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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. It's Friday, May 1. I'm Mark Bisnow, editor in chief coming to you live from New York. Before we get started, this episode of First Draft Live is presented by Agora.
Mark Bonner:Whether you're managing deals, raising capital, or growing your portfolio, Agora is your trusted platform for seamless real estate investment management. Visit agorareal.com to learn more. That's Agora, real.com. Okay. Let's dive in.
Mark Bonner:Yesterday afternoon, the Fed voted to hold rates for the third straight meeting. The vote split eight to four. That's the most dissent since 1992. And in what may have been Jerome Powell's final act of chair, the statement said world. So so world.
Mark Bonner:So to So we're here's what that means for commercial real estate. The rate relief that the industry has been underwriting toward, the cuts that were supposed to close refi gaps, restart stalled deals, and let that maturity wall finally exhale, it isn't coming. Markets are now pricing in zero cuts for the rest of 2026, maybe even in the 2027. The war in question started on February 28 when The US and Israel struck Iran. Since then, the Strait Of Hormuz, through which 20% of the world's oil moves, has been running at roughly 5% of normal traffic.
Mark Bonner:2,000 ships are currently stranded in The Gulf as we speak. The World Bank said yesterday that energy prices are on pace to surge 24% this year. Gas is now well over $4 a gallon all across America, and economists expect it to stay there. For CRE, the Iran war isn't a geopolitical sidebar. It's the reason the Fed is frozen.
Mark Bonner:It's the reason inflation forecast keep moving up, and it's the reason the window that was supposed to open for this market in 2026 is staying shut, at least partially. But the reality is that's the new pressure on top of the old one. The old one, The system absorbed it quietly and expensively. Somewhere between 1.5 and $2,000,000,000,000 in loans got modified, restructured or pushed forward since 2023. CMBS office delinquency had a twenty five year record and more than a 100,000,000,000 and CMBS maturities come due this year and more than half aren't expected to pay off.
Mark Bonner:The lawyers, they have a phrase for where we are right now. Fix it in '26 or lose it. Well, fixing it just got a little bit harder. That's why we have Chad Lavender with us today. Chad has done more than $37,000,000,000 in transactions.
Mark Bonner:He's the president of Capital Markets for North America at Newmark. And right now, he's in the middle of more of these conversations than almost anyone else that I know. Chad, welcome to First Draft Live.
Chad Lavender:Thanks for having me. This is gonna be fun. Such a rosy rosy preload.
Mark Bonner:Well, yeah. Chad, we took a stroll through the macro picture. So I'm gonna I'm gonna get you to bring us down to the ground level because here's the tension I keep coming back to. Newmark just reported yesterday all time q one revenue record. Capital markets up 45%.
Mark Bonner:Total debt volumes up a 112% year over year. By any measure, that's a market that's moving. But the question I want to ask is this, moving towards what? Because a 112% jump in debt volumes tells me a lot of that is the maturity wall forcing transactions, sponsors refinancing out of necessity, maybe not conviction. And that was before yesterday's Fed decision, before markets priced out every cut through 2027.
Mark Bonner:So where you sit right now in live transactions, what does this market actually feel like? Is it recovery? Is it resolution? Tell tell us about this, Chad.
Chad Lavender:Yeah. So that's a great question. I mean, from where we see it today, the market's very constructive. I'd say the owners in the real estate market are pretty fatigued with kind of thinking through rates and exactly what's gonna happen. You know, I think they've all kind of resolved to the fact that hope is in a business plan that we have to go and do what's right asset by asset.
Chad Lavender:Know, refi activity is up 52% since pre pandemic levels. 70% of loan volume was refinances last year, so a large portion. I would say the bank market is up, you know, over 50% year over year and at pre pandemic levels. So you have a super healthy bank market. You have a lot of deposits in the bank that need to be put to work.
Chad Lavender:You've had a lot of payoffs the last few years. So the banks are really putting out a lot more liquidity in the market as well as the debt fund market just seems to get more robust every day. So you have a very constructive debt market that is, know, a lot of times right now, if you have the time and have the ability, your best counterparty right now is to refinance. And at the same time, investors are looking at their assets, their portfolios, and whether they're a closed end fund or not, there's different reasons for people to do asset sales. And a lot of people are actually taking profits, which is a ton of fun to see, and they've kind of gone through their business plan.
Chad Lavender:A lot of what people are also focused on is GDP growth. So what's happening in our broader economy, we're gonna go head down, what's happening here where I'm investing and what's happened at the corner of the block where my asset is. So, we had a good jobs report, our unemployment data was really great. So I would say that you're trying to muddle your way through a lot of conflicting data points and everyone's looking at their specific asset and how that affects them. We're seeing record office rates in a lot of markets, really Dallas, San Francisco, New York.
Chad Lavender:So that's really driving the Class A side of the office market. We're seeing tepid rent growth on the multifamily side, except in really the Bay and New York and the Northeast Midwest, we're seeing positive signs there. But the Southeast Sunbelt is really struggling to get through supply and we're starting to see some green shoots there on the rate growth side. So different indicators across the board. The good thing about real estate is it's such an optimistic industry and everyone looks forward on from an investment perspective.
Chad Lavender:So people are looking forward, people are optimistic about the future and trying to, you know, we have $378,000,000,000 of dry powder raise to deploy into the market. So people are trying to get active and put money to work.
Mark Bonner:So how much of this activity that you're seeing is genuinely new capital deployment versus sponsors just trying to get out from under a bad capital stack?
Chad Lavender:Well, and and I'd say there's one other thing. We're seeing this new trend of recapitalization, continuation vehicles, GP led deals, where the GP wants to stay on these deals and live out their business plan, but their LPs have a time constraint and need to get recapped out. So we're seeing a lot of recapitalizations as well, which is really something we've seen really intensify over the last twelve months. And I think the next twelve months, we'll see that trend continue.
Mark Bonner:So let's talk about the debt wall because that's not behind us. It's here. The NBA says 875,000,000,000 in commercial mortgages will mature this year. Of the roughly 100,000,000,000, it's specifically in CMBS. Morningstar estimates that more than half won't pay off.
Mark Bonner:$25,000,000,000 has already passed maturity without resolution. But here's the number that really matters. Trap says 76,600,000,000 in CMBS debt will hit hard deadlines this year. No extensions are are left. No runway.
Mark Bonner:It feels like a binary choice, refi or sell. So how do you see that dynamic playing out, Chad? And where did the stress actually go?
Chad Lavender:Well, I would say we've also seen those hard deadlines extend. I mean, if you have a troubled loan, your best lenders traditionally your current lender. So we've seen our biggest competitor in the debt market is people extending their loans for doing new financings. So I think we'll see that a lot of those continue to get worked out. There's a lot of capital really looking for loan sales and loan acquisition opportunities.
Chad Lavender:We did the signature bank deal on behalf of the FDIC for nearly $60,000,000,000 and people are looking for things to do, not necessarily in that scale, but we're not seeing a lot of that product come to market. We're helping lots of clients on loan sales, but I don't think we foresee like some some wave actually cresting and falling by any means. I think it'll be more of the same, just kind of constructive refinances, sales, and workouts with their lenders.
Mark Bonner:Yeah. I mean, I was doing some research earlier this week and, you know, more than half of regional banks are carrying CRE concentration above 300% of capital. Are those institutions actually recognizing their exposure?
Chad Lavender:You know, we have a, I guess, a group that does that specifically, an appraisal group, and we haven't seen a lot of issues there. We're seeing banks being even the regional banks be very front footed trying to put out more loans. And I think they're getting payoffs where they need them. So if they have a great sponsor that's doing the right thing and the business performance is taking a little longer, they're working with those sponsors. And we haven't seen really an impairment, outside of a couple asset classes really on the low quality end of the spectrum.
Chad Lavender:But if you have high quality assets and good markets, we're not seeing many issues there.
Mark Bonner:You know, this extend and pretend dynamic, which we've been living with for at least the last thirty six months, I keep bringing this up and people keep quietly and loudly telling me, go away. You don't know what you're talking about. This is a media obsession. Tell me, Chad, do I not know what I'm talking about here? Because it feels like this is very real.
Mark Bonner:It feels like this can has been kicked down the road a 100 times. What's the situation here? Can this can be kicked again? I mean, numbers are screaming in our faces that this is a very real dynamic that the industry and the market at large hasn't quite rectified yet. What's happening here?
Chad Lavender:Yeah. I mean, I think the lenders are being constructive, so they understand that there may have been a lot of new supply get built in this market and then it's leasing up. So they expect the next twelve months to be better than the past twelve months. So I think you have smart people that are constructive on both sides. We're seeing lots of people do pay downs on their loans to kind of get them in order or continue to pay debt service.
Chad Lavender:So I think it's going to be more of the same and we're expecting big things from a performance perspective on really industrial multifamily and all the alts the second half of the year. So we're expecting to watch people grow their NOI out of this and be able to refinance or sell throughout the year. And we've seen a lot of that take place so far too.
Mark Bonner:Do you think the media is obsessed with this? Where are they getting it wrong?
Chad Lavender:Tell me.
Mark Bonner:I'm obsessed with what I'm seeing in the spreadsheets that I analyze on a weekly basis, and I'm fascinated as to why this continues to be kicked down the road.
Chad Lavender:Well, I think people are optimistic about the future. So if you have GDP growth, you think you're going to be able to grow your rates no matter what asset class, and you're having supply continue to dwindle across the board. So the fundamental backdrop gets a little better every month. And I think that's why people are being constructive on how they take care of those situations. Plus a ton of liquidity on the debt side as well.
Mark Bonner:We're gonna we're gonna get the liquidity in just a second here. But if you're just tuning in, this episode of First Draft Live is presented by Agora. We're here with Chad Lavender, president of Capital Markets for North America Newmark. If you have questions, send them in, and we'll get to as many as we can. Liquidity, let's get into it, Chad.
Mark Bonner:CMBS issuance finished 2025 roughly a 140% above the year before. Newmark just reported debt volumes up 112 in q one. By the headline numbers, the lending market is open. The structure underneath has changed. Banks are back as you say, but as but at 12% market share.
Mark Bonner:Private debt funds are now the most aggressive lender in the market, highest LTV, fewest covenants, fastest close. The ten year is sitting right around 4.4% this morning. So where is that liquidity actually available right now? And where are borrowers still hitting a wall?
Chad Lavender:Yeah. So, I mean, if you look at it across the board, you know, data center debt volumes up 200%, office up about 75%, retail up over 50%. So, housing has always been the darling sector that's sucking up the most capital and commercial real estate. I think debt overall is up over 40% year over year. So there continues to be more liquidity, certainly on the debt fund side.
Chad Lavender:All those debt funds also have repo loans. So they're sixty, seventy, 80% advanced by banks. So the repo lending market is very, very good, and they have a lot of back leverage where they're able to go put out debt at attractive rates. And we've seen more players come in the market, spreads tighten. When the treasury blew out to four fifty, we saw spreads come in kind of across the board.
Chad Lavender:So the market's being very, very reactionary, very constructive, and, you know, almost insatiable from a debt perspective.
Mark Bonner:Private debt funds are winning deals on speed and certainty. Is that permanent? Or are they just filling a gap?
Chad Lavender:No. I think, you know, the banks and, you know, some of the regulated lenders have always been a little slower and have their timeline and process. And the debt funds generally have an equity book as well. So they understand the real estate really well. They're able to underwrite quickly and really have kind of a template with a lot of borrowers to go stamp out loans and go do more.
Mark Bonner:Look, let's talk about price discovery. Investment sales were still 11% below pre pandemic levels at the end of Q3 last year. Two thirds of deals were under 100,000,000. Cap rates have reset unevenly. And CBRE's 16% volume forecast for this year was written before February 28, before the war, before yesterday's Fed hold, before markets priced out every cut.
Mark Bonner:So where is genuine price discovery actually happening?
Chad Lavender:Yeah. I mean, it's happening every day. I'd say it's been pretty constant in most asset classes for the past really ninety, one hundred and twenty days. It's been pretty flat. So like multi has been pretty flat across the board.
Chad Lavender:You know, we've done a ton of BOVs, taken a lot of assets to market, we're consistently hitting our range. So I wouldn't say there's a lot of price discovery in the multifamily market, industrial market. We know where stuff's going to price. Doesn't mean that a seller wants to sell it there, but that's their decision. So I would say there isn't as much price discovery as we had even one hundred and twenty days ago.
Chad Lavender:The market's pretty constructive. People understand where pricing is where their insurance is shaking out, what's gonna happen on the tax front. So you kinda know how to underwrite. Most groups are underwriting similarly. It's just kinda cost of capital is winning the day.
Mark Bonner:Are buyers waiting for better fundamentals, or are they just waiting for someone to blink?
Chad Lavender:Well, I think they're waiting for better fundamentals. Certainly, in the Sun Belt, like in the multifamily side, people wanna see those green shoots and see rents starting to stabilize and grow. And when we see that, we see bitter pools double when you start to see those green shoots and cap rates compress a hair. So the market's looking at those last five, ten leases incessantly on exactly what the future is gonna look like from a rate growth perspective and NOI growth perspective. The office side of the market is unbelievable on the Class A side, how quickly rents are growing.
Chad Lavender:And very, very deep institutional bidder pools on the A side. BC still pretty gapped out, it's a double digit cap rate. It's not a whole lot of fun to sell those, but people can repurpose them for residential, turn them down, build industrial, you know, lots of different options with a double digit cash on cash day one. So a lot of private capital focus there. So you can clear stuff if it's priced right.
Chad Lavender:Industrial market's ultra efficient right now. There's not enough large box assets across the country, so we're starting to see development for the million square foot big bombers because that's where a bunch of the demand is and there's no spec development or availability across the country. So that's kind of a fun change. The senior housing market's off the charts. I think our team's closed over 14,000,000,000 so far this year, so we've been super busy.
Chad Lavender:Know, NOI is supposed to grow 15% to 18% per Green Street for the next three years. Student housing, great on the tier one level, great, great growth, great fundamentals, same with medical office. So we're seeing a lot of groups rotate to the halts and then retail is on fire. So everyone wants to buy retail across the board again and is under allocated to retail. So we've kinda seen that full resurgence, seen a capital rotation back to retail, which is a ton of fun.
Mark Bonner:So you sound positive. That's awesome. But to go back to CBRE's 16% volume forecast for 2026, do you think that still holds?
Chad Lavender:Well, we're up 20% year over year so far. So we're we're from Q1, we're up 20% year over year, so we're ahead of their 16%, which is a good place to start. We're seeing deals continue to get executed with really no hiccups so far. So we're hopeful that it's better than
Mark Bonner:that. Okay. I mean look outpaced
Chad Lavender:the market, so we grew a market share 40 in a big way. So we're we're outpacing our competitors from market share perspective. So I think we're feeling pretty good.
Mark Bonner:Right. I mean, one in five maturing loans this year is office related and the Fed isn't cutting, which we've already talked about. Something has to give, right? The question is what and who absorbs it? If your regional bank sitting on a distressed office book right now, what are your options and which ones are you actually seeing banks take?
Chad Lavender:You know, we're seeing a lot of banks clear out the BC stuff, and it's a lot of lender facilitated sales. So the borrowers being, you know, agreeing to give basically a deed and loose. So we've seen some of that, You know, the a stuff, people are back in the money and making money again, which is fun. And some of the b stuff happens to be, you know, have have a long enough wall and enough cash flow where they're good too.
Mark Bonner:So who do think is in the best position right now? Lenders, distressed buyers, existing owners with good assets and bad debt?
Chad Lavender:I think, you know, it's hard to broad brush it because every deal is a snowflake. They're all different. So it's really hard to broad brush. Who's in a better position right now. I think the borrower, I think the lenders are feeling good about their basis.
Chad Lavender:And in most cases, certainly the buyers want those green shoots to happen across all asset classes so they can lean in and buy more real estate and the sellers want a little bit more money, for their assets so they need valuations to go up, I. E. Or their NOI to grow so their assets worth more. So it's we're just in that in that spot where we're waiting for some positive catalyst and, you know, multi and a couple other asset classes. We've seen it in office.
Chad Lavender:We've seen it in senior. We've seen it in data centers, seen it in student medical office, and we're kinda waiting for others to kinda take shape. Starting to see it in industrial as well, which is exciting.
Mark Bonner:I was on the phone earlier this week off the record, of course, with another capital markets player that's in your world, and he was telling me that he fears that we're heading towards a forced real forced sales and price resets, And that this will just all get extended again into 2027 and he told me to buckle up. Okay? What do you think?
Chad Lavender:I mean, I do think there'll be plenty of loan extensions. We we think the market's gonna get better, and we're really focused on GDP growth and market fundamentals across the board to drive real income growth at the asset level.
Mark Bonner:Okay. Let's do a little lightning round, Chad. You see a lot of things come across your desk. What's the most mispriced asset class right now?
Chad Lavender:You know, I would still say class b multifamily. It's trading, you know, a 100 wide generally of of Class A multifamily. So well located Class B, C multifamily seems to be a bit mispriced. I think A minus office as well.
Mark Bonner:Okay. What do you what's one sector that you think will surprise everyone on the upside in the next twelve months?
Chad Lavender:I think office is gonna continue.
Mark Bonner:Office?
Chad Lavender:Yes. And the class b side of the multifamily space starting to rent acceleration.
Mark Bonner:Well, to that end, do you believe that office has bottomed?
Chad Lavender:Oh, yeah. I think it bottomed last about last summer. So we're
Mark Bonner:on the way up.
Chad Lavender:We're on the way up.
Mark Bonner:Okay. Debt funds, market stabilizer or next source of stress?
Chad Lavender:Market stabilizer.
Mark Bonner:Oh, why?
Chad Lavender:Because we're gonna see better fundamentals, NOI growth, and they're think they're putting 75¢ dollars at today's basis. So you feel really good that they're money good, below replacement cost across the board of where someone will build an asset. So they're really in a defensive position and are money good kind of across the board from what we're seeing on the loan side.
Mark Bonner:Now I don't want you okay. I don't wanna put you on the spot on this next one, Chad. But what's one market? You are. I'm about to put you on the spot.
Mark Bonner:One market you'd void entirely right now.
Chad Lavender:Oh,
Mark Bonner:is it in the state of California? Because that that tends to be where everybody tells me.
Chad Lavender:Yeah. I mean, I think people some of the smartest investors are certainly worried about mansion taxes and different income taxes and everything. But also I think you're seeing historically low price per units and price per foots. So a lot of people see that as an opportunity to rotate them where there's gonna be less new supply built. So you can kind of play both sides of the coin on it.
Mark Bonner:Okay. We got a question from our audience here, Chad. What do you expect to see in the student housing sector? More capital deployment, refi heavy?
Chad Lavender:More capital deployment. We're seeing a lot of cross border capital as well as domestic capital core funds, just like in senior housing, really focused on student housing as an allocation to their housing or housing bucket. So more of a multifamily portion as well as affordable housing. We're seeing a ton of demand there from an institutional capital perspective.
Mark Bonner:Okay. And this is the last question, Chad. I mean, I want you to put your future goggles on for a second. When will we look back on 2026 as a crisis that never really happened or the one that's still unfolding?
Chad Lavender:I'm always optimistic. So I think it's the crisis that never happened. And, I think we're we're hopeful that we see big things on the job side and the GDP side continue to unfold and all this CapEx getting spent in The US is kind of a catalyst for GDP growth and a lot of ancillary businesses around the AI infrastructure world as well as, the advanced manufacturing world, kind of that start to play into our GDP growth. Overall job creation will affect warehouses, apartments, of everything positively. So we're expecting that tailwind to really start to take hold.
Mark Bonner:Okay. That's all the time we have for today. Chad, appreciate you so much for being with us.
Chad Lavender:Awesome. Great to see you. Great to be with you. Longtime listener. It's fun to be with you.
Mark Bonner:We'll be back soon with another episode of First Draft Live. You can also find today's episode and all of our past conversations on your favorite podcast app. I'm Mark Bonner, and this is First Draft Live. Have a great weekend, y'all.