The U.S. added 256,000 jobs in December, dropping unemployment to 4.1%. 

Those figures should worry real estate.

That’s because it was a stronger jobs report than many expected and the highest growth since March — and this morning, the chance for multiple interest rate cuts this year feels a lot lower than it was 24 hours ago.

The Fed indicated in December that it would slow the pace of reductions in 2025, but the consensus has been that there would be two cuts. But now traders are betting on only one that comes later in the year. CME’s FedWatch shows a 43% chance of a 25-basis-point reduction in June, while some traders are saying they aren’t holding their breath for a drop until October. 

An interest rate increase could also be on the table this year — Apollo Global Management Chief Economist Torsten Sløk said in December there was a 40% chance of a hike.

The S&P, Dow Jones and Nasdaq are all down this morning on the report.

Meanwhile, yields are rising — terrible news for CRE borrowers. The 10-year Treasury increased 7 bps to 4.75%, the highest since 2023. 

The consumer price index release on Wednesday will be a big one for the Fed as it decides where to go from here. 

But in general, the economy has remained surprisingly hot, and CRE hasn’t seen the relief in the cost of debt that it expected when the Fed started cutting rates last year. 

If the 10-year Treasury doesn’t start to dip, it’s going to be a more formidable year for property than almost anyone expected. 

— Mark F. Bonner, Kayla Carmicheal, Jay Rickey and Catie Dixon

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On Our Radar

• $1.3B in CMBS debt is in LA fire evacuation zones. Fires in the Los Angeles area threaten $1.8B in commercial real estate backing $1.3B in CMBS debt, according to a Trepp analysis obtained exclusively by Bisnow. Among 152 properties in evacuation zones, nearly 60 are multifamily, with additional retail, hotels and offices. Infill locations like Pacific Palisades and Santa Clarita are at greater risk, with Encino holding 653K SF of office space, including the 227K SF Encino Financial Center. 

• America’s office vacancies hit a record 20.4% in Q4. According to Moody's, office vacancies in the top 50 U.S. metro areas hit a new peak as hybrid and remote work reduced space demand. Two solutions are gaining traction: converting offices to residential and demolishing outdated buildings (but it’s also true for 21st-century buildings, Bisnow recently learned). Moody's economist Thomas LaSalvia predicts a “permanent reduction in office demand,” with vacancies potentially peaking in nine to 15 months. 

• The global wellness real estate market is poised for a $2T boom. It’s projected to grow from $438.3B in 2023 to more than $2T by 2034, with a 14.8% compound annual growth rate, driven by demand for health-conscious living and eco-friendly designs, according to Transparency Market Research. The U.S. and UK lead growth, with major players like Delos Living and Welltower expanding their offerings.

• Subway, bus and commuter rail ridership is surging in Manhattan. That follows the launch of congestion pricing in New York this week, where 500,000 more passengers on Tuesday tossed their car keys aside and took public transit. Subway usage saw the largest jump, with over 3.7 million riders, an increase of 400,000. Commuter rail lines like LIRR and Metro-North also reported notable gains. The streets are noticeably thinner with cars — and one guy Mark knows made it through the Holland Tunnel in eight minutes this week! (For non-New Yorkers: You’re normally stuck there at least 20 minutes.)

Today’s Deep Dive: ‘My House And Everything I Own Is Gone’: Wildfires Push LA Real Estate To The Brink

Kitty Wallace is still closing deals.

As uncontained wildfires plagued Los Angeles on Thursday, the vice chair at Colliers Los Angeles had opened her Brentwood home’s doors to three evacuated families. And she knew that if the Palisades blaze kept developing, her household — which now consists of 12 people and two dogs, thanks to the flames — could be the next to evacuate. 

Still, there was business to attend to. On Friday, she’s scheduled to close the sale of three multifamily buildings in Glendora, about 17 miles east of the Eaton fire, as part of a 1031 exchange. The buyer is a local player who watered his house, evacuated and got back to signing contracts via Docusign. The deal must go on, she said.

“Yeah, we’re closing. It’s in the [fire] zone and we’re closing,” Wallace told Bisnow Thursday as she drove to another property tour in Venice Beach. “That’s what we do! We don't have a, ‘Hey, by the way, you're in a fire zone, don't close.’ So you close.” 

Nearly 200,000 people have been forced out of their homes by four major fires that have blazed their way through 29,000 acres of Los Angeles and surrounding smaller cities since Tuesday. At least five people have died, and more than 10,000 structures have been destroyed by the Palisades and Eaton fires. Early estimates released late Wednesday place the cost of damages at $52B, making them among California's most destructive fires in history. 

Easing winds have helped firefighters, but major fires remained uncontrolled Thursday night, with a new blaze, the Kenneth fire, prompting evacuations in Woodland Hills. 

Bisnow reached out to scores of commercial real estate players in the Los Angeles area who were fighting for their livelihoods, homes and businesses — battling back tears and openly wondering what the next hour or day would bring.

Read the full story here.

This Morning’s News

HOSPITALITY — Trumps In Talks to Reclaim Former D.C. Hotel (WSJ): The Trump Organization is exploring a deal to reacquire its former Washington, D.C., hotel, now a Waldorf Astoria. The lease on the property, sold for $375M in 2022, could cost over $300M to reclaim. Talks raise potential conflict-of-interest concerns tied to Trump's presidency. Read more here.

MULTIFAMILY — Aimco Explores Selling Itself Off To Boost Shareholder Value (Bisnow): The Denver-based company is looking for ways to boost shareholder returns, and that may come down to selling off major parts of its business or the company altogether. Aimco’s 7.7M SF portfolio includes 5,200 apartment units, 1,000 new builds and a Miami development. Read more here.

FINANCE — Loan Maturities Spark Worries Over Refi Challenges (CoStar): $8.6B in CMBS loans are scheduled to come due this month. Some industry professionals expect an increase in foreclosures. Read more here.

MULTIFAMILY — Luxury Apartment Market Faces Overcapacity (WSJ): An oversupply of upscale apartments in the U.S. has outpaced demand. Some renters are “concession shopping.” Read more here.

MULTIFAMILY — ​​Moody's: Multifamily Rents To Rise, Vacancy To Dip After Resilient 2024 (Bisnow): Rental demand in the apartment market held steady last year, allowing owners to keep rents near record heights. Despite rising vacancy rates, Moody’s predicts more price growth for 2025. Read more here.

INSURANCE — Insurance Industry Crisis Sends Shockwaves (TRD): Global losses from natural catastrophes were $166B in 2019, $210B in 2020 and $380B in 2023, according to the Insurance Information Institute. Last year was even worse. Read more here.

MULTIFAMILY — NMHC Pushes Back On Algorithm Criticism (NMHC): The National Multifamily Housing Council says media reports on rental pricing algorithms distort the role of the software in housing costs. Read more here.

INDUSTRIAL — Warehouse Leasing Resilient Despite Lower Demand (WSJ): Tenants renewing industrial leases signed in 2020 and 2021 are “staring at a giant increase,” said Mark Russo, head of industrial research at Savills. Prices are elevated in part because developers have stopped building new inventory. Read more here.

OFFICE — New Amazon Real Estate VP Takes Over (Puget Sound Business Journal): Shannon Loew has assumed responsibility for Amazon's real estate portfolio this month. He succeeds John Schoettler, who retired in December after 23 years building Amazon's corporate campuses. Read more here.

AI — Ferguson Partners: Real Estate's AI Adoption Surges (Mann Report): 87% of the respondents allow their employees to use AI tools. Participants reported using AI for CRM database analysis, tenant work orders, financial and accounting processes, leasing analysis, customer service/improved chatbots, rent and asset valuation predictive analytics and lease administration. Read more here.

FINANCE — FHFA Director To Step Down (Bloomberg): Sandra Thompson, head of the Federal Housing Finance Agency, said she would resign. A Supreme Court decision would have allowed President-elect Donald Trump to remove her quickly after his Jan. 20 inauguration. Read more here.

CONSTRUCTION — Dodge Momentum Index Up 10.2% (Dodge): Healthcare and education supported the institutional portion, data center and warehouse planning drove much of the growth on the commercial side. But commercial planning would still be up 8% year-over-year if all data center projects were removed. Read more here.

FINANCING — IQHQ Secures $900M For Expansion (IQHQ): Life sciences real estate developer IQHQ reported Friday that it raised $900M last year to fuel growth and development. Read more here.

IOS — Realterm Buys $277M Industrial Outdoor Storage Portfolio From Brookfield (Bisnow): The deal is made up of 13 single-tenant truck terminals and low-coverage industrial assets totaling 632K SF and 131 usable acres. They are in Chicago, DFW, Northern New Jersey, the Inland Empire, Orlando, Seattle and the Bay Area. Read more here.

RETAIL — Walgreens Gains 10% Amid Promising Turnaround Signs (Morningstar): Walgreens' stock surged 10% Friday morning as the company reported early progress in its efforts to optimize its footprint, lower operating costs and bump up cash flow. Read more here.

M&A — Apollo Eyes $9.5B Stake In Seven & i Buyout (Bloomberg): Apollo Global is looking to take a substantial stake in the bid by Seven & i’s founding Ito family to take the convenience store operator private. Read more here.

M&A — NAI James E. Hanson Acquires The Garibaldi Group And NAI Summit (NAI): NAI James E. Hanson President William Hanson will serve as president of the three companies, which will have more than 100 team members and 10M SF under management. TGG will relocate its offices to NAI James E. Hanson’s Parsippany, New Jersey, office. NAI Summit will continue to operate under its name and out of its office in Allentown. Read more here.

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The First Draft is produced by Director of Newsletters Jay Rickey, Managing Editor Catie Dixon, Editor-in-Chief Mark F. Bonner and Deputy Newsletter Editor Kayla Carmicheal, with an assist from AI. We’d love your feedback! Email us at firstdraft@bisnow.com.