Six Months In – The Market's Biggest Surprises and What's Next

The first half rewrote the script for 2026. Now the question is whether commercial real estate can keep outperforming expectations.

In this special Fourth of July episode, Manus Clancy and Dianne Crocker sit down for their mid-year reckoning of a year that has not gone according to script. The January playbook, built on rate-cut optimism and cooling inflation, was obsolete by February, replaced by war in the Middle East, a 75-basis-point spike in the 10-year Treasury, and a Fed prompting chatter about hikes instead of cuts. And yet equities hit record highs, private credit fears around firms like Blue Owl evaporated, banks came roaring back into CRE lending faster than anyone modeled, and the LightBox CRE Activity Index held triple-digit-strength through May.

For this episode, Manus Clancy and Dianne Crocker share their take on the biggest surprises of 2026 and why the market that should have seized up under “category 5 headwinds” instead kept transacting.  From there, the conversation turns to their predictions for the second half. They dig into the quiet rotation away from Sun Belt darlings like Austin and Phoenix toward overlooked Midwest metros like Columbus, Indianapolis, and Milwaukee where output from LightBox’s ScoreKeeper model is already flashing early signs of momentum. Office gets a surprising win too: top-line leasing activity is picking up in trophy submarkets even as office-to-residential conversion goes fully mainstream at the other end of the spectrum. And they don't skip the bigger risks, like an AI-driven equity bubble, an uneasy labor market, and—the single Jenga piece that could topple the whole bullish case—the Iran conflict.

It all closes with a rapid-fire lightning round: will the Fed cut, hike, or hold? where will lending and transaction volume land by year-end? and what’s the 10-year Treasury going to look like in December? Manus and Dianne put real numbers on the board that they've committed to revisiting when the year wraps. If you want the clearest gut-check on where commercial real estate stands at the midpoint (not where anyone predicted it would be), this is the episode.

02:42 Mid-Year Market Recap
05:45 The Biggest Surprises of 2026 So Far
13:43 Why Secondary Markets Could Outperform
19:14 A Bullish Outlook for CRE
22:11 Office Recovery and the Biggest Risks Ahead
23:44 AI, Jobs, and the Future of Real Estate
31:19 Lightning Round: Rates, Lending, and Transactions
35:19 Bold Predictions for the Second Half

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

www.lightboxre.com

Transcript

The CRE Weekly Digest by LightBox

Episode 104: Six Months In – The Market's Biggest Surprises and What's Next

July 2, 2026

Dianne Crocker: 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 Dianne Crocker. I'm here with Manus Clancy. If you're new here, you picked a good week to tune in. For our loyal listeners, we appreciate you being here every week with us.

Last week, Manus, we talked about the bizarre paradoxes that characterized the first half, and on this week's episode, as promised, we are dedicating this special Fourth of July episode to our midyear review of the market. But before we do that, Manus, I was out of office the past two days, so I'm feeling a little bit like Rip Van Winkle.

Why don't you talk us through the developments that happened this week? 

Manus Clancy: We're certainly talking about a short week, with Friday being the early celebration of the July 4th weekend, July 4th being Saturday. So I think a lot of people have headed for the mountains or the beaches already. I think traders and money managers, once they got past that six thirty end of quarter tying up the loose ends, they probably got in their SUVs and started heading to the vacation spots.

So not a tremendously busy week this week, but a couple things we could point out. We did get a really nice dip in the ten-year Treasury yield late last week and early this week. We got as low as about four thirty-seven, which was down from about four fifty-five a week or two ago. That was nice to see. We saw oil prices hit pre-war levels, settling in that high sixty dollar range.

We feel good about that. Gas prices have come down. Hopefully, that means better CPI prints are on the way, better inflation numbers, less pressure on the Fed going forward. We also saw some new records in the equity markets this week, but that dip in the ten year was reversed over the last day and a half or so.

We're back up to four forty-six today. Certainly not moving in the direction we want to today. In the equity markets, we saw more all-time highs, but beneath the surface, some real weakness Among the Mag Seven, among the Amazon, Google, Meta/Facebooks of the world, kind of a big sell-off in tech the last couple days, so the market's moving in two different directions.

And then on Thursday, a rare Thursday jobs report. Normally, it's the first Friday of every month. This month it's gonna be Thursday because Friday is a holiday. And so we'll look at that to see if the data can sustain its momentum. Last month, a better-than-anticipated jobs report. We'd love to see that again for the June numbers.

So you didn't miss much, Dianne. I said a lot of words there, but it wasn't anything earth-shattering. 

Dianne Crocker: Well, I guess not earth-shattering is, is good news given how the market played out this year. So believe it or not, yesterday was the end of the first half, so I know it's got both of us kind of reflecting back on the first six months of the year and thinking about what the second half will bring.

So I've a couple things that surprised me about the first half. I'll start, Manus, and then I'm curious about what stands out in your mind. As I think back to New Year's and then even the MBA Craft Show was in early February, one surprise for me in terms of how it played out was that the January playbook had a shelf life of like six weeks

You know, it just seemed like there was, there was so much optimism, like the Fed had adopted an easing bias, lender allocations were growing, we were seeing transaction flow coming back, and the story that everybody wrote for this year was, you know, we'll see an improving rate climate, and we have rate cuts baked in, and inflation will keep cooling.

And that was generally the consensus. And then February through June just tore that up. You know, inflation came in hotter than anybody modeled. Nobody saw the war in Iran, you know, and, and rates didn't just fail to fall, you know, they went the other way. So you talked about the 10-year getting down to four point three seven.

The high point was May 19th It was at 4.66, I believe. And suddenly nobody's talking about cuts anymore, you know. And, and we've talked about it here, that hikes are back on the table for some people, and nobody wrote that scenario in January. So for me, the, the big surprise was just how quickly those forecasts became obsolete.

What's on your list? 

Manus Clancy: Well, it does tend to happen. It, it, it seems like three out of the last five years that has been the case. In 2022, it was the war in Ukraine that for a period of time sent oil prices higher and sent people scurrying about wondering what would come next. In 2023, this came later in the year.

It wasn't quite as immediate, but it was the failure of Silicon Valley Bank. Last year it was tariffs. This year it was the war in the Middle East. And it just seems like these playbooks you mentioned, they get torn up, or this year they got torn up very early in the year. It seems like that has been the norm rather than the exception the last few years, that we come in with sugarplums dancing in our head after Christmas, and by February, all the PowerPoints and PDFs have been, you know, thrown in the, in the trash can and we're starting from scratch all over again.

So I think your point is really well taken. 

Dianne Crocker: And so what does that mean for us moving forward, Manus? Are you saying that come January 1st, we better point back to this podcast and tell people, "Curb your enthusiasm," because the past couple of years were a, were a rough road? 

Manus Clancy: The foreshadowing of early next year, I like that quite a bit.

If we tape it, we could roll it out again right after New Year's and u-use that as the cautionary tale. But I wanna break down this first part, which was surprises in the first year, into three segments. One kind of more macro financial, one more lender-based, and one more CRE specific. And I'll start with the top-down, which is the broader outlook.

And I think the biggest surprise there, obviously the biggest surprise over the first half of the year was that we went to war in the Middle East, right? Nobody had that on the, the bingo card late last year, early this year. But the biggest surprise from the top down was that the equity markets didn't even blink.

In twenty twenty-five, when tariffs were announced, we saw a correction/bear market for a short period of time after Liberation Day. This year, it was hardly a speed bump, and we saw record after record for the Nasdaq, the Dow, the S&P 500. We saw extraordinary run-ups in certain tech stocks, especially those that were chip makers or suppliers of compute capacity for the big AI firms.

But who would have guessed that with a 10-year up seventy-five basis points, with weak consumer confidence, with weak home builder confidence, with doubling of oil prices, that we would have seen the best quarter and the best half year we've seen for equities in several years. 

Dianne Crocker: I thought a little bit about equities leading into this.

You know, I think the glass-half-full scenario for equities moving forward is, you know, if oil stays lower, if earnings hold up, consumer spending holds up, all the things that you just mentioned, that should keep investors focusing on earnings and AI rather than what's happening on the, the geopolitical front.

And then, yeah, we could see the market even push to new highs. We definitely saw a first half that was led by AI enthusiasm, but we just started seeing concerns rising and doing so in a way that I think looking ahead, I know we're not at the forecast section yet, but that small disappointments could trigger some outsized pullbacks on the equities front, and I think that'll be really interesting to watch in the second half.

Manus Clancy: I do think we're starting to develop a healthy skepticism on how quickly these AI operators can actually turn their models into profit. And I do think that that's a worthy question to ask, considering how much some of these big tech names have run up over the last six months. In some cases, it's been doubling, quadrupling, tripling of their share prices.

So I am a healthy skeptic at this point in that area. But that was pleasant surprise number one for me in the first half. Pleasant surprise number two is in the lending area. If you remember, Dianne, we ended last year with people chewing on their fingernails, concerned about PE problems, that the loan issue with PE firms, not the CRE loans, but the corporate loans, the sub-investment grade loans that were being made by PE firms or had been made by PE firms were not up to snuff, that the lenders had lost their discipline, that losses were going to be sizable.

There was a chance that this was going to become systemic. There would be bank losses out there. We saw the share prices of some of the high flyers like Blue Owl and others slide considerably And redemptions were big. People wanted their money back from all of these big operators. And at this point, we haven't seen any real ramifications from this.

Yes, the reputational risk is there, and yes, people still want their money back, but nobody's really talking about systemic anymore. 

Dianne Crocker: And you won't hear anybody complain about that either. You know, there's one prediction that didn't pan out but was very positive. You know, and I think another trend on- while we're talking on the lending front is one that we mentioned in last week's podcast, which is banks got back into the CRE lending game, I think, a lot sooner than anyone expected.

The first quarter lending numbers came in, we talked about it last week, and they were way above what the Mortgage Bankers Association is predicting for all of calendar year 2026. And a lot of that was driven by demand for refis on the loans that were maturing. But there's also, I think, renewed momentum just in issuing new loans for originations, and I think that started to rise probably faster than a lot of people expected.

So that's another surprise on the upside of, uh, the first half of 2026. 

Manus Clancy: I'll leave with one last thought on this BE side, and I can't remember where I saw the headline, but it may have been Barron's, although it could also have been The Real Deal or Commercial Observer. I don't, I don't... I'm not positive, but it was something to the effect of Blue Owl is back.

And for me, Blue Owl was, I hate to say it because I don't like to single out negativity, the biggest concern for me, mostly because they didn't have the track record of a Blackstone or a Starwood or a Brookfield, and they had been gobbling up so much market share over the last couple of years that I thought, if there's gonna be a problem here, maybe that's where it is.

And instead, not only did it not become systemic, now we're seeing a headline which says, "Blue Owl is back." They're back to playing offense, and the reputational concerns are behind them. And I talk about my bingo card being empty. That's another one I didn't have, right? I didn't have equities holding up in the war.

I didn't have PE resilience being as strong as it was. So by the end of this first segment, you might find out that I don't have any of, uh, things covered. 

Dianne Crocker: So you're saying that Blue Owl was your canary in a coal mine? 

Manus Clancy: Not to disparage Blue Owl at all, but they were the ones that you had the most opaqueness with because you didn't have the track record.

They had been growing so quickly. So kudos to them. You know, they came through the fire and lived to talk about it, right? And that- Yeah ... and good for them. So I, I'm so happy that this has not become systemic and didn't bleed into the other capital markets. 

Dianne Crocker: Yeah, for sure. What else is on your ledger for surprises of the first half?

Manus Clancy: The last one is the biggest and best surprise was the Knicks, right? We knew the Knicks had a good team, but I'm not sure that their odds of winning the title was more than 10% heading into the new year, and yet they won the title, so that's my biggest, most pleasant surprise. But on the CRE side, it tethers back to the equity side, that if you told me in February that the 10-year was gonna go up 75 basis points, that there would be war in Iran, that oil prices would double, I would've said lenders would be racing for the exits.

We would have a liquidity problem, that sales and refinancings would largely dry up, and people would take their chips and go home or take their ball and go home, and that did not happen at all, right? We got category five headwinds, and yes, while activity was slower in the second quarter than it was in the first quarter, the slowdown was marginal, right?

It wasn't this dry up that I would've thought when you were facing category five hurricane winds. 

Dianne Crocker: Yeah, and it's, you know, and that brings me to one of the surprises I had, which I know that you've written about in your weekly commentary too, is that for so many reasons that were completely unforeseen back in January, the commercial real estate market could have seized up.

And not only did it not seize up, but the LightBox CRE Activity Index, it's held in the triple digit highs for the first five months of the year. I'm sitting here on July 1st when we're recording, waiting for my data points to come in for the three prongs of the index to see what June brings us. But January through May, the CRE Activity Index was in the triple digits.

It's running higher this year than last year, and it's because we kept seeing more and more property listings coming to market every month. We kept seeing lender demand for evaluations being strong, and environmental due diligence stayed active. So that was definitely a surprise on the upside and, and something that hopefully we'll, we'll see continue through the rest of this year.

Manus Clancy: I'm a little bit surprised our listeners know that I am quite bullish on CRE right now. I, I try to really look at the segment with a jaundiced eye all the time, but I don't see any reason right now to be jaundiced. I'm a little surprised that not, that there aren't more people as optimistic as I am, considering that we've come through so much, and now that some of these pressures are easing, that they are not as upbeat as I am about the second half.

Dianne Crocker: So on that note, why don't we switch gears and start talking about our forecast, Manus. 

Manus Clancy: That sounds great. 

Dianne Crocker: One metro story is, is very different than another. You had Richard Hill on as a guest, and he really characterized Midwest markets as... What did he call them, Manus? Flyovers? That's right. You know, that investors tend to fly over them and, and not really pay attention to them.

For years, you know, in, in watching these metro trends, everybody was talking about Sun Belt metros, you know, that, that there's been this migration story that's keeping Sun Belt metros in the crosshairs of investors, and that's basically been gospel since, like, 2021. And investors were flocking to Austin, to Phoenix, the usual suspects.

But the data's pointing to the fact that Sun Belt migration is decelerating faster than a lot of models predicted, and we've got multifamily markets in some of those that are dealing with a lot of excess supply. And now we're just starting to see the signs of secondary metros in the Midwest. I'm talking about Columbus, Indianapolis, Milwaukee.

Our data on the phase one environmental site assessment side is seeing stronger growth there than in some of the Sun Belt metros. And environmental due diligence happens before big deals, before big loans. So it's really interesting to me that we could see the second half bring a moment where those, those more boring Midwestern metros or secondary metros start to outperform the ones that were really the star of the show over the past couple years.

Manus Clancy: That wouldn't surprise me in the least. I think these markets you're talking about didn't have the run-up In 2022 and 2021. So people are buying them or have bought them at lower bases, and you haven't seen the flock out of these markets that perhaps people were predicting. So I, I like that prediction. I think that that's a really good place to start.

I wonder, and this is just kind of me speculating, I do think that we saw this wave of people during COVID flocking out of the Northeast, places that were cold with long commutes. They didn't wanna go into downtown offices anymore, to the Southeast and Southwest. I wonder, and I, and I'd love your thoughts on this, if we're on a cusp of another mini boomlet of this behavior, but it's not showing up yet.

You know, we talked last week about Morgan Stanley moving some of its headquarters to Texas. We've talked about the billionaire tax in Seattle. We have a socialist mayor in Seattle. We have a socialist mayor in New York. We talk about the quality of life issues in Los Angeles, and it makes me wonder if a year from now we'll see some of the ramifications of this, that between the higher taxes and business leaders wanting to relocate their headquarters for tax reasons to other locales, if that will have a gravitational pull and some of this excess supply we're seeing in the Southeast or Southwest gets absorbed by this.

You know, it, it's probably too early to call this, but there's enough saber-rattling among business leaders that we don't want a billionaires tax. We don't want a, uh, higher corporate taxes, right? And if that comes to pass, maybe that soaks up some of the problems in the Southeast and Southwest. 

Dianne Crocker: Mm-hmm. It could be, and I mean, you know, back to the point I made earlier, I think that's what makes commercial real estate so exciting is that people are always moving around, companies are always moving around.

There are always market forces that are driving those decisions, and for investors, it's, you know, what's the next biggest thing? If one market becomes overcrowded or overvalued, you know, where can I go where I can... it's less crowded, there's less competition, and I, um, might stand a better chance of an ROI on an asset before everybody else catches on.

Manus Clancy: Yeah, I, I do think it will take time. This is a long game. Firms don't decide in two weeks to move. This is like a year-long process for site selection and so forth, but I do believe diversification of headquarters will be the story we're talking about a year from now, 18 months from now. It was a big story 10 years ago with all these firms moving from California and New York to Plano, Texas, and Richardson, Texas, and so forth, and I do think we see another wave of this over the next year.

I will bring up an anecdote from this week in the news, I'm not sure if you saw this, that Google founder Sergey Brin, he was an owner of rent-stabilized properties in New York. He ended up selling his portfolio this week for six cents on the dollar And we've known this for a long time, that rent policy in New York is you can't hike rents, therefore nobody can make a profit, therefore the building is not in demand.

And because profits are not being made, the building is allowed to decay. The physical plan gets worse and worse and worse. So for many years we've heard stories of loans or properties being sold for forty cents on the dollar, forty-five cents, thirty-five cents. This is a new low for me. Bruyning, who probably has money to, to burn, I suppose, taking a ninety-four percent loss on his portfolio of rent-stabilized properties in New York.

Dianne Crocker: That's pretty incredible. I did not see that headline. So do you think it'll trigger more deals like that? Sign of things to come? 

Manus Clancy: Well, certainly it's a new low for the market, and I do think- Yeah ... right at, at that point, e-even for people that are skeptical of the market, you might have bottom fishers come in and buy.

But I was thinking about it more from this perspective, that, you know, he has seen firsthand what can happen to property values and quality of life and so forth in New York and, you know, upper northwest guy, right? I think he's already moved out of the Seattle area, but it could influence his decision.

Like, do we move more people from our firms into places that are not quite as low in the quality of life spectrum or high in the tax spectrum? 

Dianne Crocker: Mm-hmm. Yep, very true. All right, what else do we have on the forecast front? 

Manus Clancy: So nobody's gonna be surprised by my forecast because I've been talking this way for several weeks.

I am bullish on CRE in the second half of the year. The narrative goes this way, that the peace holds, oil remains somewhere between sixty-five and seventy-five dollars a barrel, that we get some very favorable inflation prints in the second half of the year, that bond yields begin to fall, and that unleashes even more momentum in the CRE markets than we saw over the first six months of the year.

Capital costs come down. Borrowers think the time is right. I'm back to a point where we were in February in terms of borrowing rates, and I think we see the market take off. That's in the CRE side. On the equity side, I'm probably not as bullish. I think that at some point in the next couple of months, we will see a sizable equity sell-off.

We'll see some kind of dip or correction, largely because I don't think CRE values have gotten frothy. Activity has stayed high, but values haven't gotten frothy. I think in the equity side of our world, AI valuations have just gotten to dotcom level bubbles at this point, and I think a reckoning probably has to happen at some point.

Dianne Crocker: Let me ask you this. Go back to your CRE forecast. So we visualize your forecast as a big Jenga tower. What's the wooden peg under which that would have to come out for your forecast to fall apart? Would it be that the war in Iran peace deal doesn't take shape? Would it be that the Fed comes back and surprises everybody by hiking rates?

Like, what's the biggest if in your scenario where if it doesn't play out, the forecast falls apart? 

Manus Clancy: It's funny you should say that because I was reading CNBC before, and Warsh is on the front page today, Fed Chair Warsh, talking about inflation being too high, and that's leading people to think rate hikes are, are on the table again.

I'm a little surprised by that. I'm, I'm surprised he's not talking about give this 30 days with falling oil. You're not gonna be talking about inflation being too high in a few weeks. But we'll see. But to your point, what are the, the Jenga pieces that would change things? Certainly, the war becoming more belligerent again and oil going back to $100 a barrel, that would eliminate a lot of the good feelings I have right now, without a doubt.

With the current administration, there's no telling what happens next, right? We didn't see the tariffs at the levels we thought when they were announced. We didn't see a war in Iran on the bingo card. So there's always that threat of the unknown. And then I think the, the third-biggest thing is the election in November.

Dianne Crocker: Yeah. 

Manus Clancy: That if we saw something where Democrats ran the table, and part of running that table meant there was gonna be a big push for more spending Another round of impeachment efforts. I think you'd see the markets react poorly, especially if spending was a big part of the equation, which I think it would be for Democrats.

That would also concern me, but I think it would take a real Democratic wave to make me alarmed. 

Dianne Crocker: My predictions were more granular than yours. You know, I think on the office front, I do think we'll continue to see transaction activity heating up at the top end. I was really surprised at how fast recovery happened in the office sector, and certainly we've talked about here, you know, it's still not broad, it's very, very uneven.

But we've seen big office deals in the transaction tracker data from your group, you know, where some of the top 10 deals of each month are office, you know, three or four out of the top 10, and some of them prices have actually appreciated versus prior. So that was a happy surprise I think this year. But I also think at the other end, we're gonna see more office-to-resi conversions, you know, where that really starts to go mainstream.

I think a lot of the things that we've talked about here this year have shown that office-to-resi projects have really advanced from test cases to really proven test cases where they're going mainstream, and that adaptive reuse is making investors and developers a little bit more comfortable than, than it would've been just a few years ago.

When I think about commercial real estate, I agree with a lot of what you said in terms of the optimism, and certainly our data here at LightBox supports that glass half full or, or bullish scenario. My biggest Jenga piece is definitely the war in Iran, just because I think that that affects everything else, and if that were to fall apart and oil prices stayed high, the detrimental impacts of that would ripple through everything that impacts commercial real estate.

So that's by far my biggest Jenga piece. 

Manus Clancy: So let me ask you about this potential Jenga piece, and if you have any instincts On this front, I almost used this as my Jenga piece but decided not to, but I think it's worthy of discussion, and that is the jobs market. We saw a kind of anemic job creation late last year, early this year.

It's come back to some degree. We're certainly not in that two hundred to three hundred thousand per month that we love to see during an, an expansion. We're kind of more in the hundred, hundred and twenty-five range. But there's a lot of talk about AI and layoffs and uneasiness in the jobs market. Is this something that shakes the foundation over the next 12 months, or do you think that we just keep muddling through?

Or is it too early to tell? 

Dianne Crocker: Well, you hit on my second-biggest Jenga piece, which is the labor market, and it's because that's, you know, that's where, really where the, the rubber hits the road. You know, our economy needs to see a healthy labor market. We need to see wages increasing. We don't want unemployment to go any higher, and that affects so much.

You know, it affects consumer spending, which has been very, very strong up until now. And if we start to see the labor market weaken, then that also helps make a case for a more pessimistic outlook, I would say. But hopefully, you know, the labor market starts to recover. There's so much speculation about the impact that AI could have on the labor market, and there will be pros and cons, but honestly, nobody knows where, where that will land.

Manus Clancy: Very early in that narrative for sure. I do think there was a period of time where the fear was outpacing the reality I think there was a period of time where people thought layoffs would be epic, unemployment would shoot up. I think we are looking at this a little bit more reasonably now. I think that people are understanding that this will take time to play out.

And I do think even though expectations have changed and people are realizing this is not gonna happen in three months, this is a much longer game, I do believe it's gonna be an even longer game than people think. It's one thing to be, you know, pulling up chat and saying, "Do this for me." It's another thing to replace a 400-person call center with something new that you know is gonna work every single time and give the right answer every single time.

So I do think this will be played out over more like a five-year horizon- 

Dianne Crocker: Yeah ... 

Manus Clancy: not a five-month horizon, but time will tell for sure. 

Dianne Crocker: Yeah, I totally agree, and I'll, I'll add something to that because it was more of a soft prediction that occurred to me as I was walking the dogs this morning, just thinking about AI and the conversations this year about data center investment, which is going like gangbusters, obviously, and the speculation that we just talked about in terms of AI's impact on the broader labor market.

But it seems like there's kind of this quiet counter trend too that's a little bit softer, which is, you know, as we forecast what AI might mean in terms of reshaping office demand and data center investment, you know, there's another story that's kind of getting less air time, but people are talking more and more about it, and that's just that it makes, I think, for a, a growing hunger for human connection, you know, and, and being together and collaborating, even if you're just collaborating on what the heck does AI mean and, and where is it gonna take us.

And I think that growing hunger for human connection is starting to show up and will keep showing up in the way that real estate is designed, whether it's office, retail, multifamily. I think people are starting to kind of lean into spaces that are built in ways that allow people to gather in a world that's getting more and more digitally isolated.

So properties that allow that space and allow that to happen, that that's gonna be a factor driving commercial real estate investment decisions. 

Manus Clancy: I'll take a very, very quick detour here just to get your opinion on this. This has been around for a couple of years now. You walk into a McDonald's, not every McDonald's has this, but some do, and there's the kiosk, and You have to, you know, go to one screen.

You gotta find, you know, do I want ketchup? Do I want pickles? Do I want onions? To me, it's a hassle. To me, it's a step in the wrong direction, and I really go out of my way to not use operations or franchises, whatever, where I have to do this. I want somebody to hear me say, you know, "I want two cheeseburgers," right?

"No onions, regular Coke, large fries." I don't wanna be sliding around. I do that all day. I'm on a computer all day. I don't wanna have to do it, you know, in a McDonald's. I don't know how you feel about this. 

Dianne Crocker: See, you proved my point that human connection matters. I myself don't consider McDonald's a restaurant, but I will say that when—

I go into grocery stores, and now they have a little scanner that you can take at the front, and you go by and, you know, as you're shopping, you scan your own goods, and then you pay at the finish. I don't wanna do that. I don't wanna do self-checkout. I wanna go through a line. I want a cashier. I'm old school, but yeah, I'm with you on that front.

I just, uh, I don't care for McDonald's. 

Manus Clancy: And there's always that one item that doesn't scan 

Dianne Crocker: Exactly 

Manus Clancy: So you're still including a human being in this whole process, right? I just want it to be not a screen. You know, I don't wanna to do this. I will talk about this for one second because it does kind of underscore the point I was making with the job market, and again, I'd love to hear your thoughts on this.

Here is where I think we're going with AI, and I'm gonna paint a picture, and this is not precisely the picture of LightBox, but it's a picture which is kind of metaphorical for companies like us. And today, let's say we have 10 23-year-olds that are out there collecting and entering data for us and putting it in there, right, in a database to utilize in our products and take advantage of and monetize and so forth.

And the thought is, AI can do that, and you'll go from 10 24-year-olds to one, right? And you'll lay off 90% of your workforce. And there's something to that, for sure. But the way I look at it is more this way, that because of AI, we're gonna be collecting 10 times more data than we ever did. And so these 10 24-year-olds that we have, they're no longer entering data, but you need one person, one human being, to just look at the additional 90% of the data that you're doing.

So those 10 people, instead of collecting data, they're looking at output, but you're collecting 10 times more than you ever did before. So it's the same number of people, it's just a different task. 

Dianne Crocker: That was actually a prediction that I had in my mental list, is that where you will see growth is with the data scientists.

You know, especially in a market like this where it's so differentiated and there's more and more data out there, as you mentioned. You know, the investors, I think, who win in the second half are gonna be the ones who have those strong data scientists on their team who are analyzing not just data, but the right data at the asset level, instead of leaning in on a macro story that the market's learning has proven unreliable this year because rates haven't come down yet, and all of the other forecasts that people made back in January that didn't play out.

The data becomes that much more important, and if there's more and more data, then you need more and more people to help you make sense of it. 

Manus Clancy: As an organization that's done a lot with AI over the last two and a half years, building models and commercializing them and, and putting extraction software into banks and so forth, I think what we've learned here at LightBox is you're gonna be able to collect 10 times more than you were collecting at any point in history, but you'll never eliminate the need for somebody to reconcile differences that source A says one thing and source B says another thing, and there'll always be somebody who has to say, "Which one of these is right?"

Right? JLL is saying this, CBRE is saying that. And for that reason, I do think that there'll be a hybrid here where you're collecting enormous sets of data, so much more than ever before, but you do need people that can separate the wheat from the chaff when there's conflicts. 

Dianne Crocker: All right, Manus, let's close out here with a lightning round.

Five things I'm gonna ask you to, uh, make predictions on. First one, rate cut or hike or none in the second half? 

Manus Clancy: One of each They will mistakenly hike rates at some point soon, then the wave of lower CPI numbers will come in, and we will reverse course. So we'll be back to where we were, but the rate hike narrative will be very short-lived until CPI numbers start coming in lower.

Dianne Crocker: Interesting. So I went with a hold, but maybe your hike and then cut levels it out, and we wind up in the same place. 

Manus Clancy: Maybe it's just recency bias, seeing Warsh kind of ring his pearls about, uh, inflation being too high right now. A- as I said, I think we're gonna see a complete reversion now that we're at $68 oil, and inflation and all its ugly permutations driven by energy- 

Dianne Crocker: Yeah

Manus Clancy: are going to reverse in the second half of the year. But that may not be enough to keep the Fed from making a mistake in the next two or three months. 

Dianne Crocker: So second part of the lightning round is lending increase year over year in 2026. What's your prediction? 

Manus Clancy: I think we're gonna see a terrific second half for lending.

I think it's gonna be our best second half since 2022 or whenever we hit the maximum velocity during the COVID period of time. And I do think that we will revert. Again, we will revert to those pre-Iran war numbers in a way where people will say, "This is great. We're back to February. Hit the bid, refinance, take advantage of where we are now."

Dianne Crocker: Yeah. Agreed, and part of it is because we have so much refi need driving volume. But it'll probably concentrate in sectors that have real income growth, industrial, data centers, multifamily. All right, transactions. What are you seeing year on year for 2026? 

Manus Clancy: More of the same. I think that because I'm anticipating rates being lower, I think when people start seeing the cost of financing coming down, more deals will pencil.

And I don't think we get into that peak 2022 euphoria that we saw where people were throwing money at value-add projects hand over fist. But if we're at 125 now with the LightBox Activity Index, I see us 135, 140 by the end of the year. I see a nice respectable but not euphoric increase. 

Dianne Crocker: Mm-hmm. Yeah, so the index was 126.6 in May.

We'll have the June numbers next week. It was 86.7 in December. That's because we usually see a seasonal dip at the year-end. So for December, I'd put it at probably in the range of 98 to 100, which would still put it 15% above where it was last year. I think the triple-digit trend will continue certainly over the near term, but our listeners can tune in next week to see where we land with June.

All right, last lightning round question, Manus. Where do you think the 10-year will land at year-end? 

Manus Clancy: Well, I'm gonna revisit my last prediction first very quickly. We do see that December dip. So I'm gonna say we hit 140 in the fall, but we do end up sort-- like in that 120 range, that we do have a December dip.

So if we're gonna go back and revisit this, I have to be very, very precise. On the 10-year, I think we're in the very low fours, 405 to 410, something like that. I'm not so bullish that I think we get to 375. I think that these CPI prints will start in August and September, and it'll take time for the market to understand this, that inflation is, is really back to that two and a half percent number that we saw before the war started.

But I'm thinking like 405, 410. 

Dianne Crocker: And I'd be happy if it were just operating in a more narrow band of less volatility because I think that's what really threw the market for a loop in the first half. So I'll take that. 

Manus Clancy: But even a 425 is terrific considering where we peaked. 

Dianne Crocker: Yeah. 

Manus Clancy: Nobody's gonna be disappointed if we get back to 425 and risk premiums stay where they are.

Dianne Crocker: Yeah. All right, Manus, well, we usually end with a slice of life, but let's end with a crazy second half prediction on any topic. What do you have? 

Manus Clancy: Well, you know me. You know, I'm a simple man with simple dreams, and you know, I'm very happy eating my McDonald's hamburger, you know. Buying my clothes at Kohl's, not at Saks Fifth Avenue.

You know, I'm a hat and T-shirt guy. So you knew this was not gonna be something, you know, deeply thoughtful about humanity or the future of technology. The Giants are back. The New York Giants are back in the playoffs this year. 

Dianne Crocker: How did I know it was gonna be sports related? 

Manus Clancy: Well, you know me. You know, you know, I'm a, a simple guy.

I'm chips and salsa and, uh, you know, a cold beer and, and, you know, what you see is what you get. 

Dianne Crocker: I love that. Mine is that, uh, Taylor Swift accidentally becomes the most important economic indicator of 2026. 

Manus Clancy: My goodness. We didn't even talk about the fact that she might get married this week. 

Dianne Crocker: And- I know.

Rhode Island is, uh, Rhode Island is all abuzz. There are people camping out outside of her, uh, her piece of real estate in Rhode Island, hoping that today's the day, and that's been happening for weeks now. 

Manus Clancy: And they're also talking potentially Madison Square Garden, so there's all these rumors out there.

So Dianne, what are you wearing to the wedding? 

Dianne Crocker: I don't know. I'm not on the guest list. 

Manus Clancy: Oh, I'm sure somebody of your stature 

Dianne Crocker: would, uh- I could be a wedding crasher like that old Owen Wilson movie. 

Manus Clancy: That was a very funny movie. 

Dianne Crocker: It was. All right, well, that brings us to the end. So thank you to our producers at Bruyning Media.

Be sure to join us next week as we break down the latest headlines and share the LightBox CRE Activity Index for June. You can listen on all your favorite podcast platforms, and send your comments or questions to podcast@lightboxre.com. As always, thanks for listening, and have a wonderful Fourth of July long weekend.

Manus Clancy: Let's go