In addition to office, what other sectors one CRE veteran believes should be targets for brokers
One sector of the commercial real estate market that has been slumping since the COVID-19 pandemic might finally be showing some signs of life.
The office sector understandably went through some difficulties due to the pandemic and the rise of remote work. However, recent return-to-office mandates are just one factor starting to bring some life back to the beleaguered segment, according to one commercial real estate (CRE) veteran.
Nathan Cohen (pictured top), head of the CRE division at LBC Capital Income Fund, said one of the big keys now is that there is a clearer picture of what these office properties can produce now that the pandemic is a couple of years in the past.
“I think office seems to really be bouncing back,” Cohen told Mortgage Professional America. “We’re enough out of the COVID stretch now to at least have a few three-years worth of historicals to show what it's going to be. I think that trajectory goes up very slowly and very consistently.
“One of the things I've seen in my 20-plus years of experience in commercial real estate is that you have two kinds of growth. You have the kind of growth that goes up very fast, and then you have consistency. I think we're going to see a straight, slow, consistent, safe growth.”
Looking at leases
Cohen noted that it doesn’t mean the deals being done in the office space are completely pain-free. He said some of the deals require cash-in to get them closed, due to a reduction in the property value relative to the loan amount of the refinance.
“The deals that are getting done in office now, because of the financing they got 10 years ago,” Cohen said. “You're going to be looking at a cash-in deal most of the time, but you know that you're just going to have to take the medicine and readjust everything.”
One trend Cohen is noticing is that lenders are paying closer attention to the tenants in the building and when they signed their leases.
“One thing some of the more sophisticated lenders are looking at in office is, when did these leases get signed?” he said. “So if you have a bunch of 20-year leases right now, even if you're in the middle of a 20-year lease and it's got 10 years left, and it was signed 10 years ago, it doesn't hold as much weight as a new five-year lease that got signed last week.”
One of the reasons is an adjustment in the rent charged to the tenants. Tenants who have not recently renegotiated may be overpaying for the space they’re renting out. That’s why Cohen has seen brokers advise building owners to consider renegotiating those leases early, offering a reduction in rent in exchange for an extended lease.
“Are your rents in line with the market right now?” Cohen said. “If you're not right down the middle of the fairway, that should be a cause of concern for the lender, for the borrower, for the broker, for everybody involved. That's not a good sign. You want the rents to be right down the middle.
“If my average rents are $28 a foot, and I have a class B Building, and I'm looking at Class B-plus and A-minus buildings, and they're leasing out in my market for $18 a foot, you might be better off just redoing all your leases.”
By taking that proactive step, Cohen said a building will be in a much better position when the next refinance comes up. He said it’s where a broker can be a huge help, modeling potential loans for the customer.
“Down the road, you may make your building a lot stronger of a deal for you to get financed again,” he said. “That's where a good intermediary can help you with some financial modeling to tell you, ‘If you do that, your loan amount will most likely be this, and you're going to be okay.’ Or, ‘Your loan amount will likely do this, and you're going to have to come in with cash.’ But even if you have to come in with cash, you're actually going to get the loan.”
Other strong sectors
Cohen noted that, besides the office sector rebounding, another sector he really likes is the smaller retail centers. Those buildings house businesses that are essential for a neighborhood.
“I've always been a big fan of small, in-line retail centers,” he said. “AI is never going to paint my nails, give me a haircut, be a restaurant, or all those great mom and pop uses that are out there. They're really strong businesses because the tenants really care about what's going on there, and they're there every day.”
As affordability challenges persist, economist Jay Parsons cautioned that local resistance in Texas is slowing housing progress. He noted that true solutions depend on cities supporting development and cutting excessive regulations.https://t.co/5xQcS1Ehtm
— Mortgage Professional America Magazine (@MPAMagazineUS) October 16, 2025
He said a couple of other areas brokers should keep their eyes on are the multifamily space and higher-end hotel properties.
“There are some great areas of opportunity in the multifamily sector,” Cohen said. “So that's one to watch out for as far as acquisitions. I love hotel deals. I think the newer product with experienced operators at a lower leverage point is a good place to be, especially for hotels with a bit more of a service component.
“Back in the day, there was maybe a valet. It doesn't need to be a five-star place. I think upper-middle is a great place to be in the hotel segment. Where upper-middle-class people can go and it's still affordable, and even affluent people still feel comfortable and feel like it’s a nice place.”
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