T
he CREF Roundup delivers a concise snapshot of key developments, insights, and commentary in commercial real‑estate finance, tailored for industry professionals. For deeper analysis, see our blog, The Carveout.
**Retail Sector Faces First Consecutive Negative Absorption Since the Pandemic**
A Real Assets Adviser article notes that retail space leased minus vacated has dipped for two straight quarters. In H1 2025, about 15 million sq ft were vacated, driven by weaker discretionary spending and economic uncertainty. Vacancies rose to 4.9 %—still below the long‑term average—while new construction slowed to its lowest quarterly level since 2000, potentially stabilizing the market. Tariffs on apparel and electronics add cost pressure, further dampening tenant demand.
*Takeaway: Retail is in a period of uncertainty, with declining demand and rising vacancies threatening owners.*
**Office Capital Markets Show Early Signs of Recovery**
CBRE reports that most markets now enjoy positive net absorption, and tenants are expanding again, boosting NOI prospects. Although fundamentals improve, lower‑tier Class B & C offices lag: cap rates had risen, but the share of properties with double‑digit rates fell in H1 2025. Still, over 70 % of Class B & C assets face double‑digit yields, indicating lingering risk. The modest decline suggests the worst may be over for some segments, hinting at a thaw in investor sentiment.
*Takeaway: Office demand is rebounding, yields easing for riskier assets, and confidence may be returning.*
**CMBS Special Servicing Rates Decline for a Second Month**
Trepp reports a second consecutive monthly drop in CMBS special servicing rates in August, following a peak in June. The decline stems from a $14 billion reduction in outstanding loan balances. Lodging and mixed‑use saw the largest cuts; office was the only sector with a notable increase.
**CMBS Loan Workouts: Early Negotiation Is Key**
TreppWire’s podcast with Shlomo Chopp stresses the importance of early, creative negotiations to bridge borrower‑lender valuation gaps. He critiques appraisal practices that overrely on past data, advocating for data‑driven, objective methods.
*Takeaway: Early, informed, and flexible negotiation is essential in a complex market.*
**Affordable Housing Challenges in 2025**
BBG’s white paper highlights a U.S. crisis: over 22 million renter households spend >30 % of income on housing, and 12 million spend >50 %. A shortage of ~7.3 million units persists. 2025 is projected to see ~80,000 new affordable units, yet starts fell 30 % in 2024, and future completions are expected to decline. Key tools—LIHTC, public financing, adaptive reuse, zoning reform, and state/local initiatives—are vital, especially when developers combine incentives to bridge gaps. Regional issues include aging stock, permitting constraints, cost inflation, and land scarcity, while innovations such as modular construction, transit‑oriented mixed use, employer‑funded housing, and creative tax/lease incentives offer solutions.
*Takeaway: Meeting affordable housing demand requires coordinated federal, state, and local policies, innovative financing, regulatory reform, and cost control.*
**Industrial Demand, Labor Data, and Office‑to‑Residential Trends**
TreppWire covers revised U.S. labor data showing weaker job growth, raising expectations for Fed rate cuts amid concerns over data reliability. Treasury Secretary Scott Bessent criticizes post‑2008 policies for fueling inequality and market distortions, calling for less intervention. Industrial real estate shows cooling demand and financial stress, though data centers remain strong. Major firms are tightening hybrid work policies, with 2026 as a likely stabilization point. Washington, D.C. offers limited tax abatements for office‑to‑residential conversions, while retail investment stays robust in Boston and Charlotte.
*Takeaway: The economy and real‑estate markets are in transition, driven by uncertain data, policy debates, evolving workplace trends, and shifting property uses.*
**Security Interests: Beyond Liens**
A Secured Finance Network article notes that intensified lender competition, especially from private debt, has weakened traditional covenants and standards. Lenders must adopt practical recovery strategies for collateral—inventory, receivables, cash, equipment, real estate, equity, and contract rights—through pre‑ and post‑closing measures such as access agreements, DACAs, and environmental due diligence.
*Takeaway: Lenders need proactive underwriting and documentation to ensure recoverable collateral value.*
**Glossary of CMBS Terms**
CREFC publishes a glossary of CMBS terminology for newcomers and veterans alike. Save the link for future reference.
**The Carveout**
A legal blog for sophisticated capital‑market participants, The Carveout covers trends in commercial real‑estate finance, focusing on non‑recourse carveouts and CREF loan platforms—CMBS, debt funds, private capital, REITs, life insurance, and other complex capital sources. Visit the blog for insights.
