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Current Season: First Draft Live
Between economic whiplash, shifting policies and market volatility that changes by the hour, you need industry insights that cut through the noise. That's exactly why we're launching First Draft Live, a new weekly series that breaks down what's happening, why it matters and what you need to know to do better business.
Join us live on Bisnow.com every Friday at 12:30 PM ET / 9:30AM PT for conversations with the industry's sharpest minds discussing the week's most critical stories, or catch the replay right afterwards — here on your podcast app of choice.
Okay. Welcome to First Draft Live. I'm Mark Bonner, Bisnow's editor in chief live from New York. My guest today is Spencer Levy, Global Client Strategist and Senior Economic Advisor at CBRE. Also, host of the podcast, The Weekly Take, and someone who spends his days translating macro noise into actual capital decisions.
Mark Bonner:Spencer, welcome back.
Spencer Levy:Mark, thanks for having me.
Mark Bonner:So listen. Before we get into anything else, last time you were in that chair closing out 2025, you told me Patrick Ewing ruined your childhood, and you weren't gonna believe in the New York Knicks again until they brought home the actual trophy. Not a banner, not a moment, the trophy. Well, they brought home the Larry O'Brien championship trophy, Spencer. So I believe I'm owed the pleasure of watching you eat that one right here, right now before we do anything else.
Spencer Levy:Well, all I'll say is this, Patrick Ewing, you're now off the hook.
Mark Bonner:Okay. Business. Your last appearance in December was our final first draft live of 2025. You called the year, quote, controlled turbulence. Things broke.
Mark Bonner:Confidence didn't come back, but activity sure did cautiously, selectively, and usually with a lawyer in the room. Well, we're at the halfway point now, and it felt like the right moment to bring you back because this week, Bisnow published our halftime report. 62 commercial real estate executives all across the globe answering one question. Are you moving or waiting? Here's the short version of what happened between then and now.
Mark Bonner:Q1 was the best start commercial real estate has had in years. Dollars 113,000,000,000 in volume, the strongest opening since before the rate shock. For about twelve weeks, the recovery looked less like hope and more like a fact. Then The US went to war with Iran. The ten year crossed 4.5%.
Mark Bonner:SEER resales fell 33% in April alone. And as of this week, the ceasefire that was supposed to close that chapter is falling apart again. So Spencer, was controlled turbulence ever a real framework? Or was it just a nice way of describing a year that hadn't been properly tested yet?
Spencer Levy:The way that I look at the world is like this. There's always macro noise. And obviously, this year, there's more than many years, but let's face it. There's been macro noise since COVID. And a lot of it.
Spencer Levy:And so we have learned how to adjust. And I think the most simple way to put this is the single most important adjustment is with respect to interest rates. And while the ten year treasury today is hovering around four and a half, maybe a little higher, the market's adjusted. That's the way I've suggested it. And the the ten year treasury is the most important number in finance.
Spencer Levy:I've been tracking that number, multiple times a day, every day of my career, because it tells you what is the cost of capital relative to the risk free rate. And I think that people have adjusted to that four to four and a half, even higher treasury where it's been hovering. Now I will say this, and I'm not gonna get political here, but I I know for a fact that the ten year t is the most important number, not just to me, but to this administration. And so they're doing everything they can to keep that number down through both market action because they can determine which treasuries they sell and don't to try to keep the the rate down. But also, is a key factor in what's happening geopolitically.
Spencer Levy:I'm not gonna suggest it doesn't go through the minds of a lot of the decision makers. Like, if we do this, how much is it gonna impact the treasury, which then has the spillover effects on its impact on commercial real estate volume and the value of securities.
Mark Bonner:You know, some people would call that noise. Right? And last time that you were on the show, Spencer, you told everyone to ignore the noise and follow the durable demand drivers. You loved New York, San Francisco, Miami, Dallas, and the Midwest, specifically Columbus on the strength of the intel plant in that Mexico to Canada rail corridor, and Chicago, believe it or not, on Fulton Market and River North even with the office headlines working against it. Our halftime survey went back into the field with those same markets in the mix.
Mark Bonner:And your list got a mixed report card, I have to say. We've got a New York brokerage voice on record asking why anyone would invest in the Big Apple right now. And Dallas Fort Worth split straight down the middle, Dallas being the darling of US real estate the last year or two. One source moving forward, another hitting pause in the same market. So my question to you is, did the noise actually break the drivers this time?
Mark Bonner:And which of your markets still hold up, and what do you want back?
Spencer Levy:Well, when I answer that question, first of all, I still believe very strongly and always will in durable demand drivers. Let me give you a let me tell you a story before I get to your direct answer. So I had on my podcast the other day, the CEO of Digital Realty, Andy Powers, and we debated where you should put a data center. And the data center debate is between the clusters that exist in Northern Virginia, New York, San Francisco, and then every place else. Dallas is another cluster.
Spencer Levy:The every place else are places that cheap water, cheap power, and maybe a better regulatory environment because we're seeing the gates go up all over the country for people who don't want data centers.
Mark Bonner:Okay. 14 states have moratoriums and more coming online probably in the next few months. Keep going.
Spencer Levy:Right. But this this so that's the playing field. We're talking about the same playing field here. But what he what I said was for the technology behind AI, you don't have to be in a cluster. You can be in a secondary location because that's where you build the machine.
Spencer Levy:And he goes, well, that's right. But after you build the machine, guess where you have to be? In the cluster. Because latency being close to another machine like that and another data center matters. And he said, that's why our company will only buy in these major clusters.
Spencer Levy:And I think that was a eye opening moment for me because I think we can all follow the news of the day and say, well, I'm gonna put a data center right in the middle of Lake Michigan because it's got a lot of water there and it's cold up there and just as an example. But, really, you have to take a look at your cost and time horizon of your capital. If the cost and time horizon of your capital is longer term, maybe going into one of these places where it's better in the short term might not be your best choice. And that's why I like New York, San Francisco, Miami, and parts of Chicago because over the long term, they're going to outperform the rest because they have durable demand drivers led by labor, capital, and infrastructure.
Mark Bonner:So you're defending your list. And if so, I wouldn't blame you, but which one is doing the most work right now, and is it carrying the others that aren't on your list?
Spencer Levy:Well, everything is a shade of which asset class, which sub market.
Mark Bonner:Because I
Spencer Levy:don't like markets. I like sub markets. And so when I say I like San Francisco office, I really like certain parts of San Francisco office, not all of it. Now I do like all of its multifamily, so there's a contrast. I do like all of its industrial, so there's a contrast.
Spencer Levy:But I think in office, you need to be very selective in which markets you choose. In the markets that I choose, looking at Jackson Square as an example in San Francisco or looking at Wynwood in Miami, places like that. What I really look at is what I call, and again, there's a thousand terms out there, but this is mine, which I probably stole from somebody, CBD adjacent. Because a lot of the CBDs, however you define it, have these 30 to 70 story towers that are really challenged. But when you go to some of these CBD adjacent areas in markets like Charlotte, in markets like Los Angeles.
Spencer Levy:You're gonna find some incredible places for office in addition to other forms of real estate.
Mark Bonner:Right. And Denver is one of those places that has a lot of empty buildings in its own downtown. Once a darling of commercial real estate, no longer the case. I mean, the what are your thoughts on Denver with all the troubles that its downtown has suffered the last year or two?
Spencer Levy:I I I don't think Denver is any different than Boston, Los Angeles, and a lot of other markets where its CBD area has been more challenged than the other. So I'm not gonna throw Denver under the bus because Denver is a great market. Denver is a great market over the long term because it's one of the best live work play markets there is with the Ski Mountains an hour to two hours away, with having this great tech sector, with having great transportation, having a great airport there there, in addition to other forms of transportation. So I'm not throwing if you want to get a guest to throw Denver under the bus, it's not gonna be this guy.
Mark Bonner:Okay. I'm not throwing Denver under the bus either, but I'm gonna move on. Back in December, you gave your own audience three options for what might unlock 2026. Cooler inflation, clearer policy, or fatigue. Basically, deciding waiting is riskier than acting.
Mark Bonner:Our halftime survey answered that question without knowing it was answering you. The line that stuck with me is this one, and I quote, the ones moving aren't moving because conditions improved. They just got tired of waiting. So, Spencer, is fatigue a real strategy, or is it just repricing risk with better PR?
Spencer Levy:Wow. That's an interesting way to put it. But I would say that the investors that I deal with are the most sophisticated investors in the world, and they have choices. And that's the thing, investors with choices. Because if you don't have choice and maybe some form of fatigue of I gotta get this money out the door, that may come into place.
Spencer Levy:I'm not suggesting that that that urge doesn't exist. It does in some segments. But most of the investors I deal with is say, I have choice. And what does choice look like? So if you're a big insurance company, to use an example of one of the main funders of a big part of our industry, and you're in the core end of the segment, you say, okay, I could buy a core asset or I can build the core, and maybe I can get to my magical 7% yield on cost, is sort of the starting point for a lot of development, or I could just buy a municipal bond and put a little leverage on it and get the same return.
Spencer Levy:That's the problem at the core end of the segment. That's why core has been so much more difficult to raise money for than core plus than value add and opportunistic because then you're not competing with risk free or almost risk free alternatives. So to me, our investors have simply changed their asset type allocation and their market allocation. Now I think they're changing asset type more than they're changing market because much like that conversation I had with the CEO of Digital Realty, I think people are still very careful about market. And I think not saying they're not careful about asset type too, but I think they'll have more liberty on asset type.
Spencer Levy:And the best example of that, of course, is industrial outdoor storage, which I'm proud to say we just had an episode of The Weekly Take this morning on that. But the reason why people like that asset type is because it's the new self storage. Because self storage fifteen or twenty years ago was really a mom and pop business, weekly managed. And then they institutionalized it, they improved the management, they improved the rents and voila, people made billions of dollars in self storage. They see the same opportunity in industrial outdoor storage.
Spencer Levy:So I think that people, when you're talking about secondary market, iOS really looks interesting because it needs to either be a pertinent to significant nodes of transportation, most notably shipping, but also it needs to be a pertinent to significant nodes of manufacturing, which could be further inland, but still needs to be transportation pertinent.
Mark Bonner:So if it's not genuine conviction out there, and I'm not saying that there isn't genuine conviction in iOS and some of these smaller asset types that are fast growing. But it again, if it's not genuine conviction, what's actually driving the movers right now? Because at some point in time, iOS using that as an example, that is gonna run out of runway. And then what? Are we hoping that the macro look gets a little clearer or that or is there going to be, an actual reckoning at that point when the runway ends for things like iOS?
Spencer Levy:There is no reckoning coming.
Mark Bonner:The reason No reckoning coming.
Spencer Levy:There's no reckoning coming because I used to run the restructuring services group at CBRE fifteen years ago, and we were sitting there with catcher's mitts waiting for the sky to fall of all the bad debt deals. And guess what? Didn't really happen. And a lot of people are doing the same thing now, but what people don't realize is that what happened over the last four years? What happened over the last four years is that the value of the most troubled assets and I I'm not gonna hear throwing office under the bus, but let's just call a fact to fact office devaluation happened over the last four years.
Spencer Levy:And when that devaluation ended, banks, particularly secondary banks, had put enough risk capital against it so that they weren't damaged. So they're not under financial pressure to fire sale this stuff, and a lot of people put more capital in. And now you know what the best time to buy office was? Last year. You know the second time best time to buy office?
Spencer Levy:This year because it's still a disfavored asset class, but the pendulum went too far. So, Mark, to go directly to your question, the market is always evolving. So when I got into this business thirty years ago, something like 40% of all institutional investment was in the office sector. Then it went down to 25. Then it went to 20.
Spencer Levy:I think now it's a 12 if you look at the Nacreave Index. Okay? That at least that's where the indicator is going. So the market is always moving. Retail had its day in in the doghouse too ten years ago.
Spencer Levy:What's one of the most popular asset classes today? Retail. What's more popular? You know, these other small asset classes, student housing, senior housing. The beauty of commercial real estate is it's always evolving by asset type and market, and I dare I say it, the pendulum always swings too far and will come back.
Mark Bonner:But let's touch on the reckoning or and and let's get your opinion on this. You flagged the debt wall back in December. Nearly $1,000,000,000,000 coming due. You shrugged off Fannie Freddie privatization completely. Your words, quote, it does not make me lose a minute of sleep because the government guarantee holds either way.
Mark Bonner:We just had Crefsi's Linda Pendergast on the show last week. She's in her final weeks before retirement. Her numbers say $875,000,000,000 is due this year alone. Only about a quarter of it is refinanced so far, and her own members can agree on whether the extensions holding this up are a bridge to recovery or a delay of the reckoning. Does your December confidence still hold up?
Mark Bonner:Is the wall behaving the way you expected it, Spencer?
Spencer Levy:Yes. Period. And so now that I've said yes, period. Look. We always like to aggregate things in big numbers like you just did $875,000,000,000 maturity wall.
Spencer Levy:Which asset classes are worse? Can these be refinanced, are they gonna put new equity in, kicking the can down the road. I've heard it all. What I do know is this, is resiliency within the commercial real estate market is much greater today than it was fifteen, twenty years ago. And then we got past that maturity wall.
Spencer Levy:We're gonna get past it again through a similar type of resiliency through the combination of both asset improvement as we've seen in office. We're gonna see new money coming into the market, and that new money is not just institutional, but family offices is a very big piece of the market. I even see foreign money coming back because foreign money in a typical year is 1515% of the market. Last year was less than four. I see it coming back, in part because of some of the geopolitical noise, but also because there's no new supply or the amount of new supply relative to historic norms in every asset class is near lows.
Spencer Levy:Not not in multifamily yet because there's still a lot of legacy building, but nevertheless, that's going down significantly too. So the lack of new supply is going to create opportunity where the distress in the market is pushing the other way, but the lack of new supply is pushing back towards opportunity.
Mark Bonner:Deferred distress. And I just wanna say the wall is not a figment of my imagination. Right? It is not a media narrative. And so what I wanna ask you, Spencer, and and please correct the record, cause I think a lot of people have heard the wall is coming, the wall is coming, the wall is coming.
Mark Bonner:Hasn't come to your point. Agree with you. But what does it look like when it does surface? And if it does come, when do you think it's gonna happen? Because we can't extend and pretend forever.
Spencer Levy:Well, first of all, you should know that when I was a kid, there were I only knew two Pink Floyd albums, The Wall and The Dark Side of the Moon. And then I got older, and I started listening to their older stuff from the sixties and seventies, I'm a gunman and a few other albums. Amazing. They are much more talented than I thought when I was a kid. But nevertheless
Mark Bonner:I'm an animals guy personally, but keep going. Well, the house of the rising sun. Yeah.
Spencer Levy:Which by the way, an interesting little side note. Nobody knows who actually wrote that song. It's as a has no author.
Mark Bonner:Oh, I was I was talking about animals, the Pink Floyd album.
Spencer Levy:Oh, I was talking about the band, the animals
Mark Bonner:with I do like them too. I mean, I am from New Orleans and you know? Okay. Anyway, keep going. Keep going.
Spencer Levy:In any event, I'm not suggesting that you're wrong mathematically. What I am suggesting is if history is a guide, the last time we had this wall of maturities issue, we got through it in a similar fashion to how I see it today. But we have one additional factor here that's going to help us. And that additional factor is the factor that the banks are much healthier than they were back then. So we don't have that hanging over our heads, and we have almost no new supply.
Spencer Levy:Now granted, there was almost no new supply back then too. I agree. I knew you were gonna go there. I read your mind. But nevertheless, I think that we're in much better shape.
Spencer Levy:I think there's a lot of capital sitting on the sidelines that can provide rescue capital. So I can give you just, you know, tangible examples of how rescue capital has gotten cheaper, and that's in the price of preferred equity. The price of preferred equity has come down by several 100 basis points in the last couple of years because more people were getting into that sector. That's how the market works. It overreacts to what they see as opportunity.
Spencer Levy:It also overreacts to what they see as risk.
Mark Bonner:So the last time you you were on the show, Spencer, you were adamant that you weren't gonna call data centers a bubble. You used uncertainty and hilariously irrational exuberance, quote unquote, if you had to reach for a word of all. And the risk you actually fight wasn't overbuilding. It was technological disruption. You brought up the deep seek movement, the Chinese chip news that ruined one manufacturer's whole year.
Mark Bonner:Since then, things have changed. And nearly $20,000,000,000 data center campus in North Carolina got scrapped outright after a county moratorium fight, one of many happening coast to coast in The United States. That's not technological disruption. That's local politics killing a deal. And that's been spreading over the last few months.
Mark Bonner:14 states now moratoriums. There are a few others that are considering. We'll see how the year ends on this front. All of that happened in the last six to seven months. Does that change your read on data centers?
Mark Bonner:Is the risk to data centers still the thing you were worried about in December or is it something new?
Spencer Levy:Let me just remind our audience what business we're in. We're in the supply and demand business. All that's happened in the last six months is that demand for data center space has gone up significantly, and there's been increased risk on new supply. What does that mean? It means that existing data centers are worth more.
Mark Bonner:Right. But let let me remind our view our listeners that you're also in the agony and ecstasy business. Right? And it seems like there's a lot more agony than ecstasy the last six months. So do do these political headwinds, do these local politics, do these power grid restraints give you any pause for this multitrillion dollar build out?
Spencer Levy:No. Go ahead. I I know. And the reason is because less supply means existing supply is working and they may find additional markets. I mean, I've mentioned this on my last trip, but I'll be explicit now.
Spencer Levy:I'm a big believer in Southern Europe and Portugal, and Spain, which need data centers, and they have all the the lines that come from Northern Virginia. I'm even a believer in Brazil, which has the same underwater sea cables and is under built in data centers. So I'm more bullish today than I was six months ago on data centers, and the lack of new supply actually makes me more bullish. And, you know, you take a look at things like, you know, again, I'm not here to get political, but you look at things like rent control, okay, which is something that everybody in multifamily fears, and I can understand why if you're impacted by it. But if you are in a segment of multifamily that's not impacted by rent control, your supply goes down of new supply and your existing product is worth more.
Spencer Levy:So again, we can be as complicated as we'd like to be, but ultimately less supply means existing supply is worth more.
Mark Bonner:Spencer, in December, your unlock for 2026 was specific. Inflation cooling toward that 2% number and the short end of the curve coming down from around three and a half percent towards something closer to two. Neither of those things has happened. If anything, the Fed's newly released minutes show real division. Nine of 18 members leaning toward a hike this year, and Warsh himself won't even submit a personal rate projection.
Mark Bonner:So is your December unlock still the right one, or does the back half of this year need a different trigger entirely?
Spencer Levy:I am very proud of those predictions I get right professionally. And among those predictions I've gotten right professionally, include calling retail, five years ago when everybody else was running the other way. I called San Francisco coming back two years ago when a lot of people were running the other way. I'm calling New York now when a lot of people are running the other way. Okay?
Spencer Levy:So I'm just I I don't hide the ball on my predictions. I've been really bad on inflation. Alright? I called inflation lower forever back five years ago, and that didn't work out. I call I called lower inflation this year, that didn't work out.
Spencer Levy:So of my macro predictions, I'm not proud of my inflation predictions. I am proud of my micro predictions. So look. I mean, the bottom line is inflation is not in check because of the disruption in The Middle East, and that's going to maintain high inflation because the price of oil flows through so many other things in the economy. Now we did have a cooler CPI report this morning notwithstanding that.
Spencer Levy:I'm not saying but as I often say, one data point does not a trend make. And so higher inflation, higher interest rates indefinitely is our base prediction at this point. Now do we think that it's gonna cool somewhat? Yes. Do we think the ten year is gonna come down somewhat?
Spencer Levy:Yes. But it's not gonna come down a lot. So this is why when we began today's conversation, I began it by saying the market has adjusted to higher interest rates, has adjusted to higher inflation. Would I like it to be lower? You're darn tooting to quote Fargo.
Spencer Levy:The bottom line is we don't see that happening in the near term, and the obvious short term catalyst is and hopefully, it's short term is the disruption in The Middle East.
Mark Bonner:When do you see that coming to an end? We've won the war five or six times at this point. The straight has been open or closed a dozen times at this point. Every week and every month this goes on, it gets worse and worse for capital markets on the commercial real estate side of things. Are you worried?
Mark Bonner:I'm sure I'm you might were you one of these people who thought this was gonna be an in and out job by by by The US?
Spencer Levy:Me be clear on how I'm going to answer this question. I have no idea when the Middle Eastern crisis is going to end. I will say that the market has already adjusted in many ways to it, not completely, but you can see the volatility in the markets has lessened over time as the Middle East crisis continues. And you're seeing it in a variety of ways, the stock market being one of them, of course. So I'm not going to predict an end to it.
Spencer Levy:I'm just gonna say what everybody else says. I was hoping it ends soon, but I'm not predicting anything there. All I'm saying is that the market has adjusted to the volatility, not completely, but largely.
Mark Bonner:We're running out of time, Spencer, but I would do wanna land on something that we we a little game that we played in December played a little bit of hot or not. Hot or not for 2026. Let's see how you did. I'm gonna read you your own call category by category, and you tell me if it holds up, if you're revising it for the back half of the year. So in December, you said office was hot.
Mark Bonner:Still hot?
Spencer Levy:Yes. Hot hotter.
Mark Bonner:Hotter. Why?
Spencer Levy:I just did an episode of the weekly take, and I was very fortunate. It was one of the great episodes we've done with Larry Silverstein and Mary Anne Tye. Larry, Silverstein is the developer of the World Trade Center. And he owned it when it went down, and he's rebuilt it. And that's why his book's called The Rising.
Spencer Levy:It was a op if you can have optimism, he, hey, brought a lot of optimism to it.
Mark Bonner:It's a great book. Yeah.
Spencer Levy:In any event, the crux of the matter is for the best office and the best submarkets, it's a great time to be in office. It's that large category of second tier office and second tier submarkets where the problem lies. So I hotter than it was before.
Mark Bonner:Hotter.
Spencer Levy:Gotcha. Because institutions are coming back to actually believe that.
Mark Bonner:Industrial. You said it was getting hotter. How do you feel now?
Spencer Levy:We are looking for a second half of this year of increasing demand on the leasing side. But I think it is still going to be very much a tale of two worlds of the new stuff versus the old stuff. Because if you look at demand last year, everything that was built 2020 and beyond, tremendous absorption. The older product, not as much. So I still think that there is a bit of a reckoning between the new stuff and the old stuff, but overall very positive in industrial.
Mark Bonner:Multifamily, you had it at getting hotter. How do you feel about it now with the new housing bill?
Spencer Levy:I am neutral at the moment on multi housing, and the reason why I'm neutral on on multi housing, this is not to get political, but I think that the fall off in two things. Number one, we had a demographic bubble in terms of having less young people that would rent. And second, we had a fall off in immigration, and those are two significant demand drivers in multifamily. So I'm neutral there. I am more positive going forward on new development because of the housing bill.
Mark Bonner:Retail, you had it as hot in December. How do you feel now?
Spencer Levy:Well, as I'm being, you know, mister honest here and said I blew it on inflation and didn't blow it retail. I'm doubling down because people are still cycling out of other asset classes and see retail. It's a great place to be. And of the places with no new supply, retail may lead the charge of no new supply It's still hard to build, still too expensive to build, and yields are coming down. I just took a look at the yields this morning on all the asset classes.
Spencer Levy:I think retail came down the most in terms of cap rate compression.
Mark Bonner:Are you still hot on data centers?
Spencer Levy:Let me me give you the
Mark Bonner:Sent a trick question. You ready? Hotter. Hotter.
Spencer Levy:Because, you know, people think that, you know, they're gonna, you know, kill kill data centers because they have no new supply. Wrong answer. Existing data centers just got more valuable. And I'm not now I'm not hoping for no new supply. I'm not hoping for moratoriums, but I'm just saying that it it made existing supply more valuable.
Mark Bonner:But all these other things that we talked about, these headwinds, they have to be rectified at some point in time. Right?
Spencer Levy:This is part I I this is goes well beyond the scope of this show. But the the fight the fight against data centers, I hate to say it has nothing to do with data centers. It is a it is a broader Us versus them, right versus left type of battle that's just manifesting itself in a new arena.
Mark Bonner:You were really hot on private credit in December. How are you feeling about it now?
Spencer Levy:I would say that private credit has had a reckoning of sorts on the corporate side, not on the real estate side. People need to understand that. Real estate private credit has done fine. It's the corporate private credit where it has had the reckoning and you saw some negative headlines. So I'm still bullish on private credit within the real estate sector.
Spencer Levy:I'll leave corporate private credit to others.
Mark Bonner:And the hottest of all, your words, was Family Office Capital.
Spencer Levy:I stand behind that. And the reason is time horizon. Because when I ask people what they do, I ask them not what their cost of capital is. I ask them the time horizon. And family office capital is very often intergenerational.
Spencer Levy:They can hold this stuff forever. They're sort of like REITs in the sense of they they're indefinite life vehicles, infinite life vehicles. But the beauty of of family offices as opposed to to REITs is that they can do anything. REITs really have to stay in their swim lane both by asset classes and they shy away from new development. The reason why I love family offices is they can build when nobody else can.
Spencer Levy:And three years from now, the person with the new product wins. So I'm still very bullish on family office money.
Mark Bonner:Distress investing. You were cold on this. How are you feeling now?
Spencer Levy:I haven't changed my answer. May maybe maybe one step towards neutral. If there's cold, neutral, and hot, but I would say cold to neutral on distress investing because I think the market has proven to be resilient and will remain so.
Mark Bonner:Okay. Moving through a couple here. Sunbelt, you were warm on the short term, hot on the long term. How are you feeling today?
Spencer Levy:I feel similar. I do see some cracks in that armor as it relates to certain asset types and certain markets. But nevertheless, over the long term, demographics win in terms of the total number of people and the quality of the workforce. I'll use one example there. I'll use Phoenix.
Spencer Levy:And when I was a kid, people used to go to Arizona State University, maybe not necessarily for the academics. But what happened? They went to Arizona. Arizona changed the laws and now all the smart kids in Arizona get free rides at Arizona State. And what happened as a result is Tempe is the number one submarket in Phoenix.
Spencer Levy:That's not an accident, that's Arizona State up in its game. And so, that's just one example before you talk about retirees and other people wanna move to Arizona because of the better climate, the tax environment, and other things. But that's the kind of place where they have durable demand drivers that's gonna drive Phoenix forward.
Mark Bonner:Gateway cities. You were warm on the short term, hot on the long term. I think you you it sounds like you're hot on gateways. I'm not hot.
Spencer Levy:I hotter than I was in December. Once again, a lot of people were not fans of New York, San Francisco, LA. I mean, we go right down the list. Listen, each one of those markets has tough submarkets. All of them.
Spencer Levy:Dallas has tough submarkets. But over the long term, durable demand drivers win. And the more institutional investors I talk to, while they may have expanded their asset type allocation, they've narrowed their market allocation.
Mark Bonner:Right. I mean, speaking of New York, I mean, what do you make of the situation with the local commercial real estate industry versus, the mayor? A lot of vitriol there. A lot of I mean, a lot of people say that this is an impossible place to do business, that we're losing, that the city's in in deep doo doo as they say. What do you make of it?
Spencer Levy:I had two terrific guests on my show. I I I've had hundreds of terrific guests, but I'm just gonna quote two of them. I'm gonna quote Sam Zell, and I'm gonna quote Larry Silverstein, who were both asked the same question or they gave the same answer. New York's death has been written a thousand times during their careers that were both long legendary careers. It didn't happen then.
Spencer Levy:It ain't happened today. It actually I am not worried at all about the long term future of New York, even though in the short term, there'll be some submarkets and some sub asset types that may suffer in the short term. In the long term, New York's gonna be just fine.
Mark Bonner:Right. And look, the same thing could be said about the New York Knicks. They were written off for a thousand times all throughout your life, Spencer. The trophy's real. Say it.
Spencer Levy:Patrick Ewing, you're off the hook. That's as far as I'm gonna go.
Mark Bonner:Spencer, I thank you so much for coming back to close the loop on this one and for finally getting to celebrate a Knicks trophy on the record, my friend.
Spencer Levy:Very good. And, mister Ewing, you're off the hook.
Mark Bonner:To everyone catching this on social media, on the podcast feed, or on your commute, I wanna thank you for listening. This is First Draft Live. We'll see you next time.