US Investment Sales Market Update 2025

Welcome everyone. Thank you everyone for joining our US Investment Sales Market update. I'm James Nelson. I'm principal and head of US Investment Sales. With us today is Erica Dean, who's also a principal and Senior Director of U.S. investment Sales Marion Jones, who's principal Executive Managing Director of U.S. capital Markets Joe French, visiting from our D.C. office, Vice President of Capital Markets Group and Mike Fay, our Chairman, US Capital Markets Group Executive Committee, Principal Managing Director who's going to be talking to us today about the Miami office. So we're very excited about this new format. We've launched our new US Investment Sales Group. For those of you who don't know, Avis and Young is a global full service company. We have 120 offices around the world with 60 of them being in the U.S. we are especially focused in the top dozen markets. Here in the US the top dozen markets account for over a third of the dollar volume. And so that's where we see a lot of these trends coming from. Eric and I are sitting here in New York. We have much more in depth reporting for D.C. atlanta, Miami, Austin, Dallas, Phoenix, L.A. san Francisco, Denver and LA, excuse me, and Chicago. And today we are going to be taking a little more of an in depth look into the D.C. and Miami market and our as we have these quarterly webinars. Moving forward, we'll be spotlighting three markets at a time. It's just a little bit too cumbersome to go through all a dozen of them. So with that I'd like to turn things over to Marion Jones who will give us an overview and maybe some thoughts on trends to think about in the capital markets across the country.

Welcome Marion.

Great. Thanks so much, James. Yeah, I thought I'd take a few minutes to kind of COVID some broader themes that we're seeing as part of our mid year outlook. And what I would say is like big picture we have seen in our own numbers, we've had a few months in a row of some really strong performance and we've seen it from others who are in the space that there's a lot of uptick in transactional volume and you'll see that play out in some of the stats that James and the group will go over today. But as we gear up for a more robust transactional environment, a couple of things I wanted to sort of highlight as it relates to this kind of pivot point because it has been a tough deal making environment for some time and sometimes it's hard when you're sort of on the nose of a change to really understand what's happening. So one notable thing that I'll mention first is the reforecasting of the reforecast. And that's a trend that has happened. It's very unique to 2025 because we've seen a lot of volatility. But early in the year in house, economists for major financial services firms or for REITs or other large investors, they come up with their own forecasts, of course, and many of them came out in April and they issued a reforecast for 2025, generally in a downward trajectory based upon what happened with Liberation Day in recent weeks. A number of them, a number of major economists, like the lead economist from the imf, one from Citigroup and several others have been revising it back upward. And what has happened from April to now is that the sort of recessionary impact that was anticipated to follow from Liberation Day and trade negotiations, it didn't really materialize, nor did the sort of downward pressure on the whole US Economy materialize in the same way that those had predicted in April. So we have economists revising the. So they issued a reforecast on the reforecast that's largely very positive with upward momentum in the US economy, but specific to the space that we're in, which is the performance of real estate REITs. Nine major REITs across multiple asset classes have also revised their earnings projections in an upward trajectory through year end 2025. So this includes groups like Prologis in the industrial space, Brixmore in retail, Welltower in healthcare, RLJ in hospitality. So this is a pivot point that it's not, you know, it's not Marion Jones at Avis and Young or it's not just one particular, particular read. It seems to be spreading throughout the industry. And I think many have probably seen or followed John Gray and he's issued sort of similar statements in the last couple of weeks about the turning point is here or has already happened. So I would just lastly say on the reforecasting of the reforecast point that there were only 9% of REITs issued a reforecast that was downward and they were largely concentrated in hospitality. So I think it's important to note that 2025 has been a bumpy ride. There is volatility, but we're not seeing the doomsday stuff materialize. And if anything, we're at a very meaningful and discernible pivot point in the real estate cycle. Fundraising. On a fundraising perspective, we're also seeing that the capital raise environment seems to be turning A corner. It has been an incredibly tough fundraising environment, environment for a couple of years. But redemption cues are down significantly, significantly in the first half of 2025, dropping from, I mean, where they peaked at like 20% in 20. In early 2024, they're down to about 13%. That's a meaningful step back. And what's happening is that investors are redeploying that capital. They're not just pulling out and panicking. They're taking that capital out of, you know, through the redemption queue and they're putting it back into new offerings. Or in some cases, the drop in the redemption queue is just simply investors sort of canceling their redemption request in the first place. So that 7% drop translates into billions of dollars. And it is an incredibly meaningful development. And then the other thing that I would say about the fundraising environment is that it's also. Fundraising as a whole is up the first half of this year compared to last year in a meaningful way. The vast majority of that capital been raised for opportunistic and value add vehicles. So the nuance here is that, though, is that it's not predicated on huge waves of distress transactions, because we've all seen that movie and we know that the tsunami of distress is not likely to materialize. But what is happening relative to all of the money that's being raised for opportunistic and value add vehicles is they're seeking great basis place. And so you have groups like BGO and AEW hitting record level fundraising. It's not just Blackstone, okay? There is diversity among the groups that are out there successfully fundraising, and they are typically looking for opportunistic or value add vehicles. But that's an indication that they believe there are good buying opportunities now and there is upward momentum in rents and value creation opportunities. So the fundraising environment seems to be turning a bit too. It has been difficult, but there's some good momentum there. And then the last point I would make is that I think what we are anticipating for the balance of 2020 is that we expect to see increased diversity on the equity side in the same sense that in the Latter Part of 2024 and the first half part of 2025, we started seeing greater diversity among lenders, right? So money center banks were back in business, certainly on the lending side. CMBS sort of came back with a bang in the first part of this year. But we are seeing the money center banks. We're even seeing lifecos. And I can share anecdotally that within Avis and Young, we've seen Life Cos bidding on office properties. So I think that tell that the Life Cos are serious about participating in the marketplace today where it is. So, as we have seen a greater diversity and appetite from lender groups in the first half of this year, we are anticipating to see that private capital is going to experience a little bit more competition on the equity side in the second half of this year and going into 2026. So institutions are signaling that they are ready to deploy capital. International money has slowed a bit. Right. So offshore capital sources have slowed a bit, but at the same time, they retain extreme interest in some markets that might be somewhat surprising. So Dallas attracts a ton of international capital, so not necessarily just the traditional gateway cities. There are certain markets that remain very compelling to international capital. And we anticipate seeing greater uptick in international capital in the second half of 2025. And then lastly, when it comes to greater diversity on the equity, it bears mentioning that occupiers as acquirers of commercial real estate, user acquirers of commercial real estate have doubled their volume since 2019. And we don't see that trend going away. So, like all of the opportunistic and value add vehicles that are sort of being raised at the institutional level, private capital got this memo a long time ago that today is actually a pretty good buying opportunity. And those who have raised money to go after great basis plays, have and have been active, are certainly, you know, going to find themselves. At least the private capital buyers are finding themselves likely with a little bit more competition going into the buy side through the balance of 2025. So I hope that gives all of you, like a little bit of how we're looking at the world right now, really positive tipping point. We expect to, you know, see continued volatility. It's the world that we're in. But it does seem to be, and there's consensus among, you know, our peers in the, in the space that we have a lot of reasons to be optimistic and to get really focused candidly, as it turns into, you know, greater deal making over the course of 2025 and into 2026. All right, thanks so much, James.

Thank you, Marian. That's a great way to set the stage. And you're going to see a lot of these themes throughout the presentation as we talk about some of the specific markets and transactions. And I should have said to the group initially, thank you again, everyone for attending. We will have copies of this presentation for you. And also if you have questions along the way, you can put them in the Q and A. But I think we have a lot to get through. So we might save the Q and A till the end. But with that, Eric, let's jump into the sales statistics for the U.S.

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I think it got better. It was rough for a second there, but I think it's better. Okay, there you go. If one of the attendees can confirm that, that'd be great.

Okay, wonderful. Thank you. Okay, so let's jump into the sales numbers. Eric, if you want to advance the slides so you can see that this year in 2025, we are tracking below 2024 on an annualized basis. And this does reflect continued investor caution. However, we are optimistic that there are going to be larger transactions to come before the end of the year in the sense that that even here in New York, we're tracking multiple hundred million dollar plus deals that are in contract. Now, just so you all know the methodology here, this is every single US investment sale north of $5 million for multifamily development, industrial, office and retail. So we might not be getting all the specialty asset classes, but this is definitely the bulk of it. And as you can see, you know, even though 2025 is maybe not at the same levels, if you annualize 2024, again, if we're expecting a strong fin, we could very well eclipse that 391 billion. But still off the last peak cycle in 2021 that witnessed over 750 billion of transactions. So again, this is just the dollar volume which is sold. You see that multifamily is the bulk of the dollar volume occurring with industrial right behind it. And then industrial we'll look or office behind that. We'll look at how that breaks out on a further slide.

When you look at the peak to where we are today, we're 40, 48% of 2021. And although we're slightly behind 2024 on an annualized basis, we've increased from Q1 to Q2 almost 50%. So I think we saw a little bit of a dip in Q1, which could have been layover effect from election year. Transactions do take some time to actually consummate. So it seems to be that Q2 is putting us on a much stronger trajectory moving forward.

Good, Eric. I thought I was always the optimistic one. Thank you for balancing that out. We appreciate that. Okay, so for the number of sales, there were roughly 24,000 trades that took place. And you can see that here, the 2025 deal velocity is around the same levels as 23 and 24 when annualized. So again, we're still not at peak levels in this last cycle of 2021. But as Eric mentioned, we have the positive of trajectory. So we are certainly seeing a fair amount of trades that are taking place here. And with a strong finish the year, this could very well eclipse 25,000 transactions. And again, this is for all of the US we're going to start digging in to some of the top dozen markets after. But this is all sales in the.

US and when you take a look at the number of transactions versus the dollar volume, the number of transactions isn't down as much, which is really a nod to the lack of really blockbuster deals that you'll see in more of a peak market cycle.

Okay, so looking at the distribution of the number of sales versus the dollar volume. So on the left side you see the dollar volume, $64 billion coming from the multifamily sector with industrial the next largest at 45 billion office combining for 31 billion. And then retail at 27. You can see that land sales across the country is a smaller slice of that. But when you look at the number of transactions, a lot more evenly divided between the major asset classes here. Okay, so let's take a look at the top dozen markets that we're tracking now and how they performed in the first half. And these are metro areas. Okay. So, and, and we will say that the, the, the metro areas are a little liberal as far as how they are. Some might seem a little expansive, but we are using in addition to our own data, we are using RCA data, which, which reports this. But Dallas in the first half of the year logs in 13 and a half billion dollars of sales across 536 trades with San Francisco and really the Bay Area. So thinking about San Jose, thinking of Sacramento, but certainly we're going to be hearing about some very significant sales that have happened in San Francisco as of late. I've actually been out there twice myself in the last couple months. If you' visited San Francisco, it is talk about turning the corner and headed in the right direction. I know Marian was just out there as well. So positive things to come there. Over eight and a half billion dollars of trades in the San Francisco Bay area for over 469 transactions. Then you have New York combining for $7.5 billion. Louisiana coming in fourth, has the most number of sales with 591 trades across all asset classes in the first half of the year. And then as far as dollar volume is concerned, you have Phoenix, D.C. chicago, Atlanta, Miami, Denver, Austin and Charlotte rounding things out. And again, when you look at these dozen markets, they account for roughly 40% of the dollar volume across the country. So this is where a lot of the sales activity is occurring. Eric, any other comments on this slide before we advance?

When you look at Dallas, which is head and shoulders above the next closest markets here, it's really driven by the residential market down there. The Blackstone has made well over a billion dollars of acquisitions themselves in the Dallas Fort Worth market. And when you compare that to San Francisco, that's actually driven much more by the office sector. So we'll take a look at some transactions in both of those markets, but it's just unique to see how different markets are performing and where the asset classes are performing. Of note, Dallas is up 89% first half of 25 versus first half of 24.

Perfect. Okay, so let's talk about what's going on in the office market here. So here you can see to your point, Eric, that San Francisco, the Bay Area leading the way with three and a half billion dollars of office sales, followed by New York with close to 2 billion, and D.C. with 1.7 billion Louisiana and Dallas rounding out the top five. But you're seeing a lot of sales volume and activity in these markets, which is really encouraging to see that the capital flows are once again open up. Let's talk about some of the most significant transactions. And Marian already alluded to this in one of her final points. But Eric, maybe you could talk us through the top three office sales that took place in the country, across the US in the first half.

Yes, I will, and I'll actually go back a slide because when you talk about San Francisco, what I think is really interesting about this market is the three largest transactions that happened to this market, Marian alluded to it, it were actually all user sales. So we have Emory Yards, which was purchased by Sutter. Hell, we have 300, lakeside, which was purchased by Pacific Gas and Electric. And then we have Build a Commons, which was actually purchased by Apple. These are all a strong price per square foot. Apple bought over 900 foot, Pacific over a thousand and Sutter over 400 a foot. Again, this is the San Francisco Bay area. But it just goes to point to the strength of users and the prevalence of user buyers in today's market market.

And Eric, if I'm not mistaken, that was Apple's second purchase in this year. Acquiring office space where they were the tenant and establishing permanent ownership which I think is a great sign for the market.

That's right.

Okay, so looking at the office buyer composition, this is really interesting. Look at light blue, which is private buyers. Private buyers. And this is really a trend that we see ever since, you know, 22, once interest rates began to rise, a little bit more uncertainty in the market. Private buyers have accounted for over 50% of the dollar volume of office building transactions. That, that's pretty interesting to see that that is almost double what the private share was in pre Covid. If you look back to 2018, 2019, and you really see it's the institutions who've been a little bit more on the sidelines, they used to account for as high as looking back in 2015, 40% of the dollar volume now down at around 19%. So certainly plenty of room to grow. Look at the bottom though with cross border foreign investment. So you really saw that spike in 2021. That's where you first started seeing a lot of the deep discounts. A lot of the domestic investors on the sidelines. The foreign investors saw that as an opportunity to strike. Many foreign buyers are all cash buyers. So they were not as concerned about the challenges in the debt markets. You can see since then that has been a shrinking share. We could certainly talk about some of, you know, Marion had alluded to some of events from Liberation Day, although this really even speaks to what's been happening over the last couple years. And again we see this as a positive in that things are strengthening. You see more domestic investors stepping into the space again, private investors stepping up, filling the void. So again, there's plenty of different buyer categories here to fill that gap app. So now let's talk about the busyness index. This is, we're using anonymized cell phone data here to talk about physical occupants in the building. If you look back to June 2019 to June of this year and comparing the physical occupancy of these buildings, you can see that Miami and you can see Mike Fay smiling is leading the way at 81.6% followed by Manhattan at close to 78% of where office physical occupancy was pre Covid. Then you've got Dallas, Charlotte, Atlanta and you know, looking down towards the bottom, you know, San Francisco still at only about half of what the physical occupancy levels were like pre Covid. That being said, we know, and it could certainly speak to this, you know, here in New York, that it's really been the finance sector that's been driving back the return to office five days A week. But even now, you've got some of these tech companies, certainly Amazon, no surprise that they bought 522 Fifth Avenue in that they need more office space as they've asked their employees to come back five days a week. So this is definitely, I think, a positive sign for the market that there has been a return to office. We'll also now take a look at how the return to office has compared year over year. And you could see that many of these markets continue to increase in the return to office. Phoenix, Austin, Dallas, Denver, Charlotte, Atlanta, Chicago, Miami. These are all markets that year over year have improved. Manhattan has really flattened out. And again, L.A. san Francisco coming very close to sustaining this increase. And DC Tapering off a little bit. That could be some of what's taking place right now with the downsizing from the US Government. But we know the private sector, and Joe will tell us shortly, is certainly stepping and also filling that void. So now moving ahead here, we can look at where are the top office markets by inventory, just to kind of get a sense of the scale of Manhattan, 500 million square feet of office. The next closest markets, Chicago, 300 million, L.A. slightly less. Even Dallas, Fort Worth, only about half the size of Manhattan's market. But then you look at who is actually what cities are actually adding inventory, adding square footage as a percentage of the whole. Look at Austin. Austin, and we know they had a big multifamily development boom. Now they have created close to 10% of their housing stock in the last three years. And you see that Charlotte, I'm going to be down in Charlotte tomorrow looking at a couple properties. And Miami, also a lot of new office developments, certainly a positive sign. Dallas, Fort Worth as well, almost 4%. So again, Manhattan, even though you would say that, that, you know, it's got a smaller percentage of the whole, it still accounts for about 11 million square feet of new office development over the last three years. And moving right along, we look at what the US Office availability is and asking rent. So Manhattan has the tightest availability rate in the country at 16%. We were as high as 20% right after Covid, even north of at least. I look at those average asking rents at close to $80 a foot. Now, San Francisco, look at this. San Francisco has the highest availability rate at 35%, but they are second highest on asking rents. And I will tell you, this is a market that is certainly tightening up. When I was visiting our San Francisco office, spending time with our folks in our Palo Alto office, our office leasing brokers are Telling us they have never been so busy inundated with this AI boom. So clearly tenants are still paying up for premium space and we have no doubt that the avail is going to continue to shrink. Miami also under 20% availability. Charlotte in the 20s along with LA and Phoenix and with Chicago, Atlanta, Austin, Denver, still some room to go as far as tightening up in that availability number.

James, just to explain this, use this, the methodology here. So our MI team took a look at the average leasing activity from 2015 to 2019 to set the stage as a comparison versus where we are today. So this, this chart compares where we were in that period versus the last 12 months. So for example, you can see Manhattan is essentially flat, meaning we're, we're fully recovered from an activity standpoint as to where we were from a pre Covid standpoint. This mess of lines will show you that it was clearly some ups and downs to get there. But you can also take a look and see some of the markets that, that while today might be further behind where they were in, in that pre Covid period, they've seen great leasing recently, obviously at the bottom line here. This is, this is San Francisco, which is 32% off where they were pre Covid, but has actually shown, I think it's a 61% increase in leasing velocity this year compared to the same period last year. So, and James, I know you've been to most of these markets in the last year, certain CBDs, you think of Manhattan, you think of San Francisco really recovering other ones, urban cores, maybe la, maybe Dallas, the downtowns aren't doing as well, but some of the suburban markets are flourishing, if you have any commentary on that.

Yeah, no, no doubt. It's interesting to see how some of the major cities and CBDs have reacted post Covid in some cases has brought people more centralized, as you mentioned in the case of, of Manhattan and now starting to see that in San Francisco. Whereas in other markets like la, you are seeing that center of gravity certainly expand certainly beyond downtown. Atlanta has been very fascinating to watch as well. Clearly there's still activity downtown Midtown, but as you go further north into Buckhead, also Alpharetta has been very surprising. We talked to our leasing brokers up there. There is suburban office up there that has occupancy in the 90s and there is demand. So it really kind of depends on where you see that return to office or do you see. And I would, I would, you know, think certainly you look at Manhattan with public transportation, you know, people are still Willing, able to come into the city and maybe some geographies where maybe it's a little more challenging to get around or maybe a little more lacking with public transportation. The, some companies and their, their employees may, might want live and work closer. So that, that's certainly the case in Denver as well. So we'll this, this will be an interesting statistic to continue to track. So now we look at the year over year changes in leasing volume by market and that's where you see that huge pickup in San Francisco and in the Valley that we just spoke to. We've got Pittsburgh which has had a positive pickup year over year, as well as Manhattan and Boston and some of the markets still a little bit choppy with that leasing volume. So you know, we, we do it at the bottom. You, you have have, you know, Raleigh, Durham, Detroit, certainly areas that again have, have still more room to go as far as the recovery.

All right, we're going to jump into multifamily. We don't have slides for this, but I just wanted to set the stage by adding a few more data points as we get into this. So multifamily deliveries in the past few years have been really record high. So all time highs are reached in 2026. And when you look at 20 or 2025, when you look at 2026, new delivery activity is projected to drop by almost 60%, 57.3%. So I think something interesting as we look at these stats is to think about the surplus of supply that we've seen in the United States for the last years and what that's doing to occupancy, what that's doing to rent growth. So just wanted to set the stage of Ford jumping in.

So here is, you see where the bulk of the multifamily sales are happening. In Dallas you have by far and beyond the most dollar volume with $6.3 billion of trades, followed by the San Francisco Bay area with over 3 billion, New York with 2.4 billion, LA with 2 billion, and then Phoenix with close to 2 billion as well. The San Francisco Bay area, New York, Louisiana also all seen over 200 multifamily transactions in these markets. We of course are watching New York very closely, especially after the primary to see the implications on the multifamily market, you know, specifically with rent regulated product and what might take place if there, there were a rent freeze on rent regulation. You know, that being said, when looking at over 3 million housing units here in New York, over a third of those are still fair market. We do now have got good cause eviction which was actually modeled settled after LA. So the fair market increases are still available at CPI plus 500 which it seems that the institutions have gotten comfortable with. But again a lot of dollar volume, a lot of activity in Dallas as well as Phoenix, Austin, Atlanta, some of the more traditional multifamily markets that you would think of. And now I think Eric, we're going to look at some of the top sales as well. Interesting that the top four of them are all in California.

You.

Yes, that's true. So here are the top, top top sales for the first half of the year. 15 MacArthur was Crescent Heights out of Miami bought this from Essex Property Trust. 239,000,686 adore. Pretty good number there. The next one was Property Reserve out of Salt Lake. They purchased that from Hollander Partner Group which is actually a foreign seller there out of Vancouver. And then Pacific Pacific Housing out of Sacramento bought this next one at 3400 Richmond. They purchased that from Guardian Life Insurance Company. The next one, the Valley Green Drive was Rock Point out of Boston, purchased that from CART foundation which is San Francisco based. And then the Sobrato Organization out of Mountain View purchased the Seattle asset from Sioux Development also out of Seattle. And then this Last one in D.C. was JRK properties from JB Smith properties. So I think we have a lot of California representation and a lot of west coast representation here too with DC being on the east Coast.

Yeah. And the only thing I would say on that price per unit, you see a lot of these trades happening north of $600,000 a door. So you might look at that San Francisco trade at 223 a door that might seem a little light. This was 1988. Construction certainly needed a lot of of work. But still on a GROSS Dollar at $225 million, this was one of the largest multifamily sales in NorCal in over a decade. So that was, that was good to see. Okay. So now moving right along we look at what is happening with the inventory and the vacancy rates. And so you look at maybe why San Francisco has been active on the multi side. You see the vacancy rates there are sub 6%. The New York still having the lowest vacancy at 3.2%. You can also see that the average rents in New York are the highest at $3,300 a month. And you can see why some of these markets like Atlanta, Austin, where you're seeing Charlotte, where you're seeing the average monthly rent at 1500 certainly is showing some More is greater affordability. But also you're seeing some higher vacancy rates to contend with with where you have Denver, Dallas, Charlotte, Austin, Atlanta, all over 10% as well as Phoenix. We'll keep moving here. And the multifamily buyer composition here, the private investors have always been a pretty meaningful share of this at over 50%. And you see here the investors, institutional investors have been a little more bullish, accounting for 29% of the dollar volume last year and year to date. Foreign investors not as active in the multifamily space. We see a lot more of that demand in the office and retail space. Okay. I think we've covered some of our capital markets trends. But talking about the buyer profile and looking at where you are seeing the most foreign appetite, New York, close to 8, almost 9% of the buyer appetite is foreign. Look at Dallas, Dallas getting over 8% of its buyers from overseas as well as Phoenix. And then you see where institutions most active, you're seeing them in Dallas as well as D.C. and Denver. 41% of the buyers in Denver are institutional. You see where the REITs have been most active in Austin. And private buyers across the board, you know, accounting for more than a third of investors, but most active in Chicago, Atlanta and la.

And then look at San Francisco's users after those sales we talked about earlier. Big, big portion of the dollar volume traded there.

Okay. So Eric, maybe you could speak a little bit of this slide. What we, we wanted to show is some of the capital flows. I think we talk a lot about cross border FL looking at just domestic capital flows going inbound and outbound to New York.

Yeah. So being in New York is obviously a great place to sit when you're talking about connectivity to capital. And maybe I won't talk directly to this slide, but I'll share a stat that essentially explains it. We looked at the dollar volume and the buyer profiles in all these top 12 markets and if you look at the investor pools in any of those markets markets, it's always going to be the local players who are going to dominate. But when you look at where the capital is coming from, New York is number two or number three in every single one of those markets. And so, you know, part of what James and I are trying to do here is make sure that we have great connectivity to our partners like Michael and Joe for these other markets to make sure that we can help our investors place that capital where it needs to get to.

Perfect. Yeah. And you can see in the last slide that New York has exported over $3 billion of capital to Miami and Dallas and some of the other markets. So we're also watching for CMBS issuance and seeing which cities have been the major beneficiaries. New York City, over $30 billion of CMBS issued, but close to $10 billion. Over 10 billion in LA, Dallas, Miami right there at 10 billion. So that's great to also see that the CMBS markets are certainly opening up in these major markets markets, and much of that's also in the office space. So now we're going to dig into some of the specific market spotlights. So with that, Eric, let's advance to Miami. So Mike, if you want to talk about some of the trends that you're seeing in your market. Oh, and you're on.

There you go. No, I got it. Thank you all so much. So what's really a big thing is seeing the different trends across the US and you know, with James and Marianne and Eric and Joe and all of our capital markets teams across the country, we all have to, you know, measure what this is going on and how this is happening. Miami and Florida are ending up enjoying a very good run. You know, people are always saying, hey, where can I find a deal? You know, your, your, all of your statistics are doing very, very well. You're all the capital's coming at about 34% of all our deals that we do are about, you know, what I would say 34% of all the groups coming in from a foreign related group. So, you know, we see that continuing. Most people will ask us where are the opportunities, where are the distress? And what I'd like to do is go into what we're looking at in a way that ends up becoming very specific in some ways to Florida. But again, and it transcends into other markets across the country, or I at least believe it will. So the first one is the distressed condo market in Florida. Nearly a million vintage condo units are there. You know, so we've got a lot of units. Number two is we've got 2 million people living in these condos. Prices are down 22% on older condos. And then the newer buildings are still, still on the rise. Why? Because they don't have to have all the other issues of reserves, issues of other maintenance issues. There's all sorts of things. We've also had some major compliance issues with the new Florida laws in reference, the condo associations. That requires new reserve requirements. Also full backup on what I would say, structural studies and things of that nature. Hence in point, the Heron Pond deal. We enjoy a very Good reputation, Avis and Young does within the court. We are hired by the courts all the time to solve complex litigation and complex property issues. This happens to be one of them. This is a 304 unit complex in Fort Lauderdale, sits on 25 acres. They were deemed unusable and, you know, and condemned. So now the courts have hired us through the other receivership that has taken over the conduit association to go and sell this. We are just awarding a stalking horse offer at this point, and then we will be fully marketing the property once that stalking horse has been done. So condo deals in Florida are becoming more and more of an opportunistic distress situation because of the new laws. And if you remember the Champlain Towers, the collapsed condo, our team was the one, Abis and Young, who ended up selling that and was brought in by the courts as well.

So.

So that's number one. Where else is there distress in Florida? Everything else. If you can go to the next slide, please, that'd be great. We always are enjoying an influx of incredible people coming in from all walks of life, all areas. We've, we've really done well with a lot of companies, private equity groups coming in out of Chicago, out of New York and what, the west coast as well. But again, you know, those are driving our other products. Whether it's the office, whether it's retail, industrial, even multifamily, we're enjoying increases year over year in those sales. Granted, the volume is not as great, but still we're enjoying that. So where does that take us for number two? Number two is distressed agricultural citrus land. Citrus in Florida has been hammered by the aphid, which is a bug that comes in and hurts and actually kills the trees. Most of the citrus trees today in Florida are actually being inoculated with tetracycline individually. And that's why it's cost prohibitive. Most of these groves are now dying off, literally and figuratively. And you know, it's created an influx of, of literally hundreds of thousands of acres in what we would call pretty decent located areas. And that's created opportunity. These, these turn out to be great residential development sites, commercial sites, other reclation back into either some other industrial use. We also have data center use. We have a lot of different areas that are going on. What we find interesting also is where these properties are located. They're usually located in pretty decent areas with good power. Most of them, some of them are very far out in rural areas, but they also have very good water. Most of the water sources are coming out of very interesting 12 inch, 15 inch wells that come out of the ground right there. So there's lots of water for other high demand uses. As I was just mentioning data centers, another big play was solar. We as Avis and Young have probably done close to 70 to 80% of the solar initiatives in the state of Florida. Where you drive in Florida and you'll see that that was for fpnl, Nexair Energy and others. So we're seeing a doubling of that. Case in point, the Tampa Farms. This was a previous egg farmer and citrus group and we sold it to another private client group group which we are now re engaging on on possibilities of data centers. If not, it could go into total other industrial use. When we take these, what I call agricultural lands, we have to be careful about some of the what I would say, environmental issues and mitigation issues. But again, those can be worked out and again redesigned to make the properties work. Next one, please. There you go. Thank you. So distress malls are not uncommon to Florida or anything else. They're all around the US we have done a great job. Avis and Young working with the special servicers, the Rialtos, L and R Torchlight, Trimont. We've done literally thousands of transactions for all these. Whether it was Midland, you know, CW Capital. We've done very, very many, many of these deals. We've come in and acted as receivers, we act as leasing agents, we do project management, we do all the certain things that we do. We have over 140 different members of our asset resolution team across the country and the major markets and the turf markets find is each market discussing press a different. You are in that cycle whether it was office or some retail or other uses that might have an issue that might be, you know, specific to a market area. But we find the distress malls are continuing to have a reset button. This, you know, the Broward Mall that we have today, this is a current live listing that we have for Avis and Young. It is for Rialto and as you can see, it's a. It's a large, large facility and that sits on approximately 30 acres. And with the current NOI of about 5.7 million, that NOI is a little bit like a melting ice cube. Why? Because the tenants are not there are going to be there for a while. So whoever wants to buy this will have to deal with the issues of the existing tenants and also a lot of the big boxes that are in and around which are not a part of the mall itself. So we've done a Lot of these deals and we've created certain opportunities. Like the last one we just did was the Southland mall. That was $135 million sale. But that took our team to be able to go in there and round up the other surrounding retailers and box users to be able to be a part of a larger redevelopment of the mall. Another one that we've got right now, which is very interesting, is the Port Charlotte Mall. That's another Rialto list. So that again creates other opportunities. Whether it's a mall anywhere else in the US you start to see the influx of opportunity and or the reuse the realization of these properties and we find that that's to be very good. So when you look at distress in general, some of these are very, very much Florida related. But the others are also a larger swath which are our asset resolution team handles. So again, I want to thank James and Eric and Marian and of course Joe French and myself for being able to give you all this presentation that we really, really appreciate this and we appreciate all the business that we do with each and every one of you all across the country. Thanks James.

Thanks Mike. Fantastic and wonderful, wonderful to see there's still a lot of opportunities out there. And so as you mentioned, very plugged into the special services side and a lot of assignments coming out of that space. So now Joe is going to talk to us about the D.C. market and maybe some of the trends that he's seen there.

Sure. Happy to be here and thank you all for joining us today. I'll start with a theme and kind of feed it into three trends I think are contributing to that theme. But really from an inventory perspective, I'm not sure there's a market more dynamic in the United states and Washington D.C. and the surrounding metro region from a change in inventory and frankly a change in complexion from our office to for sale residential to industrial and data center uses. We think that the data center demand in the suburbs, specifically in Northern Virginia, is pretty unprecedented when compared nationally. And it's had major impacts on the value of finished lots and residential development sites rights as well as in our industrial market. And then a growing pressure for office that's located on industrial buy right zone sites to consider a higher and better use. Secondly, DC has really become the national leader in office to residential conversions. And we think that from a denominator standpoint, both in Northern Virginia as well as in suburban Maryland and D.C. proper, the change in inventory and the shrinking denominator is going to really have positive impact both on office leasing and Office demand, but also for residential product in the multifamily space as well as retail product in those urban nodes. And finally, we'd be remiss not to talk about the impact of DOGE both on federal leases and terminations as well as GSA dispositions. I think we can move to our three trend slides. I think that's probably the best use of time. Go one more and we can come back to the deals. So I'll start with data center demand. It's really on a wholesale shaping land values and really fueling explosive redevelopment demand. Washington D.C. is a top 10 MSA in the country. One of the only that's a shrinking industrial market demand from hyperscale users. Absorbing large swaths of industrial land has really put impacts on upward pricing for two particular subsectors. The first we'll talk about and we can discuss in sort of the greater scheme of office sales. But office to for sale residential redevelopments is a major topic in the D.C. market. Office campuses that are functionally obsolete today or don't have the same type of leasing velocity or interest are great targets in landmines or sorry, gold mines. For investment opportunity today we sold University Center 1 and 2 in Loudoun County. It's an interesting case study in this we had a two building single story flex office portfolio located on 17 acres of land in one of the best counties in the country to live, work and raise a family. The site was looked at as office. It was looked as a deflex industrial play and was also looked at as a scrape to for sale residential. When we took the deal out late summer last year, pricing on out sales for finished lots was in the low 30%. Today we're starting to see pricing between 40 and 42% on some of the best sites, which just shows the insatiable demand from the builders to bring new product and inventory to the market. We're seeing the same impact on the way that industrial i5 land in particular in Fairfax county is being priced for sites that are 3 to 5 acres that may not be able to be a full large scale bomber. From an industrial perspective these can be great small bay redevelopment sites and there's a strong demand to take office that's in the mid-20s. Full service rents oftentimes 12 to 13% cap rates and quickly in 20 to 24 months develop a small bay product that's able to achieve upper teens to low 20s triple net at a compressed 6% cap rate. Probably half of that office of that office cap rate. The second trend that I think is important to keep in mind is adaptive reuse is not just a niche strategy, it's a default strategy. Especially in our really urban submarkets within Washington D.C. within the inner tight suburban Maryland submarkets like Bethesda and Rockville and in the RV corridor. We're leaving the nation in office to residential conversions. And I think that's probably a product of lack of supply as much as it's a pretty healthy multifamily market from the perspective of rents and absorption. I think that the final trend that's important to consider and it kind of plays into this adaptive reuse is really the impact of the federal government's doge driven dispositions on our office market. There's obviously lease terminations and layoffs that are pretty top of mind for many investors and frankly in the regular news cycles. But there's 12 GSA owned doge driven dispositions of office buildings, probably 11 million square feet that are coming online over the next six to 12 months. The Liberty Loan building is for sale. The 301 7th Street Southwest which is almost a million square feet is on the market as well. We're going to continue to watch this trend. And 11 to 12 million square feet of functionally obsolete federal office that is quite well located in between the National Mall and the Federal Triangle as well as we call the Wharf north is a major opportunity. Eric, if we could go to the deals, the notable deals we discussed University Center 1 and 2 again that was an 84% leased suburban office building that Davison Young Investment sales team was able to achieve a $200 per foot execution. 21.2 million. It's indicative of another trend which is deals pricing and trading before entitlements are rezoning and and the aggression of the operators and buyers to take that rezoning risk themselves. We think that that's going to be something that continues to happen especially as the inventory of really great sites shrinks. And there's a growing role and I think an increasing role for operators that are partnered with national builders to take that type of risk and really price it into what we believe are excellent two and a quarter to even two and a half equity multiples in the 24 to 36 month period. From the office conversion perspective, I wanted to draw attention to 3601 Wilson Boulevard. I think this is one of the better office to residential conversion trades we've seen in the market to date. This was a $15 million trade rounding up and priced about $122 a foot. The plan is to put in some ground level retail, but it's really about 94 units of market rate multifamily. Site's got excellent facade, it's got green space, four walls of natural sunlight and an excellent parking garage with 200 spaces. It was a great buy by Gilbane and a deal to follow as we think would be a fantastic multifamily asset when completed. And then the last deal that I'd like to draw attention to is sort of showing the dichotomy that not all government credit is created equal. This was a really interesting purchase in April by Easterly representing a, you know, a nine and a half to 9.6% cap rate on a wholly government lease for the most part. Office asset 1200 First Street Northeast is, is primarily leased to the D.C. government. There's some federal tenants in there as well, but primarily municipal tenant and credit. And so with a 15 year term on the lease this deal was really impressive I think from a price per foot standpoint and really draws a dichotomy from the way that people are maybe shying away from the credit of the federal government in office use, primarily office use in the District and in shifting focus to municipal credit in a really interesting location in NOMA that's becoming dynamic with the growth in inventory of multifamily. So these are three deals that we think show sort of a change in dynamic whether it's the difference in pricing of credit between federal and municipality government tenants. Also an effort to, to overhaul the denominator, the inventory of office into both for sale residential uses as well as rental.

That was fantastic. And we are bumping up close to the hour and so just in the interest of time and we did have a couple slides in New York City, although we've already spoken to that a bit throughout. I think what we will do is direct you all to the state of the market recording that we did for New York City that we did week before last. But we did want to spotlight two markets. So thank you Joe for spotlighting DC and really the metro area as well as Mike for for Miami and some of the opportunities there. So I, I think with that Eric, we can, we can wrap up. We can also field questions if anyone has additional questions in the. You can put them now into the Q and A. I'm also happy to yeah, begin here with a couple of questions. So Joe, a question about tax abatements that are available for office to resi conversions. I know that's been critical here in New York city with our 467M tax abatement there. When converting office to residential, you're only paying 10% of what property taxes would be otherwise for the next 35 years. That's obviously very compelling. Is there as of right tax abatements in D.C. or say even Northern Virginia that are allowing some of these conversions? Conversions. And how are they taking place?

Yeah, I think that's a great question and I'd like to. I'm not sure exactly who asked. I'll get the information later. James, I like to provide our our study we put together on office to residential conversions in Montgomery county, in Arlington, Fairfax county as well as the District. Each of them have a little bit differentiated policy with respect to tax abatements. But all of them, with the exception of Arlington, are looking to integrate tax abatements in the program. One of the the differentiators between D.C. and let's say Montgomery county, for example, is D.C. is putting a minimum of 50,000 square feet. So not every office building is a direct match. Some of the smaller deals that may be looked at as a condo conversion or to a smaller unit count, call it sub 100 in that under middle market less institutional category may not qualify. With respect to Montgomery county, they're really more driven by by occupancy rate of the office buildings. And so in order to qualify you need to be below 50% leased. There are some incentives for putting nonprofits in Montgomery county on the ground level of these buildings and additional benefits that way. But it's sort of a tale of different of different jurisdictions in that respect.

Wonderful. Mike, question for you on where the bulk of distressed asset sales are taking place. So I guess the question would be are you seeing loan sales? Are these short, short sales reo all the above. How are you seeing the distress transact here?

So James, great question. So there's really broken into two areas. So if everybody remembers cmbs, the special servicers have to go through a process. The special servicers have to take back the property and then they have to run a full process as they get the actual asset. So those are going across the country in different areas. Most of the average sales, believe it or not, are not very big. They're only between probably 7 and $15 million overall. However, there's still a large amount of large office components in some of those larger portfolios. Those honestly are not even really being traded yet. But we're starting to see some of that. Conversely, on the banking side, there is a lot of the bigger banks have sloughed off a lot of their loans to the smaller Community banks and regional banks. We're seeing a lot of the regional banks that have sold off a lot of notes one offs. They're not selling off large portfolios. They're doing a sale here, sale there. So we're seeing that on certain, what I would say, assets that they want to move forward with. So we, we are seeing an increase now of distressed assets coming in. So that's something that we're, we're watching very closely, as I mentioned, and watching the courts in general, whether it be receivership sales of certain assets, whether it's an EB5 fraud case or a medical fraud case, we're starting to see some of those interesting assets change hands that way as well.

Wonderful. We have a question for Tina about institutional tenants returning to the office, although in some cases on a hybrid basis. How is that affecting the reposition transitioning of underperforming class A assets into B or creative office space? How is this impacting cap rates and investor appetite?

James, do you want to throw a.

Crack at that or Joe, you've got.

I was going to say there's a notable trade I'd share from DC that became public about a week ago at 2033 K Street. So corner building at the corner of 20th and K in the West End. The West End CBD of Washington D.C. has experienced the best leasing first half of a year we've had in probably four or five years. There's, there's an immense amount of, of interest of tenants moving from the east part of the city to the west. And so this is an interesting deal. It traded at $170 a foot. I think the building is close to 70% leased. They did a renovation for $20.5 million in 2018 and the the deal traded for $20 million to today. So interesting Class A office with the, with right size four plates purchased at a great basis with some availability. I've been told that there's some view that this could be a law firm type building, that there could be some real strong interest from the tenant side. I think CBRE recently took over the leasing and that's a deal to follow and watch that that type of basis it can be repositioned, I think with the right type of, of of tenant improvements and targeted tenant approach to become something special.

James and from New York perspective, maybe not on cap rates, but just where transactions are happening, we're seeing the barbell effect as far as occupancy. So 0 to 10% occupied accounted for 31% of the transactions for Manhattan office sales over the past five years and then 90 to 100% leased accounted for 25% of the transaction. What that means is that accounts for essentially 20% of the possible occupancy levels, 0 to 10 and 90 to 100. They're accounting for well over 50% of the transactions. The reason why 90 to 100 is a stabilized office building, easy to underwrite, there's not lease up risk. And on the other end of the spectrum, 0 to 10% a prime conversion candidate and we've seen 10 million square feet now converted in Manhattan. So. So for that perspective, just having a clarity of business plan is where we're seeing transactions being able to get done. All the other occupancy levels raise the questions about leasing it up or getting to vacancy.

We want to thank you all for joining and this was hopefully very helpful to give you an overview of the US Investment sales market. Certainly some positive trajectory that we're seeing thinking back to the really looking at the first, second, second quarter and then spotlighting some of these top markets and how they are performing. So we will send you all a link to this recording as well as the deck and look forward to sharing our observations with you quarterly. Moving forward. Thank you again.