Pictured above (l-r): Aaron Appel, Kris Mikkelsen and Ivy Zelman
The first quarter of 2025 proved to be interesting for residential and commercial real estate. Or, as Walker & Dunlop Chairman and CEO Willy Walker said: “The world is changing at a rapid pace these days. It feels like it’s time to tighten your seatbelt and hang on for the ride.”
To help make sense of what’s currently going on, Walker hosted Aaron Appel (Senior Managing Director, Walker & Dunlop), Kris Mikkelsen (Walker & Dunlop Executive Vice President) and Ivy Zelman (Executive Vice President, Zelman & Associates, Walker & Dunlop Company) for the April 2, 2025 Walker Webcast. During the discussion, the host and guests covered tariffs, economics, consumer confidence and—of course—real estate.
Housing Trends: The Mixed Bag
On the single-family housing front, Zelman commented that the spring season for buying and selling is disappointing. “There’s been a slight improvement with respect to the existing market; inventory is finally increasing, and people are tired of waiting,” she said. But price continues to be a concern. “I think the market remains pretty challenged, and I see more headwinds in the for-sale market due to tariffs and uncertainties,” she added.
One of those uncertainties rests in the consumer confidence numbers. Consumers who are generally positive about their situation are more likely to buy homes, depending on job growth and interest rates. But consumer confidence these days is in negative territory. “We’re seeing that as people stay on the sidelines, saying they want to wait,” Zelman commented. “They’re worried about the economy; they’re worried about their jobs. No question that this is probably the #1 headwind.” She added that stabilization is necessary before people are ready to buy or sell homes.
However, the fundamentals that are worrisome on the “buy” side are doing a good job of driving the for-rent side. Mikkelsen said that multifamily deliveries were “unprecedented” in 2024. Yet, at the same time, 667,000 units were absorbed. “That’s two and a half times the inventory absorbed on an annual basis in the 2013-2019 period,” he added.
However, the supply spigot has shut down. As a result, “we’re setting ourselves up for real shortages of housing inventory as we work our way through the balance of 2025 and into 2026 and 2027,” Mikkelsen said.
On to the Transactions
Appel pointed out that the conviction is strong that commercial real estate is off the bottom. Retail and industrial deals increased by 4% to 5% year over year. On the other hand, “office deals are still down, but the pace of deceleration looks much more manageable,” Appel pointed out.
Both Appel and Mikkelsen added that capital is unstuck and is looking for opportunities. “The capital markets are very strong right now,” Mikkelsen noted. “We’ve seen spreads tighten anywhere from 25 to 75 basis points in both the public markets and the private credit markets.” Commercial banks are also coming back after a two-year hiatus. “They’re extending credit again to their best customers, and we’re starting to see them pursue some new accounts,” Mikkelsen said. Also on the rise are large securitizations and fresh allocations from the life companies. While CRE is a sector-by-sector business, “we’re pretty optimistic about it for the rest of the year,” Mikkelsen said.
Appel agreed, noting that the overall transaction market is in recovery mode, with “an unbelievable amount of capital” being raised in private credit and corporate credit. “But the rate environment will play a big part in how much of that is breaking toward sales versus refinancing,” he added.
What About the Office Sector?
Appel said that the office market has turned the corner. He then qualified that statement by noting that the office sector is performing well in locations where people want to be.
“There’s different types of product,” Appel pointed out. “I was coming back from the airport the other day and drove by an (older) office building in New Jersey. I took a look at it and determined whether it should exist anymore.” On the other hand, there’s a huge demand for Class A high-rise offices in Manhattan’s Plaza District. “There’s a lack of supply,” Appel said. “The numbers are getting close to where it could make sense for new development.”
The locations also dictate top-performing versus under-performing office space. “You go to Los Angeles’ Century City, and supply is tight and renters higher than they’ve ever been,” Appel said. “But in downtown L.A., they can’t even give the space away. It just depends on where you are.”
Investment Thoughts
Walker concluded the Webcast by asking the participants what commercial real estate sector they’d bet on if they had to place their own money into it. Zelman responded that she’d like single-family rentals in her portfolio. “People are better off renting single-family than owning,” she said. “People want the white picket fence and the backyard, and there’s a shortage of that product.”
Appel indicated that Class A trophy offices or high-end homes would be his go-to, while Mikkelsen said multifamily investments could be effective. “There’s so much capital that’s still trying to get deployed into housing,” he observed.
Then there are the data centers. While there is a great deal of demand for the actual structures, Mikkelsen pointed out that there were other plays available in the space. “I think investing in and around some of that infrastructure will be a safe space for a long time,” he noted.
On-demand replays of the April 2 Walker Webcast are available through the Walker Webcast channels on YouTube, Spotify and Apple. Subscribe to get invites, replays and articles for new Walker Webcast episodes every week.
The post The Status of Real Estate with Walker Webcast Guests Aaron Appel, Kris Mikkelsen and Ivy Zelman appeared first on Connect CRE.
