Brian Uretzky and I were comparing notes this week on what’s changing across the commercial real estate market.
One thing is clear: the conversation around real estate has shifted.
For the last few years, the dominant themes were rising rates, constrained lending, office distress and uncertainty around valuations.
Today, the picture is more nuanced.
Interest rates are still creating friction.
When long-term Treasury yields remain elevated, the spread between borrowing costs and real estate yields gets compressed. That makes underwriting harder and puts more pressure on basis, rent growth and future upside.
But capital is becoming more available.
Many lenders that pulled back from commercial real estate exposure in the aftermath of 2023 are increasingly back in the market. And lender appetite can vary significantly by asset type, borrower and geography.
That matters because the exact same property can receive very different financing responses depending on which lender is looking at it.
Office is also becoming much more bifurcated.
High-quality, well-located office space continues to separate itself from the rest of the market. In many markets, the best Class A product is tightening, landlords are investing heavily in competitive Class B assets, and rents for desirable space are moving accordingly.
At the same time, commodity and functionally obsolete properties continue to face a very different reality.
So rather than saying “office is back” or “office is dead,” the more accurate statement is:
Quality is winning.
And that same theme extends beyond office.
Across office, warehouse, manufacturing, medical and retail, occupiers and owners are becoming much more selective about location, functionality, capital structure and long-term flexibility.
The broader takeaway for companies making real estate decisions:
Don’t let the headline market dictate your strategy.
Interest rates matter.
Capital availability matters.
Vacancy matters.
Construction costs matter.
But ultimately, real estate is intensely local and asset-specific.
The strongest opportunities usually emerge when you understand what is happening beneath the headline numbers… which submarkets are tightening, which buildings are gaining leverage, where lenders are leaning in, and where the market still hasn’t fully adjusted.
That is the market we are in today.
More selective. More nuanced. And increasingly favorable to companies that have good information and start planning early.
Co-authored by Jonathan Keyser and Brian Uretzky