Shutdown Week 2, Fed Cut Signals, CRE Liquidity, Lending & Deals

As we finish week two of the federal shutdown, markets shifted into risk-off mode while investors fly without official data. The team unpacks the Fed’s September minutes (cuts likely, cadence uncertain), lean on alternative signals (Carlyle’s real-time payrolls), and explains why the labor outlook is fragile. In CRE capital markets, the team breaks down how continuation vehicles are bridging liquidity, why loan modifications are up sharply yet still a small share of bank CRE, and what Fifth Third–Comerica says about scale and credit resilience. Our LightBox CRE Activity Index jumped to 116.8, pointing to broader listings and steady diligence pipelines heading into Q4. Sector moves: deep office repricing in DTLA, selective Sun Belt trades, Silicon Valley land rushing to data-center use, Dollar Tree’s owner-user distribution center in Phoenix, and creative offerings to furloughed workers in DC. And Martha gives a special sign off that’s worth a listen. 

Don't miss out on the latest insights and data affecting the commercial real estate landscape. 

 03:13 Market Flips to Risk Off
08:45 Job Market and Fed Minute Insights
13:34 Liquidity and Lending Trends
17:03 LightBox Data Dive and Market Activity
21:37 Sector Stories: Office and Industrial Real Estate
31:47 Creative Solutions in Retail and Economic Adaptation

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

www.lightboxre.com

Transcript

[00:00:00] This is the CRE Weekly Digest by Lightbox Affirm transforming the commercial real estate landscape by connecting every step of the SIR E process with comprehensive tools and data. I'm Martha Coacher with our experts, Manus Clancy and Dianne Crocker. It's the week ending October 11th, and we're wrapping up Week two of a government shutdown.

[00:00:22] Markets started to lose ground and with a blackout of official data, investors are turning to alternative sources to gauge the health of the economy. The Fed Minutes left investors guessing on the pace of rate cuts and in commercial real estate. We'll break down what this means for liquidity lending and deal activity.

[00:00:39] Manus, we saw Wall Street flip to risk off today. What do you account for that? 

[00:00:43] Well, I think it was long overdue. I think. There's been a lot of narrative around the markets being euphoric, overinflated, pricey, and I think it was only a matter of time before that took root and people said It's time for a breather.

[00:00:59] We're seeing forward looking PEs on the s and p 500 at 23 and 24, this enormous runup of tech stocks since May. And on top of that, we had Jamie Diamond today say he's more concerned than most. That we are, and I'm gonna paraphrase here, long overdue for a correction. And I think that that got people's attention.

[00:01:24] I think a lot of people are scratching their head wondering, how long can this go on? Values seem stretched. It comes in the face of tariff uncertainty. And also people are, I think, are starting to come around to the idea that while the upside is enormous from ai, the spend is also enormous. So I think that this was.

[00:01:44] Probably a healthy timeout. I think the market, going sideways for a couple weeks wouldn't be the worst thing, or even a three to 5% sell off would probably be healthy, but that's what I chalk it up to, 

[00:01:56] man. As you talk about tariffs, it was interesting in the Fed Minutes when they talked about inflation, they said that uncertainty affects this year's increase in tariffs, though most participants expect there to be an effect into next year and the end of next year, which sounds really long.

[00:02:15] I'm curious as to how they came up with that timeline. I would think that, yes, maybe for the first quarter or so, tariffs were somewhat muted by the fact that people had been stockpiling inventory. But now we know collections are real. I think we're gonna be at 300 billion quite soon. The annual run rate, they're talking about somewhere between 600 billion and a trillion.

[00:02:39] So. Maybe the Fed is thinking that buyers have still been quite discerning that they haven't been adding any more inventory that they need, and now that the holiday season is upon us that the dam is due to break. It's really hard to know. But I would also say it's quite discouraging to hear that you think often when you see these CPI numbers and PPI numbers that maybe we're gonna muddle through, maybe we're going to absorb these tariffs with only a modicum of.

[00:03:08] Higher interest rates, higher inflation, higher producer price costs. When you hear something like that, it certainly rattles you a little bit. 

[00:03:16] I'll jump in on that. Manis. This morning I heard a keynote. I'm at Crew Convention in Austin, and the luncheon presentation was by Hasam Naji at Marcus and Milch.

[00:03:27] And he spent a fair amount of time talking about tariffs and talking about inflation. And what he did that was interesting was he put today's turbulence in the context of the longer term and definitely seemed like he was trying to put the audience at ease, noting that, you know, we've. Seen stretches like this before.

[00:03:43] Don't get hysterical over the noise. Commercial real estate's a long game, and the two swing factors that he pointed to, not surprisingly were tariffs and the job market. He was definitely critical of Powell for delaying rate cuts, and he put tariffs in that, that historical context that I just mentioned, saying that they've been too low for too long and that this reset is overdue.

[00:04:06] And definitely tried to get the audience prepared for a structural, what he called a structural. Increase in prices when, uh, tariffs fully hit and that the labor market was cooling faster than the headline number suggested, which gave the fed kind of room to ease. But he's definitely concerned with the official data being disrupted in the shutdown because obviously that's only going to increase the uncertainty.

[00:04:29] Those remarks are interesting and somewhat ironic. I think that yesterday. Wednesday, October 8th, I guess we saw the NASDAQ hit another all time high. The s and p 500 hit another all time high. The Dow closed within 1% of its all time high, and even the small stock index, the Russell 2000, it also hit an all time high, yet a little bit of turbulence.

[00:04:54] On Thursday and the speaker at Crew feels like he's gotta comfort the, the audience. I, I guess people are quite nervous out there 

[00:05:02] maybe, or maybe he misread the audience. Maybe he didn't read the news today and they did. Who knows? But he definitely, I would characterize him as bullish. 

[00:05:10] Yeah. I should be clear with my remarks when it comes to tariffs, I've been saying for quite some time that I do think the impact will be felt that when you're collecting this much money, at some point it has to show up either.

[00:05:24] Compressed margins for companies if they're taking on a hit or higher costs to consumers one way or the other. My surprise with what Martha was saying a moment ago was really the fact that the Fed thinks that this is gonna take another 15 months to play out. That's really the part of it that really surprises me.

[00:05:43] We're gonna talk about retail later in our podcast, and some of the strategies that retailers are using to mitigate tariffs could be part of the reason why we haven't seen them show up yet. So we will talk about that when we talk about some of the specific retailer strategies that are underway. But I wanna point out a couple of the data points.

[00:06:04] Obviously we don't see. Jobs numbers from last month from the government because of the shutdown. But we did see a couple of other data points that underscore how fragile the job market is currently. You had, Carlisle Group had their proprietary indicators where they show payrolls are up 17,000 in September, which sounds very paltry.

[00:06:26] Of course, this is private information that they collect from a number of companies that are in their portfolio. And then we saw Axios publish. A labor curve data point that looks like labor's at a tipping point. And basically what they're doing is comparing job openings and unemployment, and that if job openings continue to stay as low as they have been, we're gonna see an uptick in the unemployment rate at some point in the future.

[00:06:54] So both of those data points do support why the Fed is looking to cut rates in the next few months. Now the question is how much will they cut rates? That's up to debate. 

[00:07:05] Well, you've given me an opportunity to give kudos to both Ryan Severino and Rebecca Rocky, who were on our podcast at various points over the last few months.

[00:07:16] Both were asked, you know, what is the data point that you're most focused on now in the second half of 2025 that might indicate. Things going sideways for the US economy and both pointed out to the US labor market and sure enough, it is coming true. We saw weak job numbers in July and August. We didn't get a September number for the reasons you discussed, but I think the consensus was that number would've been paltry.

[00:07:43] The a DP number that came out shortly before the shutdown started was well below expectations. And when you talk to people, anecdotally, people who have children, people who have, uh, new graduates, or people that are looking for new jobs, at least the buzz seems to be unlike two years ago where people were throwing money at anybody who could fog a mirror to find workers.

[00:08:12] Now the tables have turned. Finding work is pretty challenging, and if this prevails, it's not out of the question that we see a 2026 recession. 

[00:08:22] Yeah. And the other thing complicating it obviously, is the fact that we're not getting government data on labor, which is already tricky because, you know, when one round of data comes out, then it gets revised sometimes significantly with the next print.

[00:08:35] And, you know, it's, it's like the fed's almost driving through the dark with one headlight without reliable labor data. And these. Private sector sources will now come out with their own, you know, Martha, you cited a couple of them here. You know, the job market looks stable, but it's, it's definitely fragile.

[00:08:51] And if it weakens, then it has ancillary impacts on things like, you know, retail spending, possibly office demand. So not having a trusted, consistent source, I think is, is very much a complicating factor. If the shutdown is, is a prolonged one. Let's talk a little 

[00:09:07] bit about liquidity and lending, because that's where some of the push and pull is playing out.

[00:09:12] We saw a number of stories and we will start with the story about continuation vehicles, which are driving liquidity for real estate investors and Manus. You may have to explain a little bit about what a continuation vehicle is and why it's important. 

[00:09:25] Well, I have to admit, I'm really a tourist in this segment, but from what I understand it, it is a device by which.

[00:09:36] Property owners can move assets from one vehicle that they manage to another, avoiding the pain of having to liquidate at a time where markets are in troughs. So if you picture a situation like we are now where offices are trading at 40, 50, 60, 70% below where they were trading six to 10 years ago. If somebody were a forced seller, that would be inopportune and commercial Observer covered this.

[00:10:11] Well. It's probably useful for people interested in this to go to go look at that piece, but it is a device which prevents investors from having to recognize that loss and sell off assets at the absolute worst time. It's probably a smart way to manage this. We've seen other situations where. Markets were concerned about illiquidity and forced selling that would beget lower valuations, which would beget more losses and more selling.

[00:10:43] Right. And the things I'm thinking about are, and, and this is really dating me, but if you go back to 1998, there was a, a hedge fund called Long-Term Capital Markets. They were over levered, heavily invested in fixed income securities, surprisingly. Russia devalued its currency leading to a blowout in US spreads long-term capital markets was on the wrong side of these trades and was having to liquidate hand over fist.

[00:11:11] 14 banks stepped in and said, we are going to stabilize you so you're not selling under abject duress and pushing the values of bonds even lower than they should be. Fast forward to 2023. The Fed kind of did the same thing when Silicon Valley Bank failed, that they allowed banks to not be forced sellers of CMBS securities and turn paper losses into, um, real losses.

[00:11:40] So this happens from time to time. It's a smart way of allowing markets to reprice not under duress. And it's an interesting read. 

[00:11:50] So Amanda, on one side you have fund managers that are using these continuation vehicles to keep the deal alive. On the other side, you're seeing banks looking at the old school extend and amend tactics to buy some time.

[00:12:03] And we saw a story that the St. Louis Fed has calculated an increase in loan modifications over the past four quarters. 

[00:12:13] Yes, the story got some attention in the press. It also got some attention on LinkedIn. I look at it is a little as akin to if on Monday there's one Jay Walker in Manhattan, and on Tuesday there's two Jay walkers in Manhattan.

[00:12:31] Yes, the rate of jaywalking has increased by a hundred percent, but you're still only talking about two people racing in front of moving cars, right? It it, it's a non-story and to a degree, I think this is the case here. We see these. Headlines, which talk about billions and billions of extend and pretend.

[00:12:53] And it's not just about loan modifications, it's about the levels of distress and how many loans are coming due and so forth. And the numbers, especially when it comes to percentage growth, seem sizable. But as Richard Hill on LinkedIn pointed out today, the percentage amount of loans compared to what banks hold on their balance sheet.

[00:13:17] It's quite minuscule. I think it was a percentage point and a half. So I guess this is really a situation where the headline is, you know, scary. But the reality is that if you're working out and extending 2% of your portfolio or less, it seems like, um, dog bys, man story. 

[00:13:37] Yeah, so Manis, you know, one element of that story that as you said, has getting a lot of traction is that loan modifications are up and that loan maturities that have been ignored thus far, you know, are kind of reaching a point where they need to be dealt with.

[00:13:50] One of the things that surprised me in the presentation that Hassam from Marcus and Millichap did today was he shared the mortgage bankers association's latest forecast, and Martha Manis. I don't know if you. I, I certainly had not seen it before today, but it was their near term forecast for commercial lending taken out to 2027, and it was really surprising to see that the NBA's forecasting lending in 2026 to be up 35% over 2025 and another 10% in 2027, which would bring lending to levels.

[00:14:27] From 2021 for the first time since then, so he was pretty clear that he is not sure that he agrees with that bullishness on the lending front, that it's greatly optimistic. I haven't seen the commentary, and I know Jamie Wood well always puts the NBA's forecast into context, but I, I wonder how much of that growth is being attributed to these loan maturities that haven't been dealt with yet versus new originations.

[00:14:52] I certainly think that that's part of it. I would like to see what their forecast is for the 10 year treasury. I have to think that if they are counting on or predicting a 35% uptick next year, it's probably tethered to a thesis that says the 10 year treasury is gonna end. 2026 at 3.5% or three point a quarter percent, and maybe that happens if we see a US recession.

[00:15:16] Certainly that could take place. I'm certainly not in that camp. Listeners will know that I'm, I'm quite bullish on CRE. Uh, I've called the light box activity index to hit several more multi-year highs between now and the end of the year and hit 1 25, which would be a considerable uptick from the end of 2024.

[00:15:38] 35% growth seems extraordinary for me. I think the, the CRE market, thanks to the low volatility, thanks to somewhat decreasing interest rates, contracting risk premiums, and a modestly growing US economy is on that glide path for steady growth for the remainder of 2025 and most of 2026, 

[00:16:02] but not 35% growth.

[00:16:04] I, I don't see that happening, but. You know, from, uh, NBA's pencils to God's ears, right? If we get 35%, we'll all be popping corks this time next year. 

[00:16:17] One more story, Manis that I want to cover in our lending segment. That was the acquisition of Comerica by Fifth Third. Obviously this was a case of a bank trying to diversify its balance sheet and expand its reach.

[00:16:33] What are your thoughts about how much more we can see this type of activity in the lending space? 

[00:16:38] Well, I'm always quite surprised that there's not more of these, you know, banks benefit from size and when you take. Two large banks have put them together. There are certainly efficiencies of scale in kind of my simple way of thinking.

[00:16:55] It seems like we should have seen more of this in the last couple years. I think the last really big one we saw was bb and t and SunTrust, which created truist. But on the other hand, there's a lot of brain damage that comes with merging. Banks systems have to be merged. Servicing operations, lending office footprints and so forth.

[00:17:16] So I guess while it makes sense economically for mergers like this, it is an awful lot of work and that probably keeps more from happening. 

[00:17:25] Let's turn to the light box data dive. And last week, Dianne, you were, gave us a little bit of a preview of the different components of the index, but we've got the final reading and it looks like a good one.

[00:17:38] We do. Our index is out and September ended up being a reset higher. The index jumped to 116.8. That was the best reading of 2025 after August's modest seasonal lull. So that was encouraging to see. And in terms of the components, the big driver behind the increase last month was the supply of properties up for sale.

[00:18:03] Property listings surged 25% month over month, so that was a sign of sellers really reengaging after the summer season. And on the front end, environmental due diligence activity remained active and lender appraisal activity, they inched up just slightly, but they're still at strong levels. So. That tells me that pipelines on underwriting for deals that will close in Q4 are filling, and if we get another 25 basis point cut in late October, maybe another one at the December Fed meeting, that'll be another tailwind for deal flow and manis, you know, you're on track.

[00:18:38] I have to say for possibly being right with your forecast that the index, uh, could inch even higher by year end. Was it 1 25? 

[00:18:47] 1 25 was my. July prediction. I stand by that. I got a little bit nervous in August when I saw the numbers coming in, but I didn't, not nervous enough to change my forecast, so I'm standing by that and my own whisper number.

[00:19:04] Sometimes I whisper to myself. It really alarms my family. My whisper number says maybe it'll even come in higher than that, but something is going on right now, and I think buyers and sellers are seeing it and. It's a combination of three things that are happening right now. We've already seen a lot of transactions.

[00:19:22] We've talked about this for several months, that the number of large transactions every month continues to stay strong and continues to grow. The buying pool is very diverse. It's not like there's a couple of big funds that are just really leaning in. We're seeing great diversity in buying, and the word is out now that.

[00:19:44] With a four 10 treasury, which is about where we are now, that's considerably lower than where we were a few months ago. And risk premiums have compressed, and I think for a lot of these would be sellers who've been sitting on the fence for two or three years thinking, I'm just waiting for prices to rebound.

[00:20:02] I'm waiting for financing to get cheaper, cheaper. Um, waiting for liquidity to improve. That waiting is over, and I think that that's reflected in that September number that you referred to Dianne. 

[00:20:12] So Manus, that's a really nice segue into the, did you know for this week I have preliminary September data from our transaction tracker, and it, it closely follows what you just said.

[00:20:23] You know, roughly $26 billion in closings happened in September. That was the busiest month of 2025, and July and August were also very, uh, robust months for deal closing. So in September, the nine figure deals rose. 17% month over month and the mid cap deals, which are 50 to a hundred million, those jumped 26%.

[00:20:45] So both of those tiers are now running well above their nine month averages for 2025. Some assets are clearing at higher levels than the previous price. Um, some are selling at a discount, which can be severe as we know on assets that are really struggling. But I think you're right. You know the capital's there and if we keep seeing property listings.

[00:21:06] Increasing in the double digits, then it certainly suggests a busier Q4. 

[00:21:11] I think the combination to, to kind of draw strings from two different thread threads we just talked about in the last 10 minutes. I think the conditions are ripening for some of these distressed assets. Some of these. Maturities that have been kicked down the road.

[00:21:28] These loans that have been kicked down the road to muddle through this combination of higher values, lower rates, lower cost of funding, should at least help some of these borrowers on the cost muddle by right borrowers that we're looking at cash in refinancing, perhaps getting out flush without cash in, or maybe getting refinancing without needing another modification.

[00:21:54] You know that that could be one of the side benefits of what we're, what we're seeing. 

[00:21:58] And Dianne, who is talking to us from the Crew Convention in Austin, she's talked to a number of folks there and has some really good intel from what she's seen there. 

[00:22:10] I have, so I, I talked about Hassan's, uh, lunch presentation already.

[00:22:14] He was bullish just to add a couple more bits of color to what he shared in terms of asset class. He called retail the new darling of commercial real estate because experiential shopping, food, and entertainment, our back and full force, he characterized office. As the new retail, um, in terms of demand starting to creep back, uh, tenant expectations resetting.

[00:22:38] And he actually described office as moving toward being in fairly good shape as pricing clear. So that was interesting. Not much alarm on the dis. Dress side, he expects more situational deals, not a systemic wave. So that wasn't, that wasn't really a surprise, but bottom line from him was definitely cautious optimism and heavier on the optimism than the caution disciplined underwriting and patience, and that this recovery looks more like a longer term marathon than a sprint.

[00:23:07] Secondly, Martha, I was really. Delighted that I got some face time with Jeff Rinko. He is the CEO of Lee and Associates, and he was also on Light Box's, very first market advisory council, which meant that I pestered him quarterly in 2024 for market intel. So that gave me the opportunity to thank him in person.

[00:23:27] Thank you, Jeff. And he also gave me, uh, some feedback from his broker point of view from Lean Associates offices across the country. His take was that. There's so much capital out there that's eager to get placed that's very motivated for deals, but he still thinks that the bid ask gap is thwarting a lot of, a lot of activity.

[00:23:50] He mentioned in industrial in particular, that pricing is really, really hard. That's where the gap can be very wide. And in response, he's seeing some owners who are eager to fill existing industrial space, uh, coming down on their leasing prices and allowing short-term leases just to get. To get them placed.

[00:24:08] Um, loves multifamily for the reasons that we talk about here. You know, the housing crisis, the fact that construction is pulling back so strong opportunities in the right markets for apartments. And then office was all over the board, but, um, he did know what, he's seeing strength in smaller footprints, especially in Manhattan, with firms who want compelling office space to lure their staff into the office.

[00:24:32] And Jeff mentioned that, uh, Leann Associates is coming out today with a white paper called Hire for Longer. So I'm curious to take a look at that. And then last, Martha, um, crew Network, uh, is a great. Association for any women in commercial real estate, especially young ones who really wanna understand the industry and networking.

[00:24:55] And one of the great things that they do is they give 40 scholarships each year to 25 undergrad scholars and 15 graduate scholars. And last night I had the honor of being the ambassador to a few of cruise scholarship winners this year, and much to my surprise and delight. One of them is a loyal listener of the CRE Weekly Digest.

[00:25:16] That is Abby McPherson, and she found us just by looking for a CRE podcast. So I love that initiative. I think Abby's gonna go far and thank you, Abby, for being a loyal listener 

[00:25:27] and congrats to everybody for those honors. That's, uh, that's a great. Feather in, in your caps this, this early in your career. I will say there's a lot to, to feel back there.

[00:25:39] Dianne. I have to say I'm a big fan of Lean Associates research. I, I look for their stuff regularly. They're very active in almost 50 US markets, if I remember correctly. And they give very good color segment by segment across the country. So I look forward to it and I'm a regular reader there. So great to hear that there white papers coming out and I'm looking forward to that.

[00:26:00] Jeff's comments about office being all over the place are pretty spot on, and it's a perfect segue for us to shift into the sector stories that we're gonna cover, and we're gonna start with some of the office headlines that we've seen in the last week. 

[00:26:14] We'll start in Los Angeles. This is, I guess you would call more of the same here.

[00:26:20] Ques sold the Pac Mutual, which is a three building collection in Los Angeles. For $48.5 million. This story here comes from Nick Romola of Commercial Observer. The property last sold for $200 million. Ivanhoe Cambridge paid that price in 2015 for the asset. Now, a trio of three investors have come in. And acquired the 460,000 square foot Pac Mutual campus.

[00:26:52] So it is made up of, uh, the clock building, century building and carriage house. 

[00:26:58] Well, in the case of bifurcation, we've got two stories that are better stories in the office sector. 

[00:27:04] One is certainly better and one is better. I guess grading on a curve. So let's go through those both one after the other.

[00:27:11] The first one is 5 55 Mangum. This is in downtown Durham. A 251,000 square foot office sold for 72 million. The buyer there aceso. Reporting from real estate business online. A developer and previous owner had been Northwood Raven. They sold that office building, as I said, for $72 million. And why does this matter?

[00:27:36] Despite the national headlines about office pain? We talked about Los Angeles a moment ago. The research triangle area continues to see demand for well leased buildings there. The one we're regrading on a curve here, town Lane and Trinity Capital purchased four 40 South Church Street in Uptown Charlotte.

[00:27:57] They paid 75.8 million. This is a 15 story building. The property last traded in 2014 for, so it's better story. We. That was a 75% discount. Here we're talking about a. 33% discount. The property is once known as the Ally Center, town Lane and Trinity Capital trying to make a run of it in that, uh, in that market.

[00:28:24] Those are interesting Mannis. The LA one is a real head scratcher to go from 200 million down to 49. And then the contrast of that with the stories that you mentioned in Charlotte and Durham, I mean Charlotte and Durham, both are very hot markets in terms of development, in terms of population growth, especially in Charlotte.

[00:28:43] There's a huge presence. Of lenders. So that is also a big driver. So it's, I think those stories really illustrate how bifurcated office is, you know, and some markets are resetting in terms of older buildings, changing hands, and others are growing and very attractive to investors. 

[00:29:00] Well, as we said that Charlotte once sold at a discount, but it was a smaller discount than other sell offs we've seen.

[00:29:06] I haven't seen any research on this, but it would be worthy research to do, and there's probably a very, very straight line. Between quality of life issues and the sizes of losses that people are taking in these markets. When I think of markets that have really been hammered by office degradation, in property values in the office segment, I'm thinking Chicago, San Francisco, Los Angeles, Portland, yes, there are losses in other places.

[00:29:41] Charlotte, Pittsburgh, Seattle, and so forth, but. They seem more modest than those places where commutes are long and when you get off your commuter train, you're facing quality of life issues. And you know, I think probably the faster sway to restore value in these cities is for leaders of these communities to restore law and order, right?

[00:30:04] That would go a long way towards getting return to office back and getting property values. In the office segment restored. 

[00:30:11] You just made me think of one other thing, Manus, that I got from the lunch presentation today on has some's watch list for metro's or commercial real estate investors to focus on.

[00:30:22] He had a chart on job growth and where job growth by metro was running above national averages and Charlotte was right at the top of the list. San Antonio was. Second, and New York City was third. So kind of an interesting mix of metros between Charlotte, San Antonio and New York. The, your comment from before perspective is important.

[00:30:42] You know, saying that they're growing above, national average is meaningful, but the national average was 0.9% and these metros were growing by one point something percent. 

[00:30:53] There's been a great migration to those cities over the last couple years, and I think. It probably goes hand in hand with lower labor costs and better quality of life.

[00:31:02] Now New York is facing a situation. Next month we'll have an election for mayor. The leading candidate is extremely progressive, has suggested higher taxes, uh, a new way of governing, a new way of policing, a new way of rent control, a new way of selling groceries, and. What becomes of that? Does that trigger another wave of people migrating?

[00:31:29] Who knows. But you know, Ken Gritt the other day, I guess it was even today, was saying it wasn't that hard for me to pick up and move from Chicago when things went south there, when things started getting dicey expensive and when there were quality of life issues. And he said, if that happens in New York, it won't be that hard to leave either.

[00:31:47] And I think that leaders should take that to take that under advisement very seriously. Voters as well. 

[00:31:54] Let's shift to industrial. We had a couple of stories that were noteworthy. A land grab in Silicon Valley for data center redevelopment and the Dollar Tree buying a distribution center in Arizona. 

[00:32:06] Yes, the one in Silicon Valley.

[00:32:09] This is a $200 million sale in San Jose, an affiliate of Goodman Group. Bought the asset from LBA Realty. The property is at three 50 and three 70 West Trimble Road. And you know, I guess the headline here, and this comes from business journals, by the way, the headline here is No Price Seems to be too High When you have a data center redevelopment in your sites.

[00:32:38] You know, we're seeing, you know, first it was 50 million for then 75. The thirst and appetite for data center development. At the moment is incredible. 

[00:32:52] Yeah, it is. And there was an interesting story, um, on in industrial involving Dollar Tree. This one takes us to Arizona Dollar Tree acquired a 1.3 million square foot class, a industrial building.

[00:33:06] Near Glendale, which is Litchfield Park, Arizona, and the price was 147.1 million. It will be dollar tree's first regional distribution facility in the Phoenix Metro, which is a high growth market and it supports dollar tree's, logistics network expansion. What was interesting is that it sits in a foreign trade zone, so it's in close proximity to major highways down there, and it's a designated area near a US port of entry that's treated as outside US customs territory for duty purchases.

[00:33:40] So, you know, adding to that, companies are allowed to bring in imported goods or components and store assemble or even manufacture them without paying tariffs right away. So this gives dollar trees some tariff flexibility as it imports goods for its stores, which is especially important when tariffs fluctuate like they have been, or supply chain shift.

[00:34:02] I don't even know what to make of this. A foreign zone in Arizona near the desert. That just kind of makes my head spin, but it's setting me off on so many different tangents. What does this mean? You know, right now people who want cheap smokes and tax-free alcohol go to Indian reservations, right? Does this mean all of a sudden there's gonna be this whole side economy where we're putting up these massive distribution centers in duty-free zones?

[00:34:31] Like I need to do more research on this. This is kind of certainly outside my area of expertise, but it's also making my head spin a little bit. 

[00:34:39] Yeah, it's a head scratcher. I think it's smart. With tariffs and other. Logistics concerns that retailers have. They own the logistics network and it shows confidence that they think the Arizona area obviously will be a market where they can grow.

[00:34:55] And it reminds me of the story that I saw about American Eagle, where through some of their own actions, they're gonna try to reduce their tariff costs from 180 million to. 70 million by early 2026 by doing things that are similar to this, like supplier negotiations, logistics, rebalancing. Of course, some of this will mean price adjustments and that costs will be passed on to the consumers.

[00:35:21] But I think it's forcing retailers to be creative and how they can manage their costs and their supply chain. 

[00:35:27] Well, you're gonna find this surprising, but somehow I'm gonna fold this into NFL football and 30 years ago. The only thing you needed to be to run a good football team was to find the best players and assemble the best team.

[00:35:43] And then we had a salary cap come in, and the most important guy in the, in the management room was the guy who could figure out how to manipulate the salaried cap rules to get the best players under a certain cost. I get the feeling that this tariff is pushing us in that direction. The companies that will win will have the best salary cap guy on their team to say, no, we're not assembling this in Indonesia anymore.

[00:36:10] We're gonna take over that casino in upstate New York. We're gonna raise it. We're gonna put a big warehouse there, and we're gonna assemble everything in Rome, New York. It's, you know, it, it, it's a real changing of the landscape and there's no way of knowing where this goes, but there will be winners and losers.

[00:36:29] Our last story, it actually comes from the Wall Street Journal in response to the shutdown, local DC bars and restaurants are turning the deadlock into drink and unhappy hour deals. So to drive some foot traffic, establishments are offering special discounts and creative food deals that are targeting furloughed federal workers.

[00:36:48] You can get a furlough Rita, and a continuing rise solution and maybe a side of gridlock, nachos, and a debt dog. So. You know, it's part solidarity, part survival. Try to keep the registers ringing. 

[00:37:01] I wonder if happy hour is now at a new time, right? Obviously, a happy hour has always been that four to seven window, getting people leaving their offices.

[00:37:10] Is it now one of those things where you're targeting people at 11 o'clock, right? You watch the price is right, you take off your pajamas, you put on some sweatpants, and you shuffle off to the local gin mill. I don't know, is is the whole way of living changing now? I think this is gonna be race to, you know, who can open first for these places, right?

[00:37:31] If you have nowhere to go and uh, you know, you're basically just waiting for the government to reopen, why not start a happy hour right around lunch? 

[00:37:40] Before we close this episode, I wanna take a moment to say some thank yous. This is my last time behind the mic as the co-host of the Siri Weekly Digest, and I wanna take a minute to thank a few people.

[00:37:52] First to our CEO. Thank you for being such an avid listener and champion of this show. From day one to our incredible production team, Molly Farina, Josh Bruning, and Alyssa Lewis, the work you all do behind the scenes every week. Makes this show sound effortless. Thank you for your dedication, especially on those late nights on Thursdays and early Friday mornings to my co-host Dianne, who is unflappable and Manus, who is unmatched in his humility and generosity.

[00:38:21] Thank you both for your insights, humor, and perspective that have made every episode a real conversation to all of our guests. Thank you for sharing your expertise, your stories, and your time, and of course to you, our listeners. Whether you've been with us since the very first episode or you've just tuned in recently, you're the reason we do this, your feedback, your curiosity, and your passion for this industry, keep the dialogue alive.

[00:38:47] It's been an honor bringing you the stories shaping commercial real estate each week, and I'll be listening 

[00:38:53] for those that are new to the Lightbox podcast and to this CRE world. Martha and I go way back. We've worked together for more than a decade. This is our second podcast that we started out. Uh, we did one separately to the Lightbox one for several years, and now we've done the Lightbox one for 15 months.

[00:39:16] 300 episodes, I would imagine in total over that timeframe, A constantly and consistent growing audience episode after episode, and I'll leave you with this. First of all, thank you, Martha, for your dedication hard work and leaning in week after week to helping us produce what is an exceptional product.

[00:39:40] And for those that don't know behind the scenes. Is the consummate professional. Hardworking, though a podcast wouldn't be what it is without her. Efforts week after week after week, and so grateful to have had this time together. 

[00:39:56] In the meantime, please join the team every week as they share Siri news and data and context.

[00:40:01] You can listen on any of your favorite podcast channels and send your comments or questions to podcasts@lightboxre.com. As always, thank you for listening and have a great week.