2026 Trends, Trump's Ballroom, 50-Year Mortgage, and More | The Deal Desk
Heading into 2026, a lot of investors are still playing the same game they played in 2021: chasing whatever looks hot, reacting to headlines, and hoping the next deal fixes the last one. But markets don’t reward hustle forever. They reward positioning. If you’ve got real exposure in CRE—whether that’s a solid portfolio, meaningful liquidity, or even just a few good assets—you’re already at the point where strategy matters more than speed. The problem is most people hit that level and keep operating without a blueprint. That’s how returns get built… and quietly leak.
What separates investors who compound cycles from the ones who stall out isn’t access. It’s structure. Knowing which sectors actually have tailwinds, which markets are earning real demand, how the capital stack is shifting, and what policy or rate moves will change your underwriting before your broker calls you. If you want 2026 to be an advantage—not a surprise—you need to stop reading news like entertainment and start reading it like allocation.
In today’s Deal Desk breakdown, we cover:
• What the ULI Emerging Trends report is really saying about 2026 winners and losers
• Why niche sectors like data centers, self-storage, and senior housing are pulling ahead
• The Trump White House ballroom story—and what it reveals about regulation and development power
• The 50-year mortgage push and why “affordability fixes” can destroy long-term wealth
• The NYC-to-Florida migration narrative—what’s real, what’s hype, and how to underwrite it
• And whether a Fed cut is back on the table, plus what that means for cap rates and deal flow
If you’re serious about making smart moves heading into next year, this is the kind of context that keeps you ahead of the market instead of chasing it.
Get commercial real estate coaching, courses, and community to jumpstart your investment journey over at CRE Central: www.crecentral.com
Key Takeaways:
Data centers, senior housing, self-storage, and student housing are the niche real estate asset classes poised to shape investment trends in 2026, but each comes with unique opportunities and challenges.
Office sector recovery is uneven: top-tier buildings in strong markets are performing well, while lower-quality or less-central offices continue to struggle.
Economic uncertainty remains high for 2026; interest rates, inflation, and capital availability are top concerns for real estate investors, with overall optimism dropping since last year.
Regulatory risk and transparency are major issues—exemplified by the controversial Trump ballroom project, which bypassed normal review processes and raised concerns about public-private project standards.
The 50-year mortgage proposal is widely criticized, offering slightly lower monthly payments at the cost of much greater interest paid over time and slow equity accumulation, making it unattractive for most buyers.
About Your Host:
Tyler Cauble, Founder & President of The Cauble Group, is a commercial real estate broker and investor based in East Nashville. He’s the best selling author of Open for Business: The Insider’s Guide to Leasing Commercial Real Estate and has focused his career on serving commercial real estate investors.
Episode Transcript:
Tyler Cauble 0:00
Tyler Cauble 0:00
This episode of the commercial real estate investor podcast is brought to you by my cre accelerator mastermind, where you'll get access to my step by step investment blueprint, essentially a library of resources on how to invest in commercial real estate. You'll get connected to a supportive community of other commercial real estate investors that are doing projects just like you. You'll get personalized coaching and feedback from me every step of the way. Go to www.crecentral.com to learn more. What are the biggest commercial real estate investors and developers thinking? What are they feeling for 2026 Trump is building quite the ballroom and the 50 year mortgage might actually become a reality. Is that a good thing? All of that and more on today's deal desk. Welcome back to the commercial real estate investor podcast. I am your host, Tyler Cobble and on this segment, we dive into commercial real estate news. We will be doing this for the most part, every week. Moving forward, aside from my sabbatical, which I will be taking in December, we'll be going live and bringing you guys the latest in commercial real estate news and trends. So if you're enjoying this segment, let me know in the comments. Feel free to jump in if there are aspects of the news that you would like covered. Shoot me a message, let me know. Let's see what we've got on the docket for today. So today's capital stack, we're going to be talking about the ULI emerging trends report Trump's ballroom, the 50 year mortgage. Are people fleeing from New York City to Florida because of mom donnie's election? How will that impact commercial real estate? And there may or may not be a Federal Reserve rate cut in December. We'll talk about what all of that means for you as we go into 2026 as commercial real estate investors. So let's kick it off. Let's see what is going on in 2026 with the ULI emerging trends in Real Estate Report. By the way, if you guys do not dive into this every single year, the Urban Land Institute will typically host, with PwC, an event in most major cities where they will go through this report and also what it means for your specific city. I highly recommend that you check them out. It's typically this time of the year, November, give or take, when they are doing all these events. It's great networking. First off, if you're not a member of Uli, you absolutely should be. There were several 100 people in that room when we were going through this report last week, and it was, it was just excellent to see so high level, because this is, you know, I think this reports well over 100 pages, or at least it's close to it high level. What are some of the trends that we were seeing data center? Data centers have been forefront of most people's thoughts for the past year or two with the especially with the growing needs of artificial intelligence. I get asked all the time. Tyler, you know, how do we start investing in data centers? And unfortunately, if you're asking me that question, you can't afford to do it. Data centers are unbelievably expensive to build. I mean, we're talking about, you know, hedge funds, private equity funds, etc, that have, you know, billions of dollars to spend that are going and doing these things. I mean, we're talking about hundreds of millions of dollars that get invested into these data centers. They're growing fast. I mean, look, as Uli says here, demand for data centers continues to surge, driven by rapid growth in artificial intelligence, in cloud computing, even as power shortages and supply bottlenecks limit expansion, with national vacancy below 2% which I'll talk about here in a minute. And most facilities pre leased before completion. Constrained capacity is keeping rents elevated and development competitive. Growth is increasingly concentrated in markets with reliable energy access, so they can't go anywhere, just anywhere, underscoring how power availability is defining the next phase of digital infrastructure investment. So look, with national vacancy being below 2% that's a that's a kind of a convoluted number to be thinking about. These are hyper specific facilities. For the most part, I don't typically see people going out there and just building a $100 million facility on spec and then hoping that they find an operator. You may have somebody that announces a data center that hasn't necessarily locked in who they're going to be working with yet, but you don't typically see these projects get funded without that. It's very rare. They're very big projects, and so when you see a national vacancy below 2% Well, of course, because as this paragraph says here, a lot of them are pre leased, right? You're going out, it's a developer that has the capital. They're going out, and they're partnering with, you know, whoever, Facebook, meta, whatever, Google to actually build these. Right? So I think data centers are very interesting. You know, it's a great asset class, for sure. I think that it's just relatively unapproachable for the average investor. Now, again, like I said, there may be some sort of real estate investment trust, some sort of REIT out there that you could invest in if you were adamant about investing in data centers. And you think that that's the way to go, that's the path that I would take, is let's go out and let's invest into a REIT because at least we'll get exposed to a variety of data centers. Most of us will never be able to afford to get into one of those on our own. All right, next trend, boomers bring the next big wave with the first baby boomers turning 80 in 2026 demand for senior housing is approaching a historic inflection point, limited new supply, evolving care models and shifting consumer preferences are driving record high occupancy levels. Developers are diversifying offerings from active adult, independent living. Life communities say, light, yeah, white communities, not life to wellness focused and tech enabled facilities. I think this is interesting. You know, we've seen this trend going on for the last decade, to be honest with you, because people knew that the silver tsunami was coming for the longest time. And I find it odd that this is actually on their emerging trends for 2026 because in my opinion, it's not emerging. And in fact, if you haven't already bought or built a senior assisted living facility, you're behind the eight ball. It's it's too late. And I mean that in the sense of like everybody that was going to take advantage of this and get the most returns out of what's happening is already in the game, right? So if senior living, assisted living, is on your radar for an investable asset class for you, what I would say is it's not going to not be a good investment for you, I would just be very cautious about the type of product that you are buying or building in today's market, because after the baby boomers, our population of elderly drops off pretty substantially. So, you know, I don't have a chart here for us to look at, although, you know, we could very easily see, if we can look up age demographics United States, you can see it can't be right, how far it's going to drop off in terms of, let me see, of the next group coming along, right? I mean, the baby boomer generation was pretty massive compared to just about every generation that comes after that. Let's see if census.gov has something for us to look at so you can see, you know, let's see, this is 2020, so roughly five years ago was when we really hit a peak of the amount of elderly that were going to be approaching this. So they're now, you know, 65 and to me, I think will there always be an opportunity in senior and assisted living, sure, absolutely, but I could see a pretty substantial amount of drop in the demand going on here. Steven's jumping in and saying, Hello, Steven, what's going on, my friend, thanks for being here. All right. Next, I thought this one was pretty interesting. Self Storage transitions from utility to lifestyle and investment hybrid. Self Storage continues to evolve into a hybrid asset class with broader appeal. Demand is being propelled by housing constraints and lifestyle trends favoring flexibility, a new sub segment, storage condos, is emerging as a unique investment opportunity for individuals and small businesses blending industrial and personal use space in innovative ways. So this is, this is really interesting to me, because you know what they were talking about at the meeting was how all of these historically niche asset classes are actually coming to the forefront, right? If you think about it, we've talked about data centers, we just talked about senior and assisted living. We just talked about self storage, right? Those are historically very niche real estate assets, and they're at the forefront of what the trends will be in 2026 I think that that is certainly something that we have seen in the past few years, with how many people have started investing in a size investing into self storage and with just the cap rate compression. I mean, I remember when I first got started in commercial real estate, back in 2013 you could buy self storage facilities for north of a 15% cap rate. I mean, think about that. That's crazy. Now, you know these. Ice ones are sub 7%
Tyler Cauble 10:02
I mean, even approaching four and a half 5% right? Which is, which is pretty wild. The other thing that's interesting, they mentioned storage condos. These are really like the the wealthy guys, you know, garage condo right, where he can store all of his toys and play poker with the boys. I've seen a couple of these. I haven't seen a lot of them. You know, they're, they're banks don't tend to like them because they're just, it's, you know, how many people can actually afford to buy a condo to store all of their toys in? Sure, that's going to be a thing. And there are people out there that will be buyers for that absolutely all day. But it's just a very niche asset class. And I would actually argue that that's not technically storage, you know, as much as it is just a flex space condo, right? And I would bet if you went to a bank and you just said, I'm building flex condos, it would be far easier to get your financing in place instead of toy garages for the wealthy. All right, next piece complex outlook for student housing demand. Again, we're sticking with the niches here. These are all the top trends following a strong rebound in 2024 the student housing sector is now navigating a more complex outlook, simplified federal financial aid a record high school graduating class and robust international enrollment in US higher education combined to deliver the strongest gains in years. Student Housing mirrored that growth with near record absorption, high occupancy and steady rate increases. Yet as demographic headwinds, ongoing visa delays and rising construction costs emerge. The sector now enters a complex and uncertain phase. I've got to be honest with you guys, I would have thought that student housing demand was starting to fall off a cliff. We have so many people now that are talking about how, you know, going to college isn't worth it, you know. So if that's the case, and you can, you do have alternative options, right? You can learn online. You can learn through YouTube. You can, I mean, do what I did just basically become an apprentice, right? I dropped out and got straight into commercial real estate, and spent, you know, three years after my freshman year of high school, learning how commercial real estate worked. So you bet that by the time that my friends were all graduating from college, I knew more about my industry than they did, even though they had a degree, right, and so I was three years ahead of them, which is pretty interesting. So I mean, think about that like I find it interesting that there's a lot of demand for student housing. Now, one thing that I will say with a lot of these trends, they are macro trends, all right? Just because you know the overwhelming majority of markets are seeing this happening doesn't mean that there aren't some markets where this is totally cratering, right? I mean, take office space, for example, Nashville, not doing hot in office space, but not terrible either, right? We still see a lot of groups coming out and signing massive leases for multiple stories, if not entire buildings downtown, because people want to be here. San Francisco, on the other hand, their office market cratered completely, right? And now they're starting to rebuild that. So just because you hear, Oh, office space is dead doesn't necessarily mean that's true. It's relatively okay here in Nashville, right, especially compared to a San Francisco. So that's what I'll say for student housing demand. Make sure if you are going to get into student housing that you're just buying in the right market. Look at universities that have growing enrollment rates, or at least not declining enrollment rates. Hunter saying online schools are popping up too. Yeah, they're popping up everywhere. You know, it's it's making it substantially easier to learn without having to attend brick and mortar. And look, I mean, when I was going to the University of Tennessee, I think I was having to spend 20 or $25,000 a year to live on campus and to go to school. That's a crazy amount of money to have to spend on that now, right? I mean, most people are coming out, and they're making, you know what, 40, $50,000 a year. So for four years, you're essentially spending 50% of what your potential, of what your earning potential is going to be when you graduate. Food for thought. All right, final trend that they are tracking offices reprice amid a divided market, kind of interesting. That was what we were essentially just talking about. The Office sector is stabilizing as top tier buildings in major markets capture record rents, even as overall valuations remain far below, pre pandemic peaks, lower quality and less central properties continue to face elevated vacancies. I guess they're saying like less central properties was a confusing way to word that to me, I would assume that means suburban so. Reflecting a widening divide between trophy assets and struggling stock. This bifurcation by both building class and geography suggests that recovery will be selective and uneven across the sector. I agree. It's really interesting to see how it's playing out here in Nashville, because you have these sub markets right that even within the sub market, you have Office performing really well and really poorly in some places like take Brentwood, for example. If you're familiar with Nashville, roughly 15 to 20 minutes south of downtown, depending on the traffic, of course, well, Maryland farms over there is getting absolutely crushed. I mean, it's like a 1980s office park, tons of old school office buildings. I have seen some record low pricing for office buildings being transacted over there because nobody wants to be there. While on the other side of Brentwood, closer to Cool Springs. You know, Cool Springs is crushing it. It's technically not Brentwood, but just on the other side of Brentwood, Cool Springs is like the, you know, headquarter for headquarters in Tennessee. There are a lot of major companies that are headquartered in that area, and they're not closing down their offices, because most of the CEOs and executive teams live nearby, right? And so that's typically what's what we're seeing is really driving a lot of demand for office space today. All right, top 10 markets to watch in 2026 each year, the emerging trend survey asks industry participants to rate markets for investment and development prospects in 2026 across property types and to rate aspects of their local markets. Dallas Fort Worth, of course, remains at the top for markets to watch for the second year running. Will they go after Nashville's record? We'll see. We'll have to see. Number one is Dallas Fort Worth. Not surprising. I mean, just phenomenal growth. But here's what was really interesting to us when we were sitting in the room, Jersey City is number two. Jersey City, and that's largely due to their office absorption. They were signing so many leases in the office sector. Their office buildings are crushing it right now. So that, to me, says that the you know, work from home or the office is dead, ideology that came out of the pandemic is really starting to finally fall off, right? And we've seen it gradually build up to where people are going back to the office for the last couple of years. But for Jersey City to be number the number two market to watch in the country, ahead of all of these other ones. Pretty astounding. Miami, number three. They were in the top five last year too. I wonder if they were two or three. I think they fell back one. But of course, that makes sense. Ford is a great state with with, you know, no state income tax. Followed by Brooklyn. Brooklyn was also because of their office market. I thought that was interesting. Houston, of course. I mean, Houston is just a massive city, also in Texas, Nashville at number six, kind of disappointing. With us number seven, northern New Jersey, right. Pretty wild. Back to Office, followed by Tampa, St Pete. We actually thought that back in that's at number eight. We thought that last year we would see a lot of these Floridian cities fall off of the map simply because of the there was a rise in major weather events, right? Huge hurricanes hitting causing more damage than ever, which was causing a massive issue in insurance. It still is to this day. I think people have just accepted that insurance rates are going to be higher. How are we going to work with that now? Because you still have, you know, Miami, Tampa st, Pete on this list, in the top 10, followed by number nine, Manhattan. So we'll be that the Metro service area of New York City coming in hot with Jersey City, Brooklyn, northern New Jersey and Manhattan all in the top 10, then followed by Phoenix, of course, which has seen some pretty outstanding growth over the last few years.
Tyler Cauble 19:24
Let's see. What else I do want to talk about navigating the fog. I mean, like I said, we could sit here and read this, this report all day. But really what they were saying, I think the point that everybody was trying to hammer home is that 2025, was not the year that everyone had been expecting it to be for so long, you know, coming out of the pandemic, the the phrase was, survive till 25 right? Well, a lot of people survive till 25 and then nothing really pulled us back out of it, right? It's interesting. To see the charts that showed how optimistic developers and investors were last year in the 2024 emerging trends report compared to this year. I think people have really pulled it back and started to be a little more realistic. And this navigating the fog metaphor is pretty appropriate. There's so much fog in all aspects of our lives, whether that's economic, political, whatever it is, that we just don't know what we're kind of heading into. And so, you know, really, it's, it's an all hands on deck, be aware and ready for anything type of year, a senior vice president and a financial Association said this quote, It is a curious time for real estate with lots of uncertainty and a desire to do deals. Today's market does not reflect where we are going. So I thought that that was a pretty good take. Let's see. Here's the the firm profitability prospects for 2026 so we'll be that from 2025 they said, you know, 65% good to excellent, that has dropped down to 55% not a massive drop. But keep in mind, that's still pretty low compared to, I mean, that's as the lowest it has been since 2013 I mean, obviously it was low in 23 and 24 right? Like it was just nobody wanted to be doing anything. And in 2023 and 24 it did spike up last year, but it has certainly corrected those that are saying it's fair 34 and a half percent, right? That has gone up from 30% and then those that are saying that it's abysmal to poor. This is, I mean, it's more than doubled. You know, we went from 4.6% saying it was abysmal, that's basically a rounding error, up to 10 and a half percent. So one in 10 commercial real estate professionals feel that 2026 will be an abysmal to poor year. Well, let's keep in mind, 55% still think it's going to be good to excellent. Now I always want to remind you guys, this survey includes Office developers. It includes shopping center developers, right? All these people who are actually in sectors of the industry that aren't doing super great, right? If they haven't pivoted so they're going to be answering from their perspectives as to how, you know, it might shape out economic and financial issues for real estate in 2026 87.4% of respondents said that interest rates and cost of capital were number one. And I thought this was interesting, too. We were talking about it. And even if you know, we've been saying dry powder, there's so much dry powder on the sidelines for so long, even if interest rates drop in 2026 the overall sentiment is that that dry powder might be gone. There's not a lot of cash that's just sitting on the sidelines waiting to be deployed. At this point, it's either already been deployed or it's been reallocated somewhere else. And so the cost of getting that equity back pretty big problem. That's followed by jobs and income growth saying 66% see that as a problem. And then, of course, inflation, inflation at 49% of respondents saying that's a problem. Inflation is a huge problem, right? Because we will see that fairly quickly in let's say our lumber costs, right? But we're not necessarily going to be able to just turn around and say, Okay, well now, because we're paying more for lumber, you have to pay more in your monthly rent, right? Tenants are going to pay what? Tenants are going to pay. So, you know, I think, I think those that's what we're feeling. I mean, even on my jobs, right? You know, I would say we've gotten around interest rates right in our projects. To me, we can go out and we can find good deals that even with poor interest rates, they work, and we can refinance out of that as soon as it comes back the cost of capital, we're definitely feeling that. I mean, like, personally, just to you know, when we go out for capital, it's tougher for us to raise capital nowadays, it's not that we're bringing projects that aren't as interesting, that aren't getting the types of returns that everybody wants to see. We're still doing the same types of deals. People just have less cash, right? They're a little worried about where we might be headed economically, jobs and income growth. That's not necessarily that doesn't impact me, right? I mean, it does on a very, very macro level, but on a micro level, it's not going to impact, really, what we're doing on a day to day basis, for my project, specifically. But inflation, we're feeling that 100% I mean, we've had, I forgot what we were looking at. I had a, you know, we're ordering a bunch of stuff for the hotel, right? So we've been ordering, you know. Everything from beds to bed sheets to, you know, paintings to go on the walls, whatever, right? And a lot of this comes from overseas. There's nowhere to buy it affordably in the United States. Well, I went back and looked at some of the stuff that we had ordered back in the spring compared to today. And there's stuff that's up 20 30% just in hasn't even been a calendar year, and everything's gone up 20 to 30% now you could argue, well, that's, that's corporations that are taking advantage of, you know, inflation. Maybe, I think both can be true. There can be people that are taking advantage of the situation, and there can be real inflation. Tariffs cause inflation, because as prices go up, you as tariffs go up, prices go up. There's just no way about it. James is saying, how do you personally balance forecasting versus reality? I imagine you've vetted sources over the years. That's a great question. So when it comes to balancing the forecasting, all of this stuff that we're talking about today, I like to keep it in mind, right? It might dictate how aggressive I get in 2026 in terms of acquisitions, let's say, you know, historically I might acquire, I mean, it's I bought three properties, two properties this year, three in the last calendar 12 months, right? I might just buy another one or two next year, right? Instead of getting back to where I was before 2023 which in 21 and 22 I bought four properties a year. 2020 was kind of a blip. I had one that we actually bought, but that's because things were so weird. 2019 I bought four buildings, right? So historically, like we buy roughly four buildings a year. So instead of getting back to maybe buying four buildings a year, when I look at stuff like this and go, Yeah, I mean, I am feeling that I probably won't go for four buildings, right, probably aim to do, to see how the market feels about that right? See how things are looking in terms of the conversations I'm having with my investors, the conversations I'm having with my lenders and and honestly, how quickly stuff is leasing up, right? Because this will impact every single aspect of what we do right, from from finding to financing to operating these deals and managing tenants. Because, you know, the other thing is too, like, just because you personally might not be impacted by inflation, your, I guarantee you, your retail tenants are. We've been having to deal with that pretty substantially because, you know, we've got several retail tenants that are struggling because they can't pass on 100% of the cost to their consumers. And with, you know, deportations and stuff like that, and ICE raids going on, their customer base isn't coming out and spending money, and so, you know, now we're having to work with those businesses and give them decreased rents and renegotiating how we're going to handle all of that, just because of, you know, stuff that's kind of out of our control, right? So I don't know, food for thought. That is what's in store for 2026 I think it's pretty important to keep that kind of stuff in mind as you're moving forward and making your plan. Hopefully you guys have already put together plans for 2026 but what I would say is I still feel great about commercial real estate. I think it's going to be a great year to buy. There's opportunities. In every market. Just make sure that you're paying attention and that you're being safe with it right now, Trump's ballroom, what an interesting topic to be diving into. Now, I'm not a political commentator, so we're not going to be talking about, you know,
Tyler Cauble 28:41
whether or not this should be going on, or anything like that, or what your political opinions are, because I don't care. I don't care. We're just going to talk about how dumb the ballroom is. So you know what guy I think that it's it's a really interesting thing to be going on today, considering where we really are in the market. This, this article from Bloomberg really helps sum it up. Trump's 90,000 square foot ballroom is sized for a convention center the ball. If you don't understand what 90,000 square feet is, that's massive. That is two acres worth of space. Who needs a ballroom that is two acres big. Tell you this, no previous Presidents have, right so, you know, all of the you know, stuff around, you know, this being a really needed, you know. And we're not going to talk about how gaudy it is and how reminiscent it is of, you know, The Great Gatsby and Gilded Age. But to me, like especially when people are going hungry and the economy's not doing great, I think it's just a wild thing. As commercial real estate investors, what should absolutely piss you off, though, is the fact that you and I as private developers are held to a higher standard. When it comes to maintaining historic buildings and going through the true permitting process, all right, and I'll get to that here in a minute. But this is from Bloomberg, with the East Wing of the White House unceremoniously torn down in October, the scale of President Donald Trump's plan to build a ballroom in its place is leaving experts puzzled at 90,000 square feet, the new addition not only dwarfs the historic mansion. If you guys haven't seen a rendering of this ballroom compared to the rest of the property, it looks ridiculous. It's also far more space than a ballroom typically needs to seat 1000 guests. In fact, its size suggests something more like a convention center space. Meanwhile, the $300 million price tag, which is $3,000 per square foot, is far beyond other such government projects. Neither Trump nor his contractors have submitted plans for review, as is legally required, and the project's details remain limited, save for a few top line numbers and architectural renderings showing a single banquet hall with coffered ceilings, large chandeliers, Corinthian columns and gold trim throughout. Lot of stuff to unpack there. Ms 4000 is saying, sup, what's up? Ms 4000 thanks for joining us. Okay, couple things to unpack there. Why would we ever need 1000 guests at the White House? You know, to me, that just seems like such a security nightmare for for the President. But look, even they mentioned it costs significantly more than other government buildings. That's what I want to talk about, because $3,000 a square foot is a crazy price. That's, I mean, let's put it in perspective. If you're going to go and build a brand new house today, let's say that you're not doing anything fancy you're doing, you know, regular, you know, maybe median house for the market, you're spending somewhere between probably 150 to $175 a square foot, far less than $3,000 per square foot, if you are building a government building or even a hospital, which are some of the most expensive buildings that you could possibly build, because of security, because of infrastructure. There are so many reasons as to why those are the most expensive types of buildings, typically between 650 to $1,200 per square foot. This is still three times more expensive than that. I think it's interesting that it's that expensive to me, it screams either they're building something that we don't know about, which, you know, for national security, sure I can understand that, like I get that there should be a little more transparency with the government groups that have to approve all this so or, you know, somebody's getting paid under the table. For all of us, I find it wild that private companies are paying for a public building that would never like in this capacity, could never happen on a local level, because it's blatant corruption, or at least currying favors with politicians and so, you know, I could never do that in Nashville to say, Hey, Mr. Mayor, I want to build you a really, really nice ballroom to entertain people here there, you know, there's rules against government gifting, and that's essentially what that is. But this is, this is what really irks me about the whole thing, the line where it says, you know that they did not submit plans for review and didn't go through the proper process. You and I as private developers and investors are held to a substantially higher standard when it comes to this, because look, if I want to go and get permits for a regular building in Nashville, it's going to take me six to 12 months, right? I have to go through all sorts of approvals to make sure that I'm building the building properly, that it fits the zoning, that it, you know, fits whatever overlays or anything else that's going on there that I'm building it to code. It has to go through all sorts of inspections. It has to get signups from all these different departments, you know, from from the Nashville Department of Transportation all the way to fire and life safety, right? It takes forever. But then on top of that, this is an historic building, right? The the east wing was built in 1942 that was the last time that a major addition was done to the White House. So it's not uncommon to for other presidents to add to the White House, right? Like, I'm not going to sit here and say, like, that's that's the problem by any means, because it's not right. But you. If I wanted to work on an historic building, and let's just say, in Nashville, I can't touch the facade. I have to go through additional meetings just with the historic commission to make sure that we're building everything properly. You can't tear down historic buildings. You have to work with what you have. It is a very stringent process with a lot of oversight. They just came out here and tore an historic building down that they don't even own. So like, that's on buildings that I personally own, right? That's my private property. I still have to adhere to all these rules. This is a building that this administration does not own. This is owned by the American people and historic building that they were able to just come in and tear down without any oversight whatsoever. So you know, what could that mean for us as commercial real estate investors? I think the biggest thing is that it just shows that there's a lot of regulatory risk and politics that come into these projects. And unfortunately, you see, you do see this kind of stuff happen at the local level. But how could this influence the future of public private partnerships? You know, there is a sanctity in those types of deals, a transparency in the process that makes sure that this, everything is all done above board, and that it's done in the best interest of the citizens, right? And as arduous as that process can be, it's good for the most part. Oh, by the way, here's some renderings of the of the building, right? I mean, look at how massive that is compared to the rest of the property. So, you know, I just, I think it's interesting to think about how that's all going to change. You could see there how giant This is compared to what the east wing was. It looks like. It's probably about three times the size of what the East Wing might have been, maybe more. And then the Society of architectural historians put out a statement on this, which I thought was pretty great. They said, you know, the Society of architectural historians expresses great concern over the proposed ballroom addition to the White House. Let's see funded privately by the President and unspecified donors. I mean, this was from October 16. They said, 200 million. Now it's over 3 million. Now it's over $300 million as a leading scholarly organization for architectural historians in North America. Sh limits its advocacy to matters of national and international import. The White House is one of the most historic, important historic buildings in the United States, while we recognize that the White House is a building with evolving needs and that it has undergone various exterior and interior modifications since construction in 1792 the proposed ballroom is the first major change in 83 years. Therefore, such a significant change to a historic building of this import should follow a rigorous and deliberate design and review process since the project announcement, the AIA, that's the American Institute of Architects, which, if you're working on a construction job, that's typically the type of like contracts that you'll use to make sure that your contractor is following everything right? They've got great stuff, by the way, AIA has expressed concern and offered recommendations in five areas, establishing a qualifications based architect selection process.
Tyler Cauble 38:26
That's, that's a that's really not a big requirement, right? Oh, think about how many people or businesses were selected without proper oversight on this job, right? I mean, as a government entity, you have to make sure that you're not showing favor to any one person, because then you can just essentially be granting your friends these really high paying jobs with public dollars, right? So how you know more transparency on selecting the architect enacting a rigorous Historic Preservation review? I don't think that's asking too much, prioritizing transparency and public accountability, considering proportional, proportionality and design harmony. That's a huge one. I mean, look, if you look at these renderings, this looks ridiculous, right? Like the East Wing used to balance out the west wing a little bit more, and so there was this, this balance and symmetry to the site that just made the White House campus really beautiful, in my opinion. Now it's, it'll be pretty lopsided, is what it looks like, let's say, let's see here, and leveraging collaboration and expertise across the architecture profession. So anyways, I recommend you go and read the whole statement. It'll give you a pretty clear idea about how industry professionals, like take the politics out of it. This is how industry professionals feel about it. I think that's important for us to stay on top of. All right, the 50 year mortgage is a topic of discussion these days. Will it actually make a difference? From just about everything that I have seen, I have not seen one person stand up for the 50 year mortgage. I'm starting to feel bad for it. Feel like the 50 year mortgage is getting really bullied right now, and I'm going to be honest with you, it kind of deserves it. Now, the 30 year mortgage was standardized. I believe back in the it was in the early 1900s it was probably mid like 1940s 1930s maybe, and the 30 year mortgage is great. It's been the standard for a long time. I don't know exactly how we came to that being the standard, but it's worked, right? It is a decent balance between paying down your principal and paying interest on your note, right? And I'm actually going to show you guys the difference between a 50 year mortgage and a 30 year mortgage here in a second. This article, though, is from UBS, which is a massive international bank, on what would the 50 year mortgage actually mean for homebuyers? The potential addition of a 50 year fixed rate mortgage as a financing option for home buyers could lower monthly payments. However, it would lead to higher lifetime interest payments and a significantly longer period to generate equity. It is pretty significant, by the way. Let's see Bill Pulte, director of the FHFA, indicated that the Trump administration was working on a plan to introduce a 50 Year home mortgage. I got a thumbs down. Looks like somebody's upset that I don't like Trump's ballroom as it currently stands. Mortgages with a term beyond 30 years are not considered conforming and therefore are not eligible for purchase by the GSEs. The conforming loan guidelines are derived from the Dodd Frank Act's Ability to Repay rules. One of the key drawbacks for buyers who utilize a 50 year mortgage is the amount of interest that they would pay assuming the loan stays outstanding for the full term. As a percent of total home price, a 50 year mortgage results in total interest be paid being 225% of the total home price. Let that sink in. You will pay more than double the value of the home in interest over the life of that mortgage. Another key drawback of the 50 year mortgage is how little equity is built beyond the initial down payment. It takes you forever before you're actually paying anything other than interest. I think it's like somewhere closer to 15 years, which is wild. Yeah, only 4% of the mortgage is paid off in 10 years, and only 11% is retired after 20 years. So think about that, after 20 years, you've built up 11% equity in your property with principal pay down. Now, of course, your property is going to appreciate in value, but let me show you this like on an actual this is just a mortgage calculator that I've got online. You can see here this, this light blue is the interest that you pay. The dark blue is the principal that you pay. So you you know, this is a we're looking at a 30 year mortgage right now. You're still building up a decent amount of of principal even on day one. But if we're looking at a $400,000 home value with a 20% down payment. You're getting a loan amount of $320,000 I just wanted to use like a median house. All right, this is saying that your interest rate is probably going to be about 5.98% keep that in mind. All right, 5.98% 30 years, and we calculate it, all right. Total interest paid over that loan is $369,201 your total of 360 payments brings you up to 689,201 right? So you bought a $400,000 house. You ended up paying roughly $690,000 for it. Now, let's see what a loan term of 50 years would do. I'm not even going to change the interest rate for now. We're just going to keep the interest rate at the exact same, which is hyper unrealistic. Look at how little principle you actually pay down until, I mean, you're 10, ish, right. That's when you really start paying down your principal. Your total interest paid is $687,000 which brings you at a total of 600 payments. Total cost on this $400,000 house is now $1,007,000 that's insane. Another $300,000 just for going to this. However, look at this from Bank of America. If you look at the rates for 30 year fixed, they're saying it's 6.25% Well, the most comparable going from a 30 to a 50 year is going to be the rate. Rates on a 15 year fixed, which are 5.375% that's roughly 90 basis points higher, or, I'm sorry, lower, right. So that means that on a 30 year fixed, going to a 50, you can assume that we're going to have to raise interest rates on that. The other thing that's interesting, too, Fannie and Freddie, who most lenders will sell these mortgages to, then they'll, you know, package them up, as you know, commercial mortgage backed securities, whatever, and sell them on the market. But banks love to sell these mortgages. They go and sell them so they can free up that cash and go do another one. They make a lot of money that way. That's how banks work, right? So they don't actually keep your mortgage. Fannie and Freddie don't buy 50 year loans. In fact, we would have to completely change how those entities are structured right now to allow them to take a 50 year mortgage. So most of these banks would actually have to service this themselves unless that got changed. But let's assume that it does. You're still going to have probably 1% higher interest rate going to a 50 year mortgage. So let's go back to our 5.98% interest, and let's set it to 6.98 on the 50 Year and remember, we bought a $400,000 house. Our total interest paid is $832,000 for a total of $1.15 million on a $400,000 house, you are paying nearly three times the cost of that house over a 50 year period. That's assuming you even make it 50 years, right? I mean, who knows how many people would pass away or, you know, go into debt because you're not really paying down any principal. I mean, this is just serfdom. At the end of the day, you're just getting locked into a property that you can't really build up any equity in, which is, I don't know that's a that's a lot. So overall, not not a good move, in my opinion. I think that the the 50 year mortgage is probably not going to fly. I can't see why it would. I mean, it's it just it doesn't make any sense. And at the end of the day, we're talking about, I mean, if you look at, let's, let's actually go back to that. I want to show you guys, because, to be fair, they're pushing it, because you're going to save more on your monthly payment. All right, so your total monthly payment on a 50 year with our new interest rate is 1920 a month, so just under two grand at 5.98% on a 30 year mortgage, your monthly payment is 1914 so it's not even it's not even less. And it's, you may say, well, Tyler, you know if, if it's, I don't know either way. I don't know how you make it less. I mean, if we go to the 50 years at 5.98% interest, let's see what it ends up being. Then we went from 1914 on a 30 year down to 16. 79 so that's what they're basically trying to push is, oh, you'll save 150 to 200 bucks a month by going to a 50 year mortgage. But they're not telling you how much you're going to actually have to pay in interest rates. So it just it does not work out whatsoever.
Tyler Cauble 48:20
See, James is saying, I'm a little worried about private equity undermining the economy. We see it in corporate chains, but since we're talking real estate, I believe if private equity, commercial real estate, is allowed to go unchecked, we are in trouble. Couldn't agree more, James, I have spoken out many times on this channel, specifically about build for rent. I think that that is one of the worst things that has actually happened to the American dream. You have massive corporations that have access to an insane amount of capital and better debt terms than you and I could ever dream of going out and buying homes hundreds, if not 1000s at a time, and those are homes that could be sold to someone trying to build their American dream. So I think that's a problem. I do think that private equity should be regulated more when it comes to to buying, specifically, single family homes, right? Who cares on office? You know, it's, it's, that's business. But you know, if you start taking away people's best chance at building up generational wealth. You're going to see some problems. He's saying, you saw that Kidder Matthews group up here has a hold of several properties in this area and the West Coast and are sitting empty. How are they serving the community locally? Yeah, they're not. They're just waiting until they get some money that's for the rent. That's really, really what they're going for. All right. This is a, this is a fun one from New York City to Florida. It seems like since Mamdani got elected, there were a lot of people that were putting some money into campaigns that were saying, hey, New Yorkers are going to leave New York City if this happens. Now. So keep in mind that is heavily dependent. You know, whoever's paying for those ads has something to benefit from it, right? And if you look at the list of donors against Mamdani, they're all Uber wealthy. They're all well, well into the 1% right? You know, just essentially trying to buy an election. Now, do I think that people are going to leave New York City only because mom Donnie got elected? No. I mean, maybe there's millions of people in New York City. I'm sure that there's somebody that's mad enough that they'll leave fine. Do I think that it's going to cause some sort of massive spike in an exodus from New York City? No, I don't, I don't think that that's realistic. We have seen this time and time again. In fact, I'm going to play you guys a clip about people leaving New York City here in a second. But as commercial real estate investors, if it does happen, there's an opportunity, right? If all of a sudden, millionaires and billionaires are deciding to sell off all of their New York real estate, well, it's going to get really cheap really quickly, which is going to give other people an opportunity to buy real estate in New York City. Right? It could if everybody's moving to Miami, or just generally, in Florida, which is what everybody's saying. I don't know why everybody from New York has to move to Florida, but that seems to be the thing. It could be good for real estate in Florida, right? Which, if you're trying to base like, look for the most part, everybody that listens to the show, most of you that I have run into and talked to, we're all micro investors, right? We were small fish. You know, we're going out. We're buying 1234, deals a year, right? And these are all sub $20 million deals for the most part, which means that these larger macro trends in migration, immigration from one state to another within the United States, it's really tough to follow and see how that's going to really impact how we invest right? So, you know, keep that in mind whenever you hear things like that. But this is, this is pretty funny. I want to show this to you guys.
Speaker 1 52:14
New Yorkers are going to flee. They're going to flee New York because of Zohra and Mamdani.
Speaker 2 52:18
To my liberal friends who keep saying, well, tax rates don't matter. Then, why is it Sean that everybody is leaving New York?
Speaker 3 52:25
The main reason people are leaving New York, for example, is taxes New York City. Unfortunately, we know friends that have moved out of there for Florida and other places. The millionaires are leaving in great numbers, taxpayers, the wealthy in New York leaving.
Speaker 1 52:38
There are 1000s of people who are leaving New York who
Speaker 4 52:41
would want to leave? Well, apparently, a lot of people do. If they get to a point where they're taxed out and the
Tyler Cauble 52:46
rich, rich people will leave in droves. Well, I mean, I think it's funny, you go back and they're just saying that you can't see this if you're if you're listening on the podcast, but every single one of those clips was going back a year. We got to 2016 of people saying everybody's going to leave New York City. It's just not realistic. It's not going to happen. If it does, though, there's plenty for us to take advantage of as commercial real estate investors, like I said, that's probably going to open up a lot of opportunity for smaller fish to be jumping into the market in New York City, which, let's be honest, that is one of the best cities in the world that you could own commercial real estate in, because it is, it is such a strong economy, it is so established. I mean, hard to argue against, but here's, here's an interesting article that I found on Reddit, or thread that I found on Reddit that you know kind of prompted this discussion change. My view, hardly any millionaires are going to leave New York City because of 2% more in taxes. 2% really you're going to uproot your entire life, move your entire business, your workforce, sell off all of your commercial real estate assets because of a 2% tax. Doubt it. Anyway. CNBC crowd seems convinced everyone making more than a million dollars a year is going to move to Miami. But the reality is, New York City is the capital of the world, the cultural and financial capital, and opens up networks and opportunities that are simply not available elsewhere. If you're making more than a million dollars a year, 20 grand is nothing. It's not even a portion of private school tuition for one of your kids. People just don't pick up and leave and reset their lives for no reason. This is fear mongering at its finest, and it's going to be great to see this not happening, and perhaps be relevant to federal and state tax policy throughout the United States. I don't think a 2% raise in taxes on the Uber wealthy. Is that controversial of a thing? I mean, we're talking about $20,000 for somebody that's making a million dollars a year. Look, I don't make a million dollars a year. You probably don't make a million like statistically speaking, there might be one person. Yeah, that listens. You know a couple people that are on this podcast that make over a million dollars a year. Most of the people that I know personally that make that much money are fine paying their fair share. I think the biggest problem that a lot of people always have, and I agree with this wholeheartedly, is, is the government going to actually use those funds appropriately? That's a totally different discussion. Let's see somebody commented here. They say, you make $3 million a year. You live in a you live well in an expensive city, and spend a million dollars a year, pay a million dollars in taxes and save the final $1 million your job is tough. You don't like the people that you work with. You know, most people burn out after a few years in your role. You need 20 million in the bank to cover your lifestyle without this job. So you have a lot of savings to do. I mean, that's a little aggressive. On that entire thing. You spend a million. If you're making $3 million a year and you're spending a million dollars a year, that's crazy. But also trying to save a million, and also, depending on how you're structuring all this, you're probably not going to be paying a million dollars in taxes a year, even if you're making $3 million a year, right? I mean, look, I have had years where I completely wiped out my tax liability because of paper losses through accelerated depreciation on my real estate assets, right? So it doesn't, it doesn't work like that. This is a far more complicated topic than a lot of people give it credit for. Your firm has a Miami office. You like the weather there, and it's a short flight, so you can be back at a couple of times a month, easily if you want to Miami, saves you $380,000 a year in taxes, and another 120,000 in cost of living. So moving there increases your savings rate by 50% we're going to ignore all of the grammatical issues and typos here. Now suddenly you can quit the stressful job you hate. Years earlier, the last 20k increase wasn't a huge deal, but you've been thinking about this for a while. It's time to finally do it. I don't necessarily think that that's wrong. I think there will be people that are going to make that move. Now, commercial real estate professionals, especially those that have been investing in New York City, are pretty astute. You have to be. I mean, that is where the cream of the crop is investing in commercial real estate. I don't think that they're going to make rash decisions. If they do, great. It's a social experiment. Let's try it out. I don't, I don't have any issues with that. And if that happens, then Miami gets to gets all the benefit from it, right? Or wherever, right? I mean, everybody keeps saying it's gonna be Miami, it's gonna be New York. I don't know why, as opposed to any other cities that they could move to Dallas, Fort Worth, for example, or Nashville, Tennessee, or Atlanta, Georgia, whatever. I mean, I guess if you're going for like, states with no income tax, you pick Texas, Florida, Tennessee. Those are the most common ones. There's several other states. But still, I just, I don't know that. I see that being a huge issue. So what I would say is, if that is the case, will there be an exodus? Probably not, but it will be interesting to see either way. Because here's the thing, no matter what kind of market that we're in, no matter what's going on, no matter what the political divide is, et cetera, there's going to be an opportunity, right? And so maybe that will help create an opportunity for you going into this. You know, I thought that this article was, was a good point to bring up here. This is from Yahoo Finance. Were high income Americans really paying 91% income tax in the 1950s right? There's this common belief that, you know, the top 1% or the top income bracket, was paying 91% all right? And that was back in the 1950s and they're saying that the figure is a bit misleading, right? The Tax Foundation explains that the 91% tax rate is only applied to incomes over $200,000 this is back in the 50s, so that was over $2 million a year in today's dollars. And it's funny, they're trying to say this is misleading, because only 10,000 households fell into that top bracket. Good. I mean, taxing 91% of people are taxing at 91% somebody that's making over $2 million a year above and beyond. That is fine, right? Because they're even saying back then, the richest 1% still paid an average of 42% of their income in taxes during the 1950s you have to keep in mind that top bracket is only taxing 91% over the $2 million a year, and that's not taking into account any depreciation, any write offs, all that kind of stuff. So it's actually kind of difficult to get to that. So the fact that there were 10,000 households paying 91% over the 2 million, great, you know, fine, they get to pay their fair share. But again, this isn't a political talk show, so I don't think that it would be a huge deal for commercial real estate. I'm just interested in seeing how it actually plays out, because who knows, maybe we'll be able to start buying buildings in New York City. All right, is Christmas canceled? The Federal Reserve is talking about how they may not be making cuts to the federate. You? Which is really, really disappointing to see, but it might be back on the table. Let's talk about this. So this is from Fortune. Suddenly, the Fed interest rate cut in December looks like it's very much back on the table. A couple of weeks ago, it was basically all but debt, and I was like, Man, there goes all of our Christmas presents, right? Because interest is high, and we'd love to see it coming down, but if the economy isn't showing you why the rates should be coming down, then you can't just lower interest rates, right? That causes stagflation. Asian stocks were down this morning, and Europe was flat, but investors and US equities were ignoring all of that and renewed hopes that the US Federal Reserve will cut interest rates in December, thus fueling asset markets with a new round of cheaper money. We all like that. I like cheap money.
Tyler Cauble 1:00:49
Last week, Wall Street seemed to have decided that a December cut was off the table. On Wednesday, the CME fed watch futures index placed the probability of a cut at just 30% it was pretty dismal. I'm gonna be honest with you. We were all kind of like, Oh man, that's a that's a big bummer. Way to way to end the year with no cuts. JP, Morgan published a note predicting a cut in January. Instead, markets sold off dramatically. S p5, 100 lost 2% last week. Today, speculators put the probability of Fed Chairman Jerome Powell delivering a rate cut at 75 and a half percent. So what changed? Well, according to FOMC Vice Chair John Williams, my assessment is that the downside risks to employment have increased as the labor market has cooled, while the upside risks to inflation have lessened somewhat. Therefore I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral the Fed has two main mandates, supporting employment and controlling inflation. Until Friday, it looked as if the two were almost perfectly balanced against each other, suggesting that the Fed would keep rates on hold for December, not anymore. The US government shutdown made employment data harder to come by, but most analysts think the labor market is getting weaker. These charts from Daiwa capital markets. Lawrence Werther and Brendan Stewart say it all, unemployment is trending up and job creation is trending down. So the Federal Reserve is stepping in to help stimulate job creation, which is really great to see, which means that we might get to benefit as commercial real estate investors from lower interest rates, which we have all needed for quite some time. It has been a long time coming. We've we were expecting far more rate cuts this year than we ended up getting. But hey, like I said earlier, 2025 wasn't the year that we expected it to be. 2026 think we're being a little bit more realistic walking into it. There you have it. That has been this week's deal desk with yours truly. Tyler Cobble, if you have any topics that you would like covered on the commercial real estate news and trending segment, feel free to drop those in the comments. Let me know. I appreciate you guys happy Thanksgiving. I will see you all next week. This
Tyler Cauble 1:03:10
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