📢Good morning,

CRE debt markets reopened in Q2: new originations rose 66% YoY and 48% QoQ, with banks more than doubling activity and debt funds close behind. Lending breadth and stabilizing rates are pulling buyers back in after 2024’s freeze. The 10-year Treasury near 4.2% and futures markets pricing a 90% September Fed cut have improved underwriting confidence, even as spreads remain wider than pre-2022.

📊 Quick Dive

CMBS Market Defies Odds as Issuance Hits Post-GFC High Despite Office Woes
CMBS issuance reached $58.8B in H1 2025, a 15-year high, powered by single-asset mega-deals. Yet delinquencies also climbed: overall 7.3%, office 11.7%—both records. Investors prize top collateral while weaker pools head to special servicing, underscoring a bifurcated market. _{(Trepp, Bisnow, Bloomberg, Colliers)}

Sunbelt Apartment Investment Reawakens as Charlotte Leads a Quiet Comeback
Charlotte multifamily sales returned to pre-pandemic levels in H1 2025, with 4,700 units delivered in Q1 and ~10,700 more due in 2025. National vacancy dipped to 4.1%, rent growth turned positive at +1.2% YoY, and starts are down 50%. Pricing reset 10–20% from peaks, drawing capital back as supply crests. _{(CBRE, RealPage, Yardi Matrix, IPA, M&M)}

Investor Confidence Steady in SoCal Industrial as Vacancy Rises Off Historic Lows
LA industrial vacancy climbed to 4.8% in Q2 2025 from <1% in 2021, but leasing hit 16.2M SF in H1, the strongest since 2021. Rents plateaued at $1.45/SF/mo after an 80% run-up since 2019. Institutional trades confirm conviction in infill warehouses even as cap rates widened to ~5%. _{(Cushman, CBRE, Prologis, Green Street, JLL)}

U.S. Office Vacancy Sets New High as Conversions Accelerate; NYC Leads Stabilization
National office vacancy reached ~20.7% in Q2 2025, a record. But 23M SF of planned conversions/demolitions now exceed new deliveries, and adaptive-reuse pipelines could add 70,700 apartments. NYC absorption turned positive (+2.17M SF) with availability down to 17.5%. _{(Moody’s, CBRE, JLL, RentCafe, WSJ)}

U.S. Retail Holds Firm as Consumers Spend, With Strip Centers Outperforming Malls
Retail vacancy is stable at 6.1%, lowest among major CRE sectors. Strip centers posted +2.3% YoY rent growth, while malls stayed flat. Open-air retail investment rose 12% YoY in H1 2025. Cap rates: 6–6.5% for strips vs. 8–10%+ for malls, showing bifurcation. _{(CBRE, Cushman, Green Street, ICSC)}

Distress Plateaus as Workouts Outpace New Trouble; 2025 Maturity Wave Forces Triage
CRE distress balances stabilized at $116.4B in Q1 with Q2 resolutions > new trouble. Yet CMBS delinquency hit 7.3% in August, shadow rate 9.3%. Banks are extending viable loans as $957B matures in 2025, pushing workouts, A/B notes, and equity cures instead of fire sales. _{(MSCI, Trepp, FDIC, MBA)}

Texas Housing Reforms Poised To Unlock Supply
Three new laws effective Sept 1—SB 15 (small-lot preemption), SB 840 (commercial-to-residential/mixed use), and HB 24 (protest reform)—reshape zoning and conversion rules. Provisions cut lot minimums to 3,000 sf or smaller, allow multifamily in commercial districts, and curb supermajority protest thresholds, unlocking supply across Texas metros. _{(Texas Tribune, Texas Legislature, Gov Office)}

Investment Sales Reboot: H1 2025 Volumes Up 16% as Mega-Deals Return
CRE transactions ≥$5M rose 16% YoY to $163.6B in H1 2025. Q2 hit $96B (+13% YoY) led by private buyers. Pricing: Retail +3.5% YoY, Industrial +1.6%, Apartments +0.1%, Office –1.9%. Mega-deals like 590 Madison (~$1B) and 1345 Sixth Ave ($1.4B stake) show trophy risk appetite. _{(MSCI, CBRE, The Real Deal, Reuters)}

Private Equity Reloads: $250B+ Dry Powder Targets CRE as Pricing Stabilizes
Closed-end real estate funds hold ~$250B of undeployed capital, the most since 2021. Opportunistic vehicles are underwriting IRRs of 15–18%, core-plus at 8–10%. Deployment is lagging—only 22% drawn on 2024 vintages—but expected to accelerate into 2026, targeting maturities and recapitalizations. _{(Preqin, PERE, WSJ, Bloomberg)}

The U.S. CRE market is past the bottom of its liquidity freeze. Lending, sales, and equity flows are reopening, but the regime is selective. Sunbelt multifamily and SoCal industrial show resilience, retail is a defensive play, and office stress persists despite stock removal. Distress is being managed through workouts, not fire sales. For practitioners: pull financing quotes now, reset pro formas to today’s debt yields, and prepare equity partnerships before the wall of dry powder moves in.