Location, Location, Location: Expert Insights on Property Markets
(l. to r.: Panel Moderator Joanie Wilson, Stephanie Wiggins, Patricia Bradshaw, Pharrah Jackson, Joe Pella)
SAN DIEGO–Every commercial property sector has seen both challenges and opportunities since the pandemic. Five real estate executives gathered here at MBA’s Commercial/Multifamily Finance Convention and Expo to share their thoughts.
Patricia Bradshaw, Product Director with Trepp Inc., noted that the office sector’s delinquency rate remains near a record high. “But it’s starting to stabilize, and actually had a one-month decline before January 2025, whereas multifamily has seen a three-month increase as of January 2025,” she said.
Industrial occupancy has increased year-over-year and net operating income has remained mostly steady, even when revenues are declining. “So, we took a closer look at this data and we noticed that the revenues are declining because we’re seeing more smaller-balance loans being originated in smaller industrial markets such as Memphis and Philadelphia, versus larger-balance loans in major industrial markets like Riverside, Calif., and Los Angeles,” Bradshaw said.
Moderator Joanie Wilson, Senior Vice President and Chief Underwriter for Affordable and Bridge with M&T Realty Capital Corp., asked the panel about the challenges facing the multifamily real estate market.
“Well, this morning, there was an over/under on where interest rates are going to be; how many people thought we’d be back at a three? How many people thought we’d be at a five at the end of the year? And I think we really just don’t know,” said Pharrah Jackson, Vice President with Greystone. “And when they just don’t know, people tend to want to sit on the side, and that’s probably one of the biggest uncertainties we’re seeing across the whole market.”
Jackson said one thing that is certain is affordable housing. “That’s a huge market opportunity,” she said. “Because the affordable market is so under-served. There’s millions of units needed across the country. I don’t think there is a market in the country that has sufficient housing for affordable housing. I think that’s a really big opportunity that we’re seeing right now.”
Stephanie Wiggins, Head of Production, Agency Lending with PGIM Real Estate, noted that multifamily remains the preferred asset class for investors, “and at the moment, the fundamentals in the Midwest and the coastal markets have a slight edge over the Sun Belt and the mountain regions, because they just have more supply,” she said. “But when you’re thinking long-term, I think the Sun Belt and the mountain region’s lower cost of living is going to drive migration to those areas, as well as quality of life and business and taxes, coupled with less barriers to development. That really will have those two regions seeing more multifamily investment than others.”
Joe Pella, Head of National Real Estate with Truist – Commercial Real Estate, said the office sector has been on a “wild ride” since COVID. “It is clear over the last four or five months or so that we are starting to see a clear relationship between the winners and the losers. And unfortunately for the market in general, there’s more in the loser pocket than there is in the winner pocket.”
“Generally speaking, the location matters” Pella noted. “We talk all about the ‘smile states’ and migration to business-friendly environments that are getting better from the leasing perspective, but you can be in that market and still not perform and lose attendance to other buildings. So, what we’re seeing most in our portfolio is the flight to the Class A-plus asset.”
“In addition to trying to convince you to get out of your pajamas in the morning and fight the commute to come to work, companies want you to come to an office building that you want to come to. One that is new, or feels new, and is well located, with nearby amenities,” Pella said.
