As commercial real estate markets begin to transition into the next cycle, with prices bottoming and dealmaking climbing, the world's largest property investors are settling on which bets they plan to double down on and which may require cashing out.
Chief among those conversations in the U.S. is the Sun Belt, which developers turned to as Americans moved away from coastal cities during the pandemic. However, the surge in construction has led to an oversupply, with many investors feeling the impacts on their bottom line and distress starting to percolate.
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That includes standouts like the Miami office market, Starwood Property Trust President Jeffrey DiModica said onstage at the New York University Schack Institute’s Conference on Capital Markets in Real Estate last week.
After it was the hottest office market in the country in 2021 and 2022, activity has dwindled and returned to prepandemic levels, when Miami was a secondary player compared to New York, San Francisco and Chicago.
“There's a few buildings in Brickell, a couple on the beach, and everything else, you can't get [deals] done,” DiModica said. “There's no big companies moving to Miami. There's just rich guys moving to Miami.”
DiModica acknowledged that his company is “one of the few” large corporate employers there. Starwood Property Trust’s parent company, Starwood Capital Group, is headquartered in Miami Beach after its CEO, Barry Sternlicht, relocated it from Connecticut in 2018.
DiModica added that momentum in cities like Charlotte, Dallas and Houston may also be slowing down.
“We're certainly not going to keep having the run that we've had,” DiModica said. “So I would expect vacancy builds up, and I probably wouldn't be leaning in.”
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Courtesy of NYU Photo Bureau/@Myaskovsky
CDPQ's Michael Neuman, Dune Real Estate's Cia Buckley Marakovits, Macquarie's Jackie Hamilton, Norges Bank Investment Management's John McCarthy, Pimco's Peggy DaSilva and Newmark's Marcella Fasulo at the 57th Annual Conference on Capital Markets in Real Estate, hosted by the NYU SPS Schack Institute of Real Estate.
On the same panel, RXR Realty Chairman and CEO Scott Rechler said his firm is on the hunt to replicate the success that he has found in New York City throughout his career.
“We call it eds, meds and well-leds,” Rechler said. “Where are the places with good education systems, good healthcare systems and good leadership that’s invested in infrastructure, quality of life and economic opportunity?”
For RXR, Rechler said that has been Phoenix, Denver, Dallas, Raleigh, North Carolina, and Tampa and Orlando, Florida.
But other real estate giants, including the world's largest sovereign wealth fund, highlighted Boston for some of those same reasons.
“We're probably the largest investor in the city,” Norges Bank Investment Management Head of U.S. Unlisted Real Estate John McCarthy said. “Undoubtedly, it’s our largest investment city.”
There are more than 150,000 students at Boston-area colleges and universities, including Harvard University and the Massachusetts Institute of Technology. Total enrollment has grown by nearly 5,600 students, or approximately 4%, between 2013 and 2023, according to a report by the city.
Due to a surge in life sciences jobs, the city’s robust public transportation and improving retail options, more of those students are staying, panelists at the event said.
Prior to the pandemic, Boston’s population grew by almost 10% between 2010 and 2020 — nearly double the growth rate from 2000 to 2010. Boston shed some population during the onset of Covid-19, but in recent years, the city has once again recorded an increase in residents, though not at the same rate, according to city figures.
Meanwhile, real estate in the already-established city is subject to height restrictions due to its proximity to Logan Airport. That makes existing buildings in the area even more lucrative.
In addition to being “huge” shareholders in local real estate behemoths Alexandria Real Estate Equities and BXP, formerly known as Boston Properties, McCarthy said Norges Bank is also invested in 8M SF of office, laboratory and retail space in the area.
“We’re big believers,” he said.
Dune Real Estate Partners, which is soon to embark on a $1B office-to-residential conversion spending spree through a new joint venture, similarly has invested heavily in Boston.
“The reality is, if Boston actually were warmer, it would be the category killer,” Dune President and Chief Investment Officer Cia Buckley Marakovits said. “It's a market we'll keep investing in.”
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Courtesy of NYU Photo Bureau/@Myaskovsky
BDT & MSD Partners' Samantha Rotchford, Goldman Sachs' Miriam Wheeler, Blackstone's Timothy Johnson, Starwood's Jeffrey DiModica and Deutsche Bank Securities' Dino Paparelli at the 57th Annual Conference on Capital Markets in Real Estate.
However, Global Head of Blackstone Real Estate Debt Strategies Timothy Johnson, who sat next to DiModica, argued that Dallas is an outlier among cities in the Sun Belt in that it still has near-term growth potential.
“The economic engine of Dallas is so different from Miami,” Johnson said. “It's not just the rich person moving there. The economy of the United States is gravitating in that direction.”
Even though growth in Sun Belt cities may pale in comparison to pandemic levels, other investors still plan to keep an eye on the region, even while shifting their attention back to the coasts.
PwC and the Urban Land Institute’s Emerging Trends in Real Estate report for 2025 found that previously fast-growing cities like Austin and Phoenix are now barely growing. While the report still cites Dallas Fort-Worth, Miami and Houston as the top cities by overall real estate prospects, Manhattan, which had fallen to 42nd place for investors due to the pandemic, has moved back up to 11th place.
In the first year of the pandemic, New York City recorded the most outbound migration among all metro areas in the country, with at least 160,000 households departing the city, according to a Bloomberg analysis. However, as suburban housing prices rose and businesses reopened, those migration patterns reversed.
In the years since, residential vacancy in New York has hit record lows and rents reached record highs.
Speaking on another panel, Marty Burger, the CEO of Infinite Global Real Estate Partners, said capital is quickly returning to the city. During his time as the head of Silverstein Properties, Burger expanded the firm to Philadelphia and Los Angeles.
“In Asia, the Middle East or Europe, New York is definitely a fan favorite for institutional, private and sovereign wealth money,” Burger said.