December 2025

North America

·CMBS flows show increased appetite for high-end hotels, distressed Apple offices in California, and robust demand for affordable housing. Late 2025 has brought a risk-on turn in hotel CMBS, with seven single-asset deals totalling about $6.2 billion in six weeks and at least $15 billion dollars of hotel-backed issuance expected for the year, as lenders back high-end, supply-constrained hospitality assets. Flagship transactions include JPMorgan’s$ 253 million securitisation of New York’s Public Hotel and Morgan Stanley’s $300 million floating-rate loan on Henderson Park’s recently refurbished La Quinta Resort & Club in California’s Coachella Valley. In sharp contrast, office risk remains under pressure: Moody’s has downgraded six CMBS tranches in Natixis 2021‑APPL, backed by three Sunnyvale buildings (Silicon Valley) fully leased to Apple, after rent cuts of around 27%–29% at two properties lifted the deal’s LTV ratio to about 149%.​ The downgrade comes against a weak Silicon Valley leasing backdrop, with Sunnyvale vacancies near 19% and three years of negative rent growth in core submarkets, underlining that even Apple-tenanted collateral is not immune in oversupplied tech corridors. At the same time, affordable and workforce housing remain a bright spot for securitised credit, with Merchants Capital completing its third Freddie Mac Q‑Deal of 2025, a $173 million issue backed by five multifamily assets across Indiana, Pennsylvania and Illinois. This channels SOFR‑plus‑2.75% debt into mostly mid‑60s LTV, high‑occupancy assets such as Pittsburgh’s Connection at Southside Works and Indiana’s Flats at Fishers Marketplace, each with dedicated affordable units. (Source: JP Morgan Chase, Henderson Park, CoStar, 2025)

Bonds backing 401 N. Mary Avenue in Sunnyvale, California leased to Apple downgraded after rent reductions drove LTV ratio to 149%

·Lenders double down on billion-dollar Chicago trophy tower while older Loop tower reset at distressed levels. Two same-day Loop deals totalling $755 million underline the bifurcation in US office pricing, with the 55‑storey Bank of America Tower at 110 N. Wacker securing a $700 million CMBS refinancing on a just‑over $1 billion appraisal while 190 S. LaSalle reportedly traded for only $55 million, versus $230 million in 2019. The riverfront Bank of America Tower, now about 98% leased after Callahan Capital Partners and Oak Hill Advisors lifted occupancy from roughly 78% since 2022, drew a five‑year syndicated loan from JPMorgan, Bank of America, Wells Fargo, Goldman Sachs and BMO, marking one of Chicago’s largest post‑Covid office refinancings alongside the Old Post Office and Salesforce Tower. By contrast, distress-focused Namdar Realty Group and Mason Asset Management acquired 190 S. LaSalle at a steep discount to both its pre‑Covid purchase price and its $167.5 million 2020 loan, echoing other sharply repriced Loop trades such as 525 W. Van Buren ($35 million vs $135 million in 2015) and 125 S. Wacker ($51.5 million vs $145 million in 2017).​ For institutional investors, the message is clear: capital will still underwrite billion‑dollar valuations and large‑ticket debt for modern, well‑leased riverfront trophies, while even architecturally notable but older stock is resetting at distressed levels as opportunistic buyers step in. (Source: CoStar, The RealDeal, Newmark, 2025)

Bank of America Tower along Chicago River secures $700 million loan refinancing

190 S. LaSalle trades at $55 million, well below the $167.5million loan that previous landlord, Beacon Capital Partners, took out in February 2020.

·Blackstone takes on grocery-anchored retail and industrial with $2.3 billion Hawaii landlord private. A Blackstone-led joint venture is taking Alexander & Baldwin private in a $2.3bn all‑cash deal, securing roughly 4m sq ft of Hawaii commercial real estate at a 40% premium to the REIT’s recent share price. The portfolio is heavily skewed to grocery‑anchored neighbourhood centres including 21 retail assets with anchor tenants including Safeway, Sam’s Club and Longs Drugs and 14 industrial properties, four offices and 146 acres of ground leases across four Hawaiian islands, with the bulk of space on Oahu. Alexander & Baldwin’s largest assets include the Sam’s Club‑anchored Pearl Highlands Center and the Whole Foods‑anchored Kailua Town, reflecting a clear focus on daily‑needs retail in supply‑constrained submarkets.​ Blackstone has been building a national thesis around grocery‑anchored and “essential” assets, having earlier completed the $4bn take‑private of Retail Opportunity Investments. The buyers plan to invest a further $100m of capex into upgrades across the Hawaii portfolio, targeting both tenant facilities and local infrastructure under a long‑term private ownership model. For institutional investors, the transaction underscores continued appetite for scaled, necessity‑led retail and industrial in structurally undersupplied, island economies, even as more cyclical U.S. property segments remain under pressure. (Source: Blackstone, CoStar, 2025)

Alexander & Baldwin’s grocery anchored retail portfolio includes the Whole Foods in Kailua, Hawaii

·111 Wall Street office-to-residential financing shows strong appetite for scaled conversions in gateway cities. InterVest Capital Partners and MetroLoft have lined up $867m of debt to convert vacant 111 Wall St. into 1,568 luxury apartments, the largest single‑building office‑to‑residential financing in the US and a clear signal that global lenders see scale conversions as a viable way to absorb obsolete CBD offices into much‑needed housing. The capital stack, led by a $778.6m construction loan from Apollo, JPMorgan and TYKO, follows a separate $720m loan for MetroLoft’s conversion of Pfizer’s former HQ, underscoring rising institutional comfort with complex adaptive‑reuse business plans in prime Manhattan locations. At 111 Wall, roughly a quarter of units will be designated affordable at 80% of area median income, helping the scheme tap city incentive programmes, while more than 100,000 sq ft of amenities and waterfront views position the balance squarely in the upper tier of the rental market. Yet the surge in capital does not make these projects straightforward: industry practitioners highlight costly constraints around deep floorplates, daylighting, egress, plumbing and gas distribution for hundreds of kitchens and bathrooms, which often require heavy structural interventions and bespoke MEP solutions. That means only a subset of offices typically well‑located, large‑plate, transit‑served assets with favourable cores and window lines pencil for conversion at scale, even with record debt packages. (Source: MetroLoft, InterVest, CoStar, 2025)

InterVest Capital Partners and developer MetroLoft secures financing for 111 Wall Street conversion

·New York REIT, Alexander’s, restructures $300m loan secured against Bloomberg HQ retail through acquisition of the senior note from JP Morgan. New York REIT Alexander’s has modified a $300 million loan on the 126,000 sq ft retail condominium at 731 Lexington Avenue, Bloomberg’s headquarters, to facilitate reletting after Home Depot vacated earlier in 2025. An Alexander’s affiliate purchased the $132.5 million senior A-note from JPMorgan at par with interest rates at 7%, enabling internal control over the top tranche. The structure adds a new $65 million B-note at 13.5% interest (dropping to 7% on excess funds) for capital improvements and leasing costs, subordinated to the A-note. The $167.5 million junior C-note, accruing at 4.55%, forms the bulk of the debt and bears the highest structural risk with a 2035 maturity. A debt forgiveness clause eliminates any unpaid balance shortfall after qualified refinancing or sale post-third anniversary, shifting default risk to lenders. Vornado Realty Trust, with 32.4% ownership and REIT management, underscores aligned stakeholder dynamics in this creative financing. Ground-floor and lower-level space is now listed per CoStar, exemplifying negotiation over property surrender.

Alexander’s acquires part of JP Morgan senior loan secured against 126,000 sq ft retail condominium at 731 Lexington Avenue, which serves as Bloomberg’s headquarters.

Europe

·KKR joins wave of major managers (BNP Paribas REIM, AEW, and Hines) halting fundraising as market pressures mount. KKR has paused fundraising for its open-ended core-plus real estate strategies in Europe and Asia, becoming the latest major manager to face difficulties attracting capital for commingled funds. The New York-based firm will continue raising money for its US Property Partners strategy, highlighting stronger investor sentiment in North America. The pause follows broader market strain, with peers such as Garbe, BNP Paribas REIM, AEW, and Hines also suspending or scaling back new fundraises amid slower capital inflows and tighter liquidity conditions. KKR’s European and Asian core-plus strategies, launched in 2021 and 2023 respectively, focused on logistics and residential assets, including acquisitions in Finland, the UK, and Germany. In Europe, the platform is now overseen by Paris-based Stéphanie Morelle after Ian Williamson’s departure earlier this year. The firm will continue deploying capital from existing vehicles while monitoring when conditions support renewed fundraising. With $82bn in real estate AUM, KKR’s pause underscores that even the sector’s largest global players are not immune to the current capital-raising slowdown. (Source: Green Street, KKR, BNP Paribas REIM, AEW, 2025)

·Student housing is rebranding itself as infrastructure in Europe. A recent European Commission decision recognising student housing as “essential infrastructure” could be a game-changer for the sector, attracting a new wave of institutional and infrastructure capital. The move reflects a broader convergence between real estate and infrastructure investing, illustrated by KKR’s recent infrastructure-backed bids for Livensa Living in Spain and healthcare REIT Assura in the UK. Infrastructure funds such as CVC DIF are already active, expanding portfolios across the UK and Spain, where large, operationally resilient platforms appeal to investors seeking steady, long-term income. Reframing student housing as infrastructure could help address Europe’s 3.2 million-bed shortfall, representing a €450bn investment opportunity, widening access to lower-cost, core-plus infrastructure capital. The sector hopes classification as infrastructure will not only draw more funding but also elevate its policy standing with universities and local authorities, leading to more coordinated development and planning. Investors are most likely to target large-scale, socially driven portfolios backed by universities or featuring strong ESG credentials. The shift forms part of a wider industry trend as other real estate segments, from logistics to affordable housing, also position themselves under the “infrastructure” umbrella to secure capital and policy support in a tougher fundraising climate. (Source: Green Street, KKR, Livensa, Assura, 2025)

Infrastructure investors, CVC DIF, acquired Beaverbank Place, student housing asset in Edinburgh, UK

·London-based Mark (formerly Meyer Bergman) and Amsterdam’s Orange Capital explore €10bn AUM Pan-European merger. Mark Capital Management, the London-headquartered investment firm formerly known as Meyer Bergman, is in early discussions with Amsterdam-based Orange Capital Partners (OCP) over a potential €10bn merger. The proposed combination would unite two €5bn real estate managers to form a pan-European platform capable of scaling across multiple sectors and geographies. Both groups are seeking greater diversification and operational efficiency as European real estate enters a new cycle marked by stabilising values and rising investor focus on living and logistics assets. Mark has evolved from its retail origins into a diversified investor active across logistics, UK private rented housing, and mixed-use real estate in nine European markets. Its Crossbay logistics platform and Assembly development business have become central to its growth strategy. OCP, founded in 2014 by former Goldman Sachs banker Victor Van Bommel, concentrates on affordable housing and retail in north-western Europe, with its BTR LIV Residential platform spanning around 23,000 homes. A merger would enhance Mark’s exposure to the living sector and northern European markets while giving OCP institutional scale and capital access. (Source: Green Street, 2025)

Victor Van Bommel, CEO of OCP, which recently acquired a c. 90% stake in Adler Group’s Cosmopolitan residential portfolio (EUR 423m GAV)

·European real estate debt outlook rosier from refinancing wall to borrower’s market. AEW now estimates Europe’s 2026–2028 real estate debt funding gap at around €74bn, down 18% from its previous forecast, as easing terms and back-leverage improve liquidity, yet refinancing will still dominate activity next year. Financing specialists nonetheless expect a meaningful pickup in transaction-led lending as banks curb short-term extensions on legacy problem loans and debt costs fall below cap rates, making leverage accretive across most sectors. Banks remain selective and core focused, but non-bank lenders and debt funds are scaling up whole-loan and capital-stack solutions, helping to turn 2026 into one of the cycle’s most attractive deal flow environments, particularly in living, logistics, healthcare and needs-based retail.​ Managers see the most compelling risk-adjusted lending opportunities in the lower mid-market and in capital-constrained parts of Continental and Southern Europe, where fundamentals are solid but bank competition is weaker. Stabilising valuations, clearer forward rate curves and improving bond-market conditions are expected to support higher transaction volumes and more price discovery, with offices and retail edging back into favour alongside still-dominant residential and logistics. Across Europe, lenders are increasingly focused on ESG-aligned assets and green-to-brown refurbishments, suggesting 2026 will be an active year for real estate debt deployment, but one that rewards geographic and sector selectivity.​ (Source: PGIM, Invesco, Zenzic Capital, AEW, Green Street, 2025)

Nadine Buckland, CEO of Zenzic Capital: “The weight of capital needing deployment means we’re now into a genuine borrower’s market for the first time in years”

·European REITs outpace US on discounts and rate cuts for the first time since 2017. European REITs have surged 17.9% year-to-date through Q3, outpacing US REITs' 4.5% gains for the first time since 2017, despite the US comprising over 60% of global listed real estate. This shift arises from Europe's steep 23% starting discounts to NAV, versus a US premium, now narrowing amid ECB cuts to around 2% against stabilised 2% inflation, enabling cap-rate compression ahead of the US easing cycle. Robust demand in data centres, logistics, self-storage, and healthcare bolsters supply-demand balance, while UK Budget stabilisation signals Bank of England cuts to ~3% in 2026, targeting the UK's 20% NAV gaps. Spain and Sweden lead 2026 growth prospects, Germany gains from its €1tr fiscal boost, and France trails but avoids broader risks. Attractive sectors span high-yield retail with expansion upside, logistics with data-centre potential, self-storage scale, and prime London offices in tightening conditions. Trading at a –7.7x relative multiple discount to equities (historic median –0.6x), European REITs present strong reallocation appeal as fundamentals drive returns. Institutional investors should seize this chance to diversify beyond US dominance into Europe's recovering markets. (Source: Cohen & Steers, Green Street, 2025)