President, Chief Executive Officer & Director, MARCUS & MILLICHAP INC
Bloomberg News Features Marcus & Millichap CEO Hessam Nadji
The Three Forces Driving Commercial Real Estate; Why Retail Continues to Outperform - How the reinvention of retail continues ...
About Hessam Nadji
Hessam Nadji, CEO of Marcus & Millichap, appeared on NYSE TV and CNBC in July 2026 to discuss the commercial real estate market. He stated that the market is showing improvement, citing economic resilience and positive job growth as underpinning demand across property types. Nadji noted that office daily attendance has returned to nearly 90% of pre-pandemic levels, describing the sector as "quietly gaining momentum." He also said that retail has "come back" as an experiential product type driven by restaurants, bars, and fitness, and that multifamily demand is strong due to a housing affordability gap that keeps people in rentals. Nadji attributed a 50% drop in new multifamily supply in 2026 and a projected 70% drop by 2027 to high interest rates and construction costs. Nadji said that price corrections of 15% to 30% on average across property types, with office seeing the most severe adjustment, are bringing capital back into the sector. He described the market as having "recalibrated" by 2025 after a severe shock from the Federal Reserve's 500-basis-point rate increase. Nadji stated that investors are responding by focusing on specific asset and market strategies rather than counting on interest rate reductions, and that transaction volumes are picking up as more inventory comes to market. He identified demographically favored markets such as the Southeast, Carolinas, Nevada, and Arizona as areas attracting investment due to migration and lower costs.
Transcript (17 segments)
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Host0:00
Hessam Nadji joins us. He's the CEO of Marcus & Millichap. That's the business he does. Retail, commercial, all that kind of stuff. He joins us here in studio. Hessam, talk to us about the country here in retail, commercial real estate. What's the market look like?
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Hessam Nadji0:14
Good morning. Great to be with you again. Retail has a short-term and a long-term picture that we have to talk about in order to really express the current state of the market. The long-term picture comes from pain. 20 years of reinvention of retail, e-commerce killing brick and mortar, and the industry stopped building any new product for the most part, right? And repositioned so many shopping centers and retail concepts, and we've come out of that much tighter and a reinvented way of using brick and mortar retail, which is now being very successful. It's all pretty much driven by fitness, entertainment, food, and destination shopping. Those things are moving in a very positive direction in the near term because wages have been growing and consumer confidence has been really high, and high net worth individuals have been spending thanks to the stock market and other wealth creation mechanisms. Sales have been really, really strong. So two very short-term and long-term positive factors going. Some of the headwinds are the uncertainty related to interest rates, tariffs that made many retailers pause for a moment in store openings and balancing, you know, forecasting where consumer confidence may be going, which has weakened in the last few months. So it's really a battle between some of that uncertainty and very strong fundamentals.
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Host1:42
So during the break, you were talking to us about how some of the retail spaces are performing well in suburban areas. Talk to us a bit about what it looks like regionally as we think about demand for retail space.
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Hessam Nadji1:52
You mentioned New York right here at the heart of the capital markets epicenter of the world. We're creating 70 to 80,000 jobs a year. New York is back. Yet there is a lot of urban retail storefronts that are still empty or struggling. The consumer habits, the tourism hit that we took earlier this year, all those things play into street urban retail. Suburban retail on the other hand has been doing much, much better. And I would say urban retail is on the recovery, but not quite as strongly because the post-pandemic effect of a lot of people fleeing urban markets. That's changing, thank God, because of the mandate to return to office, which is also helping to improve both residential and retail.
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Host2:37
You know, now that I think about our Lexington Avenue, 58, 59, I mean, whoever owns those buildings or manages those buildings, they're doing a bad job. I could sell that stuff. I mean, it's prime location. People are back. It's packed. Or so I think so, right? I don't get it.
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Hessam Nadji2:54
Well, you just hit the most important part of creating wealth through commercial real estate, and that is what are you going to do with the asset? Why did you buy it in the first place? How did you finance it? What was the value in and your expected value out? And in between, what are you going to do to create value and make the property stand out? At the end of the day, this is the business execution of that strategy asset by asset.
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Host3:15
Yeah, they got the signs in the window. I'm going to call that number and say, dude, give them a ring, Paul. Get going here. All right, interest rates are coming down. And that's good for your business. How good for your business?
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Hessam Nadji3:28
Really fascinating to see what's happened with commercial real estate as a whole. We have three very positive forces working for the industry. One is price corrections. Since 2022, peak March of that year, prices have gone down on average 15 to 20% across the entire industry. Interest rates are coming down as a second positive. And more important than that is the fact that financing is back. Banks are lending again. Credit unions are lending again. And that doesn't capture much headlines because more than 80% of all transactions in commercial real estate are sub-$10 million executed by high net worth individuals.
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Host4:03
Really? Okay.
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Hessam Nadji4:04
And high net worth households, not institutions. And so when debt becomes more available and lenders are more confident, the lender spreads come in. And that's why interest rates are coming down. The only real headwind we have is this uncertainty around the government shutdown and the data that the Fed relies on and all the question marks about the effect of tariffs on inflation and what the Fed will or will not do. That's pretty much the only real headwind we're facing. Fundamentals look really great.
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Host4:36
So in my previous role before I became markets correspondent for Bloomberg Television, I was on our equities team. Thanks, Paul. I was on our equities team and I covered real estate stocks. I covered REITs in particular, and I was surprised to learn that office REITs only make up about less than 4% of REITs more broadly. So a lot of people look at commercial real estate as bad because of struggles in office, but it's really conflating that idea and really making it broadened out for the broader sector. But what other areas are you keeping an eye on? I know I used to cover senior housing a lot. Is that an area that you're looking at as we think about the baby boomers?
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Hessam Nadji5:12
Absolutely. We do business in 16 subcategories of commercial real estate. Self-storage, manufactured homes, land of course, medical office. We cover all those property types. And even within retail, there is a huge divergence of shopping centers versus fast food single tenant or auto part single tenant properties. All of those different subsectors have their own cycles. And within office, it's interesting you say that because during the banking crisis of 2023, there was so much concern that commercial real estate was the next shoe to drop and put pressure on the banking system. And when you look at the total outstanding loans held by US banks, there is less than a 5% total exposure through office.
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Host5:58
Wow.
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Hessam Nadji5:58
And not every office building is distressed. I mean by far. In fact, suburban office vacancies have been running around 11%. It's the urban older assets that have, you know, 30% vacancy rates. So there was a lot of misperception about the impact of the whole post-pandemic office issue.
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Host6:16
Private credit, to what extent is it playing a role in your business?
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Hessam Nadji6:21
It played a very significant role in 21 and 22 when debt funds were issuing loans at very aggressive underwriting and very unrealistic rent growth assumptions. Those loans are terming out and there isn't as much private credit to absorb all of those. So some of those assets are having issues and are distressed.
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Host6:42
All right, Hessam Nadji, thank you so much for joining us. Hessam Nadji, he's the CEO.