New Opportunities Caused by the Industrial Boom

Over the past few years, there has been an explosion of demand for industrial commercial real estate. This trend can be attributed to online shopping emerging as a convenient alternative to traditional retail. The pandemic and national lockdowns crippled retail and brought industrial demand to a new level entirely.

In addition, shipping costs and supply chain issues are compelling American companies to re-onshore their facilities to avoid issues abroad out of their control. For these reasons, and the simple fact that Americans love online shopping, industrial real estate has been the hottest asset class around. However, developers may have built in excess of demand and are now dialing back to realistic numbers.

In 2020, Amazon leased 284,000,000 square feet across the nation, up more than 100,000,000 square feet from the year before. The stellar tenant and its increased appetite for space was music to landlord’s ears. That is, until Amazon began changing its approach in late 2021.

The retail giant wanted to take advantage of its own success, stop leasing and develop its own real estate. It now appears that Amazon may have bit off too much, as the company has closed, canceled or delayed 89 facilities around the world. Developers will be just fine because the sub-leasing demand is still very strong, but if Amazon’s overreach is soon reflected across the entire asset class, there will be a serious over-saturation of warehouse space.

The southern Californian Inland Empire, eastern Pennsylvania and northern New Jersey have traditionally been the strongest industrial areas due to their access to ports and densely populated areas. Recently, the centrally located triangular area between Chicago, Texas and Florida has seen the biggest growth.

Plymouth Industrial REIT believes this area will continue to see great growth and may even provide a solution to over-saturation. CIO Pen White believes manufacturers will begin to onshore their companies into this triangle for its central location, affordability and abundance of land. Newly built warehouses, plus all pipeline deals, could serve American companies looking to come home and avoid the complexity and uncertainty of international markets and increasing costs. Domestic manufacturers will be able to avoid tariffs and retake control of their supply chain. Industrial CRE will have to pave the way for our companies to return.


Baschuk, B. (2022, November 2). US manufacturers ‘pumped up’ about supply-chain reshoring trend. Retrieved April 28, 2023, from

Carroll, T. (2023, March 16). Industrial Real Estate Market’s new demand driver changing space requirements. Bisnow. Retrieved April 28, 2023, from



Current Commercial Real Estate Market Conditions

Any historian worth their salt will tell you that history repeats. Patterns of similar thought and behavior can be identified throughout human history across cultural and generational boundaries. The same applies from an economic standpoint. Markets are cyclical, and there is much to learn from the past. Luckily for us, in 2023, we can observe the current market turmoil through the lens of the global financial crisis.

The recent failures of Silicon Valley Bank (SVB) and Signature Bank are reminiscent of the start of 2008. Their failures created downstream issues and halted lending from smaller regional banks. This time, however, the contagion is largely controlled. Finance professionals realized SVB and Signature had unique balance sheets responsible for their collapse. Other large banks are mostly protected by conservative underwriting and continue to lend. Banks account for $1.7 trillion of the $4.5 trillion in commercial debt – about 38 percent. Roughly two-thirds are large banks, meaning regional bank-halts only account for about 13 percent of the CRE lending pie.

The overall default rate during the global financial crisis was around 10 percent. Today’s market slowdown is also going to lead to some defaults. It’s part of the market cycle, given CRE’s boom-or-bust nature.

The main difference now is healthier loan and pricing metrics and better credit conditions. The risk premium on cap rates (spread over treasury) has been a healthy 250 basis points on average across property types. Unlike in 2008, we haven’t seen that spread narrow and cause serious overpayment. This means recent outstanding loans originated based on healthy cap rate values. Additionally, the market has seen steady rent growths.

One big issue that remains is current interest rates. The Fed has been hiking rates to fight inflation and trillions of dollars in loans are set to mature. Loans that were issued with much lower interest rates – some were practically zero. These assets have experienced significant value growth and will need to refinance at today’s higher rates. It’s important to remember that real estate values have benefitted from the inflation that is now knocking on their door.

Ultimately, these downturns reshape the markets and force its players to change their strategies. The global financial crisis saw a 30 to40 percent price correction across assets. We will likely see a similar repricing and retooling of office assets today. Banks will take hold of defaulted office spaces and sell them at a discount. As is the case with other troubled assets.

Although resistant, multifamily is not impervious to market cycles. Fortunately, for this asset class, there is a floor because the demand is always so high. Even in the face of rising interest rates, the 2022 Q4 multifamily cap rates were still going down.

It’s important to acknowledge that commercial real estate is a physical manifestation of the economy – an indication of its health. Daunting headlines and anecdotal defaults can overshadow key metrics that give hope for a less gloomy outcome. It may be a day of reckoning for a small percentage of players, but the markets will eventually right themselves, and there will be new opportunities ahead.

Hall, Miriam, Producer and Host of “Bisnow Reports: A CRE News Podcast.” Episode 46:

Moody’s Analytics’ head of CRE economic forecasting Kevin Fagan, March 27, 2023


Golf Course Repurpose

Many golf courses across the U.S. have closed as the sport’s popularity continues to decline, especially among younger generations. This has led to a surprising trend in the Chicago suburbs, where industrial buyers are snapping up golf courses for their land at a rapid pace, according to CoStar.

Golf courses offer hundreds of acres of suburban land, making them a perfect fit for industrial-development repurposes. However, this new trend raises the question of who would want to trade views of beautiful, lush green landscapes for industrial buildings and metal sheets. Communities and developers are working together to figure out how best to balance the interests of developers and residents.

While developers may be interested in turning golf courses into industrial sites, locals may be averse to truck traffic and unsightly buildings. Developers must work closely with residents and officials to transform open spaces.

Saxon Partners took advantage of an opportunity to purchase the Lansing Country Club for $2.5 million when it went on the market. The developer got approval from officials in Munster, Indiana, to create a $160 million campus for research and light manufacturing. However, the approval process took more than four years because the area’s zoning was changed from industrial to mixed-use, and prospective developers walked away.

The declining popularity of golf has resulted from the waning of the “Tiger effect” from the early 2000s when many municipalities opened their own golf courses to cash in on the sport’s jump in popularity. These publicly owned courses do not pay property taxes, which has put pressure on the privately owned competition. Consequently, property taxes hit the Lansing Club hard, costing members roughly $155,000 for the portion of the club located in Cook County Illinois.

While some golf course sales have been successfully repurposed, others have faced challenges from residents and officials who oppose proposals to build new housing on golf course sites. When weighing the pros and cons of repurposing golf courses, it is worth noting the economic benefit in the form of job creation and increased tax revenue. Despite the public’s concerns, developers remain interested in purchasing golf courses with at least two more deals expected to come in the Chicago market.

Rogal, B. (2021, May 14). Golf courses sell at fast pace, but developers are taking Mulligans on Reuse. Bisnow. Retrieved April 14, 2023, from




Press Releases

BayBridge Real Estate Capital Announces Addition

NEW YORK, April 10, 2023 – BayBridge Real Estate Capital today announced that Sam Talkow joined the firm as director of equity services.

Talkow has specialized experience in real estate debt and equity originations and underwriting. Throughout his career, he has been involved in high-profile deals, including asset and business risk management and sourcing capital in the real estate and health sectors.

Director of BayBridge Real Estate Capital Jay Miller commented, “Our firm has become known for our ability to put together complex capital stacks for deals across the country. Sam’s institutional background will add to our client services and enable us to expand our expertise on the equity side of our offerings.”

Talkow began his career at the commercial real estate special situations desk of Deutsche Bank. He also worked with Monticello Asset Management, focusing on healthcare investments and eventually assembling the commercial real estate desk.  Most recently Talkow worked at Ladder Capital as a member of their debt and equity originations team.

He holds a master’s degree in real estate and financial investment and analysis from the NYU Schack Institute of Real Estate and a bachelor’s degree in business from Boston University, Questrom School of Business. Talkow is a former member of the Boston University and Israel men’s national lacrosse teams.

He will be based in the firm’s New York City office.

About BayBridge Real Estate Capital

 The BayBridge Real Estate Capital team has a long history of bringing institutional capital to markets across the U.S.

BayBridge helps developers and investors find the financing they need for a broad range of commercial real estate projects, with a focus on structured finance. The firm has offices in Miami, Ft. Lauderdale, Boca Raton, West Palm Beach and New York City.


CMBS Trouble

Commercial mortgage-backed securities (CMBS) are investment products that offer liquidity to commercial lenders and real estate investors by using mortgages on commercial properties as collateral. These fixed-income investments provide a relatively reliable source of income to investors while also providing financing opportunities to commercial lenders. However, in 2023, the reliability of CMBS is deteriorating in step with defaulting office properties and a turbulent macroeconomic landscape.

J.P. Morgan has forecasted that, in the likely event that office occupancies don’t recover from their pandemic slump, approximately 21 percent ($39 billion) of CMBS loans linked to office properties are at risk of default. This default rate could result in an 8.6 percent loss for loan holders, translating to $38 billion in losses for the banking industry and $16 billion for life insurance firms. J.P. Morgan acknowledged that the cumulative losses might be bearable, but the banking industry, which is already under pressure due to a deposit outflow, will feel the impact. According to Yahoo Finance, regional US banks are heavily invested in commercial real estate, holding about 70 percent of the outstanding commercial property debt. In more severe scenarios, where office occupancies shrink by 20 and 30 percent, J.P. Morgan estimates that the default rates could increase to 28 and 35 percent, respectively. According to the bank, commercial mortgage-backed securities make up 22 percent ($549 billion) of commercial real estate loans, excluding multifamily, of which $185 billion is exposed to office properties.

CRED iQ analytics help quantify the distress in metrics beyond dollars and cents. Their data reported a month-over-month increase in the special servicing rate for CMBS loans, representing loans managed by special servicers regardless of delinquent status. The rate grew from 5.10 to 5.53 percent, with a 40-basis point increase over the last two months. When combined with the delinquency rate, the resulting distressed rate stands at 5.73 percent. The overall distressed rate increased compared to the previous month’s rate of 5.29 percent, with distressed rates generally slightly higher than special servicing rates. Many distressed loans are managed by special servicers.

The risk of default is driving the prices of CMBS loans down, inversely increasing yields. Rising yields are blowing out the spread between CMBS and U.S. government bonds, which indicates a decline in trading activity and decreased capital flow. As banks pull back on lending, expect mortgage REITS, life insurers and bridge lenders to step up to the plate. However, lending platforms across the board will tighten up their underwriting standards.

Works Cited

Stribling, D. (2023, April 3). Nearly $39B in CMBS office loans will default, J.P. Morgan predicts. Bisnow. Retrieved April 7, 2023, from

McDevitt, M. (2023, April 3). CMBS delinquency rate increases in March. Commercial Observer. Retrieved April 7, 2023, from