Bird Strike

Ladies and gents, Jay Powell just delivered another rate cut, transaction activity (from refinances and recaps at least) is popping, and the debt markets are all humming along nicely. Things feel … kinda good … right? 

Right? 

If there’s one thing the past five years have taught us, it’s to expect the unexpected. So, what could be the next black swan event — that rare occurrence whose impact is understandable only in hindsight — that pirouettes onto the stage of commercial real estate and makes us run for cover? 

Yes, we understand that such an event, by definition, is one that cannot be predicted (as correctly noted by Nomura’s Larry Kravetz). But, after transacting through multiple cycles, we see our lenders as superhuman market prophets, seers or soothsayers, so we unexpectedly sprung the question on them anyway (in the style of a black swan — how meta).

To kick us off, Affinus Capital’s Mike Lavipour has one eye on the corporate credit market. “While real estate credit is distinct as you have hard assets and basis protection, I could see some losses in corporate credit bleed into the banking market and spread beyond that,” he said. 

Mentioning blood in the first quotation seems like an ominous beginning … but let’s carry on. 

“The risk of an unforeseen disruption is elevated today,” Peachtree’s Greg Friedman said.  “Geopolitical tensions remain high across several regions, global trade dynamics are shifting and the effects of a prolonged ‘higher for longer’ interest-rate environment haven’t fully played out. Add to that record government deficits and liquidity constraints in parts of the financial system, and you have the potential ingredients for something unexpected to ripple through markets.”

Well, yikes. 

Berkadia’s Hilary Provinse has a short list of potential catalysts comin’ in hot, so brace yourself. 

“It could be a multitude of things,” she said. “Private credit and loose lending standards, sudden bank failures, industry-wide workforce transformation driven by automation and AI, tariff wars/geopolitical concerns/trade shock or a catastrophic climate disaster.”  

Like Provinse, Canyon Partners’ Robin Potts, Goldman Sachs’ Scott Epperson, BGO’s Abbe Franchot Borok and BDT & MSD’s Jason Kollander all pointed to AI as the potential feathering of the yet-to-be-seen cygnus. 

“The accelerating pace of AI adoption may swiftly alter worker demand across industries, prompting companies to re-evaluate their hiring strategies and, crucially, their physical space requirements,” Epperson said. “This could lead to a substantial shift in commercial real estate dynamics, particularly for office and even industrial spaces, as productivity gains reduce the need for traditional footprints.” 

And Potts: “The insatiable growth for all things AI is going to have unintended consequences that we cannot yet predict. It’s estimated that investment in AI-related projects (e.g. data centers) made up 92 percent of the U.S. GDP growth during the first half of 2025. The economy’s reliance on AI infrastructure spending is a risk to continued economic growth. Additionally, the massive energy demand from AI data centers could have negative implications for energy costs for consumers and owners of other types of CRE. AI’s impact on the job market and office absorption is also a major question mark.” 

And Kollander: “If there’s one area evolving faster than most, it’s technology-driven real estate — the infrastructure supporting AI and data growth. The opportunity there is enormous, and the long-term demand for digital capacity is clear. At the same time, the pace of change is remarkable. Cooling systems, energy sources and storage models are all advancing quickly. A shift in how data is stored or delivered — through new formats or offshore facilities, for example — could change the economics of certain assets almost overnight. We’re very optimistic about the sector’s trajectory, but mindful that innovation can sometimes move faster than underwriting assumptions.”  

Franchot Borok noted the “unprecedented demand for computing capacity driving significant U.S. power grid constraints due to the associated power need,” and said teams — like BGO’s — who understand the significance of this shift will become increasingly critical for successful investments, while “groups who still aren’t considering how they can leverage their data will be left behind.” 

Given Ali Cooley’s purview at Nuveen, it makes sense that climate events are what’s disturbing her sleep cycle. “The growing frequency and intensity of extreme weather poses significant risks to commercial real estate assets, from hurricane damage and flooding to wildfires and prolonged heat waves that can compromise building systems and tenant safety.” Thankfully, her team has others with the same concerns covered. “We incorporate property-level mitigation and resiliency into our underwriting, and one of the key benefits of our lending is the ability to finance resiliency measures that help property owners prepare for these challenges,” she said.

Madison Realty Capital’s Josh Zegen is a wee bit worried about all of the above, and more (cue thunder clap). “The next black swan could emerge from a convergence of political, technological, and environmental forces. Rising wealth gaps and housing affordability pressures may fuel socialist-leaning policies, while AI adoption could shift demand for certain asset classes, and climate change coupled with rising insurance costs could disrupt property values and operations,” he said. 

Like many of us, “a lot keeps me up at night,” Wells Fargo’s Pete Cannava said. “As of late I’m concerned with the ever-changing political landscape, geopolitical risks and the precarious market environment. Inflation has remained sticky, and, although rates have been range bound, I’m concerned that a soft labor market and decrease in consumer spending could cause a recession. I try to focus on what I can control while being cognizant of the uncontrollable, but there are a lot of risks in the current market despite the equity markets near all-time highs and deal volume being healthy.” 

Back to Nomura’s Kravetz: “Most black swan events in our industry have been macro and not industry specific — work from home for office and buying online for brick-and-mortar retail being exceptions. If there is another black swan event, the cause will most likely be a macro event, whether cyber-, geopolitical- or financial system-related.” 

SMBC’s Alex Cabria said he doesn’t have a crystal ball (say what?!) so “predicting the next big shock is tough,” he said. “That said, continued geopolitical unrest — both domestic and international — could disrupt global trade and financial markets. Such volatility could dampen investor demand for CRE and slow investment flows, further muting acquisition activity. And, if these pressures trigger a recessionary environment, we could see ripple effects on asset classes that have been performing well recently, like retail and hospitality.” 

While we can hear the distant sound of large, dark wings beating slowly toward us, Cabria reminded us to keep focusing on the positives: “After a roller coaster ride over the past five years, the industry could use a period of stability. And. if history is any guide, resilience tends to win out in real estate.” 

Amen, Cabria, amen.