Welcome back to the Deep Dive. Today we’re we’re really gonna cut through the noise in commercial real estate. We’ll be zeroing in on the most important headlines, specifically from June 19th through the 27th, 2025. I’m quite curious myself to see what patterns emerge this week. Yeah, me too. Our mission today, like always, is to pull out those vital insights, maybe some surprising facts.

Basically give you a shortcut to being really well-informed about the critical dynamics shaping commercial real estate right now. Absolutely. And we’ve sifted through quite a stack of diverse sources for this deep dive. Primarily the top 50 commercial real estate headlines, but also some really interesting, very granular Texas focused retail news popped up.

So the goal is to give you a clear, concise picture of where commercial real estate stands today, highlighting key trends. The challenges definitely, but also the opportunities. And we’ll put a special emphasis on the Texas market, which is well thriving and specifically the retail sector There.

Okay, so before we get too deep, is there one big picture takeaway that really jumps out from this latest data? There is, it’s pretty significant. Dallas has officially been ranked the number one commercial real estate market for 2025. And this isn’t just about growth. It’s it’s a powerful signal, really shows how strong economic fundamentals and maybe pro-business policies can reshape market leadership pretty quickly.

Almost like a blueprint for other areas. Wow. Number one, for Dallas. That is a significant shift. Okay, so let’s unpack this further. Let’s dive into the current market dynamics because it feels like we’re seeing a landscape in, active transition. The executive summary from our sources really seems to emphasize that major shifts, clear differences between sectors and certain regions.

Definitely showing strength. Exactly. And what’s fascinating is the contrast. On one side we’re seeing some pretty serious challenges. Commercial mortgage backed security, CMBS delinquencies. They’ve climbed to 11%. That’s the highest since what, 2013? 11%. Wow. Yeah. And then you have these aggressive retail closures.

9,900 business shutdowns reported just in 2024. Plus there’s that that looming $1.5 trillion maturity wall. Essentially, a huge wave of commercial mortgages coming due soon. That’s creating some intense refinancing pressure for property owners. Okay. That 11% delinquency rate and the $1.5 trillion maturity ball that sounds.

Pretty daunting. Is there any genuine counter narrative here? I. Or are we really looking at widespread paint ahead? It’s definitely not a uniform picture of gloom. If you dig a bit deeper, you find some very strong positive indicators too. We’re seeing major transactions like Google committing to that huge 804,000 square foot lease done in Austin.

And there are substantial refinancing deals happening, like $1.2 billion deals. That signals clear institutional confidence, in parts of the market, it’s not a blanket crisis. It’s very specific. Yeah. I see. So despite those significant headwinds, you’re saying there’s still clear institutional appetite in certain segments.

Exactly. While some sectors are definitely struggling, others like industrial are showing incredible resilience. Warehouse lease rates are up. Get this 75.7% over the expiring contracts, 75%. That’s huge. It’s staggering. And the multifamily market seems to be stabilizing. Class A properties hit 95.7% occupancy.

This resilience is an isolated, it’s a key factor driving that stronger performance in certain regions. And speaking of strong performance and resilience, Texas really seems to be leading the charge across all its major metros, doesn’t it? Strong economic fundamentals, the business friendly environment.

It’s clearly supporting that market leadership, but how is Texas managing the statewide trend so consistently, even with all these national pressures? It’s multifaceted, and this brings up an important point about financial pressures and maybe where we might find some. Unexpected recovery signs.

The headline, US commercial real estate credit Pain really caught my eye Distress has reached $116 billion. That’s a 23% increase year over year. Marks the highest level of distress in over a decade. A 23% jump year over year to $116 billion. That’s a massive increase, but does that mean. Entirely new problems are popping up, or is it more like a backlog finally coming into the light?

It’s probably a combination, but the research also suggests a moderation in the rate of delinquency increases. So even as the total numbers keep climbing, the pace might be slowing down just a bit. And what’s really surprising actually, is that. Commercial property deal making seemed to pick up after those Trump tariff announcements.

Interesting. Yeah. We saw a Texas apartment complex financing restart after just a brief pause that really shows the underlying resilience of property owners. They seem to be finding ways to adapt. Push forward even with volatility, right? That’s the bifurcation we keep hearing about, isn’t it? I think CNBC pointed that out.

There’s this clear split in commercial real estate. Some property types, some quality levels are just significantly outperforming others. It’s definitely not one single market. Precisely and reinforcing this kind of selective positive outlook is the Fed’s senior loan officer opinion survey. It showed only 9% of banks actually tightened lending standards back in April, 2025.

That suggests maybe a high probability for property value increases in 2025 despite that tariff volatility. Okay. But we can’t ignore that CMBS delinquency rate still climbing to 11% and the office sector is particularly hard hit accounting for over half of those delinquencies. You mentioned maturity defaults driving a lot of this.

Borrowers struggling to refinance at these higher rates. So if I’m getting this right, it’s not just about empty offices, it’s critically about the financial structure of these properties hitting a wall. That feels like a different, maybe more insidious challenge. Indeed it is. Now, let’s zoom in a bit on the evolving retail sector, because this area is seeing some really dramatic shifts.

That headline, retail closures hit Cyclical High, tells a big story. 9,900 business shutdowns in 2024, and for the first time in several years, closures actually outpaced openings. 9,900 shutdowns. That’s a stark figure. What does this really mean for the overall health of the retail sector? I. It signals a major period of consolidation.

Strategic repositioning, major chains leading the way. JON closing 800 stores. Macy’s, planning 150 closures over three years. Lots of discount retailers scaling back too, yet it’s not all negative. The sources also highlight 7,700 new retail openings announced for 20 24, 20 25. That’s gonna return about 140 million square feet of space to the market.

So while some close others are definitely expanding, or new concepts are emerging to fill those gaps. And we’re seeing a lot of strategic moves too, like consolidations, Kirkland’s, for instance, consolidating its real estate after being bought by Beyond Inc. Some of its locations are even converting into Bed, bath and Beyond home stores.

And other chains like Harris Teeter, Jack in the Box. They’re closing locations, but framing it as part of optimization strategies, it feels like a very dynamic period for retail driven by, consumer behavior shifts and the need for operational efficiency. Exactly. And this leads us right to a crucial focus.

I. The remarkable strength of retail right here in Texas, especially in the Dallas-Fort Worth area. Weitzman’s Shopping Center Review. It gives excellent insight here. It shows Austin, Dallas-Fort Worth, Houston, San Antonio, all maintaining healthy retail occupancy above 90%. Austin’s actually leading the state.

This really highlights how robust local economies are supporting consumer spending down there. What’s truly powerful I think, is that these cities seem positioned to weather any potential economic softening, and they’re doing it from positions of real financial strength, and there was that critical local win that really underscores this resilience.

Texas Governor Greg Abbott vetoed Senate Bill three. That preserved over 8,500 hemp businesses, occupying millions of square feet of retail space. Yeah. Protecting an $8 billion industry in Texas, that feels like a huge save for the retail economy there directly impacting property owners and occupancy.

Absolutely. It’s a perfect example of how local policy can directly shape the commercial real estate landscape, particularly in retail. And we’re also seeing this surging trend of. Service-based tenants in the Texas retail market, these businesses are taking up a larger share of newly leased space. The highest level since 2019, actually, we’re talking fitness centers, healthcare providers, diverse dining options, experiential retail.

It’s a clear shift away from just traditional goods. That shift to service-based retail is absolute vital for property owners to understand, isn’t it for long-term viability. Now, while retail is clearly transforming. Let’s widen our lens again. Let’s quickly touch on some broader market trends that still have significant Texas relevance.

The office market, while still facing those headwinds, is showing some maybe early recovery signs like Trump’s $114 million payoff for his 40 Wall Street mortgage and that San Francisco $177 million office deal. It’s most expensive in three years. Do these scattered winds mean a turning point, or are they just outliers for now?

Probably not a full turning point just yet, but they do signal that high quality, located office assets can still command interest and investment even as the sector as a whole continues to rebalance. We’re also seeing substantial financing and investment activity elsewhere. That $1.2 billion refinancing for the massive DC waterfront development that signals strong institutional appetite for large scale quality projects.

And yeah, $8.6 billion in. CMBS loans are maturing in January, 2025, but extensions are being sought for 85% of them. That shows efforts to avoid default rather than just immediate distress hitting. Okay, so institutions are still willing to commit significant capital when the underlying assets are strong and borrowers are actively trying to manage their debt.

The overall investment outlook seems pretty positive then. Bels is forecasting $542 billion in total US commercial real estate investment for 2025. That’s a massive 39% annual increase, and the US expected to capture the bulk of global CRE investment. That’s a lot of capital potentially flowing in. It is indeed and the multifamily sector.

It continues to benefit from rising demand and falling supply. High mortgage rates are also pushing more people towards renting, which boost the apartment market strength. Plus you have these crucial policy, Vic. Like increased funding for L-I-H-T-C. The low income housing tax credit, which is key for affordable housing and the opportunity zone program renewal, incentivizing investment in distressed communities.

Together, those are driving development of over half a million housing units. Those policy wins are critical for tackling housing supply. Definitely. Now let’s really hammer home Texas’s authority in all this because it’s not just general growth, it’s specific strengths. Dallas’ number one, ranking for 2025, for instance, it highlights that post pandemic retail demand search, sure.

But also an incredible economic recovery, 11.2% employment growth since February, 2020. That’s phenomenal. Shows how quickly a strong market can bounce back. The Texas multifamily market is showing really strong stabilization, occupancy, and stabilized class. A apartments hit 95.7% in May, 2025. That’s the highest since June, 2022.

Very healthy, very attractive for investors on the industrial side. Lone Star electric supply, expanding to Perlin, 114,000 square feet, 75 jobs. Phoenix investors acquired a 1.5 million square foot warehouse in Texas, and maybe more impactful for existing owners. Industrial tenants are facing those substantial rate increases.

We mentioned about 75.7% higher than expiring leases. I. That reflects immense demand and really tight supply. Yeah, absolutely. For office and tech, Google taking the full 804,000 square feet at Sale Tower in Austin is just a massive vote of confidence, both for Austin’s downtown office market and the tech sectors continued presence.

Although it’s worth noting, the federal government did cancel over 35 leases across Texas. That signals some broader space reduction initiatives that even strong markets aren’t totally immune to. A bit of nuance there. Mixed use developments are also thriving. Kaizen starting a $370 million project in Dallas and the construction boom across Texas is just incredible to watch.

Yeah, that $17 billion Samsung semiconductor facility in Taylor, major data center construction all over Dallas-Fort Worth, jcbs, huge 720,000 square foot plant in San Antonio, creating over 1500 jobs. The infrastructure investment supporting all this growth is immense. It really sets the stage for future economic expansion.

Definitely and looking at national trends that still have relevance for Texas, we’re seeing, interestingly, more office space being removed than added first time in over 25 years, about 23.3 million square feet slated for a demolition or conversion versus only 12.7 million of new construction. This net reduction could potentially help future vacancy rates improve by taking older, less desirable inventory offline.

Makes sense. The industrial sector, as we’ve said, continues to be the strongest CRE performer nationally. Benefiting from E-commerce logistics, and alongside that, data centers are seeing just exceptional growth fueled by all the demand for AI computing power. Clear, bright spots. Absolutely. And despite the challenges we discuss in retail, prime space availability remains quite limited nationally.

This is leading to higher asking rents and persistent high demand for those prime locations, which, really highlights the ongoing need for expert local knowledge, like what we focus on in Dallas Fort Worth, to identify and navigate these opportunities where competition is fierce. That’s where local expertise truly shines, doesn’t it?

Knowing exactly where those prime spots are and how demand is shifting on the ground, but on a more challenging note. Nationally record high insurance costs are hitting the entire CRE sector up 40% year over year and 120% since October, 2020. That’s a significant added cost pressure that can really eat into profitability for developers and owners.

It really is, and it’s important to remember too. Small banks hold about 70% of all CRE loans outstanding, so they face continued pressure. Although the Fed stress test indicated they could survive a pretty substantial drop in CRE values. Still, it underscores how systemically important commercial real estate is to the banking sector, particularly those community banks.

And we keep circling back to that $1.5 trillion maturity wall approaching through 2025. It’s just such a massive hurdle out there. However, the data showed retail loans while making up about 26% of newly special service loans are actually showing more resilience. Within the office sector. That’s a key distinction for investors looking for relative stability.

And finally, experts are really emphasizing the critical need for significant investment in climate resilience and cybersecurity for sustained CRE recovery. These aren’t just, nice to haves anymore. They’re becoming essential for long-term viability, for regulatory compliance, and frankly for attracting modern tenants and investors.

So to wrap up this deep dive, it feels abundantly clear that the commercial real estate market is in a period of really active but very differentiated transition. We’ve seen clear winners, especially the Texas markets with Dallas, firmly grabbing that number one national ranking thanks to its unique economic strength.

And it seems proactive policies. Yes, but the challenges are still undeniable, particularly with those CMBS delinquencies and that looming maturity wall. But as we discussed, it’s not really a story of widespread distress across the board. Instead, you have strong institutional capital flows. You have policy support for things like housing and clear sector differentiation, all providing significant opportunities for strategic investors and developers, particularly in high growth markets like Texas.

Absolutely. The picture is definitely nuanced, but the potential is clearly there for those who understand where to look and how to adapt to these evolving trends. So as you, our listener, consider all of this, think about how these macro trends and these micro trends, especially that shifting landscape of retail and the sustained growth here in Texas, how will that shape investment and development decisions in the coming months?

What stands out to you about the unique resilience and the evolving nature of the retail sector, specifically in Dallas-Fort Worth? And how might that inform your next move?