President, Chief Executive Officer & Director, MARCUS & MILLICHAP INC
Schwab Network Features Marcus & Millichap CEO Hessam Nadji
How Fed Policies Are Shaping CRE Investment, and
Why Office and Retail Property Outlook Continues To Shine
Is the Fed being too cautious? How Fed messaging is weighing on investor sentiment.
Commercial Real Estate pricing recalibration creating opportunities.
Why office properties have emerged as a “diamond in the rough” investment opportunity.
The forces driving retail property investor optimism for 2026.
Visit the website for more: https://www.marcusmillichap.com/
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 (16 segments)
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Interviewer0:00
So let's welcome in our next guest to do just that. Hassan Naji, president and chief executive officer at Marcus and Milich. Thank you so much for joining me here today.
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Hessam Nadji0:08
Thanks for having me. It's great to be here.
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Interviewer0:09
Give us just an overview of what you're seeing out there in the commercial real estate space right now.
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Hessam Nadji0:15
Well, it's a very interesting time because we really believe that we just came through another Fed miss. And by that I mean the messaging from the Fed that is so reluctant to acknowledge the slowdown in the economy, especially the labor market which has slowed down much more dramatically than expected, should be one of continued accommodation but of course they've been resistant to do that which creates a lot of uncertainty and hesitation among investors in commercial real estate. It's a very interest rate sensitive asset class because it depends so much on leverage. The majority of transactions that happen in commercial real estate use leverage to make the deals happen. And for that reason, there is an unnecessary degree of uncertainty at a time when this property sector is absolutely healthy. It's not being overbuilt. The construction pipeline of new office buildings, which have not at all been the problem, office has had a demand problem, or shopping centers or other property types is declining. So we're building less assets and the demand is very correlated to the economy which has done very well. So net net it's a healthy asset class with really solid returns and great advantages from the tax bill that just got extended or passed a few months back. Yet here's a bit of a headwind created by the Federal Reserve in not acknowledging how much the economy is slowing down.
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Interviewer1:47
Well, look, they are data dependent. So I suppose they have to see what that tells them about how things are going in the job market and inflation too. They put three rate cuts into the system this year. Obviously they're penciling in one more next year. With that in mind, as you mentioned, obviously an interest rate sensitive sector that you work in. Would you characterize then 2025 as a good year then for commercial real estate?
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Hessam Nadji2:11
It was an improving year but under potential.
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Interviewer2:14
Okay.
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Hessam Nadji2:15
What we're seeing is the time that it takes for prices to readjust in reaction to the Fed's sledgehammer that they took to interest rates. A 500 basis point increase in a very short amount of time is the worst financial tightening our industry has experienced since 1980. And the valuation of real estate because of the leverage component is so dependent on the cost of debt that it was badly disrupted. Thankfully enough time has gone by where prices are adjusting to the higher interest rates and I don't think interest rates are due to come down significantly. Therefore the market has to adjust to the reality of a 4% yield on the 10-year Treasury and therefore plan accordingly. We're seeing a price adjustment in multifamily apartment buildings, right? That is already happening. In shopping centers and retail that is already happening. Office buildings are badly affected by the post-pandemic demand issue which is now starting to recover. Believe it or not, today versus a year ago, I would consider the office sector as a recovery sector and one that offers a lot of diamond in the rough.
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Interviewer3:23
Yeah. Look, I want to talk about that because it's a double whammy for you, wasn't it? Because throughout the course of the last 5 years, it wasn't just those higher interest rates, but it was the fact that people weren't in the office.
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Hessam Nadji3:33
Exactly.
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Interviewer3:34
Tell us about that rate of return. I mean, we all have friends in certain different sectors. Some are mandated 3 days, some don't have to come back at all. Some are saying come back full-time as you were pre-pandemic. Where is that at right now?
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Hessam Nadji3:47
You know, companies have become a lot more aggressive about demanding a return to office. A year ago, 57% of the traffic that was being registered was really back to normal compared to 2019, pre-pandemic. Today, the daily attendance is about 80% of the pre-pandemic levels in 2019. I don't believe we'll ever get back to 100%. Because even with the return to office mandates, it's four days in the office, three days in the office. There is a degree of tolerance for hybrid lifestyles and work setup and I think that's actually productive for the workforce but where we were at just two years ago was less than 50% of pre-pandemic levels of daily attendance so the improvement is significant and we're up to 80%. By the end of 2026 I anticipate we'll be close to 90% of pre-pandemic office attendance. And that's why office buildings in some ways are a diamond in the rough for investors. Prices have come down, recovery is coming and it's already happening. Therefore, it might be a good time to come back and invest.
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Interviewer5:02
So, there are opportunities when you look at real estate particularly as an alternative investment. As you say, where have you seen the most improvement? What's driving that demand? Office, industrial, retail?
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Hessam Nadji5:14
Well, I've actually been in town in New York for the past four days because of the ICSE convention which is the largest retail convention and really an interest group for shopping center owners, tenants, all the retailers in the world attend this conference talking about their plans and networking with landlords and advisers. The vibe from this conference is the best I've sensed in the last two and a half years since the recovery began. Retail is actually outperforming all the other property types because e-commerce created such a disruption and reimagination of obsolete older shopping centers which are a lot easier to demolish and rebuild than office buildings are. So, it's gone through a massive reshaping as a product type and now because of consumer demand, fitness, food, and fun, the 3Fs that are attracting new demand to retail shopping centers, it's doing extremely well.
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Interviewer6:16
Wow. Okay. So, retail outperforming. Hassan, we're going to have to wrap it up there. It's been a lovely chat. Thank you so much for joining me here and coming into the New York Stock Exchange. We'll do it again soon.
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Hessam Nadji6:24
Great. Thanks for having a great weekend.