December 19, 2025 • 42 mins
2025 was a noisy year.
Policy changes, interest rate adjustments and geopolitical roller coasters kept CRE on their toes.
With financing loosening up and transactions picking up, the groundwork is being laid for a better 2026, but where is a safe investment in a world where fundamentals seem to be shifting?
CBRE Global Client Strategist and Senior Economic Advisor Spencer Levy said he advises his clients to wade through the noise and look at the drivers in New York, San Francisco, Dallas, Miami and the Midwest to really see what’s on the horizon for CRE.
These include the reshoring of manufacturing and the train from Mexico to Canada, which carries nearly $2T in trade each year.
“You follow that durable demand driver, that infrastructure, despite some of the tariff noise, despite some of the trade noise, despite some of the political changes — that’s the time to find opportunity,” Levy said.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Mark Bonner (00:09):
Alright. Welcome to First Draft Live. I'm Mark
Bonner, BizNow's editor in chiefcoming to you live from New
York. It is Friday, December 19,our final first draft live of
2025, which feels like the rightmoment to say out loud what
everyone in commercial realestate has been muttering under
their breath all year. This wasa weird year.
(00:32):
If there's one honest takeawayfrom 2025, it's not that the
playbook didn't didn't justbreak. It kept getting rewritten
mid deal. This wasn't a arecovery year. It wasn't a crash
year. It was the yearuncertainty became the dominant
asset class.
Policy lurched. Tariffs spikedand blew holes in construction
budgets. A record forty threeday government shutdown froze
(00:55):
lending pipelines, jammedinspections, and told everyone
to underwrite without a map. Andyet, here's the twist. Some
things actually worked.
The Fed cut rates three times.Capital thawed. Private credit
stepped in. Banks crept back.Deals finally broke loose.
Office sold, albeit at discountsthat made people wince, but
(01:19):
leasing stabilized. Retailquietly held its ground.
Multifamily, it stayed liquid.And data centers went absolutely
bananas. So this wasn't totalchaos.
It was controlled turbulence.Confidence didn't come back, but
activity sure did selectively,cautiously, and usually with a
(01:40):
lawyer sitting in the room. Thattension between what broke and
what held is the story of 2025.Few people that I know have a
clear, more global view of thesecross currents than Spencer
Levy, global client strategistand senior economic adviser at
CBRE, someone who spends hisdays translating macro noise
(02:03):
into actual capital decisions.And like me, suffers through his
life as a Knicks and Mets fan.
But not this week. Right,Spencer? You're stoked that the
Knickerbockers hoisted theirfirst trophy since the next
Nixon administration. Am Iright?
Spencer Levy (02:21):
Well, notwithstanding our pre call, I
think I have to add that PatrickEwing ruined my childhood. And
the reason was is that PatrickEwing was supposed to be the
savior of my childhood, andPatrick was great. 20 points, 10
in rebounds, two blocks a game,never brought home the gold. So
until they bring home the trophyfrom '73, I'm not gonna put my
(02:42):
optimism in that camp.
Mark Bonner (02:44):
Spencer Levy, folks, not excited about the
first trophy, probably supportsthe decision by the New York
Knicks organization to not hanga banner in Madison Square
Garden. That's great. Thank you,though, for being here to close
out the year with us. We'll getinto the Knicks, the Mets, and
even the Jets and the Saints andLSU football in a little bit,
but let's get to CRE wrap 2025.And before we get going to our
(03:07):
audience, please liberally dropyour questions, comments, and
heresies into the chat.
We'll get to as many as we can,but let's get into it. So,
Spencer, 2025 didn't break CRE,but it stress tested it. From
your vantage point, was thisyear more about macro
fundamentals or about confidencein the rules of the game?
Spencer Levy (03:28):
Well, I like to put it in this in a slightly
different but similar fashion. Ithink people take too much out
of the macro and not enough outof the micro. And what do I mean
by that is there is a there wasa heck of a lot of noise in
2025. And, yes, some of it hadreal impact. And the real
impact, of course, greatest wasin April when we saw the tariff
increase, the spike in the tenyear treasury, and then perhaps
(03:50):
most importantly, a real falloff in foreign capital flows
into The US.
But that turned tail quick. Itturned tail in a couple of
weeks, and then we saw the tenyear come in, ten years
stabilize in that four to fourand a quarter range. We've seen
the stock market surge. We'veseen foreign capital come back.
So, yeah, I guess it was thetale of two years pre April,
post April, but at least theApril May malaise was only the
(04:11):
April May malaise.
And look, I would make
Mark Bonner (04:13):
a strong argument that Merriam Webster should make
the word uncertainty the word ofthe year. That itself seemed to
become the biggest risk premiumin all of commercial real estate
to your point. And that's macronoise for sure. But it was noise
that did show up in themicroeconomics of commercial
real estate. What do you whatare what are we gonna do about
that?
Spencer Levy (04:34):
What I advise my clients to do is when they see
noise, you should seeopportunity. Because I think
people overplay the noise, bothmacro politically and otherwise,
and what they need to look at,and I hate to use hand gestures,
durable demand drivers. Anddurable demand drivers are
things that cities like NewYork, like San Francisco, like
(04:55):
Miami, like Dallas, and dare Isay it, increasingly, yep, I'm
gonna say it, the Midwest. I'mlike, well, what? The Midwest?
That's where everybody's beenrunning away from for the last
twenty years where everybodywants to be in a smile state or
gateway city. But people have tolook at durable demand drivers.
And one of the durable demanddrivers that's really improving
(05:15):
the Midwest is not just thereshoring of manufacturing. It's
the train line from Mexico toCanada. I understand almost
$2,000,000,000,000 of trade goesacross that trade every year
train every year, and it's onlygoing to increase.
And you follow that durabledemand driver, that
infrastructure, despite some ofthe tariff noise, despite some
of the trade noise, despite someof the political changes, that's
(05:36):
the time to find opportunity.
Mark Bonner (05:38):
Right. But look, policy is no longer a foot a
footnote here. Right? It can'tbe ignored. To your point,
tariffs, permitting delays,power availability,
environmental roadblocks,litigation risk, and whatever
else comes out of the WhiteHouse.
How should underwriting evolvewhen these policy changes are
happening faster than asset lifecycles?
Spencer Levy (05:58):
Well, I go back to my original answer, but I will
put a asterisk on it now. Thereare some policies you need to
watch. And so the, one big,better, beautiful bill had some
things in there you have to beaware of. Right? Some of them
you know.
Some of them you know as itrelates to the extension of
opportunity zones, themaintenance of the 10:31
(06:20):
exchange, getting rid of eightninety nine, which would have
really slowed foreign capitalflows to The US. But there are
some things in there, and Ibrought my handy dandy notebook
with me just so I get it right.But qualified improvement
property, which is basicallymanufacturing, you can expense
it 100 in year one. That is anunbelievable tax benefit. And
(06:42):
there's also bonus depreciationallows you to expense 100% of
things like TI dollars.
These things are going to changethe mathematical equation of
what is a good real estateinvestment because you can just
knock it out against yourincome. And so it is a thing
that you should look at, youshould use, and once again and
(07:04):
again, this is not the Midwestis number one show but it is
going to give further help tothe Midwest, certainly from the
qualified improvement property,and it's going to give further
boost to office for the bonusdepreciation as TI dollars
become marginally cheaper.
Mark Bonner (07:19):
We're going to talk about geography in a few minutes
here. But like, I think thestory of the year was that CRE
didn't move in 2025, but it didfracture. Right. Office thought
multifamily stayed liquid wheresupply and insurance behaved,
retail stabilized, industrialcooled, data centers ran around
from the pack. They got AIheadwinds out there.
(07:39):
What did the market misread thisyear? And what do you think is
still mispriced for 2026?
Spencer Levy (07:45):
I still think that the mispricing and and I when I
say mispricing, let's just bevery clear what we're talking
about here. If you could sell meevery asset in Austin, Texas
right now at fair market value,I would buy it all. The problem
is they're not selling at fairmarket value. They're selling at
prices that expected cap ratesto stay much lower than they
(08:06):
really are, interest rates to bemuch lower than they really are,
and the leasing volume is muchworse than people believe
because, you know, look, bottomline is they overbuilt. Okay.
Oh, no. Bad news. Right? Youknow what it reminds me of? It
reminds me of Nashville tenyears ago.
We had exactly the same thing.They overbuilt. You know, we
have ten years of new supply.It's not gonna happen. Wrong,
(08:27):
wrong, and wronger.
Is wronger even a word? Thepoint is durable demand drivers.
Austin is probably the fat, noit's not, it's the second
fastest growing city in Americabehind Boise, but it's a lot
bigger. It's got tech. It's gotcapital.
It's got human capital. It's gotcool. It's got weird. And that
is their expression, keep Austinweird. Folks, you see this short
(08:50):
term dislocation and when youcan get stuff as close as
possible to what is true fairmarket value, unbelievable
opportunity even in markets thatare soft at the moment.
Mark Bonner (09:01):
I think it's weird two point o if you really wanna
be honest. I mean I mean,Spencer, when Austin was keep
keep Austin weird, I mean, itwas because it was the land of
hippies and people who smokepot. I mean, it's a lot
different now with being a techcapital of the world. Let me
just talk to you about datacenters really quickly. Data
centers red hot, probably thestory of the year in commercial
real estate, one of the thingsthat it's most proud of as a
(09:23):
monolith, yet headwindseverywhere.
What do you make of this AIbubble noise?
Spencer Levy (09:29):
Well, you use the B word. I am not going to use
the B word. I'm going to use theuncertainty word because I think
that if people people don'tremember, right? I have a long
history in the data centerspace. I remember the first data
center space I looked at wasInfomart in Dallas back in 2001.
So it's been around for a while,folks. But what also people
(09:50):
don't realize is that rents weredeclining in data centers until
about four or five years ago.Declining. Okay? This is like
the new big thing where rentsfinally hockey sticked in the
last couple of years.
But why did they hockey stick?They hockey stick because of AI,
because of crypto, and becauseliquidity. Right? Liquidity
(10:10):
sometimes drives other things,and the liquidity came from big
foreign banks that are able towrite $500,000,000 and up checks
to give you some of the debt.Lots of equity coming in.
So it's heavily, heavily liquid,but there are strong
fundamentals to back it up,including but not limited to the
fundamental that it's hard toput new supply on. It needs a
lot of power. Needs a lot ofwater. So it's a very good space
(10:31):
to be in in data centers. Allthat said, there is a percentage
of the real estate space thathas caution on it.
And the caution on the space isthe B word that you just used a
moment ago, which I'm not goingto use on air. And also the
concern about technologicaldisruption. Look what happened
to, you know, one of the bigchip manufacturers back in
(10:52):
January. Some company in Chinasays we can do chips with one
third the power. That companyhad a bad day at the office.
So I am not a tech expert, butthere is technological
disruption that is part of thestory that is giving some people
caution.
Mark Bonner (11:05):
Look. Bubble. Bubble. Bubble. Bubble.
Bubble. Bubble. Is this a mediacreation? I mean, lot of smart
economists are out there sayingbubble.
Spencer Levy (11:15):
Well, listen. I remember when I was a kid, I
used to get these things of ofbubble with a little thing you
used to blow. You remember thatthing? And you can and if you
blew it just right, you can geta double bubble. So, I mean, we
could talk about bubbles all youwant all day long.
What you're really talking aboutis irrational exuberance, to use
the word that I think was givenby Alan Greenspan. And I think
(11:36):
he used to say irrationalexuberance in this sector, and
that's when he would jack upinterest rates to try to cool
the exact irrational exuberance.Do we have irrational exuberance
in AI and other sectors of theeconomy? I think that the
fundamentals are good enoughthat no, we don't have. Do we
have a lot of liquidity there?
Yes, we do. Is that often acaution sign to to hit the pause
(11:59):
button? Yes, it is. But thefundamentals are still excellent
in the space, and you need moreof them because unlike other
asset types where, you know, youcan put it pretty much
concentrated in one place, datacenters have to be in other
countries because of differentregulatory regimes. So it's not
like the kind of thing where yousay, we'll just stick them all
(12:19):
in Dallas.
No, they got to put one inArgentina, got to put one in
Chile, you got to put one inPortugal, or many maybe more.
The point is that I agree withyou. I'm not going with
irrational exuberance. I'm notgoing with bubble. I am going
with a lot of liquidity, whichis often a caution sign, and
I'll leave it at that.
Mark Bonner (12:40):
Let's talk about another word, capital. It didn't
disappear in 2025. It gotdisciplined. Private debt
dominated early. Banks creptback later pushing issuance to
$227,000,000,000 in the firstthree quarters.
That's an 85% jump year overyear. Delinquencies held near
1.56%, but nonperforming loanskept rising, at large banks.
(13:03):
Committee slowed. Structurestightened. Optionality became
strategy, my friend.
Where is capital actuallypositioning for 2026? Not
talking, but moving.
Spencer Levy (13:17):
Well, the good news is this. A lot of
appraisers don't get a lot oflove. This is the thirty seconds
of love for appraisers. And whyis that? Because when markets
are good, appraisers will oftenundervalue an asset because
they're going with comps, andcomps are backward looking.
When things are going up,they're looking back. Well, when
things are going down, they'realso looking back, and they'll
(13:37):
keep asset values higher. Whathappened because of that? They
slowly ramped down the value ofoffice buildings rather than
dropping them like a stone, andthat allowed the banks to
recapitalize. Okay, what wasgoing down, what was going up?
And it took a couple of years.And now some of our best capital
sources right now are regionalbanks, which had a high
(13:58):
percentage of real estate inthem because they recapitalized.
So look, the bottom line isthis. There's a lot of liquidity
in the market right now, butthere's not a lot of liquidity
right now for new construction.And I think new construction,
it's a great time to build now.
Why? Because new constructionfell off the cliff and fell off
the cliff because labor costsare high and interest rates are
(14:20):
high. Though I did hear actuallyin a meeting I had yesterday
that they're beginning to see adrop in labor costs. That was
one of the first meetings Iheard that. And I'm like, well,
how are you hearing a drop inlabor costs?
He said, because there's not alot of new construction and
these contractors andsubcontractors got to work and
they're pricing it lower. Sothere's even optimism there. So
I think that right now for 2026,there's capital for everything,
(14:44):
but capital for the higher riskassets. And, you know, I have a
good friend of mine who thinksactually construction is less
risky than buying existing, butthat's a debate for the other
day. But capital for the higherrisk assets like new
construction, I think is readyto go.
I think it's ready to go oncethe coast is clear, maybe by
another 50 basis points ininterest rates.
Mark Bonner (15:04):
We'll see, Spencer. I mean, it hasn't necessarily
been a wonderful year forconstruction. I mean, anybody
who's working a pro form a saw acategory five hurricane wash
upon its shores. Tariffs havebeen really hard.
Spencer Levy (15:16):
Really hard for multifamily in particular.
Particular. And you got you havea second And
Mark Bonner (15:20):
we're in a housing crisis. Right? So that's a
pretty serious situation, don'tyou think?
Spencer Levy (15:24):
Well, the thing about it, when you look at
tariffs, okay, you havecommodities, which is like wood
and steel and oil, and then youhave finished products like the
refrigerator, like the stove.Those are the things that got
hit a lot harder than thecommodities because the
commodities, havereplaceability. For these
finished goods, you don't haveas much replaceability. And
(15:46):
that's why multifamily actuallygot hit harder than did some of
the other sectors in terms ofthe falloff of new construction,
which actually was a good thingbecause twenty twenty four, not
2025, 2024 last year, I believewas the year that had record new
deliveries in the multi space.So we probably needed somebody
to hit the pause button.
I'm not saying it was good thatthe way we hit the pause button,
(16:07):
but hitting the pause button alittle bit multifamily was
probably healthy overall becauseof the peak where we were a year
ago. But the housing crisis,very we could have a whole show
on the housing crisis. But letme sum it up like this. Yes, we
need a lot more units wherepeople work. It's not that we
need more units.
(16:27):
Oh, look, we have all theseempty houses in, you know,
Rochester. And by the way, Ilove Rochester, so don't give me
the nasty grams from Rochester.But, you know, markets that
haven't grown as quickly. That'snot where we need the houses.
You need the houses right wherepeople are moving.
And those houses are of allshapes and sizes. So one of the
most politically disfavoredasset classes is institutionally
(16:51):
owned SFR or BTR, single familyrental or build to rent. And I
push back on that hard all day.I'm like, Folks, does it
marginally increase the price ofa single family home? Yes.
At the local level, marginally,it may in fact do that. But you
know what it does? It bringsmore money into the sector. That
means you're going to make moreof it. And that's what we need.
(17:11):
We need incentives for moresupply, period. Now the second
thing you might need is just adifferent way of looking at
housing. So I'm surprised ittook me eighteen minutes into
your show to shamelessly plugthe weekly take, but we have a
whole episode on new ways tothink about housing, not as
entire houses but as bedrooms.Meaning that if you have a four
(17:32):
or five bedroom house, why don'tyou rent it out by the bedroom
rather than renting it out bythe whole house? Yes, I know it
brings up privacy concerns.
Yes, I know it brings upsecurity concerns. But if we can
figure out how to operate SFRBTRbetter, which we have in the
last decade, we can figure outhow to use smaller segments of
existing housing stock moreefficiently.
Mark Bonner (17:53):
If you're just joining us, this is First Draft
Live. I'm here with the greatSpencer Levy of CBRE unpacking
the year that was 2025commercial real estate. Spencer,
I hate to burst your bubble, butAmerica is not moving anymore.
In fact, the last couple ofweeks from a number of reliable
data sources as America hasstopped moving, migration has
stalled as sub 3% mortgages havelocked households in place,
(18:17):
making a typical relocation 73%more expensive per month. What
movement remains is smaller,wealthier, and increasingly
corporate driven.
Arkansas, Idaho, North Carolina,they lead in inbound games.
While Bentonville, home ofWalmart, alone is capturing
nearly 40% of Arkansas rivals.Louisiana topped outbound list
(18:39):
again, my home state, whileoutflows from California,
Illinois, and New York finallycooled. What do you what do you
make of that, Spencer?Concerned?
Spencer Levy (18:50):
Here comes the big my my not surprised face. And
why is my not surprised face? Soonce again, going back to, and,
again, I forgive me forshamelessly plugging, The Weekly
Take podcast, but we had on theshow before he passed away the
late great Sam Zell. And on theshow he said very colorfully, by
(19:11):
the way, one of our mostcolorful guests we've ever had
to say the least he said, Thedeath of New York has been
forecast every five years forthe last forty five years.
Didn't happen then, it ain'thappening now.
And that's why people arestaying in New York because they
have great economic activity.They have the great durable
demand drivers, infrastructure,capital, human capital, live,
(19:33):
work, play, cool. All thesethings say, you know what?
Living in these big cities isactually a very good place to
be. And low cost is great, butit's not everything.
And so I was in a market wherewas I last week? I was
everywhere last week. Last week,I was in Raleigh, North
Carolina, one of the truly,truly great growing markets in
(19:54):
The United States. For all theright reasons. I was very
fortunate.
I interviewed the CEO of theCarolina Hurricanes. Anyway,
there were some complaints bythe locals that things were
getting more expensive. And, youknow, things are getting more
expensive. And what I said tothem was this. That's a high
class problem to have becauselow cost is a race to the
bottom.
(20:14):
You will always have somebodywho will do it cheaper than you,
always. But you will not alwayshave somebody who will do it
better than you. And better isnot necessarily cheaper. It
comes down to, I hate to use afancy economics word, utility.
It's not anything but utility,and utility is a combination of
economic opportunity and, dare Isay it, happiness.
(20:37):
You put those two thingstogether, you get a whole lot of
that in the big cities too.
Mark Bonner (20:42):
Look. Where do you you're on the road a lot,
Spencer. I mean, where youtalked about the Midwest. Tell
me more about that. Where do youthink is next in terms of
investment in The United Statesor even overseas, Europe or
Asia?
Spencer Levy (20:54):
Well, look. I was very big on Madrid, Spain, and
Spain overall, and I still ambig on Spain overall. And the
reason is very straightforward.It's just that magic word, it's
just math. Because Spain andSouthern Europe during the
global financial crisis in02/2012 was a very, very tough
place to be because the bankswere broke and unemployment was
(21:16):
high and nobody was building.
Well, guess what? That wasfifteen years ago, folks, and
the banks are now super healthy.Unemployment's still high, so
labor is cheap, and they'reunder built. Now the story was
slightly better probably in thefirst quarter of this year when
the US dollar wasn't as weakbecause the US dollar devalued
(21:36):
by 10%, folks. And by devaluingthe dollar by 10%, it made
Europe and other places slightlymore expensive.
But nevertheless, places thatwent through the apocalypse,
like Southern Europe, now lookpretty good because they've
solved those problems becausethey're underbuilt and lower
cost.
Mark Bonner (21:55):
Got a question from the audience related to this
topic. Do you think Miamioverbuilt as well since class b
condos are now not moving?Miami's been one of these things
that's been in the all year,last couple of years since the
pandemic. Right? They're thatthey're gonna steal all of our
population because of Zora andMondami here in New York.
What do you make of the Miamidynamic? Can that last?
Spencer Levy (22:16):
First first of all, you should know that if we
weren't on this show, I'd besitting in Little Havana right
now with my Panama hat, which issitting right over there,
smoking a cigar and drinking thebest Cuban coffee in the world,
and I'd probably wash it alldown with the best Cuban
sandwich in the world. LittleHavana is one of the coolest
little sub submarkets there is.But that's what makes Miami
(22:38):
awesome, what makes it durableover the long term because it
has these cool cultural elementslike that. Wynwood is a cool
emerging market that's night andday different than brickable. We
have a lot of our big clientsmoving over there.
Is there going to be someoverbuilding in condos? Yes. But
the overbuilding in condos isthe Class B condo story is not
(23:00):
overbuilding related. It'srelated to the change in
building codes in Miami becausewe had that terrible, terrible
tragedy about four years agowhere Surfside collapsed, killed
just dozens of people, and Miamisaid not happening again. And so
people that are in older condobuildings are running the risk
of being whacked with a massivecapital expense charge.
(23:20):
That's why b condos aren'tmoving. It has nothing to do
with lack of demand. Oh, I'd buya b condo right now if I didn't
have that overhang over me. Sothat's the real issue there. It
is not the overbuilding.
It is the change in law, andpeople just need to adjust to
it.
Mark Bonner (23:35):
I mean, can the hype meet the reality? I mean, I
I is the runway still there forMiami? Right? I mean, it it sort
of the narrative I mean, it is acool place to visit. I love I
love Miami myself, Spencer.
But can it remain hot as, agrowing city that attracts major
investment and major populationgrowth over the next two
Spencer Levy (23:54):
or three years? Can. And and I said what what
I'm my the first words out of mymouth are gonna sound negative,
but I'm then I'm gonna spin it.It's actually not that easy to
build in Miami. Miami is asomewhat more regulated market,
and with people in Florida, it'smore regulated than say a Tampa
or in Orlando to build newstuff.
That said, that's sometimes atough zoning board is your best
(24:14):
friend because it makes yourexisting product more valuable.
But Miami suffers from a coupleof things that a lot of big
cities that are growing quicklysuffer from. The traffic there,
no good. Okay? The issue ofrising prices of the Class A
market makes it tougher, moreexpensive, hard to get around,
all that stuff.
(24:34):
That's a high class problem tohave. The Miami story isn't
going anywhere, and it may havesome short term challenges in
certain submarket or sub sectorslike Class B, but that's due to
a change in law. But no, I thinkMiami has great long term
strength. And by the way,they're improving the Miami
Airport, thank God, because theMiami Airport for a city of its
(24:57):
caliber needs a bigger, better,more beautiful airport.
Mark Bonner (25:00):
We've got another question from the audience here.
They wanna hear more about yourlove for the Midwest. Are the
opportunities set as simple asfollow the railroads? What are
the nuances to be aware of inyour opinion?
Spencer Levy (25:13):
Okay. So here's the biggest nuance of all. And
I'm surprised it took me thislong to bring it up on the show.
The single biggest change in ourmarket over the last two years
and going to be for the next tenis from 2012 to 2022, 75% or so
of the real estate gains weredue to compressing cap rates
because we had low interestrates. Guess what we have now?
(25:35):
High interest rates and they'regoing to stay high. They might
come a little bit lower, butyou're not going to get bailed
out by the magic, which is areally low exit cap rate. And so
if you're not going to getbailed out by a really low exit
cap rate, you need to do twothings. Number one, you need to
operate better so that you cangrow NOI faster. And the second
(25:56):
thing you need to do is get ahigher going in cap rate.
And the Midwest has higher goingin cap rates. Are you going have
a higher going out cap rate too?You will. But you know what?
I'll take the 150 to 200 basispoints upfront if I know I'm not
gonna get the lower exit caprate in the major markets too.
So I think the Midwest story isnot just the railroads, it's the
(26:17):
math.
Mark Bonner (26:18):
What cities do you like?
Spencer Levy (26:20):
Well, look. It kills me to say this as a guy
whose son goes to Michigan, butI love Columbus, Ohio. Okay? I
love it because they are, youknow, a beneficiary of this
train line thing. They also haveNew Albany which has a new Intel
chip plant, has new datacenters.
It has the Ohio StateUniversity. Yep. I said it. And,
you know, those are the kind ofthings that are gonna drive the
(26:42):
economy. It's also so it'slocation.
I think it's it's it's centrallylocated near probably half The
US populations within 200 milesof Columbus. I mean, it's really
well located. So Columbus is amarket I like, but here it is.
And now now I'm gonna get thrownoff the show. Chicago.
Yep. Who said it? I did. And youknow why? Because not all of
(27:04):
Chicago is great.
And, yeah, it's tough in certainmarkets, particularly the office
market for older office stock.You know what? We just sold a
multifamily deal in the suburbsof Chicago that was
oversubscribed, and and theFulton market is one of the
great submarkets. River North,another great submarket. I love
markets that people don't likethe headlines, but if you look
(27:25):
into the submarkets, there'sgreat opportunity.
Mark Bonner (27:29):
That is surprising to hear. And by the boo to the
buckeyes. No I mean, offenseintended to buckeyes fans over
here, but I hear you loud and
Spencer Levy (27:37):
because you
Mark Bonner (27:38):
Of course, I'm an LSU guy. We took care of Ohio
State in the two thousand sevennational championship in the
Louisiana Superdome.
Spencer Levy (27:43):
How was You know what?
Mark Bonner (27:44):
I went
Spencer Levy (27:44):
to Cornell, and we took care of Dartmouth in the
nineteen thirty one nationalchampionship too. So, I mean,
how far back we're gonna go?
Mark Bonner (27:50):
The Ivy League. I love it. One more question from
the audience, and then we'llwe'll we'll get into the our
final thoughts. The recent BLSreport is subject to a lot of
criticism, and it seems politicsis more overtly intruding into
government statistics. Shouldinvestors be concerned about a,
quote, unquote, credit event in2026 like investors losing
(28:13):
losing faith in US treasuries?
Spencer Levy (28:17):
No. Next question. I mean, this one to me is the
easiest answer of all. Know, Youlot of people say that, oh,
people aren't gonna trust thetreasuries because our national
debt is ballooned up to$3,435,000,000,000,000 dollars
wherever it is right now. But USdebt to GDP is only about a 110%
now.
Only about I wish it was 80%.Right? Don't we all do? But you
(28:37):
know, we can handle it so longas interest rates keep coming
down a little bit. If they stayhigh, it crowds out a lot of
other spending because it throwsso much of the government
spending into nonproductiveuses, which is debt service
rather than building a newhospital or a road or a school,
something that's reallyproductive.
Right? But no, I don't thinkthere's any risk of people
losing faith in the full faithand credit of The United States.
(29:00):
And the full faith and credit ofThe United States comes from a
thousand different factors ledby rule of law, led by critical
mass, led by strength in a in a100 different ways. And, you
know, you all you gotta do istake a look at The US's
formation of new Fortune 500companies versus every other
place in the world, and we'redoing pretty good.
Mark Bonner (29:18):
True. But, know, I'm a I'm a journalist, Spencer.
Right? So I'm skeptical bynature. Right?
Yesterday, we're high fivingabout the inflation report
coming out of the government.Then this morning, I wake up
into the headline at the NewYork Fed president is saying
that those were artificiallyinflated. So therefore, there is
mistrust in the data that'sbeing provided by the US
government. I wonder if ifthat's gonna become a factor
(29:40):
moving forward.
Spencer Levy (29:41):
Or do
Mark Bonner (29:41):
you think that's more noise?
Spencer Levy (29:43):
One data point is not a trend to make. Alright.
That is
Mark Bonner (29:46):
It's not one time. It's more than one time over the
last six months.
Spencer Levy (29:49):
These numbers are not being manipulated. They're
being changed by events. Okay?So the reason why inflation
number was partially low wasthat we had a government
shutdown of forty five days,which retarded some spending.
And then we have to and you knowwhat's gonna happen now?
And I was just on the calltalking about this with another
economist. It's going toincrease GDP in the next in
(30:12):
first quarter of next year. Andso the bottom line is the
distortion of the numbers thatyou are claiming is not done for
nefarious reasons. There areevents that are driving that.
Mark Bonner (30:26):
Didn't say it was nefarious, but it does create
fog. It creates uncertainty andit feels into this chaos
narrative of the last year.Right? Yeah. And it makes it
very difficult to make big timedecisions when you've got extra
fog in the room.
These are already complicateddecisions that we're talking
about here. And then when youhave that added on, it's just
one more layer of uncertainty.
Spencer Levy (30:46):
Yeah. Look, again, I think if people are voting
against the government, youknow, give me a call because the
government is and The US isn'tgoing anywhere. The government
in The US is the land of as andlisten. I'm not saying it's
perfect by a long shot. I'm notsaying it isn't noisy.
I'm not saying that democracyisn't a mess sometimes. And as
(31:08):
Winston Churchill says,democracy is the best form of
government unless you compare itto all others. I think I got
that wrong with them. Is is thewell, the bottom line is this.
I'm not like some big, yo, USAall the way guy.
I'm just here looking at thefacts, and the most important
fact is growth, right? We'regrowing slowly. We're growing
(31:28):
like 2%, and I think we're goinggrow a lot faster than that due
to AI. But the bottom line isusing it to help grow AI, using
it through AI and other ways togrow, it's going be because of
the entrepreneurial spirit ofThe US government system overall
that permits entrepreneurialismin a way that is not permitted
(31:52):
in a lot of other places. So,look, no way.
I I'm not I'm black and white onthis one. Notwithstanding our
problems, I wouldn't wanna beany place else.
Mark Bonner (32:02):
You're black and white, you're red, white, blue,
my friend.
Spencer Levy (32:05):
Nearly one saying we don't have problems. Look, I
Mark Bonner (32:08):
am with you. Well, last last question before we get
into our our our our finalthoughts here. Nearly
$1,000,000,000,000 in commercialreal estate debt is gonna come
due in 2026. The maturity wavedidn't crash this year. It just
deferred.
At the same time, the biggestunanswered policy question still
looms. The future of Fannie Maeand Freddie Mac and what
(32:30):
privatization could mean forhousing finance. Is 2026 the
year uncertainty finallyconverts into opportunity, or do
you think it's just another yearof selective motion?
Spencer Levy (32:42):
You are worried about the wrong stuff, my
friend, because theprivatization of Fannie and
Freddie does not make me lose aminute of sleep. And the reason
is very simple, because theimplicit or the explicit
government by the way, thepresident said he was explicit
when it came to the guaranteeof, government debt through
(33:04):
Fannie and Freddie even if it isprivatized. That's not going
away, and that's all thatmatters. The privatization thing
really has to do with, you know,the efficiency of operations and
has to do with the bondholdersand things that have very little
to do with the bondholders ofthe Fannie and Freddie stock,
not the bondholders ofgovernment bonds from Fannie and
(33:25):
Freddie. That's what we'retalking about here.
Are we going to impair the valueof government bonds of Fannie
and Freddie? The answer is nope.Are we gonna impair the value of
the implicit or explicitgovernment guarantee? Nope. And
whether it's private or owned bythe US federal government, I
think it has almost no bearingon what's going to be the
liquidity of the multifamilymarket multi and single family
(33:46):
market.
Mark Bonner (33:47):
If one thing were to unlock real momentum in 2026,
what do you think it would be?Lower rates, clearer policy for
sellers, or simply fatigue,meaning investors deciding that
waiting is riskier than acting?
Spencer Levy (34:03):
I like to be mister fan actually, I try to be
the opposite of mister fancytalk. And I'm gonna be real
simple here, folks. If inflationmaterially cools down like, when
I say cool down, I mean, gettingclose to that 2% magic number,
and we can legitimately reducethe short end of the curve from
(34:23):
where it is now in the three anda half percent kind of range,
three to three seventy five,down to something closer to two,
all that will unleash growth.Alright? And the president knows
that.
Everybody knows that. The wholeevery it's it's just math,
folks, because the short end ofthe curve right now is still
marginally restrictive in termsof new new economic activity in
(34:47):
the economy. And so because it'smarginally restrictive, we're
not growing as fast as we can.But what will happen is going
back to several of the thingsyou said before, Mark, was it'll
let people sell their singlefamily homes. It'll allow more
economic movement in thecountry.
It'll allow more investment incertain things because the cost
of debt is lower. So that is theone thing. If inflation really
(35:10):
cools, that is the single mostimportant thing that could boost
the economy. The single thingthat could really nail the
economy is the exact opposite.That inflation goes bonkers
again.
And that and that to me causesconcern. And the concern or the
the thing that causes the thirdthing that causes concern is
inflation goes bonkers, theystill cut interest rates because
(35:32):
then you know what would happen?The bond vigilantes would take
over and jack up the 10, andwe'd be in a worse position
overall.
Mark Bonner (35:39):
Spencer, let's play a little game. Hot or not for
2026. You game?
Spencer Levy (35:45):
Bring it hot.
Mark Bonner (35:46):
Hot or not. Hot or not. Office. Hot. Industrial.
Getting hotter. Multifamily.
Spencer Levy (35:59):
Getting hotter.
Mark Bonner (36:01):
Okay. Retail? Hot. Data centers? Well, I know where
you're going here.
Hot. Not warm. You're going hot.Okay.
Spencer Levy (36:13):
Private I'm going hot because I see the issues in
data centers as not beingresolved in 2026. Think that the
issues of data centers, ifthere's going to be a challenge
in that center sector with theworst challenge with the b word.
Right? It's it's delayed by afew years. It's delayed by a few
(36:34):
years by a technological changethat I don't see on the horizon
immediately.
Mark Bonner (36:37):
Okay. Spencer Levy is hot for data centers. Private
credit.
Spencer Levy (36:43):
Private credit. Define private credit. Meaning
like from a non bank financialinstitution? Yeah. Family
office.
Oh, family office. Oh, soprivate capital versus
Mark Bonner (36:53):
Private capital. Yeah.
Spencer Levy (36:55):
Yeah. Private capital versus institutional
capital. Well, it was hot thisyear as compared to institutions
because actually private capitalwas doing a lot of the
development deals that theinstitutions wouldn't do. And so
I see it, staying hot andgetting hotter for another
reason that we didn't bring upon the show and we should have.
Mark Bonner (37:14):
Okay. Hot or not? We gotta keep moving, Spencer.
I'm sorry. You're hot.
Okay.
Spencer Levy (37:18):
I I would say of all the things we mentioned, the
hottest of all is going of thethe traditional investors going
for private capital, nonaccredited capital versus going
for pension fund endowmentcapital. That is of all the hot
categories, that may be thehottest category of all.
Mark Bonner (37:36):
Okay. Distress investing. Cold. Okay. Secondary
markets?
Spencer Levy (37:47):
With good infrastructure hot, with bad
infrastructure cold.
Mark Bonner (37:50):
Sunbelt. Would say I Hey. You're hot on the
Midwest. Are you are you stillhot on the summer?
Spencer Levy (37:59):
I once would the overbuilding is done and over
the long term hot, but in theshort term, it's warm because
there's there's been someoverbuilding in certain
segments.
Mark Bonner (38:08):
Gateway cities, Dallas, New York, Los Angeles.
Spencer Levy (38:12):
Long term, couldn't be any hotter. Short
term disruption, greatopportunity. So I'm warm short
term, hot long term.
Mark Bonner (38:19):
The New York
Spencer Levy (38:19):
Knicks. My childhood was ruined by Patrick
Ewing. It's not gonna be ruinedtwice, but I will say this about
my beloved New York Knicks isthat, dollar bill Bradley and
and Walt Clyde Frazier andWillis Reed, and Phil Jackson
all hung it up a long, long timeago. There's something about
(38:40):
1940 for the rangers thatreminds me of 1973 for these
knicks. What's gonna win for theknicks isn't talent.
It it's believing. And that'swhy we go back to the '69 back
to the Mets. You gotta believe.
Mark Bonner (38:53):
The New York Mets.
Spencer Levy (38:56):
Well, now I live in Baltimore, and I I thank you
for the gift that is PeteAlonso.
Mark Bonner (39:02):
Oh, man. That hurts, man. How about your Jets,
man? We got the Jets and theSaints this weekend. Both of our
teams hot.
They gonna win?
Spencer Levy (39:09):
Still playing that game? How many paperbacks can
they sell
Mark Bonner (39:12):
over there? You're totally right. Alright. I'm
gonna I'm gonna give one tomyself. LSU football.
The lane train is going all theway to the playoff. I'll see you
there. And the Saints, verysadly, we are not dad. We are we
are cold. Not gonna be good.
Okay?
Spencer Levy (39:29):
Well, listen. I think LSU football, the whole I
don't even wanna get in. This isnot a foot this is not the
college football segment oftoday's program.
Mark Bonner (39:37):
Oh, it sure is. But we need to wrap up. What do you
want to say about LSU football?You can get it in right now,
man.
Spencer Levy (39:41):
My son my son is a is graduating from Michigan and
they won the natty and thenthings just all went downhill
and it's just gotten horrible inthe last few weeks. But look, I
went to Ivy League ball, okay? Iwent to Cornell, right? And I,
you know, I'm so old school. Ijust love that system And it's
like, you know, you're such afunny duddy.
(40:03):
We're making billions ofdollars, and you just don't
wanna play because you'rebecoming better people. You
know? No. It's you know, Ialways chose the better academic
school over the other one, andmaybe nobody thinks that way
anymore.
Mark Bonner (40:16):
It's all about winning, man. Okay. Spencer,
this has been a lot of fun.
Spencer Levy (40:20):
One story for you. One more winning Oh, god. Okay.
Come on. Quick.
To be said. In 1940, Cornellalso won the national title,
beating Dartmouth on what was afifth down play. What happened?
The president of Cornell foundout it was a fifth down and
forfeited the game. That's whatfootball should be.
(40:42):
It's about a lot more than justwinning and losing.
Mark Bonner (40:46):
Spencer, thank you so much for closing out the year
with us. This has been a lot offun. And to everyone watching
live today and to everyone whocatches First Draft Live later
in the week on social or on yourpodcast feed or in your car or
on your computer at the gym, wethank you. And, yes, we also
wanna thank the one listener whoreached out to me earlier this
week to say that they played theshow off fishing on some
(41:07):
beautiful freshwater lake inTennessee. Thank you.
We see you. To our listeners andviewers overseas, we are
grateful to you as well. Itmeans more than you know that
this conversation travels as faras it does. This is our final
first draft live of 2025, andnone of it happens without the
incredible team behind thescenes at BizNow every single
(41:29):
week. Elizabeth Baker, WillFollett, Katherine Rountree, Sam
Anderson, Ali White, AndrewNathanson, Katherine White,
Julia Troy, and Katie Dixon.
It truly takes a village,Spencer, to put this show
together, and I'm deeplygrateful for mine. We'll be back
in 2026 with more signal, moreclarity, and hopefully a little
(41:50):
less uncertainty. Until then,have a wonderful warm holiday
season. This is First DraftLive. We'll see y'all in 2026.
Alright. Welcome to First Draft Live. I'm Mark
Bonner, BizNow's editor in chiefcoming to you live from New
York. It is Friday, December 19,our final first draft live of
2025, which feels like the rightmoment to say out loud what
everyone in commercial realestate has been muttering under
their breath all year. This wasa weird year.
(00:32):
If there's one honest takeawayfrom 2025, it's not that the
playbook didn't didn't justbreak. It kept getting rewritten
mid deal. This wasn't a arecovery year. It wasn't a crash
year. It was the yearuncertainty became the dominant
asset class.
Policy lurched. Tariffs spikedand blew holes in construction
budgets. A record forty threeday government shutdown froze
(00:55):
lending pipelines, jammedinspections, and told everyone
to underwrite without a map. Andyet, here's the twist. Some
things actually worked.
The Fed cut rates three times.Capital thawed. Private credit
stepped in. Banks crept back.Deals finally broke loose.
Office sold, albeit at discountsthat made people wince, but
(01:19):
leasing stabilized. Retailquietly held its ground.
Multifamily, it stayed liquid.And data centers went absolutely
bananas. So this wasn't totalchaos.
It was controlled turbulence.Confidence didn't come back, but
activity sure did selectively,cautiously, and usually with a
(01:40):
lawyer sitting in the room. Thattension between what broke and
what held is the story of 2025.Few people that I know have a
clear, more global view of thesecross currents than Spencer
Levy, global client strategistand senior economic adviser at
CBRE, someone who spends hisdays translating macro noise
(02:03):
into actual capital decisions.And like me, suffers through his
life as a Knicks and Mets fan.
But not this week. Right,Spencer? You're stoked that the
Knickerbockers hoisted theirfirst trophy since the next
Nixon administration. Am Iright?
Spencer Levy (02:21):
Well, notwithstanding our pre call, I
think I have to add that PatrickEwing ruined my childhood. And
the reason was is that PatrickEwing was supposed to be the
savior of my childhood, andPatrick was great. 20 points, 10
in rebounds, two blocks a game,never brought home the gold. So
until they bring home the trophyfrom '73, I'm not gonna put my
(02:42):
optimism in that camp.
Mark Bonner (02:44):
Spencer Levy, folks, not excited about the
first trophy, probably supportsthe decision by the New York
Knicks organization to not hanga banner in Madison Square
Garden. That's great. Thank you,though, for being here to close
out the year with us. We'll getinto the Knicks, the Mets, and
even the Jets and the Saints andLSU football in a little bit,
but let's get to CRE wrap 2025.And before we get going to our
(03:07):
audience, please liberally dropyour questions, comments, and
heresies into the chat.
We'll get to as many as we can,but let's get into it. So,
Spencer, 2025 didn't break CRE,but it stress tested it. From
your vantage point, was thisyear more about macro
fundamentals or about confidencein the rules of the game?
Spencer Levy (03:28):
Well, I like to put it in this in a slightly
different but similar fashion. Ithink people take too much out
of the macro and not enough outof the micro. And what do I mean
by that is there is a there wasa heck of a lot of noise in
2025. And, yes, some of it hadreal impact. And the real
impact, of course, greatest wasin April when we saw the tariff
increase, the spike in the tenyear treasury, and then perhaps
(03:50):
most importantly, a real falloff in foreign capital flows
into The US.
But that turned tail quick. Itturned tail in a couple of
weeks, and then we saw the tenyear come in, ten years
stabilize in that four to fourand a quarter range. We've seen
the stock market surge. We'veseen foreign capital come back.
So, yeah, I guess it was thetale of two years pre April,
post April, but at least theApril May malaise was only the
(04:11):
April May malaise.
And look, I would make
Mark Bonner (04:13):
a strong argument that Merriam Webster should make
the word uncertainty the word ofthe year. That itself seemed to
become the biggest risk premiumin all of commercial real estate
to your point. And that's macronoise for sure. But it was noise
that did show up in themicroeconomics of commercial
real estate. What do you whatare what are we gonna do about
that?
Spencer Levy (04:34):
What I advise my clients to do is when they see
noise, you should seeopportunity. Because I think
people overplay the noise, bothmacro politically and otherwise,
and what they need to look at,and I hate to use hand gestures,
durable demand drivers. Anddurable demand drivers are
things that cities like NewYork, like San Francisco, like
(04:55):
Miami, like Dallas, and dare Isay it, increasingly, yep, I'm
gonna say it, the Midwest. I'mlike, well, what? The Midwest?
That's where everybody's beenrunning away from for the last
twenty years where everybodywants to be in a smile state or
gateway city. But people have tolook at durable demand drivers.
And one of the durable demanddrivers that's really improving
(05:15):
the Midwest is not just thereshoring of manufacturing. It's
the train line from Mexico toCanada. I understand almost
$2,000,000,000,000 of trade goesacross that trade every year
train every year, and it's onlygoing to increase.
And you follow that durabledemand driver, that
infrastructure, despite some ofthe tariff noise, despite some
of the trade noise, despite someof the political changes, that's
(05:36):
the time to find opportunity.
Mark Bonner (05:38):
Right. But look, policy is no longer a foot a
footnote here. Right? It can'tbe ignored. To your point,
tariffs, permitting delays,power availability,
environmental roadblocks,litigation risk, and whatever
else comes out of the WhiteHouse.
How should underwriting evolvewhen these policy changes are
happening faster than asset lifecycles?
Spencer Levy (05:58):
Well, I go back to my original answer, but I will
put a asterisk on it now. Thereare some policies you need to
watch. And so the, one big,better, beautiful bill had some
things in there you have to beaware of. Right? Some of them
you know.
Some of them you know as itrelates to the extension of
opportunity zones, themaintenance of the 10:31
(06:20):
exchange, getting rid of eightninety nine, which would have
really slowed foreign capitalflows to The US. But there are
some things in there, and Ibrought my handy dandy notebook
with me just so I get it right.But qualified improvement
property, which is basicallymanufacturing, you can expense
it 100 in year one. That is anunbelievable tax benefit. And
(06:42):
there's also bonus depreciationallows you to expense 100% of
things like TI dollars.
These things are going to changethe mathematical equation of
what is a good real estateinvestment because you can just
knock it out against yourincome. And so it is a thing
that you should look at, youshould use, and once again and
(07:04):
again, this is not the Midwestis number one show but it is
going to give further help tothe Midwest, certainly from the
qualified improvement property,and it's going to give further
boost to office for the bonusdepreciation as TI dollars
become marginally cheaper.
Mark Bonner (07:19):
We're going to talk about geography in a few minutes
here. But like, I think thestory of the year was that CRE
didn't move in 2025, but it didfracture. Right. Office thought
multifamily stayed liquid wheresupply and insurance behaved,
retail stabilized, industrialcooled, data centers ran around
from the pack. They got AIheadwinds out there.
(07:39):
What did the market misread thisyear? And what do you think is
still mispriced for 2026?
Spencer Levy (07:45):
I still think that the mispricing and and I when I
say mispricing, let's just bevery clear what we're talking
about here. If you could sell meevery asset in Austin, Texas
right now at fair market value,I would buy it all. The problem
is they're not selling at fairmarket value. They're selling at
prices that expected cap ratesto stay much lower than they
(08:06):
really are, interest rates to bemuch lower than they really are,
and the leasing volume is muchworse than people believe
because, you know, look, bottomline is they overbuilt. Okay.
Oh, no. Bad news. Right? Youknow what it reminds me of? It
reminds me of Nashville tenyears ago.
We had exactly the same thing.They overbuilt. You know, we
have ten years of new supply.It's not gonna happen. Wrong,
(08:27):
wrong, and wronger.
Is wronger even a word? Thepoint is durable demand drivers.
Austin is probably the fat, noit's not, it's the second
fastest growing city in Americabehind Boise, but it's a lot
bigger. It's got tech. It's gotcapital.
It's got human capital. It's gotcool. It's got weird. And that
is their expression, keep Austinweird. Folks, you see this short
(08:50):
term dislocation and when youcan get stuff as close as
possible to what is true fairmarket value, unbelievable
opportunity even in markets thatare soft at the moment.
Mark Bonner (09:01):
I think it's weird two point o if you really wanna
be honest. I mean I mean,Spencer, when Austin was keep
keep Austin weird, I mean, itwas because it was the land of
hippies and people who smokepot. I mean, it's a lot
different now with being a techcapital of the world. Let me
just talk to you about datacenters really quickly. Data
centers red hot, probably thestory of the year in commercial
real estate, one of the thingsthat it's most proud of as a
(09:23):
monolith, yet headwindseverywhere.
What do you make of this AIbubble noise?
Spencer Levy (09:29):
Well, you use the B word. I am not going to use
the B word. I'm going to use theuncertainty word because I think
that if people people don'tremember, right? I have a long
history in the data centerspace. I remember the first data
center space I looked at wasInfomart in Dallas back in 2001.
So it's been around for a while,folks. But what also people
(09:50):
don't realize is that rents weredeclining in data centers until
about four or five years ago.Declining. Okay? This is like
the new big thing where rentsfinally hockey sticked in the
last couple of years.
But why did they hockey stick?They hockey stick because of AI,
because of crypto, and becauseliquidity. Right? Liquidity
(10:10):
sometimes drives other things,and the liquidity came from big
foreign banks that are able towrite $500,000,000 and up checks
to give you some of the debt.Lots of equity coming in.
So it's heavily, heavily liquid,but there are strong
fundamentals to back it up,including but not limited to the
fundamental that it's hard toput new supply on. It needs a
lot of power. Needs a lot ofwater. So it's a very good space
(10:31):
to be in in data centers. Allthat said, there is a percentage
of the real estate space thathas caution on it.
And the caution on the space isthe B word that you just used a
moment ago, which I'm not goingto use on air. And also the
concern about technologicaldisruption. Look what happened
to, you know, one of the bigchip manufacturers back in
(10:52):
January. Some company in Chinasays we can do chips with one
third the power. That companyhad a bad day at the office.
So I am not a tech expert, butthere is technological
disruption that is part of thestory that is giving some people
caution.
Mark Bonner (11:05):
Look. Bubble. Bubble. Bubble. Bubble.
Bubble. Bubble. Is this a mediacreation? I mean, lot of smart
economists are out there sayingbubble.
Spencer Levy (11:15):
Well, listen. I remember when I was a kid, I
used to get these things of ofbubble with a little thing you
used to blow. You remember thatthing? And you can and if you
blew it just right, you can geta double bubble. So, I mean, we
could talk about bubbles all youwant all day long.
What you're really talking aboutis irrational exuberance, to use
the word that I think was givenby Alan Greenspan. And I think
(11:36):
he used to say irrationalexuberance in this sector, and
that's when he would jack upinterest rates to try to cool
the exact irrational exuberance.Do we have irrational exuberance
in AI and other sectors of theeconomy? I think that the
fundamentals are good enoughthat no, we don't have. Do we
have a lot of liquidity there?
Yes, we do. Is that often acaution sign to to hit the pause
(11:59):
button? Yes, it is. But thefundamentals are still excellent
in the space, and you need moreof them because unlike other
asset types where, you know, youcan put it pretty much
concentrated in one place, datacenters have to be in other
countries because of differentregulatory regimes. So it's not
like the kind of thing where yousay, we'll just stick them all
(12:19):
in Dallas.
No, they got to put one inArgentina, got to put one in
Chile, you got to put one inPortugal, or many maybe more.
The point is that I agree withyou. I'm not going with
irrational exuberance. I'm notgoing with bubble. I am going
with a lot of liquidity, whichis often a caution sign, and
I'll leave it at that.
Mark Bonner (12:40):
Let's talk about another word, capital. It didn't
disappear in 2025. It gotdisciplined. Private debt
dominated early. Banks creptback later pushing issuance to
$227,000,000,000 in the firstthree quarters.
That's an 85% jump year overyear. Delinquencies held near
1.56%, but nonperforming loanskept rising, at large banks.
(13:03):
Committee slowed. Structurestightened. Optionality became
strategy, my friend.
Where is capital actuallypositioning for 2026? Not
talking, but moving.
Spencer Levy (13:17):
Well, the good news is this. A lot of
appraisers don't get a lot oflove. This is the thirty seconds
of love for appraisers. And whyis that? Because when markets
are good, appraisers will oftenundervalue an asset because
they're going with comps, andcomps are backward looking.
When things are going up,they're looking back. Well, when
things are going down, they'realso looking back, and they'll
(13:37):
keep asset values higher. Whathappened because of that? They
slowly ramped down the value ofoffice buildings rather than
dropping them like a stone, andthat allowed the banks to
recapitalize. Okay, what wasgoing down, what was going up?
And it took a couple of years.And now some of our best capital
sources right now are regionalbanks, which had a high
(13:58):
percentage of real estate inthem because they recapitalized.
So look, the bottom line isthis. There's a lot of liquidity
in the market right now, butthere's not a lot of liquidity
right now for new construction.And I think new construction,
it's a great time to build now.
Why? Because new constructionfell off the cliff and fell off
the cliff because labor costsare high and interest rates are
(14:20):
high. Though I did hear actuallyin a meeting I had yesterday
that they're beginning to see adrop in labor costs. That was
one of the first meetings Iheard that. And I'm like, well,
how are you hearing a drop inlabor costs?
He said, because there's not alot of new construction and
these contractors andsubcontractors got to work and
they're pricing it lower. Sothere's even optimism there. So
I think that right now for 2026,there's capital for everything,
(14:44):
but capital for the higher riskassets. And, you know, I have a
good friend of mine who thinksactually construction is less
risky than buying existing, butthat's a debate for the other
day. But capital for the higherrisk assets like new
construction, I think is readyto go.
I think it's ready to go oncethe coast is clear, maybe by
another 50 basis points ininterest rates.
Mark Bonner (15:04):
We'll see, Spencer. I mean, it hasn't necessarily
been a wonderful year forconstruction. I mean, anybody
who's working a pro form a saw acategory five hurricane wash
upon its shores. Tariffs havebeen really hard.
Spencer Levy (15:16):
Really hard for multifamily in particular.
Particular. And you got you havea second And
Mark Bonner (15:20):
we're in a housing crisis. Right? So that's a
pretty serious situation, don'tyou think?
Spencer Levy (15:24):
Well, the thing about it, when you look at
tariffs, okay, you havecommodities, which is like wood
and steel and oil, and then youhave finished products like the
refrigerator, like the stove.Those are the things that got
hit a lot harder than thecommodities because the
commodities, havereplaceability. For these
finished goods, you don't haveas much replaceability. And
(15:46):
that's why multifamily actuallygot hit harder than did some of
the other sectors in terms ofthe falloff of new construction,
which actually was a good thingbecause twenty twenty four, not
2025, 2024 last year, I believewas the year that had record new
deliveries in the multi space.So we probably needed somebody
to hit the pause button.
I'm not saying it was good thatthe way we hit the pause button,
(16:07):
but hitting the pause button alittle bit multifamily was
probably healthy overall becauseof the peak where we were a year
ago. But the housing crisis,very we could have a whole show
on the housing crisis. But letme sum it up like this. Yes, we
need a lot more units wherepeople work. It's not that we
need more units.
(16:27):
Oh, look, we have all theseempty houses in, you know,
Rochester. And by the way, Ilove Rochester, so don't give me
the nasty grams from Rochester.But, you know, markets that
haven't grown as quickly. That'snot where we need the houses.
You need the houses right wherepeople are moving.
And those houses are of allshapes and sizes. So one of the
most politically disfavoredasset classes is institutionally
(16:51):
owned SFR or BTR, single familyrental or build to rent. And I
push back on that hard all day.I'm like, Folks, does it
marginally increase the price ofa single family home? Yes.
At the local level, marginally,it may in fact do that. But you
know what it does? It bringsmore money into the sector. That
means you're going to make moreof it. And that's what we need.
(17:11):
We need incentives for moresupply, period. Now the second
thing you might need is just adifferent way of looking at
housing. So I'm surprised ittook me eighteen minutes into
your show to shamelessly plugthe weekly take, but we have a
whole episode on new ways tothink about housing, not as
entire houses but as bedrooms.Meaning that if you have a four
(17:32):
or five bedroom house, why don'tyou rent it out by the bedroom
rather than renting it out bythe whole house? Yes, I know it
brings up privacy concerns.
Yes, I know it brings upsecurity concerns. But if we can
figure out how to operate SFRBTRbetter, which we have in the
last decade, we can figure outhow to use smaller segments of
existing housing stock moreefficiently.
Mark Bonner (17:53):
If you're just joining us, this is First Draft
Live. I'm here with the greatSpencer Levy of CBRE unpacking
the year that was 2025commercial real estate. Spencer,
I hate to burst your bubble, butAmerica is not moving anymore.
In fact, the last couple ofweeks from a number of reliable
data sources as America hasstopped moving, migration has
stalled as sub 3% mortgages havelocked households in place,
(18:17):
making a typical relocation 73%more expensive per month. What
movement remains is smaller,wealthier, and increasingly
corporate driven.
Arkansas, Idaho, North Carolina,they lead in inbound games.
While Bentonville, home ofWalmart, alone is capturing
nearly 40% of Arkansas rivals.Louisiana topped outbound list
(18:39):
again, my home state, whileoutflows from California,
Illinois, and New York finallycooled. What do you what do you
make of that, Spencer?Concerned?
Spencer Levy (18:50):
Here comes the big my my not surprised face. And
why is my not surprised face? Soonce again, going back to, and,
again, I forgive me forshamelessly plugging, The Weekly
Take podcast, but we had on theshow before he passed away the
late great Sam Zell. And on theshow he said very colorfully, by
(19:11):
the way, one of our mostcolorful guests we've ever had
to say the least he said, Thedeath of New York has been
forecast every five years forthe last forty five years.
Didn't happen then, it ain'thappening now.
And that's why people arestaying in New York because they
have great economic activity.They have the great durable
demand drivers, infrastructure,capital, human capital, live,
(19:33):
work, play, cool. All thesethings say, you know what?
Living in these big cities isactually a very good place to
be. And low cost is great, butit's not everything.
And so I was in a market wherewas I last week? I was
everywhere last week. Last week,I was in Raleigh, North
Carolina, one of the truly,truly great growing markets in
(19:54):
The United States. For all theright reasons. I was very
fortunate.
I interviewed the CEO of theCarolina Hurricanes. Anyway,
there were some complaints bythe locals that things were
getting more expensive. And, youknow, things are getting more
expensive. And what I said tothem was this. That's a high
class problem to have becauselow cost is a race to the
bottom.
(20:14):
You will always have somebodywho will do it cheaper than you,
always. But you will not alwayshave somebody who will do it
better than you. And better isnot necessarily cheaper. It
comes down to, I hate to use afancy economics word, utility.
It's not anything but utility,and utility is a combination of
economic opportunity and, dare Isay it, happiness.
(20:37):
You put those two thingstogether, you get a whole lot of
that in the big cities too.
Mark Bonner (20:42):
Look. Where do you you're on the road a lot,
Spencer. I mean, where youtalked about the Midwest. Tell
me more about that. Where do youthink is next in terms of
investment in The United Statesor even overseas, Europe or
Asia?
Spencer Levy (20:54):
Well, look. I was very big on Madrid, Spain, and
Spain overall, and I still ambig on Spain overall. And the
reason is very straightforward.It's just that magic word, it's
just math. Because Spain andSouthern Europe during the
global financial crisis in02/2012 was a very, very tough
place to be because the bankswere broke and unemployment was
(21:16):
high and nobody was building.
Well, guess what? That wasfifteen years ago, folks, and
the banks are now super healthy.Unemployment's still high, so
labor is cheap, and they'reunder built. Now the story was
slightly better probably in thefirst quarter of this year when
the US dollar wasn't as weakbecause the US dollar devalued
(21:36):
by 10%, folks. And by devaluingthe dollar by 10%, it made
Europe and other places slightlymore expensive.
But nevertheless, places thatwent through the apocalypse,
like Southern Europe, now lookpretty good because they've
solved those problems becausethey're underbuilt and lower
cost.
Mark Bonner (21:55):
Got a question from the audience related to this
topic. Do you think Miamioverbuilt as well since class b
condos are now not moving?Miami's been one of these things
that's been in the all year,last couple of years since the
pandemic. Right? They're thatthey're gonna steal all of our
population because of Zora andMondami here in New York.
What do you make of the Miamidynamic? Can that last?
Spencer Levy (22:16):
First first of all, you should know that if we
weren't on this show, I'd besitting in Little Havana right
now with my Panama hat, which issitting right over there,
smoking a cigar and drinking thebest Cuban coffee in the world,
and I'd probably wash it alldown with the best Cuban
sandwich in the world. LittleHavana is one of the coolest
little sub submarkets there is.But that's what makes Miami
(22:38):
awesome, what makes it durableover the long term because it
has these cool cultural elementslike that. Wynwood is a cool
emerging market that's night andday different than brickable. We
have a lot of our big clientsmoving over there.
Is there going to be someoverbuilding in condos? Yes. But
the overbuilding in condos isthe Class B condo story is not
(23:00):
overbuilding related. It'srelated to the change in
building codes in Miami becausewe had that terrible, terrible
tragedy about four years agowhere Surfside collapsed, killed
just dozens of people, and Miamisaid not happening again. And so
people that are in older condobuildings are running the risk
of being whacked with a massivecapital expense charge.
(23:20):
That's why b condos aren'tmoving. It has nothing to do
with lack of demand. Oh, I'd buya b condo right now if I didn't
have that overhang over me. Sothat's the real issue there. It
is not the overbuilding.
It is the change in law, andpeople just need to adjust to
it.
Mark Bonner (23:35):
I mean, can the hype meet the reality? I mean, I
I is the runway still there forMiami? Right? I mean, it it sort
of the narrative I mean, it is acool place to visit. I love I
love Miami myself, Spencer.
But can it remain hot as, agrowing city that attracts major
investment and major populationgrowth over the next two
Spencer Levy (23:54):
or three years? Can. And and I said what what
I'm my the first words out of mymouth are gonna sound negative,
but I'm then I'm gonna spin it.It's actually not that easy to
build in Miami. Miami is asomewhat more regulated market,
and with people in Florida, it'smore regulated than say a Tampa
or in Orlando to build newstuff.
That said, that's sometimes atough zoning board is your best
(24:14):
friend because it makes yourexisting product more valuable.
But Miami suffers from a coupleof things that a lot of big
cities that are growing quicklysuffer from. The traffic there,
no good. Okay? The issue ofrising prices of the Class A
market makes it tougher, moreexpensive, hard to get around,
all that stuff.
(24:34):
That's a high class problem tohave. The Miami story isn't
going anywhere, and it may havesome short term challenges in
certain submarket or sub sectorslike Class B, but that's due to
a change in law. But no, I thinkMiami has great long term
strength. And by the way,they're improving the Miami
Airport, thank God, because theMiami Airport for a city of its
(24:57):
caliber needs a bigger, better,more beautiful airport.
Mark Bonner (25:00):
We've got another question from the audience here.
They wanna hear more about yourlove for the Midwest. Are the
opportunities set as simple asfollow the railroads? What are
the nuances to be aware of inyour opinion?
Spencer Levy (25:13):
Okay. So here's the biggest nuance of all. And
I'm surprised it took me thislong to bring it up on the show.
The single biggest change in ourmarket over the last two years
and going to be for the next tenis from 2012 to 2022, 75% or so
of the real estate gains weredue to compressing cap rates
because we had low interestrates. Guess what we have now?
(25:35):
High interest rates and they'regoing to stay high. They might
come a little bit lower, butyou're not going to get bailed
out by the magic, which is areally low exit cap rate. And so
if you're not going to getbailed out by a really low exit
cap rate, you need to do twothings. Number one, you need to
operate better so that you cangrow NOI faster. And the second
(25:56):
thing you need to do is get ahigher going in cap rate.
And the Midwest has higher goingin cap rates. Are you going have
a higher going out cap rate too?You will. But you know what?
I'll take the 150 to 200 basispoints upfront if I know I'm not
gonna get the lower exit caprate in the major markets too.
So I think the Midwest story isnot just the railroads, it's the
(26:17):
math.
Mark Bonner (26:18):
What cities do you like?
Spencer Levy (26:20):
Well, look. It kills me to say this as a guy
whose son goes to Michigan, butI love Columbus, Ohio. Okay? I
love it because they are, youknow, a beneficiary of this
train line thing. They also haveNew Albany which has a new Intel
chip plant, has new datacenters.
It has the Ohio StateUniversity. Yep. I said it. And,
you know, those are the kind ofthings that are gonna drive the
(26:42):
economy. It's also so it'slocation.
I think it's it's it's centrallylocated near probably half The
US populations within 200 milesof Columbus. I mean, it's really
well located. So Columbus is amarket I like, but here it is.
And now now I'm gonna get thrownoff the show. Chicago.
Yep. Who said it? I did. And youknow why? Because not all of
(27:04):
Chicago is great.
And, yeah, it's tough in certainmarkets, particularly the office
market for older office stock.You know what? We just sold a
multifamily deal in the suburbsof Chicago that was
oversubscribed, and and theFulton market is one of the
great submarkets. River North,another great submarket. I love
markets that people don't likethe headlines, but if you look
(27:25):
into the submarkets, there'sgreat opportunity.
Mark Bonner (27:29):
That is surprising to hear. And by the boo to the
buckeyes. No I mean, offenseintended to buckeyes fans over
here, but I hear you loud and
Spencer Levy (27:37):
because you
Mark Bonner (27:38):
Of course, I'm an LSU guy. We took care of Ohio
State in the two thousand sevennational championship in the
Louisiana Superdome.
Spencer Levy (27:43):
How was You know what?
Mark Bonner (27:44):
I went
Spencer Levy (27:44):
to Cornell, and we took care of Dartmouth in the
nineteen thirty one nationalchampionship too. So, I mean,
how far back we're gonna go?
Mark Bonner (27:50):
The Ivy League. I love it. One more question from
the audience, and then we'llwe'll we'll get into the our
final thoughts. The recent BLSreport is subject to a lot of
criticism, and it seems politicsis more overtly intruding into
government statistics. Shouldinvestors be concerned about a,
quote, unquote, credit event in2026 like investors losing
(28:13):
losing faith in US treasuries?
Spencer Levy (28:17):
No. Next question. I mean, this one to me is the
easiest answer of all. Know, Youlot of people say that, oh,
people aren't gonna trust thetreasuries because our national
debt is ballooned up to$3,435,000,000,000,000 dollars
wherever it is right now. But USdebt to GDP is only about a 110%
now.
Only about I wish it was 80%.Right? Don't we all do? But you
(28:37):
know, we can handle it so longas interest rates keep coming
down a little bit. If they stayhigh, it crowds out a lot of
other spending because it throwsso much of the government
spending into nonproductiveuses, which is debt service
rather than building a newhospital or a road or a school,
something that's reallyproductive.
Right? But no, I don't thinkthere's any risk of people
losing faith in the full faithand credit of The United States.
(29:00):
And the full faith and credit ofThe United States comes from a
thousand different factors ledby rule of law, led by critical
mass, led by strength in a in a100 different ways. And, you
know, you all you gotta do istake a look at The US's
formation of new Fortune 500companies versus every other
place in the world, and we'redoing pretty good.
Mark Bonner (29:18):
True. But, know, I'm a I'm a journalist, Spencer.
Right? So I'm skeptical bynature. Right?
Yesterday, we're high fivingabout the inflation report
coming out of the government.Then this morning, I wake up
into the headline at the NewYork Fed president is saying
that those were artificiallyinflated. So therefore, there is
mistrust in the data that'sbeing provided by the US
government. I wonder if ifthat's gonna become a factor
(29:40):
moving forward.
Spencer Levy (29:41):
Or do
Mark Bonner (29:41):
you think that's more noise?
Spencer Levy (29:43):
One data point is not a trend to make. Alright.
That is
Mark Bonner (29:46):
It's not one time. It's more than one time over the
last six months.
Spencer Levy (29:49):
These numbers are not being manipulated. They're
being changed by events. Okay?So the reason why inflation
number was partially low wasthat we had a government
shutdown of forty five days,which retarded some spending.
And then we have to and you knowwhat's gonna happen now?
And I was just on the calltalking about this with another
economist. It's going toincrease GDP in the next in
(30:12):
first quarter of next year. Andso the bottom line is the
distortion of the numbers thatyou are claiming is not done for
nefarious reasons. There areevents that are driving that.
Mark Bonner (30:26):
Didn't say it was nefarious, but it does create
fog. It creates uncertainty andit feels into this chaos
narrative of the last year.Right? Yeah. And it makes it
very difficult to make big timedecisions when you've got extra
fog in the room.
These are already complicateddecisions that we're talking
about here. And then when youhave that added on, it's just
one more layer of uncertainty.
Spencer Levy (30:46):
Yeah. Look, again, I think if people are voting
against the government, youknow, give me a call because the
government is and The US isn'tgoing anywhere. The government
in The US is the land of as andlisten. I'm not saying it's
perfect by a long shot. I'm notsaying it isn't noisy.
I'm not saying that democracyisn't a mess sometimes. And as
(31:08):
Winston Churchill says,democracy is the best form of
government unless you compare itto all others. I think I got
that wrong with them. Is is thewell, the bottom line is this.
I'm not like some big, yo, USAall the way guy.
I'm just here looking at thefacts, and the most important
fact is growth, right? We'regrowing slowly. We're growing
(31:28):
like 2%, and I think we're goinggrow a lot faster than that due
to AI. But the bottom line isusing it to help grow AI, using
it through AI and other ways togrow, it's going be because of
the entrepreneurial spirit ofThe US government system overall
that permits entrepreneurialismin a way that is not permitted
(31:52):
in a lot of other places. So,look, no way.
I I'm not I'm black and white onthis one. Notwithstanding our
problems, I wouldn't wanna beany place else.
Mark Bonner (32:02):
You're black and white, you're red, white, blue,
my friend.
Spencer Levy (32:05):
Nearly one saying we don't have problems. Look, I
Mark Bonner (32:08):
am with you. Well, last last question before we get
into our our our our finalthoughts here. Nearly
$1,000,000,000,000 in commercialreal estate debt is gonna come
due in 2026. The maturity wavedidn't crash this year. It just
deferred.
At the same time, the biggestunanswered policy question still
looms. The future of Fannie Maeand Freddie Mac and what
(32:30):
privatization could mean forhousing finance. Is 2026 the
year uncertainty finallyconverts into opportunity, or do
you think it's just another yearof selective motion?
Spencer Levy (32:42):
You are worried about the wrong stuff, my
friend, because theprivatization of Fannie and
Freddie does not make me lose aminute of sleep. And the reason
is very simple, because theimplicit or the explicit
government by the way, thepresident said he was explicit
when it came to the guaranteeof, government debt through
(33:04):
Fannie and Freddie even if it isprivatized. That's not going
away, and that's all thatmatters. The privatization thing
really has to do with, you know,the efficiency of operations and
has to do with the bondholdersand things that have very little
to do with the bondholders ofthe Fannie and Freddie stock,
not the bondholders ofgovernment bonds from Fannie and
(33:25):
Freddie. That's what we'retalking about here.
Are we going to impair the valueof government bonds of Fannie
and Freddie? The answer is nope.Are we gonna impair the value of
the implicit or explicitgovernment guarantee? Nope. And
whether it's private or owned bythe US federal government, I
think it has almost no bearingon what's going to be the
liquidity of the multifamilymarket multi and single family
(33:46):
market.
Mark Bonner (33:47):
If one thing were to unlock real momentum in 2026,
what do you think it would be?Lower rates, clearer policy for
sellers, or simply fatigue,meaning investors deciding that
waiting is riskier than acting?
Spencer Levy (34:03):
I like to be mister fan actually, I try to be
the opposite of mister fancytalk. And I'm gonna be real
simple here, folks. If inflationmaterially cools down like, when
I say cool down, I mean, gettingclose to that 2% magic number,
and we can legitimately reducethe short end of the curve from
(34:23):
where it is now in the three anda half percent kind of range,
three to three seventy five,down to something closer to two,
all that will unleash growth.Alright? And the president knows
that.
Everybody knows that. The wholeevery it's it's just math,
folks, because the short end ofthe curve right now is still
marginally restrictive in termsof new new economic activity in
(34:47):
the economy. And so because it'smarginally restrictive, we're
not growing as fast as we can.But what will happen is going
back to several of the thingsyou said before, Mark, was it'll
let people sell their singlefamily homes. It'll allow more
economic movement in thecountry.
It'll allow more investment incertain things because the cost
of debt is lower. So that is theone thing. If inflation really
(35:10):
cools, that is the single mostimportant thing that could boost
the economy. The single thingthat could really nail the
economy is the exact opposite.That inflation goes bonkers
again.
And that and that to me causesconcern. And the concern or the
the thing that causes the thirdthing that causes concern is
inflation goes bonkers, theystill cut interest rates because
(35:32):
then you know what would happen?The bond vigilantes would take
over and jack up the 10, andwe'd be in a worse position
overall.
Mark Bonner (35:39):
Spencer, let's play a little game. Hot or not for
2026. You game?
Spencer Levy (35:45):
Bring it hot.
Mark Bonner (35:46):
Hot or not. Hot or not. Office. Hot. Industrial.
Getting hotter. Multifamily.
Spencer Levy (35:59):
Getting hotter.
Mark Bonner (36:01):
Okay. Retail? Hot. Data centers? Well, I know where
you're going here.
Hot. Not warm. You're going hot.Okay.
Spencer Levy (36:13):
Private I'm going hot because I see the issues in
data centers as not beingresolved in 2026. Think that the
issues of data centers, ifthere's going to be a challenge
in that center sector with theworst challenge with the b word.
Right? It's it's delayed by afew years. It's delayed by a few
(36:34):
years by a technological changethat I don't see on the horizon
immediately.
Mark Bonner (36:37):
Okay. Spencer Levy is hot for data centers. Private
credit.
Spencer Levy (36:43):
Private credit. Define private credit. Meaning
like from a non bank financialinstitution? Yeah. Family
office.
Oh, family office. Oh, soprivate capital versus
Mark Bonner (36:53):
Private capital. Yeah.
Spencer Levy (36:55):
Yeah. Private capital versus institutional
capital. Well, it was hot thisyear as compared to institutions
because actually private capitalwas doing a lot of the
development deals that theinstitutions wouldn't do. And so
I see it, staying hot andgetting hotter for another
reason that we didn't bring upon the show and we should have.
Mark Bonner (37:14):
Okay. Hot or not? We gotta keep moving, Spencer.
I'm sorry. You're hot.
Okay.
Spencer Levy (37:18):
I I would say of all the things we mentioned, the
hottest of all is going of thethe traditional investors going
for private capital, nonaccredited capital versus going
for pension fund endowmentcapital. That is of all the hot
categories, that may be thehottest category of all.
Mark Bonner (37:36):
Okay. Distress investing. Cold. Okay. Secondary
markets?
Spencer Levy (37:47):
With good infrastructure hot, with bad
infrastructure cold.
Mark Bonner (37:50):
Sunbelt. Would say I Hey. You're hot on the
Midwest. Are you are you stillhot on the summer?
Spencer Levy (37:59):
I once would the overbuilding is done and over
the long term hot, but in theshort term, it's warm because
there's there's been someoverbuilding in certain
segments.
Mark Bonner (38:08):
Gateway cities, Dallas, New York, Los Angeles.
Spencer Levy (38:12):
Long term, couldn't be any hotter. Short
term disruption, greatopportunity. So I'm warm short
term, hot long term.
Mark Bonner (38:19):
The New York
Spencer Levy (38:19):
Knicks. My childhood was ruined by Patrick
Ewing. It's not gonna be ruinedtwice, but I will say this about
my beloved New York Knicks isthat, dollar bill Bradley and
and Walt Clyde Frazier andWillis Reed, and Phil Jackson
all hung it up a long, long timeago. There's something about
(38:40):
1940 for the rangers thatreminds me of 1973 for these
knicks. What's gonna win for theknicks isn't talent.
It it's believing. And that'swhy we go back to the '69 back
to the Mets. You gotta believe.
Mark Bonner (38:53):
The New York Mets.
Spencer Levy (38:56):
Well, now I live in Baltimore, and I I thank you
for the gift that is PeteAlonso.
Mark Bonner (39:02):
Oh, man. That hurts, man. How about your Jets,
man? We got the Jets and theSaints this weekend. Both of our
teams hot.
They gonna win?
Spencer Levy (39:09):
Still playing that game? How many paperbacks can
they sell
Mark Bonner (39:12):
over there? You're totally right. Alright. I'm
gonna I'm gonna give one tomyself. LSU football.
The lane train is going all theway to the playoff. I'll see you
there. And the Saints, verysadly, we are not dad. We are we
are cold. Not gonna be good.
Okay?
Spencer Levy (39:29):
Well, listen. I think LSU football, the whole I
don't even wanna get in. This isnot a foot this is not the
college football segment oftoday's program.
Mark Bonner (39:37):
Oh, it sure is. But we need to wrap up. What do you
want to say about LSU football?You can get it in right now,
man.
Spencer Levy (39:41):
My son my son is a is graduating from Michigan and
they won the natty and thenthings just all went downhill
and it's just gotten horrible inthe last few weeks. But look, I
went to Ivy League ball, okay? Iwent to Cornell, right? And I,
you know, I'm so old school. Ijust love that system And it's
like, you know, you're such afunny duddy.
(40:03):
We're making billions ofdollars, and you just don't
wanna play because you'rebecoming better people. You
know? No. It's you know, Ialways chose the better academic
school over the other one, andmaybe nobody thinks that way
anymore.
Mark Bonner (40:16):
It's all about winning, man. Okay. Spencer,
this has been a lot of fun.
Spencer Levy (40:20):
One story for you. One more winning Oh, god. Okay.
Come on. Quick.
To be said. In 1940, Cornellalso won the national title,
beating Dartmouth on what was afifth down play. What happened?
The president of Cornell foundout it was a fifth down and
forfeited the game. That's whatfootball should be.
(40:42):
It's about a lot more than justwinning and losing.
Mark Bonner (40:46):
Spencer, thank you so much for closing out the year
with us. This has been a lot offun. And to everyone watching
live today and to everyone whocatches First Draft Live later
in the week on social or on yourpodcast feed or in your car or
on your computer at the gym, wethank you. And, yes, we also
wanna thank the one listener whoreached out to me earlier this
week to say that they played theshow off fishing on some
(41:07):
beautiful freshwater lake inTennessee. Thank you.
We see you. To our listeners andviewers overseas, we are
grateful to you as well. Itmeans more than you know that
this conversation travels as faras it does. This is our final
first draft live of 2025, andnone of it happens without the
incredible team behind thescenes at BizNow every single
(41:29):
week. Elizabeth Baker, WillFollett, Katherine Rountree, Sam
Anderson, Ali White, AndrewNathanson, Katherine White,
Julia Troy, and Katie Dixon.
It truly takes a village,Spencer, to put this show
together, and I'm deeplygrateful for mine. We'll be back
in 2026 with more signal, moreclarity, and hopefully a little
(41:50):
less uncertainty. Until then,have a wonderful warm holiday
season. This is First DraftLive. We'll see y'all in 2026.
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