a bunch of rate cuts this year, you stood as an outlier predicting a much more measured path from the Fed, and you proved to be correct.

And honestly, I think that's one of the reasons why you're on that list. 

Ryan Severino: Yeah, I would say that call for 24 in particular was pretty good. And then, you know, without straining my arm, pounding myself in the back, I think one of the things that I. I did, where I carved a little bit of a niche out for myself is really pioneering this idea of writing a weekly, what's going on in the world, what's going on in the economy, and then specifically focusing on what it means for commercial real estate.

And I've been doing that pretty consistently since about, call it September of. 16. So not quite a decade at this point, but I've gone back, other people have gone back and looked at the totality of that and I will simply say I'm proud that I've gotten a lot more right than I've gotten wrong over that nine-ish year period.

And so it's nice, like I said as an uber geek to get a little bit of recognition for that. 'cause a lot of those calls. Haven't been easy. We've been through some objectively interesting times over that nine year period, and so it hasn't been dull. It's certainly been exciting in, in certain respects, but as I said, I won't strain my arm too much, patting myself on the back, but it's definitely been a challenging environment with which to try to put out a weekly and try to put out forecasts about the economy and the real estate markets and try to be right more than I've been wrong.

It has not been the easiest environment over that nine, 10 year period. 

Manus Clancy: So Ryan, we got a little bit more excitement last week, not the good kind of excitement with the jobs report, especially the revisions for May and June. Were you surprised by that? And how does that change your outlook for the second half, if at all?

Ryan Severino: So, Manus, in terms of surprise, maybe the magnitude of the revisions were a little bit surprising just because of how large they were, but in terms of. The slowdown in the labor market. I can't say I was completely surprised by that. It's funny, if you recall the last time we did this, call it, you know, the beginning of the year, you asked me for another contrarian view because as Martha mentioned, my 24 call on.

On interest rates was very contrarian relative to the conventional wisdom. And I said that I was still not bullish on rate cuts like 7, 8, 9, 10. Nothing ridiculous like that. But I think relative to the people who didn't think rates were going to get cut at all this year, I was a little more bullish than that view.

And I still feel more bullish than that. And my logic for that was I saw inflation continuing to trend down in a world without disruptive policy. I also saw a greater risk to the labor market than I saw that inflation was going to spiral and run away from us again. And in that sense, I don't feel completely surprised by this now, I'll be honest and say certainly government policy is probably exacerbated that.

So the magnitude might. As where I started, this answer might've been a little bit surprising to me, but the idea that we are in August of the year, and I think the data has pretty, again, not straining my arm, patting myself in the back, but I think the data is now really leaning into this idea that there's, there is a slowdown in the economy and there's probably more downside risk in the labor market than there is with.

Some kind of inflationary spiral getting away from us. And so I'm, I was a little bit surprised just because of the magnitude of the restatements. Usually we don't see them quite of that magnitude, but if you think about the environment during which that occurred, those kinds of restatements usually occur around some kind of significant change in the economy, especially some kind of disruption in the economy.

And not to be remotely political about this, but. Since the beginning of April, we've had a significant shift in trade policy. And so in that sense, I'm not surprised by the fact that the labor market is weakened, but I will concede that the magnitude of the re restatements were a little bit surprising to me.

Manus Clancy: I have a question. It's an academic question that only a professor from Columbia might be able to really understand, and I hope I can state it very well or well enough that you can understand it. But let me go here. The Fed has a dual mandate, right? One is employment, one is inflation. Normally, when you see the Fed fighting inflation, it has to do with an overheating economy, right? Economy, where velocity of money is moving too fast and they're looking to cool things off. And now what we have is not an overheating economy per se. That is driving inflation or the perception of inflation.

It's more of a shock to the system. So when you hear Jay Powell talking and he's saying, I'm worried about inflation, it's all around the tariffs. So I equate this to the scenario. If war broke out and oil went to $150 a barrel, you would say that's gonna be such a slam on the economy, that it's time for the Fed not to increase rates.

But to be more dovish, to fight against the slowing economy because of this shock. So it surprises me a little bit that the Fed has not taken that position with regard to rate cuts. This is not an overheating economy. Whatever inflation's gonna be driven is from basically a tax hike due to tariffs. Why be so hawkish?

Ryan Severino: I don't wanna speak for the Fed per se, but their argument would be. That they are, at least up until recently, as recent as last week with Chair Powell's statement, that the voting members have been, in terms of the dual mandate that you referenced, have apparently been a little more concerned about inflation because of the shift in trade policy that you mentioned relative to the slowdown in the economy.

But I agree with you. My thought, and again, this goes back to our discussion at the beginning of the year. I was more concerned about the economy slowing down. I thought inflation was on its way back to target. We've clearly seen an improvement over the last few years. My model was suggesting that, and the nice thing about modeling and doing my own modeling is the counterfactual and economics is always really difficult.

But I do have a good model run, good model runs from before April in a world where we've got trade policy, something like it existed in. January, February, even March, just for argument's sake, they have inflation in the US heading back to Target and the official numbers by the end of the year. Now there's two things I would say about this.

Number one, anybody who's heard me speak over the last two years or read anything that I've written, knows that I don't like the way that we calculate inflation in the us, especially shelter inflation. I have been beating that to death for the last few years because we have been. Mis measuring it and where the rubber meets the road on this is, we've been overstating it over the last few years.

Those of us in the real estate industry know that housing appreciation has slowed considerably with rate increases. That apartment rent growth has slowed dramatically from where it was during the pandemic, and it just comes through in the official data and a lag. It's not really reflective of reality.

So if we've been measuring inflation correctly. We might already be at Target. Right? Again, the counterfactual is a little bit difficult to know, but the other point is, if you look at inflation over the last four or five years that came through because of the pandemic, there was really a global phenomenon, right?

We shut down. The global supply side of the economy and almost everywhere in the world, but certainly in the major industrial economies in the world, with some differences in timing. We saw similar trajectories of inflation that it ran up and spiked in somewhere in 2022 and then decelerating. And if you look at almost all of those other places in the world.

Inflation is basically at Target in Canada. It's at about a 2% target in the European Union, including in the major constituent economies of Germany, France, and Italy. It's at or below Target and Australia. It's at or below target. There. There are a couple exceptions in there, right? Japan's got its own interesting thing going on with inflation.

So it's above Target and the UK has its own interesting thing going on. So it's reac accelerated and is a bit above target. But my point is that. Wave broke and crested and we were part of that wave. And I mean, up until last month we had been on this deceleration wave. And so if I'm the Fed, I'm not, but if I'm the Fed and I'm looking at this, I think, well, we can get some disruption because of trade policy.

It is going to slow the it's, it is slowing the economy down, which, which is manifesting now a little bit more in the labor market. But I don't see the risk of inflation running away from US 1970s style versus. We're at a point now where policy decisions in the US have caused enough uncertainty and are starting to show through in the inflation data to the point where they're restraining growth.

And I feel, I don't wanna say worried I don't think we're headed for a recession, at least not just yet. I don't wanna scarem monger about this, but my examination of that dual mandate now feels. In terms of being more concerned about the labor market than inflation, I probably even feel more strongly about that than I did in Gen in, you know, earlier in the year when we talked about this and I didn't know that we were going to get this kind of trade policy earlier in the year.

I was just looking at what the model says and thinking about the trajectory of this, and so that's my guess on what the Fed is thinking. But again, they met and spoke before Friday when the labor market data came out, and we already had. Two dissenting members last week. Again, I really try to stay outta the political realm, but not to be remotely political, but you know, the president is going to appoint now a voting member, and he will very likely appoint a dovish and not a hawkish voting member.

Dr. Kugler, who's leaving, was one of the most hawkish members, and so just playing the mathematics is. Probably going to start to shift at least some of the conversation that we're hearing from the Fed, although keep my fingers crossed on the policy front. 

Manus Clancy: Yeah. To take it on a personal level.

It feels like that moment when you're carrying a child up to bed and your wife says, can you also take this piece of luggage and the laundry at the same time? The risk is we have higher costs because of tariffs, but not an overheating economy, a weaker job market, and the Fed chooses not to cut. Leaving that triple whammy for the US consumer.

That's my biggest fear now. And it does feel like absent a change of tone from Jay Powell, that's the path we're on. 

Ryan Severino: And my concern, again, I don't wanna keep referencing, our previous conversation, but my concern at the time was that real interest rates were positive that the nominal interest rate was exceeding the underlying inflation rate.

So when you do the back of the envelope, mathematics. The real interest rates in the economy were positive, and that tends to be what restraints economic activity. So I agree with you. We could be at a point where the economy's slowing down, which we're already seeing in the data, the labor market is slowing down, which we're already seeing in the data.

There's a little bit of inflationary pressure coming through because of a policy decision, to your point, which I think is an astute one, not because the economy's overheating and we could run the risk. Of leaving rates too high for too long, leaving the real rates positive, and then, and you know, that is, Boy, I hate to say this because the universe usually listens when I say things like this, but that is the classic recipe for a post-war recession in the United States, right? You just leave interest rates too high for a little too long, and I'm not talking about a pandemic or balance sheet recession like we had in the financial crisis.

I'm just talking about your typical post-war recession in the us You leave rates too high for too long and eventually you tip things over a little bit. That risk is there. That risk is not off the table, especially if the Fed is too concerned about short-term inflationary impacts and missing the picture a little bit about the deceleration and growth and what it's doing to the labor market. Yeah I think that risk is very much on the table right now. 

Dianne Crocker: Hey Ryan, I wanna jump in. Congrats to you on the new feather in your cap. I think we are. Thanks. We already knew you were an influential figure in real estate, so it's nice to see it's official. I will say I'm a loyal reader of your weekly commentary, and I would recommend to our listeners that you follow Ryan on LinkedIn to access his analysis each week.

He also always has a fun thought of the week, like how many minutes? People over the age of 85 read per day compared to teens before we dial into commercial real estate Ryan, you know, I feel like on the topic of interest rates, which is obviously top of mind today, along with tariffs, we're all kind of here playing the role of fed commentator. You know, it's like Sunday football, and we're all breaking down the rate playbook and everybody's got a take on what the Fed should do versus what they will do. As Martha said, you were one of the few last year who called it right? You said fewer cuts later in the year while everybody else was forecasting four or five.

Six rate cuts by midyear, which never happened. And it sounds like your sense now is that rate cuts should be in the near term future, but may or may not be given that labor is about to turn negative. I agree with what you just said in terms of the dangers of waiting. But let's assume that the Fed cuts rates at the September meeting, how much of an impact do you see that having on commercial real estate lending in an already cautious market?

Ryan Severino: We've already seen I don't wanna be excessive, so I'll just say notable improvement in the lending environment. I think if you look at the last year or so, the Fed did ultimately cut about a hundred basis points last year, which I think was beneficial from my perspective. It's the long end of the curve where things have been held up a little bit.

We haven't really seen the long end of the curve come in much. Cyclically the 10 year treasury peaks, call it circa 5% this cycle. We're still bouncing around in the fours because of a bunch of things that are going on. I think it can help, but I think until some of this uncertainty abates and we have a little more transparency on exactly where inflation is going, we're probably going to bounce around in the plus or minus 4% for a little while, which in the long run is feels about right to me.

But I think we'd probably need to see uncertainty. That uncertainty, especially around policy to me is really the crux of this because commercial real estate is such a long duration asset, both on the, generally on the lending side but certainly on the owner side, on the equity side, it's difficult to feel enthusiastic about going out and making such long-term bets.

Policy is going to be mercurial and bounce around a little bit. So I think it can help. I just would caution everyone to avoid thinking if the Fed cuts two or three times, which feels to me probably what they should do, but I can't promise you that they will. I would not expect it to be a panacea because they think the long end of the curve right now is still.

Concerned about a lot of the uncertainty that is prevailing in the economy and some of these latent inflationary pressures, which are now starting from trade policy, which are now starting to show through in the data a little bit more. If we can get through that, if the uncertainty can abate even a bit and we could have a little more clarity on what inflation is likely to do, then I think that would do a world of good for the lending environment.

Dianne Crocker: So Ryan, we just closed our midyear sentiment survey, and it was actually kind of a pleasant surprise. We heard from 237 respondents across a very broad base of commercial real estate, 76%. They're feeling reasonably good about. Able to increasing activity in the second half, and I wanted to dial into something that I read in your latest weekly commentary you wrote that the noise around policy changes and the related uncertainty have slowed down the recovery in commercial real estate markets, but not halted the recovery.

That it's maybe proceeding more slowly than we would like, but that there's still time on the clock. I think cautious optimism is probably the most overused term right now in addition to, to resilience. But I wanted you to comment on, what did you mean by more time on the clock? And are the signs that you're watching pointing toward that growth in the second half that so many of our respondents are looking at?

Ryan Severino: Again, not to keep referencing this, but I think about our last conversation. I was feeling pretty optimistic. I won't use the word co. I hate that expression, right? Talk about hedging, cautious optimism. I gotta cut that out of my own vocabulary, but I did feel pretty optimistic about where the market was going.

If you look back over the first half of the year. I'm going to agree with that statement I made fairly recently. Maybe the pace of improvement has not been as great as I would've liked it to have been and those of us in the industry would have liked it to have been, but across most objective measures and subjective measures, it's fair to say that we've seen an improvement.

Your activity measure has improved over the balance of the first six months of the years. Lending activity has increased. For all that we just discussed over the balance of the first six months of the year, returns have increased over the first six months of the year. Fundamentals have been a little hit or miss, depending upon property type, but overall I would characterize it as an environment of stabilization.

Maybe not as exciting as significant recovery, but again, I'm measuring that relative to where we started and it's hard to look at the totality of this and not say things. Have improved, again, across objective and subjective measures. The market has clearly improved over the first six months. Even if that pace is not as rapid as I would ideally like it to be, I think about where we are in early August of this year and think we still basically have five months left on the calendar.

That's a lot of time for things to continue to get better, even if. Uncertainty doesn't abate the way that I would ideally like it to, and inflationary pressure has a little bit of a longer tail and still filters through into the, toward the fourth quarter of this year. I tend to think that the market, because it is such a long duration asset, still has the ability to peer through these kind of short term disruptions.

And when I peer into my crystal ball, our crystal balls at BGO and look at the medium to long term. I'm still bullish on commercial real estate. I wouldn't do this as a vocation for a living if I didn't think that were honestly true. I certainly wouldn't come on one of the top 10 podcasts in the industry and tell everybody that it's true if it were not.

And so I'm trying not to be so fixated on the next four to five months because there are a lot of variables in the equation that maybe used to be constants that we didn't have to think about. I'm almost 100% confident over the medium term and then into the long term that this will still be an asset that recovers along with the economy and offers compelling opportunities irrespective of which side of the business you're on.

That is a hill I'm still willing to die on. No doubt about it. 

Manus Clancy: Brian, I join you on being a glass half full guy when it comes to CRE, and one of the things that makes me glass half full at the moment is that. In mid-April when US equities were selling off 20% and we had reached really max panic in that part of the market.

Unlike past periods, the lending market didn't turtle people continued lending. We saw Turling obviously in the great financial crisis during the oil bust around 2015 or so. Early COVID, and we also saw it fairly recently after the failure of Silicon Valley Bank, but we just really soldiered on much more confidently this time.

What do you chalk that up to? 

Ryan Severino: I will hope that it's reflective of the fact that a lot of people in our industry were able to look at this and just say, this is a short-term policy disruption. Right? Because even if, I'm glad this is not the case, but even if we ended up with the very punitive tariff rates that were announced on April 2nd, we didn't thankfully.

But even if that were the case, it would function like a one-time shock. It would not spiral the way, you know, contrasting with the point that you made earlier. If this were an overheating economy and we had a serious risk of something like a wage price spiral, and that was what was going to be driving inflation, then I'd say, okay, maybe there's warranted consternation, because that can really lead us into a pretty dangerous place.

This kind of policy change. Again, it's not great for economic growth. It's definitely a constraint relative to some kind of pre tariff baseline, and it's not great for inflation. It is almost certainly going to push inflation up relative to that baseline, call it, depending upon what index you use, 50 to a hundred basis points.

But I do not think this is the death nail for the economy. Or the real estate markets. And if anything, to use the word, you know, Dianne mentioned this, I'm guilty of using this word too. I gotta come up with a good synonym. But boy, the resilience of commercial real estate in the face of so much over the last four to five years, I think it has more than acquitted itself in a really trying environment relative to probably the popular perception of it among, not even just the broader populace, but even people involved in the investments world.

I think our industry was smart enough to look at this and say, okay, maybe all of this isn't ideal, but we have a big enough asset class and a diverse enough asset class that there will be opportunities even in a policy environment that I will just objectively call suboptimal for economic growth and for the real estate markets.

Manus Clancy: We wanna go through the individual property types quickly and get your opinion on these. I'll start out with multifamily. And we had a thesis a couple weeks ago where we said, is it possible that multifamily is actually the safe harbor in the tariff world, in the post four two world? Because it puts a lid on new development.

People say it's too expensive to put a shovel in the ground. Supplies are expensive. Labor's expensive. We can't source lumber anymore, and. Something like multifamily actually outperforms for that reason. Existing supply just is the beneficiary of new starts Just tailing off. Let's get your reaction to that thesis.

Ryan Severino: Yeah. I'm still bullish on multifamily housing in general, but multifamily, the supply pipeline has abated considerably even before trade policy started to impact some of the things that are important inputs to construction and prices of those things. When I look at it, I think a lot of the disruption and a lot of the increase in vacancy we've seen over the last few years was pretty concentrated in certain parts of the country.

Other parts of the country, the housing market is still maybe not quite as on fire as it was once upon a time. But prices keep going up, inventory gets snapped up from the market in relatively short standing on the for sale side. And vacancy rates are still very low for multifamily. Therefore, when I look at this, I think.

This is still maybe the easiest no-brainer in real estate. Demand keeps going up. Supply on a structural basis can't keep pace. And even in the parts of the country where we did a little bit of overbuilding in certain pockets. That's really abating. So I am as bullish as ever on the housing market. This might even make it a better play than it otherwise would've been.

Dianne Crocker: Can we jump to office? I know that when we spoke with you earlier in the year, we spent a fair amount of time talking about office, and a lot has changed since then. Notably, return to office mandates are a lot more prevalent now than they were even just a. Couple months ago, huge flight to quality with Class A office space.

And as I recall, you kind of coined the term third place a concept that owners were under pressure to, to make office buildings attractive to employees and create this space in the lower level that can be a sense of community and a place to hang out. So what are your thoughts on office and where it stands now?

Relative 

Ryan Severino: to our last conversation, I think it is fair to say it has objectively improved, not a panacea. I don't wanna overstate this, and it's only been about six months or so, but the tone has certainly shifted over the last six months for a lot of the reasons that you mentioned. The performance still has a ways to go before, before the office market at large stabilizes.

There are definitely pockets within that where we are seeing improvements. Certainly the high quality segment is doing well. We're starting to see more conversions over time. We're starting to see demolitions of uncompetitive obsolete assets, which will rightsize the inventory a little bit. It's still very early in the game for office, so I don't wanna be too hyperbolic about this.

I will take six, seven months of marginal improvement at this stage of the office cycle and be more than happy with that given all of the negative things that have been said about office over the last few years. So again, I don't wanna be too hyperbolic. It, there still is a ways to go but I would say on the whole, the environment feels more positive to me than it did 6, 7, 8 months ago, even.

Dianne Crocker: Understood. How about industrial? 

Ryan Severino: Still positive? I still do. I think even recently there were some. There were some headlines about how the industrial market is maybe not stabilizing just yet, and the outlook was still somewhat dour. And I think it's indicative of what I was discussing before the tendency of some people to focus on short-termism when it's the longer term that really matters.

I'm not trying to throw the press under the bus. The press is great. I have friends and dare I say, allies in the press. So this is not a screed against them. I will simply say. Sometimes the headlines are just that very short term in nature and not so much thinking into the crystal ball medium to long term.

I am still optimistic about the asset class, medium to long term. I think industrial has changed over time. This is not your parents or grandparents, you know, 130,000 square foot warehouse building constructed in the 1990s. These are. Larger, more technologically advanced and sophisticated distribution facilities that really, really integrate well into our very advanced globalized economy.

And I don't see any sign of that changing for all the pushback on globalization and issues that we had with the pandemic. We are not going to completely undo 30 to 40 years of supply chains and distribution networks. And that makes me feel still positive about where industrial's going over the medium to long term.

Dianne Crocker: Right. One more food group I wanna hit on, and I'll give you another word that should probably exit our vocabulary because it's overused and that's nuanced. You know, every asset class has its nuances and it's hard to make generalizations. But having said that, what would you say about retail? 

Ryan Severino: I still love retail and I will just put my cards on the table.

I am more optimistic about retail than BGO as a firm, but I am working hard to change opinions both internally and externally. I still think that retail has been unfairly tarred and feathered and that a lot of the popular consciousness surrounding retail lags reality retail is still the tightest of the major property types.

If you are going to go out and build something new and get a construction loan, you really need to have a solid thesis and probably pre-leasing, which brings a lot of the new assets that come online. If they're not fully stabilized, they're still pretty well occupied. I don't see that changing. And the other thing that I really see that makes me feel positive about this, I'm going to apologize to the three of you and all the listeners.

Myself for using this term, but I'm going to use it anyway. When you think about younger shoppers, younger people in society, they look at shopping in a physical center, like a vibe. And you know, that's where I'm gonna apologize, but it's true. And I think what's interesting, I don't never mind dating myself.

I'm Gen X. Up until Gen X we liked physical centers. Right. I'm that generation where we went to the mall with our friends and hung out and, chatted with attractive people from other high schools or whatever the case happened to be. And then we did this kind of uncontrolled social experiment on a whole generation millennials, where we just inundated them with technology of all sorts.

Everybody thought like, oh this is the death nail for all physical gatherings including in, in the mall. And then that went so badly that subsequent generations are now looking at that going, you know what, that was a really bad idea. So if you look at the Gen Z kids and the Gen Alpha kids, they actually like going out and socializing in person.

They don't wanna meet their significant others on a dating app. They want to go into physical stores and retail centers and. It's an unfortunate for a certain generation that they were a bit of that experiment, but to me they're the, my guess my ultimate point is they're the outlier, right?

Gen X and older, we still are physical shoppers from how we grew up. And on the other side of millennials, they tend to be physically oriented shoppers and that suggests to me that there is a strong underpinning of demand for retail that's not going anywhere anytime soon. 

Manus Clancy: Ryan, one more question from me.

You were very positive today. You talked very favorably about multifamily, retail, industrial. You feel good about the market right now? Certainly. Lenders are lending, buyers are buying the market is functioning. You mentioned before people can get construction financing, they can get financing for positioning repositioning buildings at some of the toughest money to come by when things are not functioning.

What is the one thing you're watching right now that might change the narrative for you? 

Ryan Severino: I still think it's the labor market. To me, the rubber meets the road in the economy at the labor market. GDP is a glorified accounting convention that gets asked to do more than it was ever intended to do.

Inflation comes under pressure from so many disparate factors. It can be very difficult to disentangle them, but if the labor market starts showing more cracks than we're seeing up to this point, especially layoffs, and I really wanna focus on that because. A lot of the slowdown that we've seen in job growth, including over the prior three months.

When I run the model and I do an attribution, it leans more heavily on the supply side of labor than it does on the demand side. But this is a very big but, so I wanna emphasize this, but demand for labor has slowed down over time. The uncertainty prevailing in the economy is not helping. That marginal re-acceleration in inflation is not helping that.

The only thing saving us from things really going off the rails is the fact that employers know we are in a demographics based labor shortage, structural labor shortage. I'm not talking about short-term disruption, structural long-term labor shortage, and they're reticent to lay people off because they know how difficult it is.

Or would be to go out and have to rehire those people when the cycle turns at some point. That's the only thing that has saved us in the face of 550 basis points of Fed hiking. And now with all of these changes in policy and prevailing uncertainty, if that gives for whatever reason, then there's a lack of hiring to offset that if that starts to change.

And that would be concerning to me right now, even though we're not seeing. Significant hiring. We're not seeing significant layoffs. But that's not a lot of safety net to go by. And to me that is the crux of this. And I'm not even saying that it would mean a recession per se. I'm simply saying if you ask me where I see most or I'm most concerned, or I think it, it warrants the most concern.

I do think it's in the labor market and the fact that even though we haven't seen overall deterioration. That safety net is thinner than it usually is just because it's being held back by a lack of layoffs. Not that there's a lot of layoffs, but they're being offset by a lot of hiring. There's not a lot of hiring.

There's not a lot of layoffs yet. 

Dianne Crocker: Ryan, I would say that your answer to that question puts you in good company because we had Rebecca Rocky at Cushman on just a few weeks ago, and she also answered the labor market in response to a similar question. So you're in good company there. 

Ryan Severino: Yeah. It's hard to quibble with what the labor market is telling you. A whole bunch of other economic statistics can give you impartial information or incomplete information. I don't think the labor market does. The labor market to me is still the best indicator of where we are in a business cycle. 

Dianne Crocker: But the rewriting of previous month's data is is a bit unsettling. So hopefully that will settle down a bit. I did wanna shift gears a little bit. I know we're coming close on time, but I wanna talk about technology and forecasting because I feel like if there's ever been a moment when market forecasters deserve some empathy, it's now, just between interest rates and tariffs and construction costs and all the things we've been talking about here today. It's really tough to predict much with confidence, but we're also in a moment where AI and machine learning are giving us new forecasting capabilities that we just didn't have before. And I know you're passionate about this intersection, so I'd love to hear how your team is leveraging advanced analytics into B G's.

Crystal ball into your forecast modeling. And do you view AI as a disruptor or more of an enhancement to the current modeling? 

Ryan Severino: That's a really good question. Let's start with my personal take on this in terms of how we're using it. One of the reasons why I was excited to come to BGO was because even two and a half years ago, going back three years ago when I was considering joining, they were easily the leader in this space in terms of the investment firms, certainly the private equity firms.

And since I've been there, not only have I learned so much more about how we're doing this and gotten involved, but it has developed so much over the, you know, two plus years that I've been there. I think for anyone listening who thinks that this is hype, that this can't be done, that it's a lot of window dressing, I will tell you nothing could be further from the truth.

I have seen the models do things that border on science fiction, even as someone who has studied. More mathematics than most humans should ever have to study and, coding in multiple languages and econometrics classes and things like that. I've really, embraced this over the last, I started at JLL before I had left, but really since I've been here because the best way I can describe this is just the computers are just, they're better than people will ever be at this, right?

Because the computers are single purposely programmed to do this thing we are talking about. Quantities of data. It's funny that chief data scientists and I go back and forth on this. So I will say in terms of the number of data points that our models consider, it's somewhere in the ballpark of a trillion.

Human beings did not evolve to be able to handle volumes of data and information like that, but the computer, again, is single, purposely programmed to do that. The computer, because of that, can just do things that human beings. Can't do, certainly cannot do well. And as someone who has spent, most of my career trying to build better and more accurate models this is where I almost dovetailing with the end of your question.

I see this as an enhancement. I'm willing to bow down to our digital overlords, if you will, and say, okay, you non biological beings, if you will, you can just do this better than I can. So why wouldn't I lean into that? Right? Why would I sit there and try to swim upstream and say, oh, I think I can do this better than something that's specifically programmed to do that.

So not only. Have we embraced this in terms of market forecasting, which we have. I've brought this into how I do macroeconomic forecasting. I used it to develop a machine learning model where I predicted ultimately where the effective tariff rate was going to settle. Using what I learned in behavioral economics class once a once upon a time.

I am a believer, you know, and I would say a convert once upon a time, mostly out of ignorance. I would've told you, oh, this is just. Computers looking for patterns and data. That's what I've been doing for the last few decades. But now that I'm on the other side of this and I can kind of see behind the curtain, I will tell you it is not hype.

It is not science fiction, although it feels like it. The analogy that I use when I'm talking to people about this is like, this is a train. It's leaving the station, and if you're not on this train, you're probably going to find yourself underneath it. So don't let anybody, just because your LLM doesn't always, you know, return perfect information doesn't mean that this is not the future and where the world is going.

I think there's a lot of that. People expect their LLM to give them perfectly sented information. Go back and think about what. Smartphones were like once upon a time. They were far from where they are today, what the internet was like once upon a time. It's far from where it is today. What personal computers were like once upon a time, very far from where they are today.

Therefore, I think it's really dangerous for people to look at artificial intelligence in 2025 and see the flaws in it and think that it's somehow not going to improve over the next 5, 10, 15 to 20 years. It is only going to get. Better and better over time. And again at BGO and me personally, we're practicing what we preach on this. This is not just me hyping something to gain attention. This is a very fundamental part of how we manage portfolios and target investments. Absolutely. 

Martha Coacher: Ryan, thank you for joining us today. From labor market dynamics to interest rates and forecasting tools, this has been a pretty wide ranging and thoughtful conversation. We'll be watching the data and policy updates closely. And if you wanna follow Ryan, his often contrarian predictions, follow his BGO weekly commentary.

We have our own bragging to do The CRE Weekly Digest is one of the Top 10 CRE podcasts according to CRE Daily. And that's of all time. Congrats to everyone on the LightBox production team and my co-host, Manus and Dianne, you're the cream of the crop.

Subscribe to the podcast wherever you listen, and leave us a review if you'd enjoy the conversation. For more data-driven insights, visit lightboxRE.com and join us each week as our LightBox team shares CRE News and Data in Context, and send us your comments or questions to podcast@lightboxre.com. Thank you for listening and have a great week. 

Manus Clancy: Let's go.