Welcome back to the deep dive today. We’re going to be diving deep into commercial real estate trends, shaping the industry in 2025, looking forward to it. Yeah, me too. And we’ve got some really cool articles from Bizno and the local profile to kind of help us guide the conversation. Great sources. So yeah, by the end of this deep dive you should have a really clear picture of what’s hot, what’s not, and what to watch out for in the coming year.

Absolutely. Yeah. It’s really interesting to see all the changes happening right now and kind of how dynamic this landscape has become. For sure. So let’s just jump right in. Let’s do it. Amazon. Yeah. Normally we think of them as like gobbling up real estate, you know, for all their, you know, warehouses and distribution centers.

Yeah. Makes sense. But it seems like they’re shifting gears a little bit. Yeah they’re definitely, moving away from warehouses and focusing more on data centers, which yeah, on the surface seems a little counterintuitive, but you know, when you look at the bigger picture, it starts to make a lot of sense.

So break it down for us. What’s driving this shift? Well, you know, a couple of things e commerce growth has, you know, kind of slowed down a little bit for Amazon. They’re sitting on a lot of cash. And at the same time, you have this huge demand for Cloud computing, you know, all fueled by, you know, AI and all these data heavy technologies we’re using and data centers are absolutely essential for that.

You know, they’re really putting a lot of their, you know, resources into, you know, building out these data centers. In fact, they acquired over 3000 acres. Wow. Across 14 states in 2024, primarily for data centers. That’s a lot of land. It is. What does that mean? I mean, for just the overall, you know, data center market, you know, the Amazon, like getting into it in such a big way.

Well, you know, you got to think it’s likely to increase competition. Potentially drive down prices, you know, with them kind of coming in and being such a big player, other data center providers, they’re gonna have to, you know, really step up their game to stay competitive. Yeah. And this could be really good for businesses that rely on cloud computing because it could lead to more innovation and better services.

Interesting. Okay. So it sounds like even though this might seem like a little bit of a departure for Amazon from their traditional real estate strategy, it’s actually, You know, a pretty smart move. Yeah, I think so. In a rapidly growing market. But this begs the question, you know, if Amazon is moving away from warehouses, does that mean the future of retail is completely online?

Well, not necessarily. Okay. In fact, we’re actually seeing a resurgence of a retail format that a lot of people thought was on the decline, strip malls. Strip malls? Really? Yeah. I thought those were like going away at the dinosaurs. Yeah, I know a lot of people did. Yeah. Yeah. But. You know, they’re actually outperforming indoor shopping malls in terms of occupancy and investor interest.

You know, there’s a few reasons for this. The pandemic kind of, you know, spurred this renewed interest in, you know, shopping local, supporting local businesses. Right. And strip malls, you know, they house a lot of those types of businesses. And then, you know, strip malls also offer more affordable rents.

Compared to enclosed malls, which is really attractive to smaller businesses, startups. Yeah, that makes sense. And they offer that kind of convenience factor too. Absolutely. Usually there’s like a good mix of businesses in there, like restaurants and salons, dry cleaners, gyms. Yeah, he got it. You know, you can kind of get everything you need in one place.

It’s that convenience factor and accessibility that you don’t always find in those bigger malls. For sure. And a lot of the businesses you find in strip malls are kind of Amazon proof. Right. Like you can’t, you know, Amazon can’t give you a haircut. Exactly. So fix your phone. Amazon doesn’t do manicures yet, there you go. You know. Yeah. So it seems like there’s still a place for You know, those brick and mortar stores. For sure. You know, especially the ones that cater to local needs. Yeah. Definitely. All right. So let’s shift gears a little bit and talk about a region that’s been seeing a lot of growth.

Texas. Oh yeah. Texas is a hotbed of activity right now. Lots of population growth and a lot of commercial real estate development. Right. One city that’s really standing out is Fort Worth. Interesting. They’re actually outpacing even Austin in population and job growth. Really? Fort Worth? What’s driving that?

Well, a lot of factors they’ve got a really diverse economy, strong job growth in industries like healthcare manufacturing logistics. Okay. And you know, they also have a relatively affordable cost of living compared to other major Texas cities. So it’s attractive to both businesses and residents.

Right. So it sounds like Fort Worth is doing pretty well. Yeah, they are. But we’ve also been hearing about some challenges in the Texas office market, you know, with those record high CMBS delinquencies. That’s right. CMBS loans. Those are commercial mortgage backed securities. Right. Right. They’re often used to finance, you know, these large commercial properties, including office buildings.

Right. And when these loans become delinquent, it can be a sign of trouble in the market. Yeah. And in Texas, roughly 11 percent of office buildings tied to CMBS loans were delinquent in December 2024. Wow. That’s the highest level ever recorded. Really? Even surpasses the peak of the Great Recession. That’s concerning.

It is. What’s behind those rising delinquencies? Well, it’s a combination of factors. Rising interest rates are putting a lot of pressure on borrowers. Right. And a lot of office buildings are really struggling to maintain occupancy as more companies embrace remote or hybrid work models. So it’s creating this kind of perfect storm for the office sector.

So you have these two things happening in Texas, you know, booming population growth and you know, all this development. And then you have this kind of struggling office market. So how did those two trends connect? Well, you know, it’s a complex situation. Yeah. While Fort Worth’s overall economy is strong, the future of office space in the state remains uncertain.

Right. How companies adapt to, you know, these changing work patterns and rising interest rates, that’s going to play a crucial role in shaping the, you know, long term health of the office market. Right. It sounds like we need to pay close attention to how these trends unfold. We do. On the one hand, you have these thriving cities like Fort Worth.

Yeah. Attracting all these new residents and businesses. Yeah. And on the other. You have this potential for a pretty significant shift in the office market as companies are rethinking their real estate needs. Absolutely. And this is where technology is really starting to play an interesting role. Okay.

One area where we’re seeing this is in the use of artificial intelligence for apartment rent collection. AI for rent collection. Tell me more. Yeah. So companies like Alisa AI are developing platforms that automate communication with tenants. Okay. You know, they streamline the rent collection process, which could potentially increase efficiency and reduce bias.

Okay. That sounds promising in terms of efficiency, but what about the human element? You know, could this lead to a more Impersonal or even dehumanizing experience for tenants. That’s a valid concern for sure. You know, there are some ethical implications we need to consider when we start automating these sensitive processes, especially when you’re dealing with people’s homes and their livelihoods.

Are there any like legal or regulatory discussions happening around this? Yeah, absolutely. Legal experts and tenant advocacy groups are raising concerns about the potential for bias in AI algorithms and the need for transparency in how these systems make decisions. So while it could, you know, potentially make things easier, there are some, definitely some things to consider.

There are. As this trend evolves. It’s definitely something to watch closely. Okay, well, let’s move on to something a little bit more positive. Okay. Okay. There’s a really cool development happening in Los Angeles that I think is worth highlighting. Oh, yeah. Tell me about it. So there’s a company Thrive Living.

Okay. And they’re planning to build this 800 unit apartment complex on top of a Costco. Wow. In Baldwin Village. Okay. And it’s a mixed use development, so it’s going to feature a rooftop pool. Wow. And other amenities. And they’re really aiming to reduce reliance on government subsidies. Wow, that’s really interesting, an apartment complex on top of a Costco.

Wow. Yeah, I know, right? That’s thinking outside the box. It is, at a rooftop pool, too. You know, this project really tackles a lot of challenges at once. You know, it addresses affordability, you know, density, community integration. For sure. And they’re using offsite modular construction to speed up the building process, which is also pretty innovative.

Yeah, I think it’s incredible to see, you know, these creative solutions coming out to address affordable housing challenges. Right. You know, I think this model could be replicated in other areas. Yeah, what are the possibilities? You know, imagine, you know, building these complexes on top of shopping centers, parking garages, even schools.

Absolutely. You know. It’s all about maximizing land use and creating these vibrant mixed income communities. I love it. All right, before we wrap up this part of our deep dive, I have to ask you about someone who’s been making a lot of waves in the Texas real estate market. Elon Musk. Oh, yeah. Elon Musk.

You can’t talk about Texas real estate without mentioning him. No, you can’t. So his Texas real estate portfolio is valued at 1. 6 billion. Staggering 3. 4 billion. It’s unbelievable. Yeah, he’s got everything from futuristic communities like Snail Brook and Starbase. Yeah. To industrial projects. Yeah.

Personal residences. I mean, he’s really shaping the Texas landscape with his ambitious projects. For sure. But his ventures aren’t without controversy. No, they’re not. So what are some of the concerns? Surrounding his projects, well, there are environmental concerns, you know, with his rapid development and focus on industrialization.

Some people are raising questions about sustainability and the impact on local ecosystems. So while his presence is undoubtedly a driving force. Yeah, you know, it’s important to consider. You know, the potential downsides as well, right? All right. Well, it seems like Texas is like this microcosm of all the broader trends that we’re seeing in commercial real estate.

Yeah. You know, explosive growth, shifting work patterns, the growing influence of technology, definitely all against this backdrop of economic uncertainty. Absolutely. It’s creating a lot of challenges and a lot of opportunities for, you know, investors, developers, and communities. Yeah, for sure. We’ve covered a lot of ground in this first part of our deep dive.

We talked about Amazon’s shift to data centers, the surprising resurgence of strip malls, the booming But complex Texas market, right? The ethical considerations of AI and rent collection and a glimpse into Elon Musk’s impact on the Texas landscape. We also saw some really innovative approaches to affordable housing.

Yeah, like that project in Los Angeles where they’re building apartments on top of a Costco. Yeah, it’s amazing. It’s a good reminder that there are some really creative solutions out there. For sure. If we’re willing to Think outside the box. I love that. All right. So before we move on to the next part of our deep dive, what stood out to you the most from what we talked about so far?

Well, you know, what really struck me is just the sheer variety of forces shaping the commercial real estate landscape right now. Yeah. You know, we have these tech giants like Amazon making these strategic moves, right? You have evolving consumer preferences, driving trends like the comeback of strip malls, and then these innovative solutions are merging to tackle issues like affordable housing.

Sure. Sure. It’s a dynamic and complex industry. Yeah, it is. And I’m eager to delve a little deeper into the retail sector in our next segment. Me too. We’ll be back soon to explore what’s happening in retail, including the surprising comeback of a beloved bookstore chain and major developments in the Dallas Fort Worth area.

Yeah, it really is amazing how much the retail sector has had to, like, adapt. You know, to today’s environment, we were just talking about how, you know, strip malls are attracting investors. And now we’re going to talk about a bookstore chain that a lot of people had totally counted out. You’re talking about Barnes and Noble.

Yeah. I love it. I was one of those people. Yeah. I thought their days were numbered. Yeah. Everyone buys books online. It’s true. You know, the rise of online retailers like Amazon had a huge impact on traditional bookstores. Right. But Barnes and Noble, they’ve managed to stage like a remarkable comeback.

Their CEO, James Daunt, he implemented this strategy that focused on quality over quantity. Okay, so what exactly did they do? Well, instead of trying to be everything to everyone, they kind of curated a more selective inventory. Oh, okay. Focusing on, you know, books that appeal to their core customer base.

Right. They also embraced smaller store formats. Okay. And they returned to some of those remote markets that they had previously abandoned. So they basically downsized and, like, went back to their roots. It sounds like they were able to capitalize on, like, you know, that charm and experience of a physical bookstore.

Exactly. And it seems to be resonating with customers. Don recently said he felt pretty confident about the holiday season. Oh, wow! Which is typically make or break for the bookselling industry. It’s a good reminder that sometimes, you know, going back to basics and focusing on what you do best can be a winning strategy.

It is. It reminds me of those strip malls, you know, focusing on the things that Amazon can’t do instead of trying to compete head on. It’s a similar concept. You find your niche and you cater to a specific audience. But speaking of successful retail, let’s move from a national chain to a specific region.

That’s seen a lot of retail developments in the Dallas Fort Worth area. Yeah, DFW always seems to be booming. It does. It’s currently experiencing a surge in development activity. Okay. Particularly in Frisco. Frisco. We have these reports detailing six major projects that are shaping the city’s future.

Six. That’s a lot. It is. What kind of developments are we talking about? Well, one that really stands out is called FIELDS. FIELDS. It’s a massive 2, 500 acre master plan development. Wow. It’s going to include residential units, retail spaces, entertainment venues, restaurants, basically a mini city within a city.

2, 500 acres, that’s enormous. It is. It sounds like they’re building a whole new community from scratch. They are, and within Fields, there’s a section called Fields West, which is being designed with a more urban feel. The goal is to create a walkable environment that fosters a sense of community and caters to the needs of residents and visitors alike.

It sounds like they’re going for that, like, live work and play environment. Exactly. And speaking of play, they’re also building a universal kids resort in Frisco, which is expected to be a huge draw for families and tourists. A universal kids resort. That’s a game changer. It is. It’s projected to generate a lot of tourism revenue, create thousands of jobs.

Wow. And give local businesses a boost. It’s scheduled to open in mid 2026. Okay, so something to look forward to. It is. It’s incredible how one project can have such a ripple effect on like the entire region. Right. What other notable developments are happening in Frisco? Well, they’re revitalizing their downtown area with a 69 million project.

The focus is on making it more pedestrian friendly and creating those public gathering spaces. They’re also investing heavily in infrastructure with a major project to expand the Dallas North Tollway. So they’re not just building new things, they’re also improving the existing infrastructure and public spaces.

Exactly. It’s a very comprehensive approach to development. Yeah. They’re really Planning for the future and ensuring that Frisco remains attractive to businesses and residents. But it’s not just Frisco that’s attracting attention. McKinney, another suburb in the DFW area, is also experiencing a surge in development.

Yeah, McKinney just broke ground on a new 27 million shopping center. Wow. It’s a direct response to the city’s population boom and the increasing demand for retail and entertainment options. Development often follows population growth. It does. Are there any concerns about affordability as these areas grow so rapidly?

That’s a really good point. It’s crucial to make sure that this growth benefits everyone and doesn’t, you know, price people out of their communities. Right. We were just talking about those innovative affordable housing projects in Los Angeles. Right. DFW. Yeah. Speaking of affordable housing. We have some information here about manufactured housing communities.

MHCs? MHCs, yeah. Seems like they’re facing some challenges. Yeah, they have traditionally been an important source of affordable housing. Right. But recently there’s been this trend of private equity firms buying up these communities. Okay. Which is raising concerns about, you know, potential rent increases and displacement of residents.

That’s a tough situation because on one hand, institutional investment could bring much needed capital. Right. For improvement. For sure. But then on the other hand, you had this risk that, you know, investors might prioritize profits over the needs of the residents. Exactly. It’s a double edged sword. And this issue has become so contentious that some states are actually considering rent control measures.

Rent control. Specifically for MHCs. Wow. Okay. Which what? Well, politicians in states like New Jersey and Pennsylvania are pushing for legislation that would limit annual rent increases in MHCs. So it sounds like they’re trying to find a way to protect residents without discouraging investment in these communities.

Right. It’s a delicate balance. It’ll be interesting to see how this plays out. It will. Speaking of things to watch, earlier we talked about Amazon’s move into the data center market. Right. Are they alone in this? They are not. Data centers are a growing trend in commercial real estate. Okay, so why is that?

Well, the demand for data storage and processing power is exploding, driven by everything from cloud computing to artificial intelligence, and that means we need more data centers. So what are the implications of this trend for the real estate market? Well, data centers require massive amounts of space and power.

Yeah. Developers are scrambling to find suitable locations. Okay. That can accommodate these specialized facilities. They need to be in areas with reliable access to high speed internet infrastructure. Right. And robust power grids. It’s amazing how, you know, these technological advancements in one sector can have, you know, ripple effects in another.

It really highlights how interconnected our world is. It does. And speaking of interconnectedness, let’s bring our conversation back to the office market and those concerning CMBS delinquencies we were talking about earlier. Yeah. Are we seeing like a fundamental shift in how and where people work?

That’s the million dollar question. It is. You know, we talked about those challenges facing the office sector. Right. Especially with the rise of remote work. Yeah. Where do we go from here? Well, it’s clear that the traditional office model is evolving. We’re seeing a shift towards more flexible work arrangements.

Companies are embracing remote work hybrid models and co working spaces. So is the office market doomed? I don’t think so. Okay. I think we’ll see a more nuanced approach. Okay. Some office buildings will likely be repurposed. Okay. For other uses like residential or mixed use developments. Right. Others will be renovated to better accommodate the needs of modern workplaces.

So what kind of renovations are we talking about? Well think about things like open floor plans that encourage collaboration. Okay. Flexible workspaces that can be easily reconfigured. Right. And amenities that prioritize employee well being like fitness centers, outdoor spaces, and on site childcare. It sounds like the Office of the Future is going to be a lot different than the Office of the Past.

Yeah, it’s going to be more focused on creating a positive and productive environment for employees rather than just providing a desk and a chair. But what about those office buildings that can’t be easily adapted? That’s a good question. We might see a rise in the popularity of suburban office parks.

They often have more space and flexibility for adaptation. They also offer a less congested environment, which can be appealing to employees who are tired of long commutes. So the office market isn’t dead. No. It’s just undergoing a transformation. Exactly. And the key for investors and developers is going to be to adapt to these changing dynamics.

Right. And find those creative solutions that meet the needs of the modern workforce. Okay, so let’s shift our attention now to some specific examples of how these trends are playing out. Okay. In real world markets. We’ve got some interesting case studies to dive into. Oh. Alright, so we’ve talked about a lot of really fascinating trends.

You know, everything from the surprising comeback of strip malls and Barnes and Noble to the rise of data centers and Elon Musk’s Texas Empire. A lot. But before we wrap up this deep dive, I think it’s time to kind of, you know, address the elephant in the room, those record high CMBS delinquencies.

Yeah, you’re right. We touched on this earlier, but it’s definitely worth, you know, digging a little deeper. Okay. Just as a reminder for our listener. Yeah. CMBS loans are a type of commercial mortgage that’s often used to finance, you know, large properties like office buildings. Right. And the fact that, you know, delinquencies on these loans have surpassed even the peak of the Great Recession is definitely, you know, a cause for concern.

So are we talking about like a potential crisis in the office market? Like how bad is it really? Well, crisis might be a strong word, but the numbers are definitely alarming. As of December 2024, roughly 11 percent of office buildings tied to CMBS loans were delinquent. That’s significantly higher than the 10.

7 percent peak we saw during the Great Recession back in 2012. So what’s driving this? I mean, is it solely due to the rise of remote work or are there other factors at play? Well, remote work is definitely a major factor, but it’s not the whole story. You know, rising interest rates are also putting pressure on borrowers, making it more expensive to service those loans.

And then you have this overall, you know, economic uncertainty that’s making businesses hesitant to commit to long term leases. Right, so it’s like this combination of factors that’s creating this perfect storm. What does this mean for the future of office space? Are we all just going to be working from home?

You know, I don’t think it’s quite that simple. The office isn’t going away entirely, but it’s definitely undergoing a transformation. Okay. This traditional model of everyone working in a central office five days a week, you know, it’s becoming less and less common. So what’s replacing it? Well, we’re seeing a rise in these hybrid work model where employees are splitting their time between the office and home.

Right. And then, you know, co working spaces are becoming increasingly popular. You know, they offer that flexibility in a sense of community for. Freelancers and remote workers. So the office is becoming more of a destination, like a place for collaboration and connection rather than just a place to, you know, sit at a desk.

Exactly. And that means, you know, office buildings need to adapt. We’re already seeing this trend, you know, towards more flexible and amenity rich workspaces. Right. Think open floor plans, collaborative areas. Fitness centers, outdoor spaces, you know, things that make the office a more attractive and engaging place to be.

So if you’re going to ask people to come into the office. Right. You got to give them a reason to get out of their, you know, comfortable home offices. Yeah, for sure. But what about all the existing office buildings that weren’t designed with this new reality in mind? Wha? What happens to them? That’s a big question.

Yeah. Some will be renovated and adapted. You know, to meet the needs of the modern workforce. Okay. Others might be repurposed for different uses altogether. Okay. We might see office buildings converted into residential units. Thanks. Hotels or even data centers. Oh, wow. Okay. Like we were talking about earlier.

It sounds like the office market’s kind of in a state of flux right now. It is. Lots of uncertainty about what the future holds. Yeah. There’s definitely a lot of change happening. Yeah. But, you know, I think it’s a really exciting time to be in commercial real estate. Okay. It’s an opportunity to rethink how we work, how we live.

Yeah. Yeah. How we design the spaces that bring us together. I like that it’s not just about doom and gloom. It’s about adaptation and innovation. Exactly. Finding those new solutions. And remember, real estate is all about location. Right. The areas that can adapt to these changes and create, you know, these attractive, vibrant, and functional spaces.

Yeah. Those are going to be the ones that thrive in the long run. Well said. All right. So we’ve covered a lot of ground today. We started with Amazon’s shift to data centers. Right. Explored the surprising resilience of strip malls and Barnes Noble. Right. Took a deep dive into the booming but complex Texas market.

For sure. And grappled with this evolving nature of the office. Yeah. And we even touched on, you know, the rise of AI and rent collection and the challenges facing manufactured housing communities. It’s been quite a journey. What’s the key takeaway for our listener? You know, I think it’s that the commercial real estate landscape is dynamic and constantly changing.

Yeah. It’s not a static industry. You have to stay informed, be adaptable, and think outside the box to succeed. Exactly. And who knows what new trends and challenges are going to emerge in the years to come. Right. It’s an exciting time to be watching this industry evolve. Well, on that note, I think it’s time to wrap up this deep dive.

Thank you so much for joining me today and sharing your insights. It’s been my pleasure. And to our listener, thank you for tuning in to The Deep Dive. We hope you found this exploration of commercial real estate trends informative and thought provoking, and until next time, stay curious.