Issue #1
Fiscal & Monetary Policy

Subject Matter Expert: Mark Levine, Ph.D., LLM, CRE®, Professor, University of Denver

Deficits, Debt, and Delicate Balance: Economy and commercial real estate remain resilient

The U.S. hit a new milestone in August, surpassing $37 trillion in national debt. It’s a staggering figure that hammers home the key point that it’s high time to rein in the country’s snowballing debt.

Despite the hefty load of debt – including a projected $1.9 trillion deficit looming for FY 2025 – things aren’t as bad as they seem. The economy has proved to be fairly resilient. Jobs, consumer spending, and inflation are, so far, holding up to potential headwinds ranging from AI to tariff uncertainty. Despite volatility, the stock market also has continued to notch gains.

The view is more mixed for commercial real estate with both challenges and opportunities depending on your perspective. Although growth may be slowing, fundamentals are holding up across most sectors. Certain pockets within real estate are struggling, such as the for-sale housing market, B and C office, and maturing loans that are difficult to refinance.

Policy hits and misses

On the fiscal policy side, the One Big Beautiful Bill extended some of the tax cuts from the 2017 Tax Cuts and Jobs Act and created new tax cuts for  middle American consumers. No changes to capital gains rates, reinstatement of bonus depreciation, and expansion of the LIHTC program are among some of the positive policy moves for commercial and residential real estate.

On the monetary policy side, the Fed’s pause on rate cuts for much of 2025 has been especially frustrating for commercial real estate, housing markets and the federal deficit. Although predicting the path of interest rates is never easy, it appears likely that the Fed will make some moves to lower the federal funds rate with cuts that could start in the last quarter of 2025 and continue in 2026. The speed at which that occurs, along with who will replace Jerome Powell as the new Fed Chair, both remain big wildcards.

Key Takeaway: Plenty of risk on the table

The bottom line is that, despite everything, things are looking good. One can point to several positives in the economy, such as companies that have said they’re going to invest billions of dollars in the U.S. to onshore manufacturing. Money coming in from tariffs also will help to chip away at the deficit. However, that doesn’t mean there isn’t  need for caution.

Risk remains elevated, with not just one shoe, but many shoes that could drop and alter the current course ranging from geopolitical conflicts to disruption from new technologies. AI is an issue that cuts both ways. On one side, it has the potential to negatively impact jobs. On the other side, it’s generating billions of dollars of new investment in technology and increased productivity. This, too, will increase jobs in many areas.

One of the things that history has taught us is that the economy is pretty resilient in managing small challenges. It’s the big unforeseen events that can derail the economy, and we know there are big issues on the horizon that are coming. We do have to address the $37 trillion in national debt, and the 2026 mid-term elections around the corner could shift the balance of power in Washington.

Currency issues, such as Stablecoin, is another uncertainty that will impact our economy. China is growing its economy and moving to challenge the U.S. as the largest economy in the world. Nonetheless, as of now, it appears that the U.S. is moving in the right direction to improve our economy, and real estate will be a large part of this formula for growth and stability.

Issue #2
Portfolio Risk

Subject Matter Expert: Maureen Ehrenberg, CRE®, FRICS, Executive Managing Director, Strategic Growth and Solution Development at SIREAS Inc.

Risk analysis is going broader and deeper than ever before

Assessing portfolio risk is no longer a static exercise. Risk analysis in today’s dynamic market is more expansive, complex, and fluid.

Owners, lenders and occupants have always dealt with an element of risk when it comes to managing their real estate portfolios. Although there may be some recency bias, it seems as though there are more and bigger risks around every corner. The pandemic also created some unusual risks that shook up the status quo and continue to impact real estate. Wrapping your arms around risk today starts with understanding the different categories of risk, such as:

• Property type
• Location and Infrastructure risk
• Economic and Occupancy risk
• Financing and Valuation risk
• Tenant Improvements and Capital Projects risk
• Insurance and cost risk
• Environmental and Indoor Air Quality risk
• Extreme weather risk
• Natural disaster risk
• Regulatory risk
• Social and geopolitical risk

It’s important to look at risk through the lens of the investor, as well as the lens of the occupier. What  potential risk might be there for your tenants, and how do you mitigate those risks for your occupants to make your property more desirable? Likewise, lenders also are conducting more comprehensive risk assessments on real estate loan portfolios.

Sophisticated risk analysis

Auditors are looking at risk across various categories to assess individual risks and also generate an overall risk score at the property and portfolio level. Various technologies and predictive analytics tools are helping people better understand and quantify risk. For example, one can apply different risk filters to look at things such as property locations that lie in flood plains, or risk related to lease rollover or loan maturities. Various changing risk factors have made this a dynamic exercise versus the more static approach to risk assessment and analysis in the past.

Tools range from climate-related risk software and drone surveys to real-time data on energy consumption and equipment operations collected from automated energy and building management systems. Additionally, it’s still important to have boots on the ground for on-site property assessments.

Owners and occupiers are continuously monitoring and updating risk assessments, whether it’s every quarter, every six months, or annually. Additionally, risk no longer sits in one silo, but rather investors and occupiers are taking a more holistic approach to gather and assess the data to develop a more accurate and comprehensive picture of risk.

Key takeaway: Data drives decision-making

Risk analysis provides data and insights that, in turn, influence strategy and decision-making. Understanding valuation risk helps owners and occupiers prioritize cap-ex projects, as well as inform buy-sell-hold strategies. For example, if a building is facing vacancy risk related to a tenant turnover, how much money will the owner have to put into the space and the property to improve it to retain or attract a new tenant? How much rent will they be able to charge, and is that ROI feasible?

When you start applying different risk filters related to additional capital needed, it raises new questions. Is it time to sell now rather than doubling down on capital to mitigate risks? Owners are taking risk analysis into consideration when they’re looking at refinancing their underlying debt, and in some cases, risk is becoming a tipping point for owners who are choosing to give buildings back to the lender. Building occupiers are conducting a similar risk analysis of their own to determine what lease locations they may want to keep, and which they need to exit due to supply chain, infrastructure, climate or natural hazards, increasing operating and occupancy cost expense exposure, and cost of insurance, among other factors.

Portfolio risk is something that has moved more to the forefront for investors, lenders, auditors, and occupiers. Going forward, risk and resiliency expertise is likely to develop as a specific subset within commercial real estate.

Issue #3
The Changing Nature of Real Estate: Back to the Fundamentals

Subject Matter Expert: Jim Costello, CRE®, Chief Economist, MSCI Real Assets

Cap rate compression is no longer going to cover real estate “mistakes”

For the past few decades, investors have made money in commercial real estate simply by being on the right side of interest rates and cap rate compression. We’re at the end of that game.

The commercial real estate market is coming out of an extended period, from the mid-1980s up until 2019, where owners were selling a property they had bought with a higher mortgage rate and a higher cap rate. The average building is held for seven years. During that seven years, you could mismanage it, put the wrong tenant in place, or spend too much on capex. But you could still make money based on the fact that, when the time came to sell, you were still getting cap rate compression that could paper over a lot of mistakes.

Even if the 10-year Treasury remains flat at its current level for the next 10 years (a highly unlikely assumption), capital market forces are no longer going to be a tailwind – they’re going to be a headwind.

Doing the work

Just showing up is no longer sufficient. Owners and operators are going to have to manage assets much more carefully and efficiently because the return is going to be derived from income, not from cap rate compression.

Back to fundamentals also applies to asset allocation. Especially during 2017-2019, when the QE process was coming to an end and the expectation was that borrowing costs were going to rise, investors began shifting allocations out of high capex properties, such as office and retail, and into lower capex industrial and apartments. The shift also coincided with a boom in industrial and multifamily, and those broad sector bets drove performance.

The sector bets of the past only worked because of structural change. Industrial, for example, rode the e-commerce phenomenon and an Amazon effect that drove tremendous value growth. Although e-commerce is still growing, the pace is slowing, and it’s no longer providing the outsized demand for industrial space.

The view that you have to pick the right sector to outperform no longer applies. The asset managers who are winning now and outperforming others is not because they’re picking the right sector, it’s because they’re picking the right building and managing it well.

Key takeaway: Developing a tactical playbook

Getting back to fundamentals means a greater focus on the basics – picking good assets along with good underwriting, diligence and asset management. Commercial real estate professionals need to hone their skillset and leverage the technology tools available today to get to better analysis and decisions. Back to fundamentals also highlights the importance of the asset management cycle of buying, maintaining, and selling at the right time in the market.

Locations and demand drivers are critical, and you need a strong management and leasing team to deliver a good tenant experience, find the right tenants, manage credit risk, and structure leases appropriately. Each of those basic things adds up to good overall performance, but it really starts with having the right tactical playbook for a particular property and market in order to secure the income stream as much as possible.

Issue #4
Capital Sources & Flows

Subject Matter Expert: Thomas A. Fink, CRE® Emeritus, Vice Chairman of the Board for the National Consumer Cooperative Bank

Equity remains stuck on the sidelines

Capital is the fuel that keeps the commercial real estate market moving. And, to use a technical term, the market is experiencing a “gumming up” of the works when it comes to equity flows.

The slowdown in transaction volume is impacting institutional equity across the board. Institutions that have invested in real estate funds with a typical five-, seven- or 10-year hold are not getting their capital out, which means less capital available to recycle into new funds. All of this is contributing to a more challenging environment for raising new equity capital from established institutional investors.

The current situation is not unique to real estate. It’s a common problem across the private equity fund space, whether it’s private credit or infrastructure. The slowdown in distributions means less money coming back to investors on their existing investments, and every institutional investor has limits on how much they can hold in any asset class. The end result is a restriction on capital flows into new real estate investments. Big write-downs on office valuations are also negatively impacting capital flows.

Short-term headwinds

Generally, constrained equity flows are likely to be a near-term problem. Looking out further to the medium term, capital will eventually come back because investors do like the stability of real estate and the ability to use real estate as an inflation hedge. However, there are portions of the market, such as office, retail, and hotels, where values have not kept up with inflation, and in some cases, investors have lost money. So, real estate is going to have to make a compelling case for investors to put new money into it.

On the positive side, there is still good liquidity in the debt markets. Despite interest rates which remain higher than levels after the Great Financial Crisis, there are plenty of capital sources at the table willing to lend, including banks, life insurance companies, private equity debt funds, CMBS, and mortgage REITs.

Concerns do exist about foreign investors pulling back from the U.S. as a result of current policy moves and the country’s high deficit. However, the U.S. remains the largest economy in the world and a “safe” haven for capital relative to other parts of the world. Another challenge for real estate is the huge demand for investment in infrastructure – particularly energy and digital infrastructure – that also is competing for those real estate dollars.

Heavier lift for fundraising

The bottom line is that we’re in a period where equity capital is precious. What’s ahead? Investors are waiting for the market to restart. More transaction volume will allow institutions to see a path to better liquidity and exits from existing positions, as well as provide greater visibility into where valuations have level set.

In the interim, the market for fundraising will continue to be challenging and competitive. Industry professionals will need to work harder to find capital; they will have to make a very clear presentation of the liquidity position of investors in a transaction; and they will need to demonstrate why these properties are going to remain attractive and economically viable over the long term.

Issue #5
Transformation of Real Estate Through Technology

Subject Matter Expert: Tom Shircliff, CRE®, Co-founder and Principal of Intelligent Buildings, LLC

 From data centers to PropTech, AI is reshaping the real estate landscape

AI is now virtually synonymous with technology, and AI-driven innovation is a generational issue impacting the entire commercial real estate industry.

AI has created a new category of technology that is moving to the forefront as a dominant force in all aspects of execution in commercial real estate, not to mention its tangential impact on the data center segment. The data center phenomenon is impossible to ignore because of the enormous announced investment totals, demand for land and buildings, and insatiable energy requirements.

Although AI-enabling data centers are grabbing attention as the new “bright shiny” thing in real estate investment and development, AI is impacting all areas of real estate from building operating efficiency and site selection to financial analysis and underwriting. That in itself is a sea change for commercial real estate, which has traditionally been more of a last mover to adopt new technologies. The key differences now are the speed of innovation and the fact that AI is an incredible simplifying technology.

Everyone understands AI because it’s just a question you ask or a button you push that engages a task-specific “agent”. Across commercial real estate functions, different tasks are going to get very easy, very fast – provided you have access to sufficient data inputs.

The fight for data

One of the things that property owners and operators need to do now to prepare for future AI solutions is to get control of those data inputs. They need to aggressively position to get access and ownership of the data within their buildings. We can all go to ChatGPT, Gemini, Grok, or other AI services, and ask a question and amazing results come out. The same thing can be done at the property or portfolio level, provided you have access to the data.

Access to data is not as easy as it may sound because PropTech at the building level has long struggled with accessing data across a fragmented ecosystem of investors, asset managers, property managers, contractors, and building systems. Buildings have multiple systems – including lighting, access controls, HVAC, and various sensors – that now need to be viewed as valuable data sources.

The heavy lift for commercial real estate professionals is going to be going through the steps to get access to the data, which will involve setting up internal processes, reviewing contracts and agreements, and renegotiating data rights with vendors and service providers. A second key focus will be shoring up building systems against cybersecurity threats.

Takeaway: Jumping on the fast-moving train

When it comes to PropTech, the past 20 years have been a tough slog to get companies to embrace and invest in new technologies. AI is now a fast-moving train where innovation and adoption are accelerating, and the speed at which things are advancing is a key aspect of the transformation occurring across the real estate industry.

AI solutions and capabilities are leapfrogging over one another at a faster and faster pace. Boardrooms will need to think much faster because competitors, opportunities, and risks are all moving more quickly. What that means for the commercial real estate industry is that companies and individuals will have to work harder to understand and innovate – or get left behind in this new fast-paced cycle of AI-driven innovation.

Issue # 6
The Future of Real Estate

Subject Matter Expert: Timothy H. Savage, Ph.D., CRE®, Professor of Practice at the NYU Schack Institute of Real Estate and Faculty Director of the CREFC Center for Real Estate Finance at New York University

Technology is spurring a “golden age” of commercial real estate

Historically, real estate has felt like it’s immune to technological change, and that’s not true. We are now in a “golden age” of commercial real estate where we have the data, the computational power, and a means to think about combining those two to make better decisions.

Technology, and analytics in particular, is a critical component to commercial real estate now and in the future. For example, it’s not enough to own an office tower on Fifth Avenue in Manhattan; you now need to understand how much more you can price the 20th floor compared to the tenth floor or the fifth floor.

Technology and the tool set for commercial real estate, with AI, machine learning, and more powerful predictive analytics, are driving change to processes and workflows. Alongside that, commercial real estate professionals need to change their way of thinking and their approach to problem-solving. The commercial real estate market can take a page from the residential market playbook, which is well ahead in its ability to capture and analyze sales data to drive property valuations and transaction activity.

The need for disciplined thinking

The change afoot is two-fold. One, companies need to embrace technology that is enabling more sophisticated and powerful analytics – or risk getting left behind. Two, companies need to change their way of thinking in how they approach real estate strategy and decision-making. They need to put aside conventional statistical analysis and bring in modern statistical thinking, or the Bayesian perspective.

Bayesian refers to a statistical approach that uses probabilities to represent degrees of belief and then updates these beliefs as new evidence becomes available. In a world where you don’t know what’s going to happen tomorrow, it’s a way of reasoning about uncertainty where prior knowledge is combined with observed data to refine understanding.

Takeaway: Navigating uncertainty

In the current environment, there is a high level of uncertainty around a variety of issues, ranging from the pace of economic growth to new government policy. Bayesian is a way to discipline your thinking in complicated issues, which is very relevant for the future of real estate.

The real estate industry no longer has the luxury of just beating the drum for location, location, location. Real estate decisions are more complex and nuanced. We have so much more data and more tools. But we have to be disciplined in the use of both, and the discipline that we bring to that debate is Bayesian thinking.

Issue #7
Global Chess: The Crisis of Confidence & Uncertainty

Subject Matter Expert: Randall Sakamoto, CRE®, President, Rosen Consulting Group/Managing Director, Andersen

The most certain thing right now is the uncertainty – and it’s pervasive

The most certain thing today is that uncertainty exists in almost every corner of the economy, and that uncertainty can stunt economic activity.

Policy announcements coming via social media with little advance notice have a habit of upending a belief in future stability. Without that stability, it becomes difficult to make plans to buy a home, build a manufacturing plant, or hire new workers. Pulling forward or delaying activity can obscure the health of the economy, perhaps a risk facing policy makers today.

Unfortunately, this is all occurring against a backdrop of less transparency, which is further driving the crisis of confidence. Data transparency has helped attract global investment into U.S. equity and debt markets. Without key information, it is difficult for a business leader to make strategic decisions. Government data may not be perfect, but it is the gold standard for economic and demographic statistics and, up to this point, has been apolitical.

The importance of Federal Reserve independence to economic and financial market stability cannot be overstated. With the Fed under pressure and possibly politicized, will markets believe that decisions are aimed at the economic environment or political situation? This question has deep repercussions on our domestic health but also the global perspective on the dollar as a reserve currency and U.S. markets as relative safe havens.

Lingering effects of tariffs

Major U.S. policy moves are shaking up the status quo on a variety of fronts. One of the biggest disruptors that has the potential to hit every corner of the economy is new rules of the road being drafted around global tariffs.

Some of the initial day-to-day volatility has settled as people have adapted to the overhang of tariff uncertainty. But the uncertainty hasn’t gone away or diminished. We’re still in the middle of this new price discovery as we do not yet know what tariffs levels will be assessed on several major trading partners, and tariff uncertainty will linger on into 2026 and beyond.

The April 2 tariff announcement created broad uncertainty globally, and months later we can still see how sudden policy announcements, deadline extensions or successful negotiations can sway the market. Tariffs have been set via executive order, which means that tariffs could change – for better or worse – if the administration’s policy goals change.

In the last few months, we have started to see initial impacts – slowing job creation, elevated prices, and supply chain questions. There will be more to come. We haven’t fully seen how tariff policy is going to trickle through and impact different parts of the economy, who’s impacted and who’s not, and it will take many more months, and potentially years in the case of supply chain reorganization and manufacturing onshoring, for that to fully play out.

Key takeaway: Navigating a “what if” environment

Although there is light at the end of the tunnel, what is worrisome is that it could prove to be a very long tunnel. If market volatility persists, it will make real estate much more difficult on both the demand side and the finance side. Business decisions will need to be weighed carefully, even if they appear to be the right choice today. There may be a resetting of return expectations across asset classes, particularly if inflation and interest rates remain higher for longer. Volatility in the marketplace always makes what could have been an easy decision a lot more complicated.

It’s also important to note that commercial real estate is equipped to navigate uncertainty, perhaps a bit better than other asset classes. Although the industry is data-rich in many aspects, there are often gaps and imperfections. Commercial real estate professionals are used to dealing with unknowns and less-than-perfect information. And while persistent uncertainty will require more careful due diligence from all parties, the bottom line is that the value of working with seasoned commercial real estate professionals will be greater in an uncertain time because they bring experience and expertise needed to navigate volatile markets and identify opportunities ahead.