By: Head of Data Strategy at LightBox, Manus Clancy
Over the last two weeks, the news has been peppered almost daily with announcements of new Cabinet nominees from President-elect Trump’s transition team.
The most impactful for the bond markets and for commercial real estate was Scott Bessent for Treasury Secretary. It did not bring the same level of attention or angst—for some—as other nominees. (Perhaps that’s a good thing).
The nominee has stated a commitment to reducing the U.S. deficit to 3% of GDP by 2028. That would cut the deficit by about $1 trillion per year, if successful. Bessent has also called for the U.S. GDP to surpass 3%.
Those positions—especially the deficit-cutting declaration—quickly got the attention of the bond markets.
Since the 50-basis point rate cut in mid-September, yields on long-dated Treasury yields had been climbing. After bottoming at about 3.62% shortly after that rate cut, the yield on the 10-year had risen steadily, reaching nearly 4.5% in mid-November. The climb was due to several factors: investors becoming increasingly alarmed by the size of the U.S. debt; better-than-expected U.S. economic data; and concerns that inflation could re-ignite due to either forthcoming U.S. tariffs or a too-dovish Fed.
The Bessent nomination reversed that narrative in short order. In the few days following the announcement, the yield on the 10-year dropped sharply, hitting 4.20% around Thanksgiving.
The decline brought welcome relief to the CRE market, which had turned upbeat in September as long-term Treasury yields hit their lows bringing property owners looking to refinance maturing debt and potential buyers looking for low cost of capital to the table.
Some enthusiasm faded over the last two months as rates climbed but the Bessent announcement seemed to have revived some CRE animal spirits.
Apartment Sales Continue in Big Numbers
The bell cow for the CRE market continues to be the multifamily segment. Six months ago, the CRE market would tap off at about 30 property sales of $100 million or more. This month, the apartment segment alone saw 20 sales of $100 million or more. (There were also nearly 30 sales of between $50 million and $100 million.)
Leading the way were two big portfolio sales: a $1 billion acquisition of 60 affordable housing communities by Standard Communities and a $330 million purchase of eight, mostly-Sunbelt, apartments by QuadReal Property Group. Ventas also paid $725 million for a 20-property senior housing portfolio.
Particularly active was the Denver area where there were seven sales of $90 million or more.
The bottom line is that despite the headlines describing higher multifamily distress rates tied to the tribulations of syndicators that bought at peak values in 2021, the apartment sales market soldiers on.
Office Sector Shows Signs of Life
Who had an office for the most highly valued commercial real estate property in 2024? (Don’t be shy). Yes, the trophy asset known as One Vanderbilt—which shadows Grand Central Terminal in Manhattan—was valued at $4.7 billion. An 11% stake in the property was acquired by Mori Property from Sl Green.
That wasn’t the only bright spot on the office landscape in November. Nine-figure sales took place in across the country—notably in New York (three, in addition to the One Vanderbilt), Austin (Texas), Aventura (Florida), SeaTac (Washington) and Charlotte (North Carolina).
Industrial – Investors Still Willing to Pay Up
The industrial segment also saw some sizable sales. Peakstone paid nearly $500 million for a 51-property portfolio and Cabot Properties acquired a four-property California portfolio for over $200 million from Blackstone. The latter was noteworthy for its $302 per square foot price tag.
Land Sales: Eye-Popping Numbers Continue for Data Center Acquisitions
Oh, to be a landowner near a big power station along the eastern seaboard. This month saw another handful of big-ticket land sales with the anticipation of data center development. Digital Realty Trust acquired land in Charlotte for $160 million. Meanwhile, Amazon paid $74 million for 348 acres in Becker, MN.
Retail’s White Knight
Our favorite retail story in November was the Spinoso Real Estate acquisition of the White Marsh Mall near Baltimore. The firm paid $190 million to acquire the 1.2 million square-foot mall out of receivership. The sale will resolve a big, previously distressed CMBS loan. Spinoso has been a White Knight for several large mall purchases.
The November LightBox CRE Activity Index is set to release this week, providing insights into recent deal velocity. The CRE market continues to demonstrate resilience and adaptability, with standout activity across multifamily, office, industrial, and retail sectors. As 2024 winds down, the focus remains on navigating challenges while seizing opportunities in a shifting economic landscape.
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