Welcome to our deep dive. We’re looking at commercial real estate trends today. You’ve given us a lot to work with news articles, economic analyses, even some interesting retail developments. Yeah, quite the mix. We’re going to break it all down, help you understand where commercial real estate is headed, especially as we get closer to 2025.

Right. A big question is this whole. Extend and pretend thing, is it really coming to an end? It’s a big question. A lot of folks are wondering. Your sources actually give us a lot to consider. We see stuff about loan modifications, delinquency rates, and even some political and economic factors at play.

Yeah, it’s all connected. Plus, we’ve got those specific examples, like the McKinney National Airport expansion and Bloomingdale strategy in Texas. Always good to have those real world examples. Makes it more tangible. Absolutely. Let’s start with McKinney, actually. That airport story is fascinating. They’re moving forward with a commercial terminal, but it’s smaller than what they originally proposed.

Voters rejected a bigger bond measure last year. Yeah, back in 2023, residents voted down a 200 million bond. Now the city council is moving forward with a 70 million plan. So, smaller scale. Yeah, it’ll be smaller. Three gates, five parking positions for the planes. But still a big addition. Significant. And they got federal funding for it, right?

That’s right. They secured some federal funding, low interest infrastructure loans and grants. Interesting. It seems like there’s a lot of faith in the airport’s potential. Definitely. The airport already brings in 29 million a year for the region. And with commercial flights on the horizon That number’s only going up.

Exactly. Plus, they’re working on a separate runway expansion. Another 24 million going into that. McKinney’s really investing in their future. It’s a great example of how things can work out, even when the first plan hits a roadblock. They adapted, found another way. But let’s step back a bit. Look at the bigger picture of lending in commercial real estate.

Your sources point to a lot of loan modifications happening, especially for those non owner occupied borrowers. Yeah, that’s a trend we’re watching closely. In the first 9 months of 24, the median percentage of those modifications jumped 65 basis points. That’s significant. It is. Any idea what’s behind that?

Well, one thing that really sticks out is what’s happening with the smaller banks. They’ve seen a huge increase in modifications. A 217 percent jump. 217%? Wow, that’s a massive increase. What’s driving that, do you think? It seems like those smaller banks are feeling the heat. They’ve got all these underperforming commercial real estate loans.

The modifications are a way to buy time, hoping things turn around, they’re trying to avoid foreclosures if they can. So it’s kind of a temporary fix, kicking the can down the road a bit. You could say that, yeah. It delays things. For some properties, though, it’s just delaying the inevitable, and we see this happening in the office CMBS market, too.

Only 11 percent of the loans maturing in September were actually paid off in full. Almost half got short term extensions. It’s a big difference from what we used to see. So, lenders are getting less and less patient with just extending things. Seems like it. Does this tie into that extend and pretend question?

Definitely. It’s all connected. These short term extensions have helped prevent a total market meltdown. But for how long? The clock’s ticking, lenders are starting to get picky, especially about assets that aren’t performing well. Makes sense. They can’t just keep extending forever. So what’s the timeline here?

When do we think things might hit a breaking point? Well, from what the sources suggest, 2025 could be a turning point. We’ll likely see more properties in distress hitting the market. That often leads to prices going down. Which can create opportunities for some. But challenges for others. Exactly.

Especially when it comes to financing. That’s a crucial point. We’ve been talking about these big market trends. But how does all this affect someone like you who’s actually making decisions about commercial real estate right now? Well, you gotta understand the current situation. But you also have to look ahead.

Anticipate these potential shifts. Lenders might get stricter. Certain sectors like office headwinds. All of that has to factor into your strategy. It’s not just about finding a good deal. It’s about finding a deal that makes sense in this changing environment. Okay, before we go too deep there, I want to touch on something else that popped up in your sources.

These smaller stores popping up everywhere. Ah, yes. That’s an interesting trend, isn’t it? It is. Starbucks, Tim Hortons, even Bloomingdale’s are getting in on the act. Everyone seems to be embracing smaller spaces. It seems counterintuitive though, right? Why make your store smaller when you could have more space for merchandise or customers?

It’s not just about size. It’s about efficiency and adapting to how people shop these days. These smaller formats often help retailers cut costs, streamline their operations, and cater to customers who want things fast and easy. So it’s about keeping up with the times. Exactly. And we’re seeing this with Bloomingdale’s, right?

They’ve got their Bloomy’s concept. Smaller stores, a more curated selection, a focus on the in person experience. Right on. And they’re opening one of those Bloomy’s stores in Frisco, Texas. Part of a bigger mixed use development. Bye. And speaking of Texas, it’s booming with new retail space, especially what they call first generation space.

Brand new construction, never been occupied. Houston alone has added almost 25 million square feet of it since 2020. That’s incredible. Seems like developers are pretty optimistic about Texas. They are. A lot of activity there, a lot of growth. But even within Texas, you see different trends playing out depending on the sector.

Retail might be thriving, but the Dallas Fort Worth multifamily market tells a different story. Yeah, your sources show rents actually going down in Dallas Fort Worth. Yeah. For the second year in a row, that’s kind of surprising given how strong the Texas economy is overall. It is. And these declines are across the board.

All property classes, even those fancy four and five star rentals, they’ve dropped by 2. 1 percent over the past year. So what’s causing those rent declines? The main thing seems to be a mismatch between supply and demand. They’re building more units than the market can absorb. That puts downward pressure on rents.

So Advantage Renters in Dallas Fort Worth right now. For now, yeah. But the predictions say rents could stabilize in 2025, maybe even start going up again in 2026. Of course, that’s just a prediction. Things change. They do. Speaking of changing trends, there’s that story about data centers taking off in Irving, Texas.

Oh yeah. Microsoft and QTS Realty Trust, they’re planning seven data centers there. Seven. And the city council is giving them some pretty sweet deals to make it happen. Like cutting their property taxes in half for the next decade. That’s right. A 50 percent reduction for 10 years. That’s a big commitment.

But cities are really fighting to attract those tech giants. Data centers bring jobs, investments, you know, a certain prestige. It’s all part of Irving’s bigger plan to grow their economy. It reminds us that real estate isn’t just about buildings. It’s about the economic forces that shape those buildings.

The communities around them. And while we’re on the topic of transformation, there’s that interesting story about the old Raytheon manufacturing plant in Dallas, the one that’s becoming a Porsche dealership. That’s the one park place dealerships bought the 15 acre site planning a big redevelopment, A great example of how old industrial spaces can find new life.

Could be retail, entertainment, even housing. Absolutely. It shows how adaptable real estate is. Needs change. Markets change. We’re seeing this across the country. Old factories are becoming all sorts of things. It’s fascinating. And in this case, it really highlights how strong the luxury car market is in Dallas.

An aerospace factory becomes prime real estate for a high end car dealership. But now, let’s zoom out again. Consider the bigger economic and political picture. Okay. Because your sources had some insights there as well. Yeah, there’s a lot going on. The Fed’s been cutting interest rates. But they’re also hinting that they might slow down those cuts in 2025.

Right. They just lowered the benchmark rate by 25 basis points. Right. But their message is clear. They’re going to be more careful moving forward and that combined with some uncertainty about the new Trump administration’s policies. Yeah. Well, it’s making the stock market a bit jittery. Yeah, there’s definitely some anxiety.

Investors are trying to figure out how those policies will play out, especially when it comes to taxes and tariffs could have good and bad effects. depending on the sector. It’s a lot to take in. Hard to predict what will happen, but it’s important to stay informed. Understand how these big economic and political trends might affect the commercial real estate market.

Absolutely. Everything’s connected. Creates both opportunities and challenges. Okay, so we’ve covered a lot in this first part of our deep dive. We talked about specific developments like the airport and that Raytheon plant. We looked at broader trends in lending and retail. We even touched on the economic and political landscape.

We did. A lot to digest. It is. But the key question is, what does all this mean for you, the listener? How do you make sense of it all? How do you apply it to your own decisions? That’s what we’ll dive into in the next part of our deep dive. We’ll connect these dots, explore what it all means for someone navigating commercial real estate in 2025 and beyond.

Okay, so we’ve laid out some pretty big trends that are shaping commercial real estate, but let’s get more specific now. What does this all mean for someone who’s actually out there trying to navigate this market in 2025? Right, let’s try to connect these dots. We were talking about the potential end of extend and pretend, which could mean, More distressed assets hitting the market.

That’s sounds kind of scary, but it could also be a good thing, right? Exactly. Could this be a chance to pick up some properties at a discount? I mean, that would be pretty appealing for someone who’s looking to get into the market or maybe expand their portfolio. It could be, but there’s a trade off.

Remember those alternative capital sources we discussed, the private equity firms, credit funds, they’re stepping in to fill the gap left by the traditional banks. But they’re not doing it out of the goodness of their hearts, right? They want higher returns, stricter terms, that kind of thing. Exactly. So it’s not just about finding a good deal It’s about finding a deal that works with this new Piter financing environment You might need to get a little creative a little more resourceful to make things happen.

So opportunities Yes, but with some added challenges What else should someone be thinking about as they’re looking at commercial real estate in 2025? One thing to remember is that not all property types are created equal We talked about the challenges in the office sector, and even some weakness in the multifamily market, at least in certain areas like Dallas Fort Worth, those trends don’t just disappear overnight.

Right, all those empty office buildings aren’t suddenly going to fill up, even if extend and pretend does fade away. The multifamily market, well, maybe it’s stabilizing, but it’s still very much a renter’s market in a lot of places. Exactly. So, you need to be really careful about what type of property you’re investing in, and where, on the other hand, we’ve seen how strong industrial properties can be, particularly in markets like Texas, where the data center boom is driving a lot of demand.

And let’s not forget about retail. It feels like things have shifted away from that retail apocalypse, doom and gloom we were hearing a few years ago. It has. The retail landscape is definitely changing, but it’s not dying. The success of these smaller format stores, the continued demand for first generation space, especially in Texas, Those are all good signs.

It’s all about adaptation, right? Both for the retailers themselves and for anyone looking to invest in retail properties. Absolutely. Understanding the specifics of each market and property type is essential. What works in Houston might not work in New York City. The key is to look beyond the headlines.

Really dig into the data, talk to local experts, and develop a deep understanding of the market you’re interested in. So due diligence is more crucial than ever. Don’t just jump into something based on a gut feeling. Take the time to really vet the opportunity, and speaking of the bigger picture, we can’t ignore those economic and political uncertainties looming out there.

Right, those play a role too. The Fed’s rate cuts give borrowers some breathing room, but they also raise concerns about inflation down the road, and then there’s the wild card of the incoming Trump administration, and how their policies might impact everything from taxes to trade. It’s a lot to keep track of and honestly it can feel a bit overwhelming.

How does someone even begin to make sense of all this and translate it into something actionable? That’s a great question. I think the main takeaway is that the commercial real estate market is in a state of change. The old rules might not apply anymore. Those who can adapt, innovate, and be proactive will be the ones who come out on top.

It’s not about riding the waves. It’s about learning how to surf, so to speak. Okay, so we’ve talked about the need for adaptability, the importance of due diligence, and being aware of these broader economic and political forces. What are some concrete steps someone can take to prepare for 2025 and beyond?

Well, first and foremost, research. Don’t just rely on gut feelings or what you hear from your buddies. Immerse yourself in the data, analyze the trends, and connect with experts in the specific markets you’re interested in. So go beyond just reading a few articles, really dive deep and develop a solid understanding of what’s happening in the market.

Exactly. There are some great resources out there like CoStar that provide tons of data and analysis on the commercial real estate market industry, publications, research reports, networking events. Those can all be valuable sources of information. And don’t underestimate the power of networking. Building relationships with other professionals in the field can give you a real advantage.

Absolutely. Networking allows you to tap into the collective wisdom of the industry. Learn from other people’s mistakes and stay ahead of the curve. You can get insights that you won’t find in any report or database. Okay, so research, data analysis, and networking are key. What about the financial side of things, especially given that tighter lending environment we talked about?

That’s crucial. Having a strong financial foundation is essential. This means maintaining a good credit score, getting pre approved for financing if you’re planning to borrow, and being realistic about your investment goals and your risk tolerance. So don’t jump into a deal just because it seems like a good price.

Make sure you understand the financial implications and that you’re comfortable with the level of risk. Exactly. And remember, flexibility is key in this market. Be open to considering different types of properties, exploring alternative financing options, and adjusting your strategy if things change. Be adaptable.

Be responsive. Don’t get stuck with a rigid plan that might not work in this fluid environment. Right. And finally, I would add patience and discipline to that list. The commercial real estate market is cyclical. There will be ups and downs. Don’t let the short term noise distract you from your long term goals.

It’s about having a clear vision and sticking to it even when things get a little rough. Exactly. By combining thorough research, sound financial planning flexibility, and a patient approach, you can set yourself up for success in this ever changing world of commercial real estate. Great advice. So much to think about.

It really comes down to being proactive, informed, and adaptable. Now I have one final thought before we wrap up this part of our deep dive. We’ve talked about the rise of those smaller format retail stores, and the increasing demand for first generation retail space, especially in Texas, and we’ve also discussed the data center boom happening in certain markets.

Yes, two seemingly separate trends. Where are you going with this? What if those trends could converge? What if data centers became anchors for new retail development? Data centers as retail hubs. That’s an interesting idea. Think about it. These data centers create a lot of high paying jobs, which attracts people who need services, amenities, places to shop and eat.

What if developers started incorporating those smaller format retail stores, maybe even some drive through only concepts, into those data center campuses? That’s not something we saw in your sources, but it’s definitely food for thought. It could be a win win, right? Data centers get the convenience of having these amenities on site for their employees and retailers tap into a built in customer base with money to spend.

It would definitely require some out of the box thinking and collaboration between developers, retailers, and the data center operators themselves. Yeah. But if done right, it could be a really innovative approach to mixed use development. It’s just a thought, but it highlights how important it is to think differently and explore those unconventional opportunities, especially in a market that’s changing as rapidly as this one now, with that idea in mind.

Let’s move on to the final part of our deep dive, where we’ll tie everything together and consider the key takeaways for you, our listener. Sounds good. Let’s do it. Alright, we’ve covered so much in this deep dive. Airport expansions, loan modifications, the rise of the smaller format stores, data centers booming, even talked about data center retail hubs, it’s a lot.

You initially came to us with a pretty specific question though. Right. Is the extend and pretend era truly over in commercial real estate? Yeah, that was the big question. And based on everything we’ve seen, it’s looking like the answer might be yes. The sources really point to lenders getting tired of this game.

Especially when it comes to those office properties that are struggling. It seems those short term extensions, the ones that have been keeping things afloat, might be hitting their limit. Exactly. And even big institutional investors are starting to lose patience. We saw that quote from Glenn Grimaldi, the CEO of Navtel Credit Partners.

He didn’t mince words. He was pretty clear. So, heading into 2025, it looks like lenders will be more careful about those extensions, more scrutiny, more demands from borrowers. Right. And for you, the listener, this means you need to be ready for a market that could be a bit wilder. More ups and downs. Might be some great deals coming out of distressed sales.

Getting the financing. That might be a whole other story. So what can our listeners do to prepare for this shifting market? Any advice? Sharpen those due diligence skills. Don’t just skim the surface. Dig deep into those financials. Really understand the local market. Make sure you’re comfortable with the risk you’re taking on.

So it’s more than just finding a property with a good price tag. Way more. You have to understand all the details. Make sure it fits with your plan and your risk tolerance. Absolutely. Good due diligence isn’t just about avoiding the bad deals, it can help you find hidden potential. Maybe that old Raytheon plant isn’t just for a Korsha dealership.

Maybe it’s a chance to build something totally new, a mixed use development that brings the whole area back to life. It’s about seeing the possibilities that other people miss. Having that vision, that entrepreneurial spirit. And speaking of possibilities, we were just talking about the data center boom and the rise of those smaller retail stores.

Hmm. What if someone put those two things together? You’re thinking about data centers becoming like anchor tenants for retail. Exactly. Imagine it. A data center campus with a bunch of those smaller stores around it. Maybe some drive thrusts. Serving the people who work there and live nearby. A whole new model.

Now that’s interesting. It’s different. For sure. But I like it. Could be a win for everyone. Developers, retailers, the data center companies themselves. Exactly. It shows how thinking outside the box, adapting to the changes, can lead to some really cool opportunities. And I think that’s the main takeaway from all of this.

The commercial real estate world is constantly changing. You have to embrace the change, stay informed, and be proactive. That’s how you thrive. Couldn’t have said it better myself. So, to our listener, we say embrace the change, stay informed, and never stop exploring. The future of commercial real estate is yours to create.

Well said. And with that, I think we’ve successfully navigated this deep dive into commercial real estate trends. We covered a lot, from airport expansions to those data center retail hubs. Hopefully you’re leaving here feeling more informed and inspired. Knowledge is power, right? The more you understand about this market, the better decisions you’ll make.

Absolutely. Keep learning, keep exploring, keep pushing the boundaries. Until next time, happy investing, everyone.

 Welcome back. Today, we’re diving deep into commercial real estate. You know, you’ve given us a really fascinating mix of sources for this one, economic forecasts, some development news, even some articles on retail trends. We’ve gone through all of it to bring you the insights you need to know. And we noticed you’ve got a particular interest in the Dallas Fort Worth market.

Yeah. It’s a hot market. It is. And the DFW economy seems to be humming along nicely, which usually that’s a pretty good sign for CRE. Right. But we’ve got some economic headwinds nationally, so I’m curious to hear your perspective on how things might play out. Well, you know, it’s not always as straightforward as we’d like, so.

Let’s start with the labor market, nationally. We’ve added almost 2 million jobs this year, according to our commercial real estate news. Typically. That’s fantastic news for CRE. More jobs mean more demand for office space, retail space, industrial properties, the whole nine yards. Right. It makes sense. Yes.

But. We also know that interest rates are stubbornly high. One of the Investor’s Business Daily articles we’ve got even suggested the Fed might not cut rates as much as everyone thought next year. How does that factor into things? Yeah, that’s the million dollar question. Higher interest rates mean it gets more expensive to finance those property purchases.

And that makes investors a little bit hesitant. Especially when they don’t know where rates are headed. And, historically, rising interest rates have often led to a slowdown in CRE transactions. Deals take a lot longer to close. Projects might get put on hold. Investors get a lot more cautious. So, we’ve got these two forces at play here.

A strong labor market that’s pushing things forward, and high interest rates that seem to be, you know, pumping the brakes a little bit. What’s the historical interplay between these forces been like in CRE? It’s fascinating to see these forces play out against each other. The key is to find how they balance out that strong job growth.

We’ve got can drive demand for commercial properties, but those high interest rates can stifle investment. So what you’re going to want to watch for in the coming months is how those forces interact. Keep a close eye on job growth, but at the same time, you really want to pay attention to what the Fed is saying and doing with interest rates.

If job growth remains strong and interest rates stabilize or even start to come down a little bit, that could be a really positive signal for the CRE market. Okay, so a bit of a balancing act now. Let’s zero in on the DFW market for a second. CoStar reported that DFW added 74, 800 jobs in the year ending in October.

And here’s the kicker, that growth was across all sectors. Yeah, that kind of broad based job growth, it’s a strong indicator of a healthy, diverse economy. It’s just definitely something that attracts businesses and investors, looking at CRE opportunities. Absolutely. And speaking of attractive markets.

Office employment, which has been a little bit sluggish nationally. It’s showing signs of life and DFW. That’s definitely worth noting, especially considering the national trends, right? And coup star even highlighted some specific examples of this new office leases for companies like Goldman Sachs and Wells Fargo in the area.

Do you think this is a sign of recovery for the office sector? Or is this just a temporary blip? What do you make of it? I think It’s a little bit early to call it a full blown recovery while those new leases are encouraging. We do have to consider the bigger picture We’re still in a period of adjustment where companies are figuring out their office needs and those hybrid work models Are becoming more and more common.

The real question is whether this stabilization in DFW. Yeah is unique to this market Or, if it’s the beginning of a broader trend. Okay, I see your point. Now, let’s shift gears for a second. To a company that’s been making a lot of headlines in CRE lately, Amazon. And this time, it’s not about their online shopping dominance.

You’re talking about their push into same day prescription delivery. Exactly. Amazon is building a massive fulfillment center. In DFW specifically for this and they’re planning to roll out same day medication delivery to almost half the country by next year. They’re even incorporating robots and AI into these pharmacies.

It’s like something out of a sci fi movie. It’s a pretty build move. Yeah. That speaks to Amazon’s aggressive expansion strategy. Particularly in the healthcare sector, it’s pretty fascinating to see how they’re leveraging technology to disrupt traditional industries. It is. But I’m curious, beyond just the pharmacy aspect of things, what does this move tell us about Amazon’s broader strategy?

And how might it impact the CRE landscape, especially in DFW? This move signals a couple of things that are really important. First, Amazon’s need for logistics and distribution space is only going to grow as they continue to expand these same day delivery services require these massive, strategically located facilities.

Second, it really emphasizes their commitment to automation. And cutting edge technology. They’re pouring money into robotics and AI to optimize efficiency and speed, which has huge implications for the types of facilities they require. So if you think about DFW specifically, how could this move influence industrial real estate demand?

You can expect to see continued strong demand for warehouse and distribution centers in the region. But it’s not just about size anymore. These facilities need to be more and more sophisticated. Incorporating robotics, AI, all these advanced technologies, developers and investors who can meet those specific needs will be in a fantastic position to capitalize on this trend.

The innovations in DFW don’t stop there. We also have the brand new Texas Stock Exchange setting up its temporary headquarters in Dallas. Yeah, that is a total game changer. For the Dallas business scene, you. A new stock exchange has the potential to attract more financial firms to the area, boosting job growth and demand for office space.

It’s really exciting to think about all those ripple effects, but what about the long term implications of a new stock exchange? What should people be looking for to understand how this might all play out in Dallas? If we connect this to the bigger picture, the establishment of a brand new stock exchange.

It can signal a shift in the financial landscape. It could lead to increased competition and innovation in the industry. As for Dallas specifically, just keep an eye on the types of companies that are drawn to the area. Are we seeing a big influx of financial institutions, tech firms, startups, the mix of businesses that choose to locate near the exchange?

It’s going to be a strong indicator of its long term impact on the Dallas market. Alright, we’ve covered a lot of ground already. The labor market, interest rates, some major developments in DFW, and even Amazon’s foray into futuristic pharmacies. Now, let’s dive into another hot topic in CRE, retail. That’s a sector that’s been undergoing a lot of transformation over the past few years.

It has. One of our sources, Chain Storage, had a really interesting piece on the evolution of open air centers. You know, they’re moving away from those traditional anchor stores and embracing what they call experiential retail. We’re talking outdoor gathering spaces, restaurants, entertainment. It’s almost like mini town squares.

It’s fascinating to see how developers are adapting to those evolving consumer preferences. It’s an essential shift. In the past, those open air centers really relied. Uh huh. On those big anchor stores. Yeah. To draw shoppers in. But with the rise of online shopping and all those changing consumer habits, developers are realizing they need to create destinations that offer more than just shopping.

It’s about creating. Mm hmm. A sense of place. Yeah. And community. That’s all about the experience. Right. Right. You know, creating spaces where people, they want to hang out. They want to socialize, enjoy themselves. And, This trend toward experiential retail, it could create opportunities for local businesses as well.

These centers could actually drive demand for smaller, more specialized retail spaces, which would benefit independent retailers and restaurants. What are your thoughts on that? I completely agree. The rise of experiential retail really offers a unique opportunity for local businesses to thrive. They can differentiate themselves from those big national chains.

By offering unique products, personalized service, you know, that local touch that really resonates with people. It’s about creating that sense of community and fostering those personal connections. We’ve got a great example of this in action. Chain Storage, they highlighted a development project in Naperville, Illinois, where a developer is transforming what’s essentially a vacant corner into a restaurant destination they tapped into.

Yeah. The community’s desire. For more walkable, vibrant spaces, and they’re even incorporating a theater and an ice rink into the development. Talk about creating an experience. Yeah, that’s a fantastic example of placemaking. It’s about going beyond, just building structures. And instead, creating spaces that foster a sense of community, encourage social interaction, and enhance the overall quality of life for residents.

It’s a really inspiring approach to development. Yeah. How can developers replicate this success in other locations? What are those key ingredients for creating these vibrant, community driven spaces? We’re replicating that success. It starts with a deep understanding of the local community’s needs and desires.

Developers need to engage with residents, listen to their preferences, and incorporate those insights into the design and planning process. It’s about creating a sense of ownership and belonging. For the people who are going to be using those spaces and when it’s done well, placemaking can generate benefits for everyone involved.

For investors, it can mean increased property values, higher rental rates, and a stronger return on investment. For the community, it means a better quality of life, stronger social connections, and a real sense of pride. Okay, we’ve talked about the big picture, zoomed in on DFW, explored the rise of experiential retail, I even touched on placemaking.

Now, get ready for this one. We’re going to talk about dry cleaning vending machines. Dry cleaning vending machines. Yes, you heard that right. One company is installing these vending machines in apartments, offices, even retail centers, focusing on those high traffic areas. And they’re partnering with JLL.

To roll us out on a larger scale, it seems, both ingenious and a little bizarre, at the same time, what do you make of this trend? I think it’s a perfect example of the growing demand for what we call hyper convenience in retail. Consumers are more and more pressed for time. And they’re looking for those quick, easy solutions for everyday needs without sacrificing quality businesses that can deliver that kind of seamless on demand service, they’re getting a real competitive advantage.

It’s like the next generation of the vending machine. What other examples of this hyper convenience trend are you seeing pop up and how might it reshape the commercial real estate landscape down the line? Think about automated grocery stores. Mobile ordering a pickup, even the rise of drone delivery services.

These are all examples of how businesses are using technology and innovation to meet that growing consumer demand for instant gratification. This trend is likely to drive demand for smaller, more strategically located retail spaces that cater to crypt transactions and on demand fulfillment. We could see an increase.

In micro fulfillment centers, dark stores, even repurposed retail spaces designed for those hyperconvenient services. It’s amazing how quickly things are changing. Now, let’s take a look at retail investment for a moment. We’ve got some data from chain storage showing that some cities are outperforming others.

In terms of retail investment returns, Vegas is a top performer fueled by its tourism and strong retail sales. And then Charleston, South Carolina is another standout thanks to its population growth and higher than average incomes. What makes these cities so attractive to investors? The key is understanding those factors that are driving retail performance in each market.

Vegas benefits from that constant stream of tourists, which creates a really consistent base of shoppers. Charleston’s appeal really comes from its combination of population growth. Those rising incomes. And its own vibrant tourism industry. These factors create fertile ground for retail businesses to flourish.

And that attracts investors, seeking strong returns. Are there any hidden risks or opportunities that people should be aware of when they’re considering investments in these markets? Of course. Every market has its own little nuances. While Vegas enjoys that robust tourism sector, it is heavily reliant.

On the leisure and hospitality industry, which can be vulnerable to economic downturns. Charleston’s rapid growth can lead to some challenges like increased competition for retail space and rising operating costs. The key takeaway here is to do your due diligence, understand the unique dynamics of each market and weigh those potential risks and rewards.

Before you decide to jump in. Sound advice. All right. For our final stop on this retail journey. Let’s talk about Tractor Supply, the nation’s largest rural lifestyle retailer. They’re on an aggressive expansion path, planning to open 90 new stores in 2025. That is impressive growth, especially when you think about the broader trends we’ve been talking about in the retail sector.

Right. They’re tapping into what they call the life out here trend, offering a wide range of products from pet supplies to farming equipment. What are the main drivers behind this trend and how might it affect commercial real estate? The The life out here trend reflects several significant shifts in society.

We’re seeing a growing interest in sustainable living, self sufficiency, a desire for more space, and connection to nature. And this is driving population growth in rural areas and creating a really strong demand for businesses. That catered to that lifestyle. Tractor supplies expansion is a direct response.

To this burgeoning market and their success shows the potential for other retailers and businesses that are targeting this segment. So this life out here trend, it’s more than just a fad. It appears to be a much more fundamental shift in lifestyle preferences that’s likely to have a lasting impact on commercial real estate in rural areas.

We can see increased demand for retail space, housing, even mixed use developments that cater to this specific demographic. It’s definitely something to keep a close eye on. It’s amazing to see how these trends impact all these different sectors of the CRE market. You know, we talked about the rise of experiential retail, this demand for hyperconvenience, the growth of online shopping.

Oh, I can’t forget. About that ongoing evolution of the industrial sector driven by e commerce and all those sophisticated logistics operations that we’re discussing earlier. All of these trends are really reshaping the CRE landscape. It really is a dynamic time for the industry. But here’s something I’ve been thinking about.

You know, as we’ve been talking about all these trends and these technological advancements, what about the human element? How will all these changes impact the way that we interact with physical spaces? That’s a really crucial question. Has our lives become increasingly intertwined with the digital world?

The role of physical spaces needs to be reimagined. What’s going to draw people to those brick and mortar locations when they can do so much online? The answer probably lies in creating experiences that can’t be replicated virtually, creating spaces that foster genuine human connection and a sense of community.

We touched on placemaking, and I think That’s a perfect example of how developers are starting to think differently about the purpose and design of those physical spaces. Makes a lot of sense. Okay. Before we wrap up, I wanted to circle back to something we talked about earlier, the labor market. We talked about how a strong labor market is generally positive for CRE, but I noticed something interesting in our commercial real estate news source.

It looks like hiring in the leisure and hospitality sector is still Below pre pandemic levels, that is great observation. A little bit of a paradox when you consider the overall strength of the labor market that we’ve been seeing. Exactly. So what’s going on there? Why is that particular sector lagging behind the leisure and hospitality industry was hit incredibly hard by the pandemic.

Those lockdowns, the travel restrictions, social distancing measures really forced widespread closures. And let the significant job losses the sector has made progress since then, but it hasn’t fully recovered. Yeah, I can see why that would be the case. Our source also mentioned that the increase in office absorption, meaning companies leasing more office space, is being driven primarily by the Professional and business services sector.

That’s right. We’re seeing that shift in demand as we move further away from the peak of the pandemic with some sectors, we’re covering much more quickly than others looking at these different pieces of the puzzle, right? What does this tell us about the broader economic recovery and its impact on the CRT market?

It points to an uneven recovery With some sectors leading the charge, while others are still playing catch up, and that’s bound to have different effects on different types of commercial real estate. While we were seeing that increased demand for office space in some segments mm-hmm . The slower recovery and leisure and hospitality could have an impact on hotels.

Yeah. And other tourism related properties. It’s important to look beyond just those overall economic numbers. Right. And really dig into the sector specific trends. Absolutely. That nuanced understanding of those trends. Is crucial for investors and developers as they’re making decisions about where to allocate capital and what types of projects.

They should prioritize, they need to be able to anticipate those shifts in demand and adapt accordingly. Well, I think we have officially unpacked all of your sources for today. It’s been a really great conversation. Really insightful. Always a pleasure to delve into these topics and explore all those forces that are shaping the CRE landscape.

I agree. Before we sign off, any final thoughts you want to share with our listener? Just this, the CRE world is constantly evolving. There’s always something new happening, some new trend to watch, some new opportunity to explore. It’s a really dynamic field. And staying informed is absolutely key to navigating its complexities.

I couldn’t agree more. And that’s what makes these deep dives so fascinating. There’s always something new to learn and explore in the world of CRE. Exactly. It’s a field that, Constantly adapts new technologies, changing demographics, evolving economic conditions keeps you on your toes. It does. Speaking of evolving, you know, we’ve touched on so many interesting trends today from the rise of experiential retail to that increasing demand for hyper convenience.

But I’m curious, as we wrap up here, is there one trend that you find particularly intriguing or maybe one you think our listener should keep an eye on? That’s a great question. I think the convergence of technology and real estate is particularly compelling. We’ve talked about how e commerce has reshaped the industrial sector, and we’re beginning to see how things like AI and robotics are influencing everything from pharmacy fulfillment centers to those dry cleaning vending machines we talked about.

It’s really fascinating to see how technology is not just changing how we use space, but But also, how we design and build it. Yeah. That’s a really good point. And as we think about the future, it makes me wonder how these advancements will impact the role of physical space in our lives. That’s the million dollar question.

As we become more and more digitally connected, the value proposition of physical space needs to evolve. It’s not just about functionality anymore. It’s about creating those experiences. Fostering connections. Providing. That sense of place and community. Those are all things. That technology. Thank you. It can enhance, but it can’t fully replicate them.

Hmm. I think. That’s a really great takeaway for our listeners today. The world of commercial real estate, it’s complex, it’s always changing, but by understanding those key trends and driving forces, it can help you make more informed decisions, whether you’re an investor, developer, or just someone with a real interest in the future of our built environment.

Absolutely. Thank you. And remember. The CRE landscape is full of opportunities. Stay curious. Yeah. Stay informed. And embrace the possibilities. Well said. This has been your deep dive into commercial real estate. We hope you found it valuable, and we’ll see you next time for another fascinating exploration.

 Welcome back everybody for another deep dive into commercial real estate and retail. This week, uh, well, it’s a whirlwind news from Blackstone’s global strategy to the resurgence of bin stores. Yeah. You heard that right? Bin stores. Bin stores. Our primary source this week is CoStar News, commercial real estate news week of December 6th, 2024, and a few related articles as always.

So let’s dive in. Let’s start with the big players. Blackstone has been on an acquisition spree, dropping a cool 50 billion in real estate in just the last year. 50 billion? 50 billion with a B. Wow. That’s a lot of properties. It is. And what’s interesting is they’re not just focusing on the U. S. market.

They’re snapping up properties in Europe, particularly logistics facilities. Which might seem counterintuitive with the global economy, like, Slowing down. So why Europe? Well, Europe currently offers lower borrowing rates and higher capitalization rates compared to the us. For those unfamiliar with capitalization rates or as they’re often called cap rates cap, they’re used to estimate the potential return on a real estate investment.

So a higher cap rate generally suggests a better potential return. So Blackstone is strategically positioning itself to capitalize on what they see as favorable conditions in Europe. Makes sense. And speaking of smart moves, they’re also heavily investing in data centers. Both in Europe and the booming Asian market.

This is a trend that Nadeem Medjie, Blackstone’s head of real estate America’s highlighted in a recent interview, he said, and I quote, data is the new oil and it’s clear the black zone believes that controlling the infrastructure for that data is key. Absolutely. And to illustrate just how rapidly the sector is growing, consider this.

Phoenix, Arizona, a city with a significantly smaller population than Detroit, Michigan, actually has more data center space. Wow. So it’s not just the where, it’s the when and the why. Yeah. All right. Let’s switch gears from global power plays to a company facing some tough decisions closer to home. Dollar Tree, the parent company of FamilyDollar.

Seems to be struggling with their family dynamic. They certainly are. They’ve already closed over 670 underperforming family dollar stores, and may shut down another 25. Back in June, they even announced they were exploring options for the chain, including a potential sale or spin off. They purchased Family Dollar back in 2015, but the chain has been grappling with profitability, facing fierce competition from other discount retailers, and feeling the pressure of inflation’s impact on their target customer.

Yeah, and to make matters worse, analyst Neil Saunders is skeptical that Dollar Tree will find a buyer willing to pay their asking price. So it’s a tough spot to be in. All right, now on a completely different note. We have the curious rise of bin stores. Bin stores? Yeah, bin stores. Yes, you heard that right.

Bin stores are essentially discount havens, where merchandise is literally piled high in bins, offering deep discounts on everything from clothing to electronics. So it’s a treasure hunt for bargain hunters. Exactly. What’s driving this trend? It’s all about a perfect storm of factors. Surging merchandise returns a tough economic climate squeezing consumer spending, and retailers desperate to liquidate excess inventory.

Just to give you an idea of the scale of this, the return rate for online purchases in the U. S. hit a record 17. 6 percent in 2023. Wow, 17. 6%. That’s a mountain of merchandise looking for a new home. It is. So these bin stores are like the ultimate recycling centers for unwanted goods. It’s a clever business model, but is it sustainable in the long run?

That’s the big question. On the one hand, they have low overhead, they’re quick to set up, and there’s clearly a demand for deeply discounted goods. But on the other hand, the competition is fierce. Inventory can be unpredictable, and there’s a potential for them to cannibalize sales from the very retailers they’re buying from.

It’s like a delicate balancing act, then. Speaking of balancing acts, Black Friday just wrapped up, and the reports are coming in. It seems like we’re seeing a mixed bag of results this year. Yeah, there are some positive signs. Foot traffic at malls was surprisingly strong, particularly at higher end properties.

And several major retailers are reporting double digit sales increases. Yeah, I’m hearing that American dream. That mega mall in New Jersey saw a foot traffic surge 25 percent compared to the last two Black Fridays. But there’s a catch, right? Online sales were down. Exactly. It seems consumers are rediscovering the appeal of in person shopping.

As one retail expert put it, Shopping online is convenient, but it can be lonely. People are craving that in person experience, the thrill of the hunt, the instant gratification of walking out with their purchases. Plus no waiting for deliveries. So it’s back to brick and mortar, but with a twist. So what’s the overall verdict on holiday spending?

Are the experts feeling optimistic? Well, it depends who you ask. Rudolph Million of Woodcliffe Realty Advisors is encouraged by the strong foot traffic and in store sales he’s seeing. But Neil Saunders of Global Data is less enthusiastic, citing high consumer debt, and the fact that the holiday shopping season is shorter this year due to a late Thanksgiving.

So the jury’s still out on holiday spending. Now let’s head south, where we’re seeing a different kind of retail boom. Dallas Fort Worth is experiencing a surge in demand for luxury retail space. What’s driving this trend? Well, it’s a combination of factors. The Dallas Fort Worth region is experiencing significant population growth, particularly in the outermost suburbs, and there’s a growing demand for luxury experiences and high end brands.

So it’s not just about buying things. It’s about a certain lifestyle. Yeah. How is this demand translating into real estate numbers? Well, there’s over 116 million square feet of total space in these higher end retail properties. And they’re commanding premium prices around 387 per square foot. 387 per square foot, yeah.

That’s significantly higher than other areas. But retailers are clearly willing to pay for the prime locations and the affluent customer base. It seems so. It’s a testament to the power of location and a discerning clientele. Now, before we move on, I have to ask about a blast from the past. Didn’t TGI Fridays just file for bankruptcy?

Yes, they did last month. Last month. But here’s where it gets interesting. The former CEO, Ray Blanchett, has just acquired nine company owned TGI Fridays locations out of bankruptcy court. So, he’s betting on a comeback. It seems so. What’s the story there? Well, the deal, which costs 30. 5 million, includes locations in both Maryland and Texas, some of which are among the most profitable in the chain, like those at the Dallas Fort Worth International Airport.

BFW. DFW. Okay. It’s a bold move, considering the challenges facing the casual dining industry, but he clearly sees potential in the brand and its ability to adapt. So we’ll have to wait and see if nostalgia and a revised menu are enough to lure diners back. We will. Now let’s switch gears to the office market.

What’s the latest in the Dallas Fort Worth region? We’re seeing a tail of two cities. In Fort Worth, there are some encouraging signs of stability in the office market, with an average vacancy rate of 18%. 18%? That sounds relatively healthy. What about Dallas? Dallas is facing a tougher time with higher office vacancy rates.

It seems businesses are still hesitant about making long term commitments, even as the pandemic’s impact fades. This is leading to a lot of uncertainty for office landlords and developers. It’s a reminder that even within a single region, you can have very different micro markets. So who’s making moves in this uncertain landscape?

Well, in Fort Worth, we have Wilkes Development, a local real estate investor showing confidence in the market. They recently acquired one Ridgeman Center, a 10 story office tower, and plan to invest 9 million in upgrades. 9 million? Yeah. That’s a pretty significant investment. They must see potential there.

Now let’s turn our attention to the workforce. We keep hearing about a strong job market, but worker satisfaction seems to be lagging. That’s right. Despite the strong job market, recent data from Gallup paints a concerning picture. Only 18 percent of workers report being extremely satisfied with their jobs.

So what’s going on here? Are people just being picky? It’s more nuanced than that. Companies are increasingly focused on efficiency and cost cutting measures, which often translates into heavier workloads and restructured teams for employees. As a result, As a result, many workers feel stuck, overworked, and disempowered.

That doesn’t sound like a recipe for a happy workforce. What are the potential consequences of this trend? If it continues, we could see an increase in both burnout and turnover. It could also negatively impact productivity and company culture. This is a critical issue that businesses need to address if they want to retain top talent and maintain a positive and productive work environment.

Seems like companies need to find a way to balance their focus on efficiency. with the well being of their employees. Absolutely. It’s a delicate balance, but finding that sweet spot is essential for long term success. Well said. Now let’s shift gears again and talk about something a little more, uh, well, fun.

Pizza Hut is trying out a new drive thru concept. Pizza Hut, along with other restaurant chains, are trying to keep pace with changing consumer preferences. And declining dine in traffic, so they’re exploring drive thru and other innovative design concepts that emphasize convenience. Okay, so what’s so special about their drive thru concept?

Are we talking pizza drones here? Not quite drones yet, but they’re definitely thinking outside the pizza box. Their parent company, Yum Brands, recently opened a drive thru only Pizza Hut. In Plano, Texas, with a dedicated menu featuring items that are easy to eat on the go. This is actually Pizza Hut’s first ever drive thru centric menu.

That’s a pretty savvy move. It caters to our on the go lifestyles. Exactly. They’ve already been incorporating elements like online ordering and curbside pickup. So this drive thru concept is a natural next step. It’ll be interesting to see how this new format performs and if it’s rolled out to other locations.

Speaking of comebacks, get ready for this one. Chi Chi’s is making a return. I thought this chain was gone for good. It was until now. Michael McDermott, son of the co founder of Chi Chi’s, just announced an agreement with Hormel Foods to revive the brand. They’re aiming to open a yet to be disclosed number of restaurants in 2025.

Wow, that’s unexpected. What’s driving this blast from the past? Are they banking on nostalgia alone? Nostalgia might play a part, But McDermott believes there’s still a strong appetite for casual dining experiences, especially those that evoke a sense of family and tradition. He’s updating the menu to appeal to modern tastes while still maintaining the essence of the Chi Chi’s brand.

I have to admit I’m curious to see how they pull it off. Okay, last but not least, we have the National Restaurant Association’s latest survey. What are the key takeaways? The survey reveals a growing sense of optimism among restaurant operators about their future prospects. This is despite the many challenges they’ve faced in recent years.

That’s encouraging. What’s fueling this newfound optimism? Well, the trade group’s monthly performance index actually climbed 1. 6 points in November, surpassing 100 for the first time in seven months. A majority of the survey respondents reported that they anticipate same store sales and overall conditions to improve within the next six months.

So there’s a glimmer of hope for the restaurant industry after all. It certainly appears so. But it’s important to remember that we’re looking at a national trend here. Specific markets and segments may vary, so it’s always wise to consider the local context. That’s a great point. Now before we wrap things up completely, are there any other interesting tidbits of information that you think our listeners should know?

There is one more thing. Earlier we discussed those bin stores and the surge in merchandise returns. Well, a striking statistic that didn’t make it into our earlier conversation is that the total value of online purchases returned in the U. S. last year reached a record 247 billion. Wow, that’s an astronomical figure.

It really underscores the scale of this phenomenon and how it’s fueling the rise of alternative retail models like DIN stores. Exactly. It’s a clear sign of the times. And it will be fascinating to observe how this trend develops in the coming years. Alright, I think that’s a perfect stopping point for part one of this week’s Deep Dive.

We’ve covered a lot of ground from Blackstone’s billion dollar bets to the return of Chi Chi’s and the rise of Binz stores. It’s been a fascinating journey through the world of commercial real estate and retail so far. Absolutely, and we’re not done yet. There are a couple more interesting stories from this week’s news that I think our listener will find insightful.

Let’s talk about the office market, specifically how the dynamics of vacancy rates are playing out differently in Fort Worth and Dallas. It’s a classic tale of two cities. Fort Worth is showing some promising signs of stability with an average office vacancy rate hovering around 18%. This suggests a healthy balance between supply and demand.

That sounds fairly optimistic. What’s the situation like in Dallas? Dallas, unfortunately, is facing a tougher time with higher office vacancy rates. Businesses there seem to be more hesitant about committing to long term leases, even as the impact of the pandemic recedes. It’s creating a lot of uncertainty for landlords and developers who are trying to navigate this shifting economy.

Landscape. So even within a single region, we’re seeing very different micro markets at play. It really highlights the importance of understanding local dynamics. Now let’s shift our focus to something that impacts everyone, regardless of industry workers, satisfaction. We’ve talked about this strong job market.

But is everyone actually happy with their work? That’s a great question, and the answer is surprisingly complex. Despite the robust job market, recent data from Gallup reveals a concerning trend. Only 18 percent of workers report feeling extremely satisfied with their jobs. This marks a significant drop from previous years and points to a growing disconnect between employment rates and overall job satisfaction.

That’s a pretty startling statistic. What’s contributing to this decline in satisfaction? It seems to be a confluence of factors. Companies are increasingly prioritizing efficiency and cost cutting measures, often leading to heavier workloads and restructured teams for employees. This can leave workers feeling overburdened, undervalued, and lacking control over their work.

So it’s not just about having a job. It’s about feeling valued and empowered within that job. What are the potential long term consequences if this trend continues? Well, if companies don’t address this issue, we could see an increase in employee burnout, higher turnover rates, and a decline in overall productivity.

It could also negatively impact company culture, and make it more challenging to attract and retain top talent. It sounds like companies need to find a better balance between their pursuit of efficiency and the well being of their employees. I couldn’t agree more. Fostering a positive and supportive work environment where employees feel valued and empowered is crucial for both individual and organizational success.

Well said. Okay, let’s take a break from the serious stuff and talk about something a bit more lighthearted. Pizza Hut is trying out a new drive thru concept. What can you tell us about it? Pizza Hut, like many other restaurant chains, is trying to adapt to changing consumer preferences, particularly the desire for convenience.

They’re experimenting with drive thru formats and other innovative designs to cater to those who are looking for a quick and easy dining experience. So what’s unique about Pizza Hut’s drive thru concept? Their parent company, Yum Brands, recently launched a drive thru only Pizza Hut in Plano, Texas.

What’s particularly noteworthy is that they’ve created a dedicated menu specifically for this format, featuring items that are designed for on the go consumption. This marks Pizza Hut’s first ever drive thru centric menu. That’s a clever strategy. It acknowledges that people are increasingly pressed for time and want their food fast and hassle free.

Precisely. They’ve already been incorporating elements like online ordering and curbside pickup, so this drive thru concept is a logical next step in their evolution. It’ll be interesting to see how it performs and if they decide to expand it to other locations. Now get ready for this. Chi Chi is the beloved Tex Mex chain that many thought was gone for good, Yes, you heard that right.

Michael McDermott, the son of Chi Chi’s co founder, recently announced a partnership with Hormel Foods to revive the brand. They’re planning to open a series of restaurants in 2025, though the exact number and locations are still under wraps. This is quite a surprise. What’s the rationale behind bringing back a brand that’s been dormant for so long?

Are they just banking on nostalgia? While nostalgia undoubtedly plays a role, McDermott believes there’s still a strong demand for casual dining experiences, especially those that evoke a sense of family and shared traditions. He’s revamping the menu to appeal to contemporary tastes, but intends to preserve the core essence of what made Chi Chi so popular in its heyday, I’m curious to see how they re imagine the brand for a modern audience.

It’ll be interesting to see if they can capture the magic that made Chi Chi’s such a beloved dining destination. Absolutely. Speaking of the restaurant industry, the National Restaurant Association just released its latest survey. And the results are quite encouraging. Yeah, that’s good to hear. What’s the overall sentiment from restaurant operators?

Despite the myriad challenges the industry has faced in recent years, the survey reveals a growing sense of optimism among restaurant operators. They’re feeling increasingly positive about their future prospects. That’s a welcome change. What’s driving this renewed sense of optimism? Well, the trade group’s monthly performance index, which tracks key industry metrics, actually rose by 1.

6 points in November, exceeding 100 for the first time in seven months. This suggests a positive shift in momentum. Furthermore, the majority of the respondents reported that they expect same store sales and overall business conditions to improve over the next six months. So it seems like there’s light at the end of the tunnel for the restaurant industry after all.

It certainly appears that way. However, it’s important to remember that this is a national trend, and specific markets and segments within the industry might experience different outcomes. So while there’s reason for optimism, it’s also wise to consider the local context and specific challenges facing individual businesses.

That’s a great point. Now before we move on to our final thoughts, are there any other interesting nuggets of information? that you think our listeners should know. There’s one more thing I’d like to highlight. Remember our earlier conversation about bin stores and the surge in merchandise returns? Well, here’s a statistic that really underscores the magnitude of this trend.

The total value of online purchases returned in the U. S. last year reached a staggering 247 billion. Wow, that’s an astronomical figure. It really puts the scale of this phenomenon into perspective. It’s no wonder that alternative retail models like BIM stores are gaining traction. Exactly. It reflects a significant shift in consumer behavior and the retail landscape as a whole.

It’ll be fascinating to observe how this trend evolves in the coming years and what innovations it sparks. Okay, I think it’s time to wrap up this part of our deep dive. We’ve explored a wide range of topics, from the contrasting office markets of Fort Worth and Dallas, to the surprising comeback of Chi Chis and the rise of BIM stores.

It’s amazing how much ground we’ve covered in this week’s Deep Dive. It really speaks to the dynamic nature of the commercial real estate and retail industries. You know, there’s always something new happening. Always a trend to analyze a story unfolding. Yeah. It’s like we’ve taken a whirlwind tour of the entire market.

From billion dollar deals to struggling chains, innovative concepts and the surprising return of brands we thought were gone forever. Absolutely. Absolutely. Absolutely. And. Amidst all this change, there’s a common thread that connects it all adaptation, whether it’s Blackstone strategically positioning itself in global markets, or former CEOs betting on the revival of beloved brands.

Everyone is trying to find their footing in this evolving landscape, right? And even consumers are adapting. We’re seeing shifts in shopping https: otter. ai And consumers shaping those forces through their choices makes you wonder what the future holds for these industries. Absolutely. What trends will emerge next?

What innovations will disrupt the status quo? And how will consumers and businesses continue to adapt to the ever changing realities of the market? Those are the questions that keep us on our toes and make this such a captivating field to follow. But we don’t want to just leave you with questions. We want to leave you with a challenge.

Yes, a challenge to take what we’ve discussed today and apply it to your own world. Think about the trends we’ve explored and consider how they might be playing out in your own industry, your community. Or even your own life. So are you seeing similar shifts in consumer behavior? Are businesses in your area adapting in innovative ways?

And how are you personally navigating these changes as both a consumer and perhaps as a business professional? We believe that true understanding comes from connecting these broad trends to our own individual experiences. It’s about recognizing the patterns the force is at play, and using that knowledge to make informed decisions.

So as you head back into your world, we encourage you to keep these trends in mind. Observe, analyze, and adapt, because in a market as dynamic as this one, the ability to adapt is the key to thriving. And remember, we’re always here to guide you through the ever changing landscape of commercial real estate and retail, so stay curious, stay informed, and stay ahead of the curve.

Thanks for joining us on this week’s Deep Dive.

 Welcome back to the Deep Dive. This week, we’re going to take a deep dive into commercial real estate. Oh, should be interesting. Yeah, we’ve got a whole stack of news articles and reports and analyses, uh, you know, everything you sent over. Great. Really focusing on, you know, what’s going on in this last quarter of 2024, especially here in DFW.

Yeah, you picked a really interesting time to do this. Oh! Yeah, because we’ve got like this weird puzzle going on. Okay. On the one hand, investment in commercial real estate is down significantly this year. Right. I mean, transaction volume in Q3 hit its lowest point since 2011. Yeah, I saw that 2011 number.

Whoa! And I was like, wait a minute. Yeah. But you know me, always looking for the silver lining. Yeah. And there are signs pointing to a possible rebound in 2025. Yeah. 2025. True. So what’s making everyone so optimistic? Well, just think about it. The 2024 election just wrapped up. Right. And that alone injects, like, a dose of certainty back into the market.

Yeah, that makes sense. Investors don’t like uncertainty. Election years, they tend to kind of hold back and wait and see what happens. So is that what’s driving up the uncertainty? Commercial property prices. I was looking at the costar data for October and their repeat sales transactions. So, you know, properties being sold again totaled over 10 billion higher than the same time last year.

Yeah. That’s a big jump. Yeah. Yeah. You’re exactly right. That is a key indicator that investors are feeling more confident. Yeah. They’re willing to make those big purchases again. Yeah. And it’s not just the election results. Okay. The Federal Reserve cutting interest rates plays a big role too. Right. Of course.

Makes borrowing more attractive. So investors are more comfortable taking on debt. to do deals. So it’s like a chain reaction. Exactly. Lower rates, more borrowing, more deals. Exactly. More activity. Yeah. Okay. So where are investors focusing their attention these days? Are they playing it safe or are they, you know, branching out a little?

That’s what’s really interesting. We’re seeing a wider range of opportunities pulling investors in. Data centers are hot right now, driven by You know, our constant need for more data storage and processing. And then you’ve got investors looking at distressed assets, office buildings, shopping malls, looking for bargains, and a potential turnaround.

So like there’s opportunity in the uncertainty. Exactly. Yeah, I like that. They’re seeing the potential. Okay, well, I definitely want to dive deeper into the performance of those specific sectors, DFW. Let’s do it. Okay, let’s start with industrial real estate. All right. I mean, it’s booming, especially here in DFW.

Well, booming. It’s actually leading the nation in industrial sales. That’s right. Even surpassing the Bay Area with over 3. 3 billion dollars in sales in just the first three quarters of this year. Yeah, through Q3. Yeah. Crazy numbers. Yeah, it’s huge. I remember reading about Stone Peak buying that massive 1.

1 million square foot industrial property in Fort Worth. Oh, yeah. for 11 million. Wow. It just shows the confidence investors have in this area. That’s a huge vote of confidence for sure. Yeah. DFW’s location is great, strong economy, access to major transportation hubs. Right in the middle of everything.

Yeah. Makes it perfect for logistics and distribution. Yeah. Can’t beat it. And all that high demand is pushing vacancy rates lower than the national average. True. But I did notice that they’re slightly higher than last year. Yeah, that’s true. Exceeding both national and historical averages for our region.

Yeah, you gotta look at those nuances, right? Yeah, so even in a strong sector like industrial, you gotta, you know, pay attention to the details. Yeah, it’s not a one size fits all situation. All right, well let’s shift gears to office real estate. Okay. This sector is facing some serious challenges right now.

Okay. Definitely some headwinds. Yeah, and it’s currently almost half of all distressed assets in the commercial real estate market. Yeah, almost half. It’s a lot. That’s a pretty big number. Yeah, it is. What’s causing all this distress in the office sector? Is it all because of work from home? Work from home is definitely a factor, but it’s not the whole story.

Okay. Rising interest rates are hitting this sector hard. Right. A lot of companies are downsizing, re evaluating their office space needs. Yeah. And that leads to more empty offices. Makes sense. And Nathan Things, he’s a senior VP at Kidder and Matthews. Okay. He pointed out some really alarming signs. Oh, like an increase in unpaid vendor invoices and property liens.

It’s not good. So those are like red flag, definitely red flag that a property might be in trouble. Yeah. Early warning signs that they’re struggling financially, but are there any bright spots in the office sector? There are some glimmers of hope. Okay. Fester, they’re a real estate firm focused on retail.

Okay. But they’re seeing strong leasing activity in some markets, like Denver. Really? Yeah. So it’s not all doom and gloom. Okay. Certain office spaces are still in demand. Right. Especially those catering to specific industries or offering really desirable amenities. So it sounds like adaptability is key.

Absolutely. The ones that can adapt are the ones that will survive. Which brings us to our next sector, retail. Right, retail. This one’s been on a wild ride for years. Yeah, no kidding. With the rise of online shopping. It’s been a roller coaster. So what are we seeing now? We’re seeing a fascinating transformation.

Okay. Companies are adapting in really creative ways. Give me an example. Okay. Burlington stores. Okay. I know Burlington. They’re strategically acquiring vacant stores, a lot of which were occupied by struggling retailers like Bed Bath Beyond. So they’re capitalizing on those closures. Exactly. Yeah.

Potentially getting prime real estate at a discount. Smart. And they’re not alone. Okay. We’re seeing physical stores. Taking on new roles in the retail ecosystem. Oh, really? Yeah. Many are now key players in reverse logistics, reverse logistics. It’s basically handling returns from online purchases. Okay. So for our listeners who might not be familiar with that term, imagine you order something online and you need to return it.

Instead of shipping it back, you can just take it to a physical store. Much easier. So much easier. And it probably saves the retailers money on those return shipping costs. And it gets people back into stores. Exactly. More foot traffic. So maybe they’ll buy something else while they’re there. You got it.

It’s a win win. It is. Retailers are getting savvy about blending the online and offline shopping experience. So retail’s not dying, it’s just evolving. That’s a great way to put it. It’s evolving. Alright, well let’s zoom in on our own backyard now, Dallas Fort Worth. Okay. What’s going on here in the commercial real estate world?

Well, one interesting trend is the rise of upscale retail. Oh, really? Yeah. Particularly in Collin County’s outer suburbs, high end brands are doing really well there. Interesting. Driven by population growth and people wanting newer, more luxurious shopping experiences. Yeah. I guess those areas are growing fast.

Yeah. And there’s a big development in the works that could make Collin County even more attractive. Oh, yeah. A 220 million amphitheater. Wow. That’s a serious investment. Yeah. They’re really aiming to make Collin County a destination. Yeah. So, not just for shopping, but for entertainment, too. Exactly. And it, it ties into this broader trend of creating vibrant, mixed use developments.

Yeah. Retail, entertainment, residential, all in one place. So we’ve got this booming industrial market, a struggling but adapting office sector. Trying to find its way. And retail is evolving. Absolutely. Changing with the times. It’s a dynamic picture, that’s for sure. Very dynamic. Lots going on. Well, to Really get the full picture.

We need to talk about those macro trends. Yeah, good point. Things like inflation, consumer spending. Those always play a big role in real estate. Alright, let’s dive into those next and see how they’re impacting things here in DFW. Let’s do it. Yeah, when we talk about macro trends, inflation’s kind of the big one.

Yeah, it’s cooled down but it’s still above what the Fed wants, right? Right above their target. Yeah. And that makes what they do next with interest rates a big deal for commercial real estate. It’s like everyone’s just waiting to see which way rates will go. Exactly. Any change there could really shake things up.

Yeah. It’s a tricky balance, isn’t it? It is. Inflation and interest rates. Mm hmm. Investors are watching carefully. Oh, yeah. For sure. There’s another macro trend we should talk about, and it’s actually looking pretty good. Oh, which one? Consumer spending. Oh, right, right. People are still out there shopping, despite all the economic uncertainty.

Yeah, they are. I bet that’s good news for the retail sector. It is. Especially for those who are adapting like we talked about with Burlington stores. Taking over those vacant retail spaces. Yes. Smart move. Strong consumer spending could really help soften the blow of rising prices and all the uncertainty.

Shows how resilient the market can be. Exactly. Especially in sectors that are, you know, meeting those everyday needs. Well, speaking of resilience and adaptation, I wanted to mention something I read about Dallas. Okay. This whole debate about getting rid of parking minimums for new developments. Oh, yeah.

Sounds like it could really change the city. It could. It’s a big shift in how cities are thinking about planning. Yeah. So, parking minimums are these rules about how many parking spaces developers have to include in new buildings. Right. They’ve been around forever, but now cities are starting to question them.

So, for those listening who maybe haven’t heard about these parking minimums before, why are they being reconsidered? Well, the argument against them is that they lead to way too many parking lots, which take up space, contribute to sprawl, and they don’t encourage walking or biking or public transit. So it’s about more than just parking.

Exactly. It’s about how we design our cities. Creating places that are less car dependent. Right. More walkable, more people friendly. So what’s going to happen in Dallas? Are they actually going to get rid of these parking minimums? Well, the City Planning Commission just reviewed a proposal to do just that.

Wow. And those potential changes are going to the City Council next. Big step. It is. It could really have a ripple effect on development across the whole city. It’s like Dallas is at a crossroads. In a way, yeah. Deciding what kind of city it wants to be. That’s right. Choosing its future. Well, let’s shift gears again.

I’m curious about that whole reverse logistics thing we were talking about earlier. Oh, yeah. Retailers seem to be getting really creative with how they use their stores these days. They are. Online shopping is booming. And that means returns have become a huge challenge. Right. Logistically. And it’s expensive.

Yeah. But some retailers are turning this challenge into an opportunity. Okay. That’s where reverse logistics comes in. So break it down for our listeners. Sure. Let’s say you buy something online. Mm hmm. It doesn’t fit quite right. Right. Instead of packing it up and shipping it back, Ugh, such a hassle. you can just take it back to a physical store.

Oh, that is way easier. Much easier. And it probably saves the retailer money on those return shipping costs. And it gets people back into the store. Exactly. More foot traffic. Which could lead to more sales. You got it. It’s a really smart way to combine online and offline shopping. It is. It’s all about adaptation.

Well, speaking of positive signs, I was reading about how CBRE is predicting a 30 percent growth in investment sales revenue for Q4. Wow, that’s a bold prediction. It is, especially with all the challenges we’ve been talking about. Yeah, what makes them so optimistic? Well, they’re pointing to a few things.

Mm hmm. Certainty after the election, falling interest rates, and a sense that asset values are stabilizing. Okay. Plus, there are just more investment opportunities out there, which is attracting new investors. So maybe not a full recovery yet. Right. But definitely some good signs. Yeah, some encouraging signs.

That seems to be the feeling among the experts. Well, that’s good to hear. Yeah. We’ve covered a lot of ground in this deep dive. We have. From overall market trends to specific sectors, the impact of the bigger economy, and even local decisions here in Dallas. Yeah. It’s a complex picture. Well, it’s been fascinating.

And now as we wrap up this deep dive, I want to leave our listeners with one final thought. We’ve talked about. You know how commercial real estate is shaping things right now, right the present, but what about its impact on the future? The big question. Yeah, how might these trends and see our e influence the way we work?

How we shop even how our cities are planned. Yeah, are we gonna see a major shift? Right in how we use physical space or is this just a temporary adaptation? That is the million dollar question, and it’s tough to say for sure. I think what’s clear is that the line between physical space and digital space is getting blurrier.

That’s true. You know, e commerce is changing retail, remote work is changing offices, and the rise of data centers is changing the landscape of our cities. Yeah, it does feel like we’re in this in between phase, trying to figure out what all this means in the long run. Right, it’s a time of experimentation, you know, adaptation, trying new things.

Yeah. Some trends I think are definitely here to stay. Like what? Like that shift toward experiential retail. Oh yeah. Where stores offer more than just products, it’s an experience. Right. And the demand for flexible office spaces, you know. Mm hmm. Catering to hybrid work. Exactly. People want options. But then you have these other trends that are still kind of up in the air.

Yes. Like what’s going to happen to the traditional shopping mall? The mall, yeah, that’s a tough one. It really is. Nobody knows for sure. It’s like we’re watching our cities evolve in real time. Yeah. It’s fascinating. The choices we make today, developers, city planners, even us as consumers. Yeah. We all play a role.

Those choices will shape the cities of tomorrow. It’s pretty exciting. It is exciting and a little bit scary too. Right. Big responsibility. Yeah. So as we wrap up this deep dive into the world of commercial real estate, what’s the one thing you want to do? I would say this, the future of our cities, the spaces we live and work in, it’s being shaped right now.

Yeah. And we all have a part to play in that. We do. Whether it’s through the choices we make as consumers, the investments we make, or even just by staying informed. Right. Engaging in these conversations. Yeah. I love that. So to our listeners out there. Yeah. Keep exploring these trends, challenge assumptions.

Think critically. And imagine the possibilities. The future is unwritten. Exactly. The future of commercial real estate is still being written, and your insights and actions can be a part of that story. Make your voice heard. Thanks for joining us on this deep dive, and we’ll see you next time for another one.

See you then.