Connect OC 2025 Recap

As one would expect, optimism reigned amongst the leaders and executives gathered at Connect OC 2025, an upbeat attitude tempered by the uncertainty still defining the early days of a new administration and a global economy in flux from conflict and trade disruption. A few key themes from the finance panel featuring Gantry’s Andy Bratt included:

• 10-year yields retreated after a spike at the beginning of the year, but will remain in the current 4% range in the year ahead, hopefully at the lower end of the spectrum.

• Acceptance of the new rate climate has helped establish price discovery, motivating decisions on investment sales and/or refinancing for assets with maturing debt.

• Banks are slowly returning to new originations but remain essentially dormant, and their focus on recourse and deposits make them far less attractive than in years past.

• Life Companies remain active and continue to provide a reliable source of permanent debt as they grow their market share and backfill the absence of banks.

• Life Companies have created creative financing structures in order to meet borrower’s current needs, such as underwriting to breakeven DSCR’s to achieve higher proceeds in order to limit cash in refinances.

• The Agencies will also continue to be a steady and reliable resource for multifamily permanent debt. Like the life companies, their non-recourse terms are attractive.

• Growing private capital and debt fund money has increased competition in the bridge, mezzanine and construction lending space, benefiting borrowers.

• New development and construction starts are down dramatically, as are investment sales to date. As lenders compete for viable transactions, spreads are coming in.

A few other key takeaways from other panels throughout the day include:

• Conditions for commercial real estate insurance improved at the close of 2024 and providers are cautiously optimistic that rates will continue to come in during 2025.

• Marketed investment sales that didn’t achieve price discovery in recent years are selling as off market transactions with a buyer identified in earlier due diligence.

• Industrial is going through a period of correction after an aggressive period of new construction to meet projected space demand that has since cooled during the current inflationary period.

• Grocery anchored and neighborhood retail centers and single tenant retail assets are benefitting from post COVID fundamentals and a lack of new construction.

• Office continues to be a challenge for the major CBD markets and for dated suburban assets, but as the era of extend and pretend ends and values align to market appetite, asset sales are happening and opening the door to repositioning or re-tenanting.