U.S. investment sales Q3 2025 market update and webinar

Please note this transcript was auto-generated and may contain errors or inaccuracies.

James Nelson: Okay, perfect timing. Welcome, everyone. We have, Marion Jones, joining as well. Thank you all for attending our

James Nelson: Third quarter, U.S. investment sales, State of the market report.

James Nelson: And, really excited if you all attended the last quarterly report that we gave.

James Nelson: You'll know that we are spotlighting a city or two every quarter, as well. So with us today, we have Susan Burks, as well as Mike Kennedy, who will be covering Dallas, later, and you'll see very quickly why. I should start by introducing myself. James Nelson, I'm Head of U.S. Investment Sales.

James Nelson: As long as Marion, who's head of U.S. Capital Markets for our group, and Eric Adein, who is also a principal and head of our U.S. investment sales group. So, a lot going on. We have,

James Nelson: quite a bit of information to get through, so I think we'll just dive in, and I will turn it over to Marion.

James Nelson: To kick things off.

Marion Jones: Great. Thanks so much, James, and thanks to all of you for joining.

Marion Jones: I'm just gonna cover a few sort of high-level, topics and indicators as it relates to kind of where we all are in the cycle. And I think where I would just point you to our conclusion, and we'll highlight some stats for you, is that we really are in sort of a turning point.

Marion Jones: Or a tipping point in this moment in the cycle. So, one of the first, you know, things that we obviously track is the cost of capital. And, obviously we had a 25-point rate decrease, last month.

Marion Jones: in all likelihood, we'll hear another announcement of the same today. And what we've observed in terms of the cost of capital is that

Marion Jones: basically, spreads started compressing over the summer in anticipation of that rate decrease, so we already saw some momentum

Marion Jones: Not only in the cost of debt capital, but I think it was beginning to get sort of priced into deals on the investment sales side as well. It doesn't necessarily mean that there was much more, you know, super aggressive bidding, although selectively we have seen that, but more so a more robust bidder pool, a little bit more aggressive on some assumptions around rent, so we saw it a little bit baked into

Marion Jones: the buyer behavior in the investment sales market. Not necessarily that, you know, cap rates immediately adjusted overnight by 25 bips. Certainly, that tends to not happen that way, but it was a little bit baked into the underwriting and the view of where rents could go, and maybe some other sort of bells and whistles within individual deals.

Marion Jones: On the debt side, we saw spreads starting to compress.

Marion Jones: really late part of the summer, second half of the summer, and then we saw even more momentum behind that spread compression, after the September rate announcement. So, in kind of the major food groups, I mean, the spreads have really compressed since, you know, mid-late summer to now.

Marion Jones: In many instances, around 50 to 70 basis points.

Marion Jones: So lenders are getting… there's a lot of competition in, the lending universe.

Marion Jones: a lot more diversity of lenders, so the banks are back in a big way. Certainly, CMBS is prolific in its production. Lifecos are back in the game, so this compression of spread relates not only to, movement in rates, it's all sort of interconnected, but movement in rates.

Marion Jones: As well as more competition, from private, credit to life codes and everything in between.

Marion Jones: So, the cost of capital has been moving favorably. Sales volume, we're going to see a lot of information and hear a lot of great, granularity in sort of where we are in the sales, market across the U.S. today. But overall, you know, 19% increase

Marion Jones: From the first three quarters of this year in sales volume compared to the same period last year. When we look at Q325 versus Q324, it's about a 9% increase. Second quarter of this year compared to second quarter of last year, about a 25% increase across the U.S, not select markets, but across the U.S.

Marion Jones: So, suffice it to say that, the sales volume metrics are also indicating that we've perhaps reached a turning point in the cycle. Another thing that we look at, obviously, is debt production, overall.

Marion Jones: And, you know, what I would tell you is that at the height of this most recent cycle in terms of debt volume across the U.S,

Marion Jones: we reached about a little over $800 million, in debt volume for 2021. That was the height. By 2023, when we started feeling the impact of rates.

Marion Jones: It had gone down to about roughly $450 million.

Marion Jones: 2024 was showed, and so that was the low, that was the low point. 2024 was an improvement over 2023, but gosh, it didn't feel like it if you were in the marketplace trying to get deals done. There felt… it just… it still screened illiquidity as a deal-making professional.

Marion Jones: So 2024 was around $520 million.

Marion Jones: An increase, or billion, excuse me, an increase from the,

Marion Jones: the 2023 of $450 billion, but certainly way off the mark of the 2021 $800 billion. So.

Marion Jones: where we are today, which is really, you know, an indicator of being at this turning point, is that in 2025, you know, for the first half of this year, we were almost at the same level as the entire year's debt production for 2024. So, around, just shy of $500 billion.

Marion Jones: And that is really, really a strong indicator as where we're going. You know, we can expect that the 2025 numbers will.

Marion Jones: certainly surpass, 2024, and probably by a very large margin.

Marion Jones: just a few other points on the economic picture, and then I want to move on, and we can get into some, you know, greater slides of more detail. Third quarter, delinquency, the percentage of loans that are delinquent, that decreased, by about 130 BIPS, 125 BIPS.

Marion Jones: So, it was nearly 6% of loans, almost 6% of all loans, to under 4% of all loans, considered delinquent volatility. Look, we're still tracking inflation and, and sort of the economic picture with jobs and layoffs.

Marion Jones: There's gonna be continued volatility, but we're seeing that we seem to have, you know, and a lot of the publicly traded REITs and economists are also pointing that,

Marion Jones: we're learning how to live with this volatility. So, 36% of REITs in the U.S. have increased their dividends and forecasts for the year, and that's across all sectors. Certainly, industrial REITs are leading the way, with 61

Marion Jones: Percent of those have,

Marion Jones: increased their dividends or revised… and or revised their forecasts. So, suffice it to say, you know, a lot of the metrics that we really track around

Marion Jones: cost of capital, sales volume, debt production, and bigger picture sort of economic activity as it relates to REITs and economic forecasts, and delinquency.

Marion Jones: pretty much in all areas, we're showing, some pretty significant indicators that we're, you know, just pushing past the tipping point in the cycle, and we have a lot more detail on some of the, the metrics and drivers behind that, so I will pass it back to James and Eric.

James Nelson: Thanks, Marion. That was a great overview, and looking at the macro picture before diving into the sales numbers. So, with that, let's jump right in, and…

James Nelson: what you'll see here, and as Marion, referred to, that on a dollar volume, and what we have here is all U.S. investment sales, for the major food groups, multifamily development.

James Nelson: industrial, office, and retail, but again, this is across the U.S, okay? And we are on pace right now for 510

James Nelson: billion dollars, which is up, from the, as Mary mentioned, 4%.

James Nelson: from the $391 million from last year. I think also, you see, when we're now tracking the previous 8 years, we are not going back to the, you know, the all-time peaks of 2015. We might never see that again, although never say never, but we are looking at the last cyclical peak

James Nelson: at 2021, before rates began to rise at an unprecedented rate, in 2022. So, interestingly enough.

James Nelson: Sales volume is now a little over half peak of 21, so 54% on dollar volume, and we're going to look at the number of trades next. The number of trades are,

James Nelson: 65% of what they were in 2021, and you look at that jump from

James Nelson: 24 to 25, we're now, you know, talking about 27,459 sales. That's a lot of sales activity across the country. That actually represents a 9% increase 24 over 25. We were speaking to a reporter the other day, and she was asking, she says, well, does that mean that sales values are going down? We said, no, it's really just a commentary on the

James Nelson: The size of transactions.

James Nelson: And we're going to be talking about profile of buyers, we're going to talk about some of the institutions that are getting in the game now, most notably in the office space, whereas some of the other emerging markets are seeing a lot more private investment. Usually, private investment happens in the, you know, the smaller to mid-sized deal range, where obviously the institutions

James Nelson: are very active in the large-scale activities. So, let's go ahead and move on. Eric, I know we have a lot to cover here.

James Nelson: You look at the last, you know, the actual breakdown on where is this dollar volume coming from.

James Nelson: 37%, is multifamily sales, so still, the majority of dollar volume is coming from multifamily, followed by industrial at 24%, followed by, office, which is the 16%.

James Nelson: for dollar volume. Interestingly, on deal count, industrial actually has the most trades. A lot of that smaller, shallow-based stuff, trading.

James Nelson: Office kind of maintaining that same 16%. Now, what's interesting is we're looking at Office's contributions to dollar volume, and deal count for that matter, before the pandemic and after. So, if you see, since, the pandemic, Office has only been about 18% of the share.

James Nelson: And so, yes, you know, we're kind of in line with that, but if you look at before the pandemic, the 5 years leading up to it, office accounted for almost 29% of the dollar volume, whereas multifamily was still the most active asset class with 32% on average. But the point is, there's still a lot more potential as these big trades in office start to happen. We're going to talk in a little bit about 590

James Nelson: Madison Avenue for over a billion dollars. That's certainly a great example of that. So we'll keep moving, Eric, please.

James Nelson: Okay, so let's talk about what are the top, markets for dollar volume, and again, this is…

James Nelson: A great reason why we have Mike and Susan joining us today. I know they love it when they see Dallas up top. Eric, Marion and I are… although we have national roles, we do sit here in New York, but it looks like the home team is being surpassed here, and this is not news in the third quarter, if you were all with us for the first half report.

James Nelson: Dallas just continues to drive tremendous deal volume, almost 18

James Nelson: billion dollars in trades, followed by New York, followed by LA, San Francisco, and Phoenix. San Francisco was up there in the first half of the year as a top three, but you can see that these markets are definitely all fighting their way back.

James Nelson: and driving a lot of deal flow here. So we'll keep moving here, Eric.

James Nelson: And now, okay, so…

James Nelson: We're now talking about, some of the office transactions, and Eric, you're gonna talk to us about office trends overall, talking about availability rates and the like, so if you could take us through these next few slides, that would be…

Erik Edeen: Yeah, absolutely. I'll jump in here to cover office. I think, when we talk about office, there's some really, telling trends as far as where parts of the office market are going, but it still is a market, a tale of two cities, the haves, the have-nots, and of course.

Erik Edeen: the well… well-established flight to quality that we've seen. So, the first stat here, the availability rate has declined 40 basis points, not a huge deal. What might be a big deal is it's the fifth straight quarterly drop, and the longest streak of tightening since 2016.

Erik Edeen: So, although it's choppy up and down, and not across all assets, all asset classes and all markets, in general, we think it's heading in the right direction. Second bullet puts it into the same terms, just with,

Erik Edeen: square footage rather than percentage. And then, of course, the last bullet here talking about where that leasing activity is actually happening, and that's really the trophy segment. The stat here is 12% leasing activity above the pre-COVID averages.

Erik Edeen: So, when we look about where office transactions are really, leading the way, James brought up 590 Madison in New York, and we'll take a look at some of the top transactions that happened in this quarter. Out of the top 5 transactions nationally in the third quarter, two of those were in New York.

Erik Edeen: But I think the real story here is actually San Francisco. We saw them starting to, move to the front of the pack in the last quarter.

Erik Edeen: As the tech boom, the new tech boom, the AI-led tech boom is really leading the way.

Erik Edeen: On the leasing front, but also, giving credence to the availability to transact in that market from an office standpoint. I think San Francisco was definitely a laggard coming out of the, the pandemic recovery.

Erik Edeen: But it's clearly an investable market now. It's highly dependent on what and where, but I think this volume speaks for itself, outpacing New York.

Erik Edeen: So here are those top, transactions of the third quarter. 590 Madison, first billion dollar outright sale in New York in 3 years since 2022. So there have been large billion-dollar valuation in recaps, but this was the first arm's length

Erik Edeen: full transaction, an RXR, in the game, institutional player, that's a great vote of confidence for the, you know, the trophy class, you know, the best class buildings that we have out there. 1177, 6th Avenue, also a great example of

Erik Edeen: Confidence in the office sector, Norges Bank, it's always great to see when the foreign capital starts coming back into the market, in a big way.

Erik Edeen: And then, the last one I'll touch on here is in San Francisco, Apple as the buyer of the North Mepilda Avenue portfolio. Why that's important is, if you look at the volume from the previous slide, we were looking at San Francisco being top of the market there.

Erik Edeen: A trend that we've seen in New York, across other markets, and very especially in San Francisco this year, is user buyers stepping up and buying their, buying their own headquarters or locations.

Erik Edeen: So the top four transactions for office buildings in the San Francisco market this year were all user buyers. Apple was 2 of them. There was one earlier in the second quarter that we reported on at the One Half Report.

Erik Edeen: But then the other two were a large energy company buying their headquarters for nearly a billion dollars, $985 million. That was $1,000 a foot, by the way. And then NVIDIA, in May, earlier this year, also purchased a building for their own use. So we think users stepping into the market at this period of time where the correction has clearly happened in the office pricing.

Erik Edeen: We think it's a great vote of confidence for those companies and the office asset class. That, combined with the institutional capital finding its way back into office.

Erik Edeen: really bodes well for office being able to close the gap on that, percentage of investment volume heading into office that James touched on earlier.

Erik Edeen: Set a different way, or looking at it differently here, if we think about where the major, or where the capital was coming from for office.

Erik Edeen: Pre-covid, you can see the institutional band here from 2015 to 2019 bounced around in the 30% to 40% range. In 2019, the last pre-COVID year, 36%.

Erik Edeen: Then it trickled down as office really went through a major correction.

Erik Edeen: And bottomed out in 2013 at 15%. And now we've seen two straight years of that percentage increasing. So, the last data point to point to would be the 36% in 2019.

Erik Edeen: We think there's at least, you know, another 10% of institutional capital that can be playing in this, office sector, and those deals are going to be larger, so you're going to see,

Erik Edeen: Obviously, larger big-ticket transactions as one-offs, but collectively, they're going to move the needle on the overall investment volume in that asset class.

Erik Edeen: So taking a look about… taking a look at which markets are actually performing well, we're going to take a look at something we call the busyness index. And so this is cell phone pings, that are stalled, or meaning somebody's sitting there in an office building, working for the day. And we're going to look at it in two ways.

Erik Edeen: Pre-pandemic to today, and then year over year, so we can get a sense of where are we from the previous norm, and where are the biggest movers today?

Erik Edeen: Miami, Manhattan, DC were really the top of the market, or have performed the best since 2020, meaning they have the highest level of recovery, in that… in that office busyness, the amount of office usage. But when you look at,

Erik Edeen: year over year, they're towards the bottom here, and a lot of that is because they were the first to recover, and now you're starting to see those leader markets, maybe not be able to recover that last little bit as quickly, and some of the other markets

Erik Edeen: are, are catching up quite a bit, so now we have Denver, Charlotte, Atlanta, Phoenix, and of course Dallas, leading the way.

Erik Edeen: When we look at the office availability and the direct asking rent, if you think about, the

Erik Edeen: types of spaces that are on the market. So, Manhattan, for example, we're looking at, $90 a square foot in direct asking rents there. That's actually not even exemplary of the space that has moved the best, which is the trophy, which is $100 plus all the way up to $300 a square foot, and maybe even greater in some instances.

Erik Edeen: For assets like One Vanderbilt. And it's also performing really well on a availability. We're down to just over 15%. That was 5% higher not too long ago. And then if you look at where the asking rates are the strongest, it is…

Erik Edeen: Manhattan, it's Miami, it's LA, and it's San Francisco. So the coastal markets seem to be leading the way there. But it's really not a one-size-fits-all recovery, and these markets are recovering at different rates. If you look at

Erik Edeen: The year over year, it actually looks like some markets are a bit choppier than others. And this goes back to the just… the different pace at which markets are recovering.

Erik Edeen: Some were leaders coming out of 2020, and others are now making moves, more, in recent times. So, like, San Francisco, for example, is a great example of… they were really a laggard, as that was

Erik Edeen: A market that didn't have much as far as quality of life and, and,

Erik Edeen: And leasing activity, and now those indicators are all bouncing back in the right way.

Erik Edeen: This is, the stat that we looked at at the beginning of this section, which is where today's leasing activity compares to the pre-COVID average of 2015 to 2019, so that 5-year period.

Erik Edeen: And, this shouldn't be news to anybody, but it's clear that the trophy segment is outperforming as compared to the A.

Erik Edeen: Which is outperforming over the B and C, but still clearly way off from where it was, 15 through 2019. And I think as the trophy gets leased up, you will start to see a bit of a trickle-down effect, with the best of the A getting the benefits first, and then eventually working its way down.

Erik Edeen: The office inventory is an interesting, thing to look at. There really has not been much new development,

Erik Edeen: for office in recent years, and I think that makes a lot of sense. I mean, how many developers do you know are out there trying to do spec office developments? I think with the corrections that's happened, there's just not a whole lot of that. And on the flip side of that coin would be actually the reduction in office inventory that we're seeing in a lot of places.

Erik Edeen: And here's where Manhattan, on a square footage standpoint, you know, we're up to 17 million square feet of conversions, either under construction or proposed. And then Northern Virginia and the DC markets, you're seeing the largest percentage of those markets

Erik Edeen: working or getting converted. And I think the overall theme on that is the municipalities that put the incentives into place, whether that's zoning or tax benefits are probably the two main drivers there, are the ones that are seeing the removal of the obsolete office

Erik Edeen: stock, which is only going to help the rest of the office stock, and it's also obviously providing housing in a market where there's a national housing crisis, which is a good segue back into multifamily and you, James.

James Nelson: Perfect, thank you so much. So, net absorption of multifamily units, for major U.S. markets have reached the lowest levels, since 2021.

James Nelson: While deliveries are maintaining record high levels, new construction starts are down by 47%. We're going to look at a chart on that in just a moment. Sales volumes and rental rates rise in multifamily properties since the start of 2025, so let's dig in here.

James Nelson: So, first of all, where are the multifamily sales, occurring? Once again, it is Dallas, leading the way, now with,

James Nelson: close to $8 billion in sales for multifamily, followed by San Francisco. Interestingly, and we'll let Mike and Susan obviously talk about Dallas, but San Francisco has been having a lot of activity on the multifamily side. We're hearing a lot of positive things, not just from our downtown San Francisco office, from our Palo Alto office. They're telling us that, kind of going back to the office.

James Nelson: Which we think is a big driver for the need for housing and retail, that our leasing brokers have never been so busy. Ironically, this, drive, this AI boom is actually requiring a need for more office space and more people, to create these products, but that's really driving a lot of demand in the multifamily sector, so that's been great to see. LA, really big market, geographically, and you see the number of trades.

James Nelson: actually had the most sales, again, maybe not the highest ticket sizes, and that's by virtue of the fact that

James Nelson: You know, certainly there's a lot of private activity there. New York, we could spend, and we do spend a whole, session doing a podcast, podcast, I've got a podcast on the brain, a state of the market for, New York, because there's so much more, to go into as far as, fair market versus rent regulation versus, developments with tax abatements, so we'll…

James Nelson: We should have a recording of that if you want to go back and hear that, but let's keep moving here.

James Nelson: Okay, so let's talk about construction starts, and I know there's been a lot of talk about this huge supply of inventory coming online. Maybe some of you read that Wall Street Journal article about how rents are softening across the country, and, not to,

James Nelson: question or criticize that, but it was a little bit light on data and a little bit heavy on anecdotes of, you know.

James Nelson: renters saying that things are too expensive, that young professionals can't find jobs, and so they're moving back with their parents, but if you look at, really, what we think is driving not only the supply dynamics, but the demand.

James Nelson: Looking at deliveries, that's the purple. Look in 2024, over 350,000 housing units delivered in 2024. Okay, so that's probably what we're feeling right now, is that's a lot of apartments to come online.

James Nelson: A lot to absorb, I mean, in this last cycle since 2015, by far the most, but look how much that drops off in 25, 26, and even 27. I mean, by 27,

James Nelson: you know, by now, if you have not started a project, you know, probably, you're gonna be pushed out into 2028. But, new deliveries are dropping dramatically. A lot of that has to do with rates, again, shooting up in,

James Nelson: mid-22, debt equity getting more expensive. Again, if you can go buy core existing assets with higher yields, are you going to build the core? Maybe not so much. And so, this is an obviously very specific market by market, but we see this as an opportunity, as in a couple years, would not surprise us if rents will, again, continue to rise in large part. Okay, we'll keep going here.

James Nelson: Occupancy, effective rents, this is really across the country, so, just showing that we've got 90% overall occupancy for the multifamily, space, and you can see that the average rent across the country is $2 per foot. Okay, we'll keep going here.

James Nelson: And Eric, I might even skip over some of these slides. I mean, you do have some significant multifamily sales here. Now, this is interesting. JP Morgan making a major acquisition in Manhattan. I know there's been some questions out there. Is there still going to be institutional appetite here in New York? Also, depending on who we're going to find out our next mayor's going to be, but look.

James Nelson: JP Morgan takes down a $244 million apartment building at a 4 cap, for a

James Nelson: a newer construction asset. You can see that Standard, buys from, Graystar. We talked a lot of multifamily activity, in San Francisco. This is a largely…

James Nelson: affordable, portfolio here, big ticket price, another multifamily trade in San Francisco, MetLife.

James Nelson: stepping up and buying in San Francisco, so seeing a lot of institutional appetite there. And then Waterton, based out of Chicago, buying in LA. So, rounding out the top 5 sales in Brooklyn, Fettner, along with the consortium, buying, a newer construction for $211 million, and there you can kind of see, with that, a yield of over 6%. So, we are seeing, with the exception of the JP Morgan.

James Nelson: Oregon acquisition, some of these trades, you know, north of a 5-6 cap. We're in the market right now with 394 units in Tampa.

James Nelson: We are offering that at, at north of a 5 cap. So, so you can start to see some more yield out there, which could be an interesting thing to look at, especially with, some anticipated rate cuts that we hope we will continue to receive. Okay, we'll keep going here, Eric.

James Nelson: This is a lot of information to digest, and we will share this all with you, but needless to say, a lot of talk about why the rents are too high in New York. It's because we have a vacancy rate of 3%. That is the lowest in the country, followed by Chicago, San Francisco Bay Area in the mid-4%.

James Nelson: There are some markets like Phoenix, Austin, Denver, and Dallas at over 10%, so we can talk about that, but you can see the spread in affordability. And then what kind of inventory is being brought online? So, again, we talked about the supply that's happening.

James Nelson: In the next year or two, but that should drop off significantly.

James Nelson: Who are the buyers? These are largely private buyers. You can see that pretty much historically, even going back to 2019, over two-thirds of the buyers for multifamily were private. So, the institutions have certainly played in this space.

James Nelson: You know, here we have the cross-border activity at 5%. Just anecdotally, though, we are still seeing a lot of foreign investment, and will be interesting to hear if

James Nelson: Mike and Susan are seeing that as well down in Dallas, but we're certainly seeing it here in New York. The Japanese continue to buy at multifamily, but again, mostly on the private side. We'll keep going here.

James Nelson: We're looking at the higher cost of ownership, which should continue to push, to the renter pool, so as of the third quarter, the average monthly-monthly

James Nelson: mortgage payments are $825 more expensive than the average multifamily rent across the U.S, so multifamily is poised to continue to attract an increased renter pool that is delaying home buying due to the higher costs of ownership.

James Nelson: And of course, that, that could very well change as, as, rates, are, continue to be, hopefully compressed. Okay.

James Nelson: With that, we can talk a little bit about retail. I don't want to spend too much time on this, because I want to make sure that Mike and Susan have plenty of airtime, but needless to say, interesting to see that LA

James Nelson: leading the way for retail sales, if you all did not see, there is a major, major retail, and, hospitality development at One Beverly Hills.

James Nelson: Group out of Miami with some foreign capital. Super exciting, to see a large-scale

James Nelson: retail development there, and I believe it's an Amman Hotel, so, certainly.

James Nelson: A great mixed-use project there. New York, still, retail on the high streets, in some cases, Madison Avenue, SoHo, we're seeing vacancy rates as low as they were before the pandemic, so that is certainly encouraging. And Chicago, if you all have seen some reports, there was a nice article

James Nelson: I believe this one was in the journal as well, talking about Miracle Mile, and retailers coming back as quality of life is improving in Chicago, so that is great to see. Okay, we'll keep going here.

James Nelson: We're looking at vacancy rates here and where the asking rents are, so Miami has the tightest, retail market with vacancy rate, I mean, this is pretty unbelievable, sub-4%.

James Nelson: Followed by Austin, looks like you all might need some more retail there, but you can see that the inventory is being added there, and you kind of see where the direct asking rents are. Miami, not surprisingly, have some of the highest rents in the country. We'll keep going here, Eric.

James Nelson: Retailers continue to shift away from regional malls, and you can now see where most of these retailers are, and the vacancy by property type. So, regency malls have a 14% vacancy rate, super regionals under 10%. You look at where the tightest, retail vacancy is, outlet centers.

James Nelson: I just heard, Steve Yoloff, who's the CEO of Tanger, speak on how incredibly well the outlets are doing.

James Nelson: This time I will bring up the podcast. We're gonna have him come on our podcast shortly, to talk about what's going on in the outlet centers, which is pretty exciting. But we see a lot of action in certainly power centers, lifestyle centers. Sure, we can keep on going. I'll roll with this, Eric, thank you.

James Nelson: And retail buyer proposition, a lot of, guess what, private buyers, although that being said, you see that the institutions are definitely stepping up. So in 2024, institutional investment only accounted for 7% of the buyers.

James Nelson: For retail, almost tripling their exposure to retail, so that is a positive thing to see.

James Nelson: keep going here. Okay, capital markets trends. Okay. Eric, do you want to cover some of this as well, or do we want to just talk about… we thought… we used to have a slide that just had all the buyer profiles for each market.

James Nelson: But we're now talking about where are the most active buyers across the, the country and the sellers. So, Eric, anything to point out here of note?

Erik Edeen: Yeah, I think, well, as far as the top buyer segments, this is, you know, take a look at cross-border, where is that capital going? I mean, I don't think it's a big surprise for us to see New York at the top of that list. It's typically seen as the world's piggy bank, a safe place to keep and park capital. We'd obviously love to see that

Erik Edeen: increase. I think,

Erik Edeen: it's been decreasing since, you know, the last peak in 2015, but we're glad to see a lot of that come back. I think as far as where,

Erik Edeen: where these other asset or investor pools are coming from is really because the snapshot we're looking at is a little bit smaller, it might not tell a complete story. It might just be more aligned with the types of deals that were available at that time. So I don't think we need to spend a ton of time on that.

James Nelson: Yeah, I mean, and sometimes you see…

James Nelson: you know, foreign investors are most active selling in New York, but they're also the most active buying. So, you know, it would be a concern if you had a bunch of foreign,

James Nelson: parties selling out of New York and maybe buying elsewhere, but it sounds like they're just trading and very actively, and again, interesting to see where institutional capital flows are going. Denver, Dallas, Charlotte, private buyers. I mean, to us, these are more emerging markets, such as Austin, Chicago, Phoenix.

James Nelson: So those are sometimes interesting to see as well, but we'll keep moving here.

Erik Edeen: Yeah, the only one I was going to point out is just the… the users, which I… the top 4 transactions in San Francisco this year all being user buyers of their offices, is clearly creating quite a… quite a big, increase as compared to other markets on the user front.

James Nelson: Wonderful.

James Nelson: Okay, Marin, do you wanna, do you wanna, address this one, just where CMBS Capital's flowing? Because this is kind of interesting as well.

Marion Jones: Sure. So, you know, we saw a huge increase in CMBS activity fourth quarter of last year, and then really throughout this year.

Marion Jones: Clearly, and they've been, they're finding a lot of competition in the marketplace, CMBS lenders are, so, it's interesting to watch CMBS issuance, because we get a really good proxy into the rest of the market, because it's publicly available.

Marion Jones: And certainly a lot of, activity in New York, and some of these are some bigger ticket deals, like some of the investment sales that are happening at,

Marion Jones: larger price points. So the, New York, I think, part of why that volume is so high is it really connects to some office, transactions that are of.

Marion Jones: larger magnitude, which is great, which is healthy for that market. There's a pretty good diversity across, you know, other major markets and regions.

Marion Jones: There are, you know, what I would say is that, just while we're on this slide, and we can move on quickly, is that, this is… this is a great proxy into, the rest of the debt, market, but there is a tremendous amount of competition, and I think we're gonna find

Marion Jones: towards the end of this year, just how clearly the banks have come back into the market and are really competing with CMBS.

Marion Jones: So you're gonna see that in some of these markets, where it looks like there's been a little bit less CMBS volume, man, the, the money center banks and the regional banks, they're the ones getting those deals, so it's interesting to see how, some of the larger ticket transactions where the risk allocation maybe is a little bit easier on the CMBS side, maybe office in New York in certain cases, where there's a looming large-scale refi.

Marion Jones: In other places where the dollar size might be a better fit for regional or money center banks, that don't have to do large syndications, you'll see those really picking up market share significantly.

James Nelson: Great commentary, very helpful. Okay, Mike and Susan, on to you. Market, Spotlight, Dallas, and you might, as a bonus, you might even get a little commentary on Austin. So,

James Nelson: Susan, would you like to kick this off and maybe just talk about some of the capital flows that are happening in Dallas, and where the activity is?

Susan Gwin Burks: You bet. Thank you, James. Well, as you can see from the chart on the left, when you combine all the asset classes, that overall transaction volume is up 35%, and the number of transactions is up 26% compared

Susan Gwin Burks: to last year, 2024. So, as we mentioned before, you see us rising, and we're very happy for that, because we were strapped for the past few years, certainly, in the market.

Susan Gwin Burks: the percentage shifts really are signaling that the Dallas-Fort Worth sales market recorded 220 transactions, and those were valued at $5 billion in total dollar volume in Q3.

Susan Gwin Burks: And that, although that is going to represent 34% decrease in dollar volume, and an additional 37% decrease in transaction count compared to Q2 of this year. The good news is that 2025 is on pace

Susan Gwin Burks: To see a 15% increase in dollar volume.

Susan Gwin Burks: and a 10% increase in transaction count when annualized compared to 2024. So we're certainly moving in the right direction, and again, very relieved for that.

Susan Gwin Burks: The chart on the right is an indication that we have a bit of a way to go to that 2021 level, as you mentioned before, James, on another slide. But we're definitely trending upward, and we believe that this is going to continue through 26 and beyond.

Susan Gwin Burks: How far beyond, we don't know, but we'd love to have another great run, for sure.

Susan Gwin Burks: The office and industrial sectors gained momentum this quarter. However, multifamily retail and development sales have cooled.

Susan Gwin Burks: some, and probably, needed to cool. As you saw the vacancy on the multifamily, we've just got a lot of inventory on the ground. We've got a lot of developers sitting there that want to go out with their projects. Construction financing has been difficult, to get.

Susan Gwin Burks: Or to pay the rate that was there, so we're gonna see some easing in that, certainly.

Susan Gwin Burks: As everyone knows, DFW is resilient, certainly the ones of us that are here.

Susan Gwin Burks: And our corporate relocations and expansions continue to lead the way and drive the market stabilization, and with strength in our premium assets, and valued opportunities are certainly emerging for our investors as well.

Susan Gwin Burks: The next slide shows… I'm going to focus here on resi conversions, actually, because that really… and again, focusing on the CBD in Dallas, this is really the hot ticket for us, and it really serves the purpose of not only bringing that residential

Susan Gwin Burks: component.

Susan Gwin Burks: Needed downtown, but also to take some of the inventory off that is, you know, obsolete in some extents, but certainly some of the newer product, it's working out really well for conversions.

Susan Gwin Burks: But the Sinclair, a mixed-use conversion, it was formerly Energy Plaza, built in the early 80s, and as you can see, there are 49, floors.

Susan Gwin Burks: 27 have been converted to residential, and 22 have stayed office. So, the cost of that renovation was about $300 million. It is certainly the most upscale of the resi conversions in… it's really high, high end. It's a beautiful, beautiful property.

Susan Gwin Burks: 901 Main Street. This one is Bank America Plaza.

Susan Gwin Burks: And it has been purchased recently, as have the four blocks surrounding it.

Susan Gwin Burks: We're all excited about this. The mixed-use conversion on this is going to be office, it's going to remain office, and… because it is all office now, but it will, convert into some hotel, some retail, and a parking garage that will be on one of those vacant lots purchased.

Susan Gwin Burks: And it will have a sky bridge over to the building. So we just see some extreme improvement there in an area of town where our convention center and a lot of growth is happening, some real exciting, positive things in Dallas.

Susan Gwin Burks: This was a 400… or will be a $400 million… $409 million renovation, and, TIF money, $103 million of TIF was secured.

Susan Gwin Burks: The last one here is not…

Michael Kennedy: Sorry, go ahead, finish up, sorry.

Susan Gwin Burks: That's okay. The last one is Santander Tower, and this is right in the heart of downtown, and this has been an excellent success story. This was the old Thanksgiving Tower, for those of you all that remember Thanksgiving Tower. It was bought,

Susan Gwin Burks: for $55 a square foot, and the conversion that has happened in this building, that was 20 years ago, but the conversion that's happened in this building.

Susan Gwin Burks: Is amazing. It has 291 units that have been converted, just

Susan Gwin Burks: through the end of last year, and it's been so successful that, we are going to bring on another 105 units in that asset this year. 50-story building, and just a beautiful story, and a beautiful building in our skyline.

Michael Kennedy: So I thought, you know, bringing up, Uptown is kind of the flip side of downtown, which Susan just went through.

Michael Kennedy: You know, Uptown is really a story of high-value office that is leasing quickly. There's not as much conversion, obviously. The high watermark in 2025 was the…

Michael Kennedy: Link in Uptown, which is about a 212,000 square foot building that sold for $218 million, and it was sold with tenants that were all signed post-COVID.

Michael Kennedy: It was really the, you know, one of the top deals in the country, and it shows that it's really two cities here. You've got Clyde Morin Park, the Deck Park.

Michael Kennedy: with downtown Dallas, with its urban redevelopment and new unit conversions coming in, and then Uptown.

Michael Kennedy: where there's a huge demand for, you know, what Eric was talking about earlier, that kind of flight to quality Uber level of quality product, and there's going to be more built right next to us. We've got the Bank of America Tower

Michael Kennedy: Coming up next to our project here in Uptown, Goldman Sachs is 50% done with their new campus by the, Perot Museum, so you've got, really two very different markets there for office, separated by the, the Woodall Rogers Deck Park there.

Susan Gwin Burks: Those are great comments, Mike, and so much so that the benefit here is going to be, with Clyde Warren Park, bringing downtown and Uptown together. Dallas Downtown Inc, people are really focusing on

Susan Gwin Burks: making our downtown one large downtown, with Uptown, with the farmer's market, with the convention center, a union arena, and the Cedars. So, we're just kind of expanding it, which is going to be very exciting, and what you see on this sheet is kind of some highlights of that.

Susan Gwin Burks: You know, approximately four and a half

Susan Gwin Burks: million square feet of office product has been converted or demolished since 2010, and that is a gain in 6… roughly 6,000 multifamily units and 4,000 hotel keys. And our current multifamily inventory is a little over 10,000 units.

Susan Gwin Burks: moving to 12, you know, soon, 15 soon, and that's across 45 buildings as it sits, and currently our occupancy is about, as we saw before, 80… 89% citywide, but about the same here, 89%.

Susan Gwin Burks: Occupancy.

Susan Gwin Burks: You know, we're poised for… with all of this, is becoming a great live-work-play community, and that's…

Susan Gwin Burks: playing out. The population in downtown is about 1,000 employees greater than it was per week in the first half of this year. That signals people are back to work. The mandate's been given, whether it's all week or whether it's a hybrid of some kind, you're going to get those pings for that. And so, it's more positive.

Susan Gwin Burks: And another healthy uptick is that leasing agents at this point are seeing a lot of activity, and we should have positive net absorption in downtown this year.

Susan Gwin Burks: I'll just briefly say two more quick things.

Susan Gwin Burks: Our, officials, our city officials, our mayor, the property owners in downtown, the organizations.

Susan Gwin Burks: Everybody's pulling and rowing in the same direction, and what that's really been is a commitment by some of the same developers that have believed in downtown for so long, and they continue.

Marion Jones: Two.

Susan Gwin Burks: believe and put the money there. And so, what that growth is saying now is that we've got approximately 3,600 more multifamily units and 398 hotel keys in the pipeline.

Susan Gwin Burks: So, it's all positive, it's growing. And again, lastly, I'd be remiss if I didn't mention the K. Bailey Hutchinson,

Susan Gwin Burks: Convention Center.

Susan Gwin Burks: It is a redevelopment project. $3 billion in funding has been secured through hotel occupancy tax revenue, and it's predicted that the expansion is going to create a demand for another 4,000 hotel keys. So, as you can see, we're excited, and we're thankful that we're here and that we've been able to see this growth.

Susan Gwin Burks: So, I'll hand it over to Mike, and he's going to talk about some of the other aspects of our growth.

Michael Kennedy: A great indicator is always how expensive it is to rent a U-Haul in your location, whether it's inbound or outbound migration. It's very inexpensive to rent a U-Haul leaving Dallas, Fort Worth, or really most places in Texas, because there are so many coming in. Bringing new families.

Michael Kennedy: A lot of new family formation occurring, job growth, so…

Michael Kennedy: A lot of that, is reflected in these sort of higher-end, large, mixed-use communities that are really coming to the forefront, branded. These are a couple

Michael Kennedy: actually that Starwood acquired from Heinz at the beginning of the year, and they really indicate that strength. Home sales in Texas have been…

Michael Kennedy: flat.

Michael Kennedy: And it's been difficult, but part of the reason is not only high rates, it's because rents in apartments were so cheap, because of all those units that have hit the ground. That is now starting to become absorbed, and people are looking at

Michael Kennedy: two years down the road, and we're gonna be in another shortage of multifamily and rental, because nothing is being really teed up, right now. So…

Michael Kennedy: And as those rents have firmed up, the housing sale velocity and lot sales and those things are picking up. So these two developments, Myrtle Creek, which is in Waxahachie, south of Dallas, and Revelry, which is actually east of Austin, are indicative

Michael Kennedy: Of these kind of live-work-play environments, where you've got integrated retail, you've got multifamily, you've got

Michael Kennedy: build-to-rent, you've got single-family home, and you really have a push toward a lifestyle that is great for families, has, you know, things for kids to do. And this… this is becoming more, the norm than sort of isolated, one-off type.

Michael Kennedy: developments.

Michael Kennedy: If you could hit the next slide, Eric.

Michael Kennedy: The other, you know, kind of megatrend in Texas, this happens to be in Austin, is destination retail and entertainment, and the fact that it is lagging

Michael Kennedy: all the new people that are here. I mean, we call it a retail desert, food desert.

Michael Kennedy: There's areas where these huge neighborhoods have come in, and there's one Jersey Mike's subs, and one donut shop, and there's really not much serving these communities, so…

Michael Kennedy: This is Gloss Entratus, which is a mixed-use development east of Austin that is really kind of coming up with employment. There's flex development for employers, but also.

Michael Kennedy: restaurants that are themed, open areas that kind of, you know, create, you know, areas where kids and families can come, medical office, all in a more kind of a walkable environment. So there's a real demand for this kind of product. I can say that on the capital markets side.

Michael Kennedy: The, we get more calls right now for new retail development and acquisition and redevelopment of existing retail than anything else here in this last quarter, and that's kind of an indicator of all the people that have come, and that trend is…

Michael Kennedy: Time to continue with the large employers in Texas, like Tesla, SpaceX, Boring Company, Samsung, Toyota in San Antonio.

Michael Kennedy: And then in Dallas, all of the financial companies that are coming here, and I mentioned earlier, Bank of America and

Michael Kennedy: Goldman Sachs are doing brand new facilities right here in Uptown Dallas, so it's that, you know, kind of growth. Also, filmmaking. A huge amount of that Hollywood business.

Michael Kennedy: is coming here. If you've watched Landman, that's Dallas-Fort Worth, that's Fort Worth, you know, you're seeing a lot of that production, and all the infrastructure, and hotel stays, and food and beverage, and theme park that kind of come with that, coming to Texas.

Susan Gwin Burks: I would just add that one thing here. Our retail, we are… we only have a 5% vacancy in retail.

Susan Gwin Burks: So, it has become a big focus, especially with, 1031 clients. They have moved over from where they would have looked before, in office and some light industrial. They're really looking at retail, which is one reason I think that,

Susan Gwin Burks: You know, food group, if you will, is having so much success.

Susan Gwin Burks: And then I think, you know, we're just going to see a lot more from the outside. Texas, we are seeing more out-of-state investors here. You had asked that, James, I think, before. More out-of-state, a lot from California, a lot, Portland.

Susan Gwin Burks: New York, New Jersey, and Florida recently.

Susan Gwin Burks: And, you know, we just think that that's gonna be a great,

Susan Gwin Burks: field for us to… to plot, if you will. And also, globally, we are seeing foreign investors take a look at Dallas again, where it had cooled.

Susan Gwin Burks: So, just to… A couple more tidbits there.

James Nelson: Yeah, thank you, Susan. Thank you, Mike. What an incredible overview, and thank you for sharing, and we can certainly, we've got a couple minutes left, we can open up for questions if you want to put it in the Q&A or the chat.

James Nelson: While we're doing that, Susan and Mike, maybe it'd just be helpful for our audience. I mean, when we talk about the Dallas-Fort Worth…

James Nelson: market, it is so vast, and we talk about uptown, we talk about downtown, but then I know you talk about a lot of the demand going north, to Preston Oaks, is it Plano? So, when you think about the CBD and where the opportunity is.

James Nelson: I mean, it seems like it is a little bit spread out. Is it kind of one big contiguous opportunity, or are you kind of driving from one pocket to the other to find these…

Michael Kennedy: Well, it's super, you know, it's segmented, but it's all related. As Susan was saying, downtown Dallas is definitely in… a lot of that legacy office is converting to residential, it's becoming more walkable, and with the convention center and all the new development happening on that sort of city hall side of town, it's going to become

Michael Kennedy: a destination again, but…

Michael Kennedy: Clearly, near to downtown. We talked about Uptown and that huge sale on the Link building and the push for more luxury stuff here. That just continues up the tollway and up I-75. You get to the Knox-Henderson node in the north, which is in huge demand for ultra-luxury development and very, you know, high price on acquisitions.

Michael Kennedy: Plano, Frisco… Frisco's its own place now. Frisco is now home of

Michael Kennedy: the Star, Jerry Jones's headquarters. It's where JBP is developing the mix, right there across from the Star, which is going to be a really incredibly high-end

Michael Kennedy: development. It's under construction. We were on the phone about that just, just yesterday. So, it's… it's a… you have to look at the whole thing to see the growth, yet…

Michael Kennedy: these are very distinct markets with different things going on in them, and Dallas is that sort of redevelopment play downtown, and some of these other places that we're talking about are clearly kind of a wealth, you know, flight to quality for new development and inbound migration of, you know, high-paying jobs.

James Nelson: And Susan, maybe… oh, yeah, go ahead, Susan.

Susan Gwin Burks: So… I was just gonna add that

Susan Gwin Burks: as in all major cities, what will inhibit our growth a bit is going to be our infrastructure, and it's going to be the roads, the highways, and you can only move so much in a day, and so I think that's why the,

Susan Gwin Burks: Mike mentioned Frisco. When you've seen such a well-planned city, you know, the walkability, the strength of the retail, the strength of the housing, the executive housing, the entertainment, we're going to see the live-work-play environments, and we're going to see more people live around

Susan Gwin Burks: You know, those areas for sure.

Michael Kennedy: You have to, because, you know, it's not practical, as practical, to drive from a suburb

Michael Kennedy: to your job anymore. You could spend all day in your car, so to create… Frisco is a huge magnet for big companies, you know, continues to grow. You've got to provide more, not only multifamily, but luxury, you know, units, condo units, townhome, as well as residential, that is a quick drive, or a quick walk to this stuff. Otherwise.

Michael Kennedy: it ceases to function. So that's definitely happening due to constrictions from highway.

James Nelson: Perfect. No, that's very helpful, and a lot of different places to look, for sure. So, with just a minute or two left, Susan, maybe you can field this question about, since there is no new supply coming on spec, when do you see something changing? What needs to change for new office development? As Mike mentioned, you know, B of A, Goldman Sachs, developing for themselves, but are we gonna see

James Nelson: time. I mean, here in New York, Boston Properties is going vertical with an 800,000 square foot tower at 343 Madison without an anchor. A little difficult to finance and do that. I think they're building that off their balance sheet, but

James Nelson: Do you see a world in Dallas where you see a spec office returning?

Susan Gwin Burks: Yes, and quite frankly, we're surprised that we haven't had one of those announcements yet. And I think what

Susan Gwin Burks: what we're seeing is the Class A and the Trophy properties are definitely leasing and filling up, and so then that's pushing some of that down to the Bs.

Susan Gwin Burks: which is great, because, you know, it's raising all of the ships. And so then, when we get that opportunity, we have seen something in Preston Center, as far as a brand new, building that's been brought to market.

Susan Gwin Burks: And it's, almost 100% leased, and it's, it's a large building. Lincoln Property, actually developed that.

Susan Gwin Burks: So, yes, we are gonna see that, and I do think that, because of interest rates, that has been, you know, part of the holdoff, but now that we're gonna see some more, you know, downing of those rates, release of the interest rates, we're gonna have, a lot more success, and I, again, I'm surprised we haven't. We're holding our breath.

James Nelson: Wonderful. I have one parting question. I'm gonna put Marian and Eric on the spot.

James Nelson: And I'm gonna throw my hat in the ring with this as well. So we are right now, this is through 3 quarters, if you annualize dollar volume for the U.S, we are on pace. We expect this year is gonna end with $410 billion in sales across the major asset classes across the U.S. So the question is.

James Nelson: come January 1st, or when we release our year-end reports, so give us till maybe mid-end of January, but

James Nelson: Do you think that $410 billion is going to hold, or where do you see the market ending this year? And we can decide if we want to do this Price is Right style as far as closest without going over. But, Marion, ladies first, where do you see the year ending for total dollar volume?

Marion Jones: Well, so, you know, I feel like this is, like, a little bit of a layup, James, because,

Marion Jones: You know, we are seeing the increases uptick quarterly, and you know, even in our own, you know, numbers internally, we're seeing every month.

Marion Jones: sort of eclipsed the last. So when we annualize things to get to the, you know, number that you're suggesting.

Marion Jones: what we might not be taking into account is, like, a booming fourth quarter. So, is it booming? Is it just a… is it a marginal improvement? I don't know, but I suspect that we will exceed, you know, the annualized number, and I'll throw out, you know, a price of right that will exceed it by, 15%.

Marion Jones: So, that's gonna be my… that's gonna be my guess.

James Nelson: Okay, I'm gonna do the math here. Eric, your number… okay, so Marion is at $471 billion.

James Nelson: Where, where are you,

James Nelson: Pegging your number for your end.

Erik Edeen: I'm gonna piggyback off of everything that Marion said. I think that institutional capital's coming back. I think

Erik Edeen: The people are comfortable with where interest rates are, and if they get better, which we think they should, it's only going to add fuel to that fire.

Erik Edeen: I'm gonna say… and add that to fourth quarter is typically the strongest quarter of the year, so if you're annualizing, you're not even getting the benefit of that. I'm gonna say a nice round 4… what's see, 475? Should I go 474 or something like that? No, I won't do that. 450.

James Nelson: 450. Okay, I'm gonna go 45. I'm gonna… I'm gonna go on the high side there, so we'll see.

Michael Kennedy: bet on this?

James Nelson: back. I'm writing them down.

Michael Kennedy: Yeah, I want to bet on this.

James Nelson: Adventure a guess.

Michael Kennedy: Make some money.

James Nelson: Okay.

James Nelson: All right, well, thank you all for joining. We really appreciate your, joining this discussion with us. We will share this deck, as always, and we look forward to being a resource to you across the country, and especially, feel free, more questions on Dallas, to reach out to Susan and Mike. I'd be happy to be of assistance. Thanks again, everyone.

Michael Kennedy: Thank you.

Marion Jones: Thanks, everyone.