Commercial real estate in 2024 is dominated by uncertainty. Midway through 2024, nobody is buying at prices people are willing to sell for, and banks lack any incentive to bridge the gap between asking prices and active offers. https://www.afire.org/podcast/202406cast/ …not to forget the looming question that AFIRE CEO Gunnar Branson keeps coming back to: “How much will climate change cost us?” “Lots of firms had hoped that this was the year when we could move back in, in a big way,” says Mary Ludgin, a senior advisor and equity owner for Heitman, a global real estate investment management firm headquartered in Chicago. Now, Ludgin says, “we’re still playing the waiting game.” So where do we go from here? How does all this uncertainty get resolved? As one of the industry’s most insightful commentators, Ludgin provides her best insights on how the market will pan out over the rest of the year. Her most pointed guidance for investors is to weather this uncertainty by diversifying on as many fronts as possible, from property types to locations, climate change exposure, and geopolitical risk factors. “As somebody that’s been trying to predict the future for my 35-year career in this field,” Ludgin says, “I’ve realized that there are things you can predict. And then there are the black swans—and the only way to buttress against the black swan… is to diversify.”

With all of the other troubles currently affecting commercial real estate, should ESG still be a priority? https://www.afire.org/podcast/202405cast/ Compliance with established environmental, social, and governance (ESG) became a critical measure of real estate performance over the past decade. But with the current slate of challenges faced by CRE—everything from high costs to building and infrastructure obsolescence—some investors are feeling inclined to put ESG lower on the punch list. ...but that would be a mistake, argues Patrick Richard, CEO of Stoneweg US, the US-based subsidiary of the Swiss real estate firm. In fact, in this new episode of the AFIRE Podcast, in conversation with AFIRE CEO Gunnar Branson, Richard builds a compelling case that investors should prioritize ESG investments as a way to generate higher returns on investment—especially now. “One thing that sustainability does is protect the value of your assets,” explains Richard, who sees ESG prioritization as a way to decrease risk and increase revenue—critical differentiators in the current real estate market. Richard explains how investing in climate resilience can decrease insurance premiums and lender interest rates, currently significant cost centers affecting pro formas. By investing with an ESG mindset, despite some current external financial or philosophical pressures, Richard says: “Not only are you protecting your assets, but you’re creating value at the same time."

Affordable housing may be the most important issue facing the commercial real estate industry today. Statistics show a shortage of more than seven million homes in the US alone. https://www.afire.org/podcast/202404cast/ More than half a million people are experiencing homelessness, and high interest rates and a growing population are making housing more expensive for more people. So—how do we solve the problem? What options are available to those of us who are investors, developers, builders, owners, and operators? To get some answers on the current housing situation—and future-focused solutions—AFIRE CEO and podcast host Gunnar Branson recently sat down with Paul Bernard, president and CEO of Affordable Homes & Communities, a nonprofit developer with a focus on housing creation in Maryland, Virginia, and Washington, DC. Bernard argues that the housing crisis is partly caused by barriers to new construction, leading to high homelessness rates, high housing costs and insufficient supply. Affordable housing is not a commodity, Bernard says. Instead, it’s an asset class where developers and investors can follow concrete steps to alleviate housing availability issues and still find returns. According to Bernard, building more affordable developments requires an all-hands-on-deck approach, starting with a new narrative that will change public opinion of affordable housing, tax credits and renewed, innovative, problem-solving partnerships with nonprofits, for-profits and the public sector.

Many leaders believe this is the key to becoming fully immune to all future risks—but evading risk forever is just unrealistic. Risk plays a big part in commercial real estate. To thrive, it’s crucial to adopt a proactive approach to manage risks effectively. So how can commercial real estate investors thrive in a time of such incredible volatility, change and blindness? How do we thrive amid constant uncertainty and exposure to risk? On this new episode of the AFIRE Podcast, AFIRE CEO Gunnar Branson sits down with General Stan McChrystal (Ret.), CEO and Chairman of the McChrystal Group, to discuss the risks facing investors during this time of heightened uncertainty in commercial real estate. As a retired four-star general in the US Army, General McChrystal translates his military training to educate leaders in commercial real estate on how to employ a proactive approach to managing risks instead of steering clear of possible failures. There’s this “unwillingness to be realistic about risk,” says McChrystal. “As a consequence, when you try to mitigate risk to zero, it takes so long that you’ve priced yourself out of the option.” In this riveting conversation about risk, General McChrystal walks us through what’s considered effective communication, how avoiding mistakes amounts to the first blunder, and how to fight back against our inclination to avoid risk. https://www.afire.org/podcast/202403cast

Technology can be enormously disruptive to commercial real estate. Remote work is responsible for the global devaluation of office properties. Artificial intelligence (AI) is already changing the way we live and work. So what will be the effect of AI on institutional investment strategies? https://www.afire.org/podcast/202402cast/ To get at some answers, AFIRE CEO Gunnar Branson talked to one of his favorite futurist investors, Jeffrey Kanne, president and CEO of National Real Estate Advisors, an AFIRE member firm and investment manager specializing in a build-to-core strategy, developing and managing large-scale, urban commercial and multifamily projects for its institutional client accounts. “The advent of AI as a technological tool is going to greatly increase the rate of change,” Kanne tells Branson. “I’m very nervous about where you can place money and think it’s safe.” The best opportunity for investment, Kanne believes, is in data centers that provide consistent power and temperature-controlled environments for the Googles, OpenAIs and Microsofts of the world. With that in mind, Kanne and Branson discuss how investors can enter the data center market. “It’s not rocket science,” Kanne says, while outlining potential pitfalls and barriers to entry for new operators. “It’s incumbent on all of us as investors to think about what the world will be like in five years, ten years, fifteen years,” Kanne says. “When I look ahead, data centers are a good place to focus on.”

Cognitive dissonance abounds in commercial real estate. On the one hand, the Fed is citing strong employment figures and predicting a soft landing. https://www.afire.org/podcast/202401cast/ And yet, the commercial real estate industry is navigating serious issues in the office sector. Will office distress trigger bank failures? Will those bank failures affect the broader economy? When will interest rates go down? And when they do, will the Fed cut enough to benefit commercial real estate?  In his conversation with AFIRE CEO Gunnar Branson, Moody’s Analytics Chief Economist Mark Zandi sounds off on all these topics and more. “If I was at the Fed, I would argue: let’s cut rates now,” Zandi says. “Obviously there’s a lot of uncertainty, but I think the most likely scenario is June.” Plus: Zandi talks AI, China and other geopolitical risks, and how he expects the upcoming US election will affect market volatility. Listen now on your favorite podcast platform, or watch on the AFIRE YouTube channel.

On the tail end of the hottest year on human record, it’s clear that climate change is already here—and not slowing down. In the years ahead, the effects of climate change will pose real hardships for billions of people around the world. The challenge of climate change is clear, especially for real estate, as explained in the first of this special two-part series. Now, in this second and final entry of the latest AFIRE Podcast—inspired by the special climate change section featured in the most recent issue of AFIRE’s award-winning Summit Journal, and sponsored by the global ESG consultancy, AccountAbility—AFIRE CEO Gunnar Branson and Summit Journal Editor-in-Chief Benjamin van Loon propose that climate change can also represent opportunity for forward-thinking investors. Climate migration will require new housing in resilient geographies, creating demand for fast and efficient construction methods. Extreme weather and other disasters will highlight the need for more robust building techniques. And an historically hotter world also could usher in carbon markets that use Web 3.0 to better reflect the actual cost of assets that contribute to global warming. (Watch the video version of this episode on the AFIRE YouTube channel: https://www.youtube.com/watch?v=2_Hxizapwf0&ab_channel=AFIRE) Featuring interviews with: Jacques Gordon, Executive in Residence, MIT Center for Real Estate Bob Geiger, Executive Director, Partner Engineering & Science Parag Khanna, Founder and CEO, Climate Alpha Zhengzhen Tan, Research Scientist, MIT Center for Real Estate

The year 2023 has been the hottest year in recent record—and it will likely be the coldest year for the rest of our lives. In the face of these record-breaking numbers and climate events, 2023 also proved to be a year that real estate investors lead the charge in confronting the constantly evolving challenges of climate change—including insurance rate hikes, migration and population changes, and the irrational implications derived from “the tragedy of the horizon.” In this, the first of a special two-part episode—inspired by the special climate change section featured in the most recent issue of AFIRE’s award-winning Summit Journal, and sponsored by the global ESG consultancy, AccountAbility—AFIRE CEO Gunnar Branson and Summit Journal Editor-in-Chief Benjamin van Loon take viewers and listeners through a conversation with the industry’s top thought leaders to explore how investors can prepare for the impending intersection of climate change, global investment, and the future of real estate. (Watch the video version of this episode on the AFIRE YouTube channel: https://www.youtube.com/watch?v=JWYO08tKnZA&ab_channel=AFIRE) Featuring interviews with (in order): Bob Geiger, Executive Director, Partner Engineering & Science Hans Nordby, Head of Research and Analytics, Lionstone Investments Jacques Gordon, Executive in Residence, MIT Center for Real Estate Parag Khanna, Founder and CEO, Climate Alpha

Despite the overwrought headlines and apocalyptic economic forecasts, office buildings still matter. At the same time, the use of office is changing and an increasing need for sustainability requires all office owners and developers to alter their approach. https://www.afire.org/podcast/202311cast/ According to Anthony Malkin of Empire State Realty Trust, the altered approach won’t be easy or business-as-usual, but there is a compelling future. Office buildings matter, including the ones that are already built. The use of office is changing dramatically, and office owners are now required to alter their approach to the business. Sustainability and decreasing carbon is now a given. Flexibility for tenants no longer just part of a wish list. Anthony Malkin, President, Chairman, and CEO of Empire State Realty Trust, joins the AFIRE Podcast to discuss how, despite the overwrought headlines and challenge of changing existing office buildings to fit the times there is a compelling future, even if it isn’t easy or business-as-usual. As Malkin explains, if you can make it with the century-old Empire State Building, you can make it anywhere.

Every headline suggest that our cities are in serious trouble. How will that impact real estate investors, what can be done about it, and what is the future of our cities? https://www.afire.org/podcast/202310cast/ In a recent op-ed for the New York Times, Ed Glaeser—the Fred & Eleanor Glimp Professor of Economics and Chair of the Department of Economics at Harvard University—wrote of the future of New York following the pandemic, stating: “The economic future of the city that never sleeps depends on embracing this shift from vocation to recreation and ensuring that New Yorkers with a wide range of talents want to spend their nights downtown, even if they are spending their days on Zoom. We are witnessing the dawn of a new kind of urban area: the Playground City.” Glaeser, the author of New York Times best-selling books Triumph of the City and Survival of the City, recently down with AFIRE Podcast host Gunnar Branson to discuss how the state of cities in America has changed dramatically and what leaders need to do now to face and overcome the challenges of today.