Being Played: The Old Art of Negotiation
“Being played” is an age-old art in negotiation. In real estate, it’s practically a script.
Agents use it to stir urgency and manipulate emotion:
- “We have multiple offers coming in.”
- “It looks like offers are over list.”
- “Get your offer in by noon today.”
This is the classic playbook of listing agents trying to push buyers into action. Meanwhile, behind the scenes, more inventory is coming to market, list prices are being discounted, and many buyers are balking at inflated valuations.
The goal is simple: trap the opposing party into overcommitting. That’s what it means to get played.
Now Playing: Real Estate Tactics in International Relations
It appears that the real estate investor in the White House is applying his own version of this art—on the world stage.
There were rumors that Putin preferred Biden in the last election, viewing him as predictable. Not so with Trump. The current administration’s unpredictability seems to have caught many off guard.
Despite heavy rhetoric around tariffs, only China faces active penalties. Tariffs on Canada and Mexico have been repeatedly postponed to April 2, 2025. In response, both countries have made significant concessions—closing borders and in Mexico’s case, extraditing drug lords to the U.S.
Europe Arms Up, Markets Adjust
Meanwhile, Europe has expanded its defense spending by over €1 trillion, a significant geopolitical development.
Back at home, the stock market correction in high tech has been swift and deep. Even the Federal Reserve has stated that employment will be another deciding factor for rate cuts. The Fed has signaled two cuts this year, not through formal announcements—but through verbal cues from what some now call "the Realtor in Charge."
Real Estate Market: Shrugging Off the Noise
Despite media noise about tariffs and spending cuts, the real estate market is holding steady.
The bond market continues to price in rate cuts by mid-year. The yield curve no longer signals a recession, and investor confidence is returning—especially in multi-family housing and office buildings.
Bank of America recently declared, “Growth is better than people think.” Meanwhile, Hudson Bay Company quietly acquired Neiman Marcus’ flagship store in Union Square, signaling strong investor interest in prime retail.
Commercial Office: Comeback in Progress
New York’s office sector is showing early signs of revival. Demand from the tech sector has resulted in a staggering 86% increase in tenant space over the past year.
The Commercial Mortgage-Backed Securities (CMBS) market is also reviving. The latest offering includes 38% office-backed loans—a figure unheard of just a year ago.
Out West, San Francisco’s Transamerica Pyramid landed its largest lease since 2020:
- 123,000 square feet to global law firm Morgan Lewis,
- Spanning seven floors,
- Signed at a premium rate—clear evidence of resurgence in confidence.
Multi-Family Housing: The Market Star
No sector showcases the real estate rebound better than multi-family housing.
In Q1 2025, San Francisco and San Mateo County posted strong demand and rising absorption rates. Over the last four quarters, net absorption exceeded 2023 levels, culminating in 2,800 units absorbed in 2024.
Submarkets like Redwood City and downtown San Mateo led the way, with Mission Bay close behind.
What’s driving this?
- Improved public safety and reduced homelessness,
- A visible crackdown on drug activity and crime,
- A renewed sense of urban livability.
The result? Businesses, workers, tourists, and residents are returning—especially in San Francisco, where the booming AI sector is fueling capital investment, job growth, and new leasing activity.
Looking Ahead: Rent Growth and Appreciation Potential
Population growth is back. The economy is stabilizing. And yet, Bay Area rent growth of 1.6% still trails the national average of 3.1%—creating a strong opportunity for future upside.
Add to that the Fed’s projected rate cuts, and you have the recipe for:
- Lower mortgage rates,
- Reduced ownership costs,
- Increased investor demand,
- Higher rental income potential.
While media chatter warns of recession and markets swing, smart investors are shifting capital into multi-family.
With limited new development and tight supply, the fundamentals point to strong long-term returns.
Institutional Money Returns
We’re also seeing the return of institutional buyers—a clear market signal.
While large trophy assets are grabbing headlines, most transactions are happening in the 6–12 unit range.
- Current cap rates: ~5.6%
- Compared to 4.1% during the 2020–2022 boom
That means higher returns for new investors—and a correction in values that has created more realistic buying conditions.
In Closing: The Bay Area Advantage
The San Francisco Bay Area continues to be a global leader in innovation, investment, and technology. It’s home to the world’s fastest-growing companies and the highest household income growth in the nation.
Increased investment in AI over the past year has likely planted the seeds for the Bay Area’s next growth cycle.
This will lift not only the office sector but also residential, retail, and multi-family—making the next few quarters crucial for savvy investors.
No comments:
Post a Comment