The FORT Podcast – Mark Gibson – CEO @ JLL Capital Markets – In-Depth Analysis of Current Real Estate Market (2H 2024 – 2025)
Mark is currently the Chief Executive Officer of JLL Capital Markets, Americas. He also sits on JLL’s Global Capital Markets Board where he shares responsibility for the strategic direction, growth, and client activities of JLL’s global capital markets business.
We discuss:
– The state of Capital Markets
– The FED and rate cuts
– The performance of Office, Retail, Industrial, and Data Center asset classes
Listen on:
Spotify
Apple Podcasts
YouTube
Topics:
(00:00:00) – Intro
(00:03:32) – State of the Capital markets
(00:11:24) – How the FED is thinking about rates
(00:16:21) – Outcomes of a rate cut
(00:21:09) – The Detroit effect
(00:23:02) – Migration data
(00:25:34) – What types of deals are working in this environment?
(00:30:32) – Housing
(00:35:29) – The importance of Mexico
(00:36:45) – The state of Office
(00:46:19) – Foreign vs. Domestic Capital
(00:47:31) – The election
(00:48:33) – Equity markets
(00:54:01) – M&A Activity
(00:57:08) – Unique strategies
(01:00:12) – Data centers
(01:03:00) – Secondary markets
(01:05:26) – The Detroit effect in real estate
(01:06:57) – AI
(01:07:33) – Tenant migration
(01:09:07) – 2025 forecasts & trends
Episode Summary:
Mark Gibson, CEO of the Capital Markets team at JLL, joins Chris Powers in this episode of The Fort Podcast to provide a deep dive into the current state of real estate capital markets. With decades of experience, Gibson offers valuable insights on a range of key real estate topics, including inflation, interest rates, office space trends, and migration patterns. His perspective provides a clear picture of how investors, operators, and institutional players are navigating the evolving landscape of commercial real estate. This discussion focuses on understanding market behavior and emerging investment opportunities.
Gibson begins by addressing the current state of the real estate capital markets, where he notes that there is no shortage of capital despite common perceptions. However, a significant bid-ask gap exists between buyers and sellers, particularly due to the rising cost of capital and lenders’ more conservative approaches. Many buyers are hesitant to transact due to the disparity in pricing expectations, but Gibson mentions that some large-scale deals have been completed where pricing parity has been achieved. As the Federal Reserve begins signaling rate cuts, this bid-ask gap is likely to narrow, leading to an increase in transactional volume, especially as capital becomes more accessible.
Inflation and Federal Reserve policy are key drivers of the current market, and Gibson elaborates on how these factors have impacted real estate. While the Fed’s aggressive rate hikes were necessary to combat inflation, they have created uncertainty and confusion for investors, especially with the inverted yield curve. However, Gibson points out that while the cost of capital has increased significantly, the real estate assets themselves have continued to perform well in terms of demand and occupancy. The challenge has been adjusting to higher debt service costs, but as inflation begins to cool, a normalization of the market is expected. Gibson is optimistic that transactional activity will improve as borrowing costs decrease, allowing more buyers to step back into the market.
A major trend discussed during the episode is the migration of both people and companies to the Sunbelt and Southeastern regions of the United States. This long-standing demographic shift, accelerated by the pandemic, is creating significant opportunities in markets like Texas, where job growth is driving population expansion. Gibson emphasizes that institutional investors are paying closer attention to these migration patterns, using advanced data to track population and employment shifts. For real estate investors, focusing on growth industries and areas with strong job markets is crucial for identifying future demand.
Housing demand is another focal point of the discussion. Gibson states that the U.S. is under-supplied in housing, with multi-family rental properties being particularly attractive to investors. He notes that many institutional investors are acquiring high-quality housing assets at a discount or replacement cost, expecting strong returns over the long term. Additionally, new multi-family housing construction has slowed significantly, creating a potential supply shortage in the coming years. Gibson also touches on the industrial sector, which is benefiting from trends like reshoring and the need for more resilient supply chains, making it another area of interest for investors.
The office market, often seen as a troubled asset class, is discussed in detail. Gibson asserts that office space is currently oversold, and he believes investors will regret not taking advantage of current opportunities in the sector. He explains that only high-net-worth families have been actively investing in office properties, as they are able to buy at significant discounts. While there is less overall demand for office space due to increased efficiency and flexible work arrangements, Gibson highlights that the best office buildings with prime locations and amenities are still commanding strong rents and high occupancy rates. He stresses that productivity, collaboration, and networking are key reasons why many companies are mandating a return to the office, despite the popularity of remote work during the pandemic.
Gibson also points out that while some office buildings are struggling to maintain value, others in prime locations are performing well, creating a clear divide between “have” and “have not” office properties. The conversation highlights that the U.S. is lagging behind other global markets in terms of returning to office environments, but Gibson is confident that demand for high-quality office space will continue to grow.
Another key point raised during the podcast is the rise of family offices and high-net-worth individuals as major players in the real estate market. Gibson notes that many wealthy families are opting to manage their wealth through real estate, viewing it as a reliable asset class for long-term wealth preservation. These families are increasingly bypassing institutional wealth managers and choosing to directly own and operate real estate assets, particularly in sectors like housing and industrial properties. Gibson emphasizes that family offices have been particularly active in buying core real estate assets at current prices, a trend he expects to continue as institutional capital begins to re-enter the market.
Gibson also touches on emerging investment strategies and opportunities in areas like data centers, driven by the demand for AI and resilient supply chains. He notes that while the demand for data centers is strong, the scale of investment required to participate in this sector is significant, with many deals now reaching into the billions of dollars. Investors are also focusing on sectors with limited new supply, such as multi-family housing and industrial properties, where returns are expected to be strong over the next few years as supply constraints push up demand.
The FORT is produced by Johnny Podcasts