The U.S. office market is molting. 

The industry has spent the last five years shedding its old skin — and underperforming assets — and is attempting to emerge fresh and appealing to workers.

Return-to-office mandates are helping bring workers back to their desks, and vacancy just ticked down for the first time since 2019. But few mandates come with teeth, meaning how many employees actually show up on any given day still comes down to how many want to, CBRE Building Operations and Experience CEO Jamie Hodari, who also co-founded and still runs Industrious, said on this week’s show. 

And while ping pong tables and pizza parties can help bring a space to life, he said he judges the success of the office based on whether people have their heads up talking to each other.

“If people are interacting with each other, if people are learning from each other, I don’t care what the lighting is,” he said. “I don’t care if the windows are 13 feet or 10 feet or whatever, that’s a commute-worthy office.”

After years of cautious experimentation, CRE’s biggest players are finally scaling artificial intelligence.

JLL has been at the forefront of it, launching an in-house AI platform called Falcon that is cutting deal timelines from weeks to hours and automating the drudgery that once bogged down teams. The result is higher revenue per head, higher success rates when pitching and faster closings.

On this week’s show, CEO Christian Ulbrich gave a peek under the hood of how JLL is getting the most out of AI and how he sees it reshaping the industry.

It’s difficult to get an edge from AI, he said. Tools that drive productivity become table stakes within six months. The real differentiation only comes from new-to-market strategy, agentic AI that reinvents parts of CRE deal-making.

Still, the industry must act.

“Don’t wait too long,” he said. “The train has left the station and it is going at Japanese speed levels of train — very very fast.”

Live from the CREtech main stage at New York’s Javits Center on October 21, WeWork CEO John Santora sat down with Bisnow Editor-in-Chief Mark Bonner to unpack one of CRE’s biggest comebacks — from bankruptcy to EBITDA positive, $2.2B in revenue and 550K members, including 47 of the Fortune 100. Occupancy has surged past 90% in Midtown Manhattan and hit 100% in key global markets.

This conversation dropped 24 hours early — in video form — for First Draft Insider Access subscribers. That's our daily briefing for people who want to see what's next in commercial real estate before everyone else. You can join them now for $9 per month at bisnow.com/firstdraft.

The optimism that permeated commercial real estate at the start of 2025 has died down as the year has gone on.

That's the headline from Deloitte's annual CRE executive survey, but Deloitte partner Sally Ann Flood said on this week's episode that the responses showed an increasingly bifurcated market. Some asset classes, like data centers and warehouses, are "red hot," while investors are still grappling with distress in office and multifamily.

But Flood said the most important theme to come out of this year's survey is the technological inflection point the industry has reached.

“The technology revolution is here for real estate. I really believe this is the time that we can embrace it and really see improvements to the bottom line by adopting the technology.”

From companies embracing AI to digitize leases, partnerships between big tech, real estate companies and energy providers and increased operational efficiency, Flood says this is the year the notoriously tech-averse industry leaps into the digital age.

The AI trade is reshaping markets and CRE is riding shotgun.

A surge of capital into chips and data centers has turned AI into the backbone of U.S. growth — pushing tech spending to dot-com-era highs and doubling data center pipelines.

But will it pay off? Alarm bells are ringing that adoption may not match optimism. That could quickly mean swathes of massive data centers sitting vacant.

Michael Pearce, deputy chief U.S. economist at Oxford Economics, sees the opposite problem. On this week’s episode, he said adoption curves are running much closer to forecasts.

His concern: CRE can’t keep up.

“All the limits are on the supply side,” he said. “On the demand side it feels limitless.”

The starting gun has gone off: The Federal Reserve lowered interest rates 25 basis points. Now CRE can be off to the races.

At least that’s the narrative.

In practice, CRE cares more about long-term debt, and the 10-year Treasury ran counter to expectations and actually rose 10 bps, Jim Costello, MSCI’s director of real estate economics, said on this week’s show. Besides, the industry’s problems go far beyond interest rates, and 25 bps isn’t large enough to make much difference.

“If you want to be successful in CRE, it’s not about that home run of capital market forces lifting the value tremendously,” Costello said. “It’s going to be a lot of singles and doubles.”

That means a focus on proper leasing, getting the right broker, careful analysis of tenants and focusing on operating expenses.

How about all that money waiting on the sidelines — will that finally loosen up with the drop in rates?

“Here’s the thing about dry powder: When you get a little wind, it can blow it away,” Costello said.

“If you don’t have a situation where managers can place money effectively and hit their IRRs, that dry powder will dissipate.”

It’s a high-pressure year for multifamily. Looming maturities, tough capital markets, changing policies, a major shake-up of Fannie Mae and Freddie Mac on the horizon and intensified national attention are all converging to complicate the sector.

But multifamily fundamentals are strong, Sharon Karaffa, president of multifamily debt and structured finance at Newmark, said on this week’s episode.

“Absorption has been very high and vacancies are very low. Most of the supply wave is behind us,” she said. “So we think we’re on the upswing.”

The ending of the conservatorship of Fannie Mae and Freddie Mac could disrupt the market, depending on how exactly it happens.

Karaffa said it is critical that the privatized organizations have a line to the Treasury to maintain affordability, that a strict regulatory framework is put in place to avoid the mess of the Global Financial Crisis and that the agencies are not combined — the market needs both to keep competition alive.

Global bond markets are under siege and CRE is caught in the crossfire.

UK 30-year gilt yields surged to their highest level since 1998, and volatility in U.S. Treasuries has repeatedly brushed them against 5%.

For commercial real estate, that means more expensive debt, climbing cap rates and global investors second-guessing allocations.

Christopher Stanley, banking industry practice lead at Moody’s Analytics, said the tightness of the spread shows increased competition in the market, but the entire yield curve has moved up considerably.

That’s going to hit net operating income, and Stanley said staying on top of liquidity and forecasting out volatility all the way through the life cycle of the project have become crucial.

“When we’re in a nervous economy like we’re in right now, everyone immediately jumps to what kind of credit problems are there going to be,” Stanley said on the show. “Credit is a part of it, but we’re really playing a balance sheet management game.”

This episode of First Draft Live is presented by Agora.

The godfather of the CMBS market issued a warning that commercial real estate is not out of the woods of its downturn, which is a potential problem for the U.S. economy. 

“The losses in CRE are so big that the rippling effect of those losses to the economy are so big that they could be quite harmful,” Ethan Penner, the founder of Mosaic Real Estate Investors, said on this week’s First Draft Live.

Roughly $23B of CMBS loans have matured without a resolution, and more than 10% are delinquent or in special servicing. Yet the CMBS lending market is roaring, with $60B in new debt issued in just the first six months of this year.

“The truth is there are massive, massive losses in real estate,” said Penner, who is credited with inventing the commercial mortgage-backed security in the early 1990s. “These are breathtaking losses, and I think that clearly the system hasn’t recognized that on any level.”

Penner also spoke about his candidacy for the California governor’s race in 2026, with a platform focused on deregulation and a radical new approach to the homelessness crisis in the state.

“I don’t know where the toilets are in the state house, that makes me an outsider,” he said. “But I do know that the systems are broken.”

Register on Bisnow.com to join the next conversation live, or check back here for the conversation after it airs. 

This episode of First Draft Live is presented by Agora.

It’s been a chaotic year for the construction industry. 

Between a volatile tariff regime, elevated interest rates and increased pressures on its labor force, contractors have had to navigate one of the most difficult environments in recent memory. 

On this week’s First Draft Live, Shawmut Design and Construction CEO Les Hiscoe breaks down the impacts of the uncertainty and how his $2B Boston-based company is handling the turmoil. 

“When things aren’t known and you can’t really plan on them in our industry, you can’t give our clients predictability,” he said on the show.

While many developers are responding to the moment by delaying projects — Hiscoe said one of his clients won’t start building until interest rates fall a full percentage point — Shawmut is advising them against it as the impacts of tariffs have yet to fully be realized.

“Waiting is a mistake,” he said.

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