📢Good morning,
Oil prices stabilized after weeks of decline, with Brent near $66 and WTI at $62. Russia sanctions risk offset OPEC+’s modest October hike, giving hotels a short-term cost tailwind into Q4. Forward curves still point toward $55 Brent by year-end, underscoring volatility risk for underwriting.
📊 Quick Dive
Brent: ~$66/bbl; WTI: ~$62/bbl. (Reuters)
OPEC+ supply hike: +137k bpd in Oct. (Reuters)
S&P Global YE25 Brent forecast: $55/bbl. (S&P Global)
Futures Nudge Higher as Street Prices a September Cut—Liquidity Window for Q4 Refis
Markets now assign ~90% odds to a September Fed cut after weak payrolls, with Standard Chartered calling for 50 bps. Equity futures rose, reopening liquidity windows for CRE borrowers. Floating-rate DSCR relief is the immediate gain, though spreads remain sticky and cap-rate compression is not the base case. (Reuters)
Chicago Medical Office Market Defies Office Slump
Chicago’s 61M SF medical office market is outperforming with vacancy near 8%—less than half the broader office rate. Net absorption topped 1M SF in the past year, supported by hospital expansions and 85%+ tenant renewals. Cap rates compressed to ~6.9% as investors and lenders treat MOBs as defensive, credit-friendly assets. (Bisnow, CBRE)
Energy costs act as an underappreciated lever on hotel NOI. Operators who lock Q4 utility hedges and structure drive-to incentives can capture both cost relief and marginal occupancy upside. The macro divide is clear: while rate cuts may reopen liquidity for refis, sector-specific fundamentals—like medical office stickiness or hotel utility sensitivity—determine which deals actually pencil.
Lenders and investors should prioritize credit-backed income streams over speculative plays. Hotels gain modest breathing room, but the more enduring defensive allocation is in medical office, where demographic demand and renewal rates shield cash flow.
Brent likely range-trades $56–66 into year-end; hedging discipline is critical.
September Fed cut odds remain high, but spreads dictate true borrowing relief.
MOB resilience will draw more institutional capital even as general office stays distressed.
Watch CPI prints this week for ripple effects on gold, spreads, and rate-cut conviction.
Chart of the Day: Brent oil prices vs. hotel utility costs in 2025. It illustrates how declining oil has eased hotel expenses, with the recent rebound showing up as mild cost pressure. CRE360
