September 2026

North America

·Chicago office distressed debt marketed at c. 67% discount to par as office faces conversion. Non‑performing debt of c.$69m on the 1.9m sq ft Michigan Plaza office complex near Chicago’s Millennium Park is being marketed for sale by JLL on behalf of Barings (a MassMutual affiliate), representing roughly a 67% discount to the original $210m loan par value and potentially handing control of the two‑tower asset to a new owner. The original loan was taken out by long‑time owner Aegis Asset Management in late 2014 and matures in 2030, but is now described as non‑performing with the outstanding balance reduced to around $69m. JLL’s marketing positions the listing as a rare opportunity for “strategic capital” to reposition an iconic, transit‑rich Class A property at an attractive reset basis relative to peers. Michigan Plaza, comprising 44‑ and 25‑storey towers inspired by Ludwig Mies van der Rohe, is currently just over 49% leased with a weighted average lease term of 4.9 years, despite a 72,645 sq ft lease to the Illinois Housing Development Authority at 225 N. Michigan Ave last year. The sale reflects broader pressure on older US office assets, where weak demand and tenant downsizing have driven vacancies up and valuations down, prompting a wave of office‑to‑residential repositioning deals in Chicago and other major cities. A debt buyer would have a clear path to take ownership of the complex from Aegis after more than two decades of control, and could pursue mixed‑use strategies to capture stronger demand for multifamily and hospitality space in a prime downtown location. (Source: CoStar, Financial Times, 2026)

Michigan Plaza, Chicago

·Starwood-era five-mall portfolio back in special servicing as values halve; BrightSpire prices $960m CRE CLO; Fitch lifts 2027 office cap-rate assumption by 43bp. A $436.9m CMBS loan secured by a five-mall portfolio once owned by Starwood Capital has returned to special servicing after failing to repay by its 1 September extended maturity, underscoring continued refinancing stress for regional malls despite operational improvements. The portfolio—Plaza West Covina and Parkway Plaza (California), Capital Mall (Washington), and Franklin Park and Great Northern malls (Ohio)—was appraised at c.$561.6m in November 2021, down from roughly $1.2bn at securitisation in 2018, with the loan balance reduced by about $112.1m over recent years via modifications, paydowns and outparcel sales. Pacific Retail Capital Partners, which took control after Starwood’s distress, has added entertainment and retail tenants and sold outparcels (including $25.8m and $31.5m transactions), but elevated rates and limited refinancing options have pushed the loan back into special servicing for a third time. Fitch Ratings is also signalling a tougher outlook for office values in 2027, raising its US/Canada CMBS office cap‑rate benchmark by 42.9bp to 7.879% (from 7.45% for 2026), the largest adjustment among the five property types it tracks. By contrast, Fitch lowered its retail cap‑rate assumption by 13.6bp to 6.805% and multifamily by 6.7bp to 5.418%, while industrial and hotel assumptions rose only marginally, highlighting office as the clear outlier in next year’s underwriting framework. (Source: CoStar, Financial Times, 2026)

Franklin Park mall in Toledo, Ohio is in the shopping centre portfolio struggling to pay off

·US bulk demand broadens beyond newest warehouses as 500k+ sq ft vacancy falls; mid‑size stock remains pressured. The US bulk distribution market (properties >200,000 sq ft) is showing a notable shift, with leasing activity beginning to extend beyond the newest generation of warehouses and helping to reduce vacancy in the largest size bands. In Q2 2026, properties larger than 500,000 sq ft posted occupancy gains, including buildings more than six years old, reversing a persistent move‑out trend in that segment since 2023. Vacancy for 500,000–749,999 sq ft facilities fell to 9.4% from a recent peak above 11%, while assets >750,000 sq ft saw vacancy drop to 7.1% from around 9%. By contrast, mid‑sized bulk properties (200,000–499,999 sq ft) continue to face elevated vacancy above 11%, with many landlords exploring subdivision into smaller suites, though physical constraints often limit splits to no less than 20,000 sq ft—the size segment driving most leasing activity. Despite improving demand for big‑box space, conditions remain tenant‑friendly: roughly 11% of available big‑box inventory is being marketed for sublease, often at discounted rates, and the median time to lease has lengthened to over 10 months from 6.8 months in 2023. Annual asking rent growth for bulk distribution remains below 4%, but with the development pipeline expected to ease toward pre‑pandemic norms, the supply–demand balance should gradually improve and support stronger rent growth as new completions moderate. (Source: CoStar, 2026)

Vacancy rates in US warehouse properties by size

·Well‑capitalised tech and amenity‑led buildings drive Manhattan demand beyond trophy corridors. After nearly 40 years in New York leasing, Rudin’s head of office leasing Craig Panzirer says the biggest surprise today is how quickly better‑capitalised technology companies are expanding and raising “higher‑quality” money, fuelling demand that is spreading beyond Manhattan’s traditional trophy corridors. He contrasts this with the dot‑com era, when speculative leasing was common; now, investors are more disciplined and tech tenants are seeking high‑quality space with strong amenities and transit access, often just outside core districts as availability tightens and office‑to‑residential conversions remove supply. This dynamic is lifting activity along Lexington, Madison and Third avenues among financial services, law and professional services firms, while tech and AI companies increasingly target Tribeca, SoHo and the fringes of Hudson Square, where Google and Anthropic have established major hubs. Amenities are proving to be a tangible leasing lever: at 560 Lexington Ave, a newly opened amenity centre (grab‑and‑go bar, lounge, meeting space, pool table and outdoor terrace) has helped drive more than 100,000 sq ft of recent leasing, including a deal with Savills. Rudin has also added a gym and conference centre at 3 Times Square and is exploring further upgrades at 32 Avenue of the Americas, where it is marketing about 500,000 sq ft near Hudson Square. Panzirer highlights conferencing, gyms and golf simulators as particularly valued amenities, alongside location, transport connectivity and nearby restaurants and hotels for staff and clients. (Source: Rudin, CoStar, 2026)

Manhattan office leasing demand map: different industries are targeting different spaces 

560 Lexington Avenue features newly built amenity center with an outdoor terrace

·Philadelphia’s largest office complex sale wipes out lower CMBS tranches and inflicts losses on AAA debt. A judge‑approved $70m sale of Philadelphia’s 1.8–2.2m sq ft Centre Square office complex to PMC Property Group and Dean Adler is set to deliver crushing losses across the $368m single‑asset, single‑borrower (SASB) CMBS stack, with even the AAA tranche expected to recover only around 44 cents on the dollar. PIMCO, which holds roughly $58m of face value in the deal (about half in the top‑rated portion), is projected to lose more than $35m, while seven lower‑ranking tranches are expected to be wiped out entirely. The property, appraised at $471m in 2019, has lost about 85% of its value as occupancy collapsed from roughly 93% at refinancing to 28% by mid‑2026. The outcome underscores the binary risk of SASB structures, where a single troubled office asset backs the entire securitisation and losses can travel far up the capital stack. AAA‑level CMBS losses remain rare, with Centre Square joining only a handful of recent cases such as 1740 Broadway in Manhattan and the Palisades Center mall, all of which were also SASB deals. More than 30 top‑rated SASB tranches are now trading below 85 cents on the dollar, reflecting broader market concern over concentrated office collateral. The buyers plan a partial mixed‑use redevelopment, including a 300‑room luxury hotel and up to 500 apartments, while retaining some office space, in a bid to reposition a landmark downtown asset that has struggled to attract tenants post‑pandemic. The sale, expected to close in the coming weeks, highlights the refinancing cliff facing older US offices in markets such as Philadelphia, Chicago, Los Angeles, Portland and Denver, where values have not fully recovered and distressed sales are resetting debt recoveries at deeply impaired levels. (Source: Bloomberg, Bisnow, CRE Daily, 2026)

Center Square (1500 Market St. in Philadelphia) CMBS tranches trading at material discounts

Europe

·Japanese capital continues to return to London offices as Dai-ichi Life lines up stake in M&G’s £1bn+ 40 Leadenhall tower. Japanese money is flowing back into London offices, with Dai-ichi Life in advanced talks to acquire a 20–40% minority stake in M&G Real Estate’s flagship £1bn+ City tower at 40 Leadenhall Street. The 900,000 sq ft, grade A development, delivered in 2024, is one of the City’s most prominent new office schemes and has been fully pre-let to tier-one tenants including Kirkland & Ellis and McGill and Partners. The deal would mark a high-profile re-entry of Japanese institutional capital into central London office assets, following years of caution and selective, mostly debt-focused exposure. For M&G, the transaction creates liquidity on a core holding while allowing it to retain asset management control and ongoing fees, fitting a broader trend of UK managers monetising stakes in prime buildings without full sales. For Dai-ichi, already a c.15% shareholder in M&G plc since April 2026 under a strategic partnership targeting multi‑billion‑dollar product flows, the move deepens its direct European real estate footprint alongside its existing equity stake in the manager. JLL is advising M&G on the stake sale, which follows the partial unwind of M&G’s earlier “Project Festival” portfolio partnership and Norges Bank’s £290m purchase of the Fruit & Wool Exchange last year. The structure signals growing confidence among Japanese insurers in London’s best-in-class offices, particularly newly delivered, sustainable buildings with strong covenants and amenity-rich specifications. If completed, the 40 Leadenhall deal would be one of many examples of Japanese money returning to London offices at the top end of the market. (Source: Green Street, 2026)

40 Leadenhall Street

·UK and Germany set to lead European logistics rental growth as supply tightens. The UK and Germany are forecast to drive European logistics rental growth from 2026 to 2031, with prime rents expected to rise by 2.3% and 2.1% per year respectively, according to Garbe Industrial’s latest Garbe Pyramid Map research with Oxford Economics. Munich, Manchester and Berlin are highlighted as standout submarkets, with annual prime rent growth of 3.2%, 3.1% and 3.0% and around 40bp of yield compression anticipated in each. Across Europe, Garbe expects prime yields to compress modestly from 5.3% to 5.1% while prime rents grow at roughly 2% annually, signalling a moderate but selective recovery in the sector. Garbe argues that stronger medium-term rental growth is now needed to avert a structural supply shortage, as high construction, financing and development costs continue to suppress new logistics and industrial building despite stable occupier demand. Italy and Poland are flagged as more cash-flow-driven markets: Italy’s logistics vacancy has fallen to around 3.7% (with some submarkets as low as 0.8%), supporting c.1.6% annual rent growth and c.15bp yield compression, while Poland is seen at c.1.7% rent growth and c.22bp compression as regional vacancy buffers are gradually absorbed. (Source: Garbe Industrial, Green Street, 2026)

·Exit creativity surges as pricing reality bites in Europe’s longest real estate downturn. Europe’s longest-ever real estate downturn is forcing investors to pursue alternative exits including secondaries, preferred equity and joint ventures as traditional sales stall and pricing remains roughly 20% below peak levels four years on. Transaction processes have become more complex and protracted, with deals that once took 6–9 months now often requiring 12 months or more, while portfolio sales repeatedly fail to meet sellers’ price expectations. Lending has hit a decade high, but around 60% of 2025 volumes were refinancings rather than new equity, leaving highly leveraged sponsors cash-flow constrained despite competitive debt terms. Preferred-equity structures have proliferated as a pragmatic compromise: lenders and specialist capital providers top up senior debt (e.g. from 70% to 80–90% LTV) with mezzanine-like equity that offers downside protection and attractive returns, while allowing sponsors to retain meaningful skin in the game and defer full mark-to-market losses. The secondaries market has similarly boomed, with c.$25bn of fund-interest transactions in 2025 and managers such as CBRE IM and StepStone raising ever-larger funds to buy discounted LP stakes, often where direct sales and IPOs are closed. Yet many market participants warn these tools risk becoming sophisticated “extend-and-pretend” solutions unless underlying asset prices adjust to higher risk-free rates and capital costs. (Source: Green Street, 2026)

Pricing movement since 2007 and 2002 respectively across all UK property

·Blackstone’s EUR 420m IOS sale marks institutional breakthrough for Europe’s industrial outdoor storage market. Blackstone has agreed terms to sell Project Indigo, a €420m pan-European industrial outdoor storage (IOS) portfolio, to specialist manager Modal and private-equity partner Centerbridge in what would be Europe’s first IOS platform transaction of genuine scale. The portfolio comprises 31 assets totalling approximately 1.2m sq m across the UK, Italy, Sweden, Finland and the Netherlands, with around half of the assets located in the UK. The transaction would lift Modal’s portfolio beyond 100 assets and towards €1bn in value, establishing it as Europe’s largest IOS platform. The deal is significant because IOS remains a nascent and highly fragmented institutional asset class in Europe, despite its well-established role in the US logistics market. IOS sites support vehicle, trailer and container parking, as well as the storage of construction materials, equipment and other operational goods, and typically benefit from constrained land supply in infill industrial locations. Project Indigo is reportedly 99% occupied and has achieved re-leasing uplifts of up to 40%, underlining the sector’s embedded rental reversion and occupier demand. Green Street estimates that IOS rents grew by 15% per annum in the UK between 2023 and 2025, compared with 20% annual growth in the US between 2020 and 2025. The competitive process, reportedly involving core-plus and value-add investors including Angelo Gordon, Redevco, Starwood and CPP, indicates that IOS is increasingly attracting mainstream logistics capital seeking supply-constrained, income-led industrial exposure. (Source: Green Street, 2026)

Modal’s IOS site at Trafford Park

·GIC, Frey eye €1bn retail park JV as KKR backs Realty Income in European retail push. Singapore sovereign wealth fund GIC is in discussions with French retail specialist Frey to form a c.€1bn joint venture targeting retail parks across Western Europe (ex‑UK), in what would be GIC’s first dedicated retail‑park platform on the continent. The vehicle is expected to be seeded with a portfolio of Frey’s existing retail parks, providing an immediate income base before pursuing further acquisitions across core Continental markets. The talks follow GIC’s recent €300m European supermarket JV with Atrato, underscoring the fund’s widening real estate exposure in Europe beyond offices and logistics. The potential GIC–Frey tie‑up comes as private capital increasingly backs European retail platforms through structured partnerships. In a closely watched parallel move, Realty Income and KKR have agreed a €528m euro‑denominated joint venture for a stabilized European net‑lease retail and services portfolio spanning 54 properties in Spain, Ireland, Poland and the Netherlands. KKR‑advised accounts will acquire a 49% stake while Realty Income retains 51% and continues to manage the assets, receiving c.€528m of gross proceeds and accessing private capital outside public markets. The portfolio, contributed at an effective 5.9% initial cap rate, features a 7.2‑year weighted average lease term, 59% investment‑grade rent exposure and tenants concentrated in grocery, transportation, home improvement and automotive sectors. Institutionally, the proposed GIC‑backed vehicle would rival Redevco’s rapidly scaling European retail parks funds backed by a €500m CBRE IM commitment and now targeting a €500m+ evergreen pool as one of the largest dedicated capital pools for Continental retail parks, a sector benefiting from resilient occupancy and rental growth anchored by grocery, DIY and discount operators. (Source: Financial Times, Yahoo Finance, Green Street, 2026)

Redevco’s Forettle retail park