Good afternoon, everybody. I'm Hessam Nadji, President and CEO of Marcus & Millichap. Thank you for joining us for today's 2026 Outlook and Market Discussion. We're very proud to be hosting this. This is an annual event for us on behalf of all of Marcus & Millichap's broker advisors, Marcus & Millichap Capital Corporation, our financing experts, our institutional division, IPA, and IPA Capital Markets. I speak for all of them when I say we take great pride in bringing the latest market information and thought leadership to all of you as our clients and fellow investor community members and everyone interested in all aspects of real estate. We have a broad audience with us today. We're very proud of the reach that this session has established over the last few years. That's thanks to our wonderful guests and industry experts that are sharing their time and thoughts with us today. A couple of housekeeping notes. We do have several thousand investors on the call, and you may get a delay if that happens. Use your F5 key to refresh the session. There is a Q&A tab on the bottom of your screen. You're welcome to use that if you submit a few things. We'll try and read a couple of them into the call. This will be mostly a very lively discussion with the panel members, as I'm very eager to hear what they have to say, and we'll get started. 2026 is an interesting time to be considering real estate investments and real estate returns and the things that it'll take to maximize those returns and making decisions on capital deployment. To help you, as we've done for 55 years, which is an important milestone for Marcus & Millichap to celebrate this year, the company was started in 1971 by George Marcus and shortly after joined by Bill Millichap. And our founding principles of value-added brokerage and value-added information delivery to the investment community have never changed. It still really drives the company today. And the quality of the guests that we have is a reflection of that commitment, not just bringing you our perspective and data, but that of many other experts outside of our company that we can all benefit from. Mark Zandi is no stranger to this session. Sharon Wilson Géno has been with us representing the housing market and multifamily in particular many other times, as has Marc Selvitelli representing NAIOP, the office industrial component of our business, organizations that we have great partnerships with. Just to hone in on Mark's background, 20+ years as Chief Economist at Moody's, probably one of the most quoted economists on Wall Street and throughout the media. What I've always enjoyed about working with Mark is the objectivity, the lack of emotion, and really sticking with the hard facts. One of the things that we do each time we have Mark, we've now had him here on the kickoff session for the year several times, is to look back at the previous forecast and what we thought was going to happen last year. Today's session will start with an overview from Mark. I'll then orchestrate an economic-related Q&A with him, and then we'll get into housing and the different product types within commercial real estate. With that, let me get started and turn the session over to Mark Zandi. Mark. Thank you, Hessam. So Hessam, have I aged relative to that picture a year ago? Do I look a little more ragged, you know, given what's happened? I think I do. I think I do. Mark, I think the cosmetic surgery is working very well, and I think that was a good decision. Yeah, thank you so much. And congratulations on 30 years at Marcus & Millichap. That's pretty cool. Yeah. That's such an honor for me to be celebrating 30 years and being with all of you and thousands of our clients on my anniversary. Thank you, Mark. Thank you. Thanks for the opportunity. My task is to give you a sense of the outlook for the economy, the U.S. economy in 2026. Just bottom line, it should be a reasonably good year, particularly in terms of GDP, the value of all the things that we produce. I would expect, and obviously there's a wide distribution of possible outcomes here, but I think in the middle of the distribution, the most likely scenario, the baseline scenario, we'll get growth of somewhere around 2.5%-3%. Just for context, in 2025, growth will come in somewhere between 2% and 2.5%. In terms of GDP, it should be a somewhat better year. Jobs are also very important. Here, more caution. Obviously, 2025 was a pretty tough year for the job market. Talk a little bit more about that in a minute. I think we'll see a bit of an improvement in 2026, but not a whole lot. So I wouldn't expect a whole lot of jobs in 2026, but just enough to keep unemployment close to where it is. The unemployment rate nationwide today is 4.4%. That's up about a half a point from where it was a year ago. And if you told me we reconvene a year from now, the unemployment rate's between 4.5% and 5%, I'd say that sounds about right. Still low in the grand historical scheme of things, but that's the soft part of the economy. So what I'm going to do here is give you some sense of why I think the economy's going to perform this way. We'll talk about the tailwinds to growth. And there's two key ones. One is artificial intelligence, AI, that came on strongly in 2025, and that should provide a lot of growth in 2026. And also a lot of fiscal stimulus in train. That's really key to the growth picture. That's deficit finance, tax cuts, and spending increases that's going to juice up growth, particularly in the first half of 2026. And then we'll talk about the headwinds. And the headwinds are very similar to last year. It goes to deglobalization broadly. More specifically, it goes to the tariffs and to immigration policy. That will continue to be a way to have growth. And then we'll talk about the risks. There are upside risks here, but I'm going to, because I think it is prudent, we'll focus mostly on the downside risks, and then we'll call a presentation. So turning to the tailwinds, artificial intelligence, you can see that in this slide that you should see before you. There's really two key channels through which AI has boosted growth. One is what you're seeing here, and that's investment, data center investment being the kind of the poster child for that surge in investment. And that'll continue. That's a train that's left the station. Nothing's going to stop that, certainly not in 2026. You can see in the chart, the U.S. is kind of leading the way here, or certainly is leading the way here globally. The blue bar represents the number of data centers. We're somewhere around 5,000-6,000 data centers that are in operation or under construction. The other bar to the right represents data centers in the rest of the world, including China. And you can see it's closer to 3,000. So we're leading the way here, and that'll continue to be the case. Obviously, the investment goes well beyond data centers. It goes to chips. It goes to servers. It goes to the power that's needed to drive these data centers and other activity. So there's a lot going on, and that will continue. The second channel through which AI has boosted the economy is through the surge in AI stock prices. And this was a surprise to me in 2025. I thought it'd be a good year for AI and AI stocks. I didn't expect what we got. And we saw a surge in stock prices and valuation generated a lot of wealth. Just to give you a number, total shareholder wealth in the U.S. today is about $10 trillion greater than it was a year ago. And if there's just even a little bit of what economists call a wealth effect, that is when people are wealthier, they're able and willing to spend more, and they do, particularly the folks that own the stocks. That drives a lot of spending, consumer spending. You can see that in the consumer spending numbers. That's where a lot of the growth has been. So AI should continue to power growth going forward. That is a key part of the optimism for 2026. The other part of the growth story, though, is, as I mentioned, fiscal stimulus, deficit financed, tax cuts, and spending increases on that. And you get a sense of that here. This shows the contribution to GDP from the different forms of stimulus that are being provided. There are tax cuts that are going to businesses in the form of full expensing of investment spending. That'll help support the AI infrastructure build-out, but other forms of investment as well. There's also tax cuts to individuals. That'll show up here pretty soon in the form of much larger refund checks. Looks like tax refunds this year are going to be about $100 billion more than they were last year. That's 2%-3% of GDP. That's pretty consequential. On the spending side, we're going to get a lot of spending with regard to defense and homeland security. That'll be offset by some cuts to Medicaid, the ACA, Affordable Care Act, healthcare subsidies in the SNAP program, which is food assistance, but the net of all that, as you can see, is a pretty significant boost to GDP, particularly early in the year, first quarter, second quarter, and obviously, that's by design in an effort to help support the economy in the lead-up to the midterm elections. But these are really important sources of growth. But there are headwinds. I mentioned deglobalization, and that headwind is still blowing really very hard. And it's most obvious in the labor market, the job market. You can see that here. This shows average monthly job growth over the past six months, six-month moving average, going back to the start of 2025, January 2025. So that shows you that, for example, in January of 2025, average monthly job growth in the second half of 2024 was about 175,000. That growth remained strong right up until Liberation Day. You may recall that's when the president announced very large so-called reciprocal tariffs. That was early April. And since then, the job market has really taken it on the chin. And as of December, you can see job growth has come virtually to a standstill. And this is before all the revisions are in. We're going to get some revisions here, and they're going to be, in all likelihood, downward. It's very possible that we'll see that the economy is actually losing jobs. In fact, the only industry that's adding meaningfully to jobs right now is the healthcare sector. By the way, just as an interesting factor, at least to me, I'm a Philadelphia native. I'm from Philadelphia. Philadelphia is a healthcare center. The job growth over the past year in absolute terms in Philadelphia, there's only two other metro areas in the country that have experienced faster job or stronger job growth. Number one is New York. Number two is Charlotte. Number three is Philadelphia. In my entire lifetime as an economist, we've never even come close to that, but that goes to the healthcare employment growth that we're experiencing. Obviously, this also goes to immigration policy. The highly restrictive immigration policy is really weighing on labor force growth, which has really slowed quite dramatically, so it's impossible for job growth to really pick up to any significant degree because of the restrictions on the labor force, but both demand and supply here are pretty weak, and this is the key vulnerability to the economy going forward, but at the end of the day, these tailwinds, these headwinds should net out to growth, and we should get some growth, particularly, as I said earlier, in terms of GDP in 2026. There are risks. As I said, there are upside and downside risks. I do want to focus on the downside risks, and you can get a sense of that here in this risk matrix. I'm pretty sure I've showed this matrix to the group before. There's a lot to get your mind around, but this is, I think, a useful way of trying to get a sense of the downside risk. The X-axis, the horizontal axis, is the severity of the risk. I kind of think of it like the present value of economic loss if the risk were to occur. So it accounts for the loss at the time of the risk and also the timing of the risk. And the Y-axis, the vertical axis, is the probability or likelihood. Obviously, this is very subjective. We use this at Moody's to help determine the narratives that drive our scenarios that we provide to clients globally. And we do this for the U.S., but we do it for every country around the world, do it every month. If the risk is in green, it's moving in the right direction, meaning less severity, lower probability. You can see oil prices seem to be moving. The potential for an oil price spike seems to be moving in the right direction. If it's in red, it's moving in the wrong direction, more risk and higher probability, and I do want to call out a few of these risks in more detail, beginning with the K-shaped economy. I do think this is something to consider. We are seeing an increasing skewing of the income, wealth, and spending distribution, and you get a really clear sense of that here in the data and some data that we constructed at Moody's. This shows the share of spending that's done by the top 20 folks in the top 20% of the income distribution. That's the orange line, and those in the bottom 80% of the distribution. This is data all the way back to 1990. You can see if you go back into the early 1990s, it's about an equal share. But that has dramatically changed over the past 30, 35 years and the skewing of spending continues on. Just for context, the folks in the top 20% of the distribution account for, they have income of over $175,000 a year. I know that doesn't sound like a whole lot if you're sitting in New York or San Francisco, but if you're sitting in Des Moines or Oklahoma City, that's a lot of money. But the reason I bring this up is because the economy, and this goes to the risk, the economy is very dependent on the spending done by that top 20%. And that top 20% is very dependent on their stock portfolios. And their stock portfolios are very dependent on the valuation of those AI stocks. As long as all those things kind of hang together, and that's the baseline, most likely scenario, we're fine. But that's clearly something to consider. That's clearly a risk. And that gets to the second risk. And that goes to valuations in the equity market. They are high, maybe justifiably, but by historical standards, they're noteworthy. My favorite measure of valuation is shown here. This is what I call the economy-wide price-earnings multiple. The numerator is the ratio of the Wilshire 5000. Excuse me, the numerator is the Wilshire 5000. That's the value of all publicly traded stocks. The denominator is economy-wide after-tax corporate earnings, National Income and Product Accounts after-tax corporate earnings. The typical multiple on average over the period shown back to 1960 is 12. You can see we're more than two standard deviations away from that average multiple. The only other time it's been higher was briefly during the Y2K period. That was clearly a bubble. Not that this is necessarily a bubble, but obviously, expectations are very high. AI adoption rates and implementation rates have to be strong. And it has to show up in the form of stronger productivity gains and corporate earnings growth. Otherwise, investors will be disappointed. And that's a risk. So the baseline is the stock market, AI stocks continue to do reasonably well. I can't imagine we'll have another year like 2025, but reasonably well. But the risk is that we will see a sell-off in the equity market. Finally, I do want to call out, put a stake in the ground. The bond market broadly feels very fragile to me. I'm not the only one saying this, but I think we're hearing an increasing chorus of concerns about the bond market. In my baseline outlook, I'm assuming the 10-year Treasury yield, which is kind of the benchmark for the bond market, will stay roughly where it is today. Last I saw, it was trading at 4.25%. So if you told me, Hessam, that a year from now it's between 4 and 4.5%, I'd say that sounds about right to me. I do anticipate several more rate cuts by the Fed. I'm more concerned about the labor market than the consensus. So I have three quarter-point rate cuts in the federal funds rate target, bringing the funds rate target down to just below 3%, which is kind of the equilibrium value. But the risk here is that we are going to see a dislocation in the bond market, which obviously will have knock-on effects through financial markets and real estate markets more broadly. I won't go through these reasons in detail. I'm running out of time. They're pretty obvious. I will say, though, one thing to note is that the ownership of Treasury bonds has shifted away from price-sensitive investors like the Federal Reserve, like global institutional investors, and even the U.S. banks to very price-sensitive hedge funds that are there playing the basis trade. And of course, the hedge funds are there when times are good, but they leave when times are bad en masse, and thus the potential for significant dislocation. That's a euphemism for a sell-off in the bond market. So that's something we need to consider a real possibility. Not my baseline, but certainly a downside risk. So bottom line, it should be a good year. I think everything's lining up for the tailwinds to outweigh the headwinds. But there's still plenty of things to be nervous about. And at this point, the risks are still more to the downside than to the upside. So with that, Hessam, I'll turn the conversation back to you. Thank you, Mark. Very insightful as always. Let me just zoom in on a few things and ask you a couple of questions about it. Starting with the fact that a year ago, coming into 2025, your forecast was essentially accurate, both in terms of GDP, interest rates, and job growth, those three most important aspects of the economy or economic metrics, I should say, that affect commercial real estate. So looking back, any reflections on how 2025 turned out? If anything, was there anything that you missed or anything that, looking back at it from a year ago, is worth noting going into 2026? I alluded to the fact that I was surprised by the contribution to economic growth coming from AI. That surprised me. It was clear that it was going to be a driver of growth, but not to the degree that it has been, particularly around AI stock prices and the wealth effects that that's generated. So that was an upside surprise to me. And we got a bit more GDP growth than I anticipated. On the downside, I am a bit surprised at how aggressive the administration has been with regard to immigration policy. It was very clear that that's the direction of travel. The president said that in the campaign. It was very obvious. But the crackdown on immigration has been very significant, and it's really hit the labor market hard. So the job growth at the end of the year is zero at best. We may be even losing jobs. That's more negative than I would have expected. And a lot of that goes to the immigration policy was just more significant. As an economist, sometimes you get a little lucky. Kind of you miss on one side, but on the other side, you also miss, and they kind of net out. To some degree, that's what happened in 2025. But those are the two things that stand out for me, Hessam. Great. Focusing on a couple of things that I frequently get asked by our clients to address o ne's inflation. Take a look at the inflation trend. It looks like a battle that has been won by the Fed. The wildcard that really erupted last year in between the early year forecast and where we ended up for the year, of course, was Liberation Day and the tariff factor. Nonetheless, if you look at just pure statistical view on core CPI and PCE, those look like they've moved in the right direction, not quite at the target level of 2% that the Fed likes to see, especially on the PCE. That's one component. I get asked a lot about inflation. And then on the tariff side of the equation, your phrase last year was, "Gee, an initially proposed rate of 27%, which is where we started, a weighted average, would require an off-ramp." The off-ramp is something that we talked a lot about in a similar session last year ahead of having had enough time to see what the tariff and the trade wars were going to actually look like. And it looks like we did experience the off-ramp to a large extent because we went from 27% weighted average proposed tariff rates to currently at about 17%. However, that 17% is still the highest since the Depression-era tariffs. And to some extent, this still hasn't played out yet. Are you worried at all about a resurgence of inflation once companies who have so far absorbed most of the hit from tariffs start to pass that on to the consumers? Or is the tariff factor any kind of a big wildcard in 2026? Well, if tariffs remain roughly where they are on net, and I think that's the most likely scenario, that they stay roughly where they are, then the inflationary effects of the tariffs will start to fade by the second half of 2026. So inflation will be persistently above the Fed's target through most of 2026. And it won't be until 2027 until we're really back to something that most Americans feel comfortable about. And one just tangential point about the inflation, inflation for staples is actually high and much higher. And that's why many Americans feel very uncomfortable with their financial situation. They're paying more for groceries and for clothing and for electricity, that kind of thing. And that's really bothering them, and reasonably so. But if the tariffs stay where they are, inflation will become less of an issue. And this is one reason why, in addition to my worries about the labor market, why I expect the Fed to cut a few more times in 2026. There's also the question of Fed independence, and that might play some role in the second half of the year. But even abstracting from that, I think that'll be the case. There is an upside risk here, though. And that is the Supreme Court is going to rule on the constitutionality of the reciprocal tariffs. And there is a reasonable probability, not inconsequential, that they strike down the tariffs. And if that's the case, it'll cut the effective tariff rate in half. That would be quite positive for inflation, for the economy. Now, the president could respond by trying to impose other tariffs. My guess is he likely won't do that. He'll probably use it as an opportunity to get inflation back in. Again, everything's focused on the election. Of course, affordability is a big part of the conversation around the election. I think he'll use that as he'll say, "Hey, look, the Supreme Court ruled. We'll come back and visit this at some point in time. But right now, we're going to let them stand and use that as a way to get inflation back in." That's an upside risk. The downside risk was highlighted by the recent events over Greenland. The president still is willing to use, at least rhetorically, at least in a performative way, tariffs as a cudgel. That's a possibility that he actually goes through, follows through at some point in 2026 on higher tariffs. That would be a problem on lots of different levels. I think the most likely scenario is tariffs remain where they are and that the inflationary effects begin to fade, particularly in the second half of the year. Then one other thank you, Mark. One other factor here to talk about is the disconnect between the federal funds rate and the 10-year Treasury. You're expecting the 10-year Treasury to be range-bound between 4% and 4.5%. We're sitting at 4.3%. The reductions by the Fed have done nothing, literally nothing, to move the 10-year Treasury yield because the market forces are driving that. One thing you mentioned is the profile of who's buying Treasuries has changed a lot. Much less long-term, less price-sensitive investors have been replaced by more speculative and shorter-term investors. But this disconnect is interesting for us to see for commercial real estate in that it's really the long-term rates that drive the cost of financing for our industry. Put on top of the disconnect here, the change in the Fed, the head of the Federal Reserve, with Powell's term ending in May, between that and the Supreme Court potential ruling on tariffs, is there going to be a lot of chaos? Is there going to be a lot of volatility and noise in the market? Should we be expecting some turbulence around both of those? Well, I think turbulence is definitely in our future. I mean, there's a lot of drama, right? I mean, we see that almost every day. The market, the bond market in particular, is just much more volatile because of some of the shifts you talked about in terms of ownership, but for a lot of other reasons. Valuations are high in the equity market. In the corporate bond market, take a look at corporate bond spreads. They are paper thin. You rarely see them as narrow as they are. I think we are going to see a lot of volatility in rates. As I said in my remarks, I do think there is a reasonable threat that I use the word dislocation. That's a euphemism for a sell-off, a spike in long-term interest rates. I can't forecast that in the baseline, but I think the risks of that are not inconsequential. I would say, though, Hessam, I wouldn't view this as a disconnect. I would view this as a normalization. I mean, it's just the yield curve is just normalizing. So if the 10-year yield stays roughly where it is and the federal funds rate goes to 3%, that spread, 125-150 basis points, is kind of an average typical spread. So I view it more as a normalization than a disconnect. Great point. Something unusual. Great point. Thank you, Mark. Let me shift the discussion over to commercial real estate by first giving the audience a big picture graphic on what's happening with the major property types, with apartments essentially posting fairly stable vacancy rates below 5%. Same thing with retail. The office market, everyone knows, has been through a lot of volatility, really, because of a demand shock, and that is beginning to recover gradually. And the industrial market is reeling from a surge in construction, which we'll talk about in a moment. But at a big picture level, it seems like the fundamentals, except for industrial, which we'll address here in a moment, are moving in the right direction. Focusing more on the supply side of what is happening, it's pretty amazing to see that the forward-looking trend on increase in stock for the major property types is starting to reflect a major pullback in new starts. That, of course, is most profound in the most active product types, apartments. We've seen a lot of construction in the last few years and industrial with literally a surge that we saw post-pandemic. Retail, not so much. We've seen a very, very limited amount of new product for all the obvious reasons. And the same thing with the office market. But the supply side is painting a very positive picture, which is just in time if the job market is going to slow to the degree that it has or potentially, even, as Mark said, with some revisions, point to some net employment losses. Zooming in on the housing part of the equation, what's quite remarkable about the apartment market is the 72% drop from peak in multifamily starts and over 50% drop in units under construction. That is a profound shift. And it'll affect the most active markets, of course, because there's only about 10 or so metros that have significant construction as a percent of their multifamily housing base. And those 10 markets usually account for 40%-45% of the total inventory of new product nationwide. So it will have a big effect on Dallas, Houston, Atlanta, Phoenix, Austin, many of the markets that have seen a lot of construction. From a demand perspective, it's remarkable to see the affordability gap hit levels that we've never seen before. Only 28% of Americans can qualify for a typical first home purchase. And the gap between the average rent versus the median price home mortgage payment is as wide as it's ever been. With that, we see, obviously, a major underpinning for demand. Renters are staying renters longer. Renewal rates are showing the effect of this trend. Yet there are concerns about operations, insurance, labor costs. And most of our apartment clients, owners across the country, private and institutional, are not really all that excited at reporting fantastic operational results or rent growth. It's in the pipeline, given the pullback in construction and this strong indication of demand, but it's not quite there yet. So let me welcome Sharon Wilson Géno to the session. Sharon has more than 30 years of experience in the housing industry. She's done a fantastic job in taking over the leadership of National Multifamily Housing Council (NMHC). NMHC is the most effective organization in educating lawmakers and advocating for the apartment industry, including, and most importantly, starting with the renter, because it is the U.S. consumer and the renter that we all serve. And their interests are really the focal point of everything from the affordability issue to adding new supply and many other regulatory components of the industry that NMHC advocates for and educates. Sharon, welcome to the session. I thought I would start with just asking you for some general observations about some of the trends that I showed, some of Mark's comments about the economy, and I did put this slide together to hear your thoughts about the federal policy proposal that had come out recently to improve the housing market dynamics, which I think would be interesting for our audience to hear about. Sharon, welcome to the session. Thank you, Hessam, and I appreciate the opportunity to be here and appreciate our long-term partnership with Marcus & Millichap IPA. You guys are incredible partners for our advocacy work and our thought leadership and other things, so really appreciate that, not just today, but every day. Lots of interesting things, obviously, going on at the federal policy level. We're coming into an election year, which changes the dynamic a little bit. There's always tension in every administration between the policy people that are driving the policies that come out of an administration from an economic side and the political people, particularly in an election year. You're seeing a lot of that happening right now, and most recently, and specifically, the president's announcement yesterday around the proposed limitation on the acquisition of single-family homes. Honestly, that's one of those situations where you can see the politics that are increasingly rising to the surface in polling data around affordability, around it's polling well for voters to perceive that corporations and private equity are hurting them, and also, more acute concern around housing affordability, but a lot of that is driven, to your earlier point, around the single-family side. You saw that gap between single-family and rental. And while rent increases have ameliorated, as you pointed out, over the last year or so, largely due to an influx of new supply, we are keeping our eye on exactly what you said, those really tremendous reductions in starts starting around 2022, 2023, given increased interest rates and other things. So you've got this proposal out there that, again, we've had really good relationships with this administration around housing. They want to be the housing administration. They really get it. But you saw that proposal really being one that I think is much more politically driven than not. But even in that proposal, you see opportunity for creating definitions, working with the Treasury on how that actually plays out. We put out positions that we are very supply-focused, and we will work with this administration on defining things in a way that will help us continue to increase supply because we know ultimately that is the answer to affordability. In terms of access to 401(k)s and the possibility of the GSEs doing large MBS purchases, again, those are opportunities to, in theory, opportunities to put more people in a position for homeownership. But again, all demand-side solutions, and these effectively are, depend on supply. If you don't have single-family homes available for first-time purchasers, which is what these are largely targeted at, and we don't have that right now for a variety of demographic and other reasons, people will continue to be in rental housing. And rental housing is an important part of that continuum of people that make a choice to purchase at some point in their life or maybe don't and decide that it's better for their lifestyle to be a lifelong renter. Nothing wrong with any of those choices. So while these particular proposals focus on bringing people into that homeownership component, none of that happens overnight. And rental housing will still be an important place for people to live, even if they are taking advantage of some of these proposals, which may, in fact, not happen overnight and be around the edges and not be a fundamental shift. Thank you, Sharon. Overall, do you expect 2026 to be a better year for operations and rent growth because of the supply pullback and the underpinning of a very strong demand picture? About the same as last year or worse? I should give you a multiple-choice question. About the same as last year, better or worse? It's a little bit of a mixed bag, and I'm not just hedging on it. If I have to pick one KPI that I watch very carefully, it's absorption rates. And absorption rates tell you a lot of things. They tell you about demand. They also tell you about supply, and they tell you about how fast the market is correcting for different supply and demand dynamics in various markets because people are obviously, if the absorption is still happening, particularly in markets that have additional supply like the Austins, the Phoenixes, the Nashville, and others, it's because the market is adjusting and doing concessions and other things to make the absorption rates work. We're still seeing that. The absorption rates remain pretty much at historic norms. So there remains demand, and we see that going into 2026. I think the big factor is highlighted in Mark's presentation is what happens with job growth. Homes are where jobs go to sleep at night. And the demand continues that curve to be as strong as job growth remains, at least at some level, where that demand curve can continue. And then, of course, to your other point, so we're seeing this curve of the absorption moving into 2026, particularly on that historic delivery over last year and maybe even through 2026 into 2027. But undeniably, you cannot deny that significant drop-off in starts beginning in 2022, 2023 that will come to roost here, we think, last quarter of 2026, first quarter of 2027. And even if demand and job growth goes down, you could still see demand for housing go up because you're going to have such a shortage again. Great commentary. Thank you. Let me switch over to the office and industrial market real quick. Amazing to see some office market recovery in vacancies. It's the first time we've seen that in a number of years, of course, since the pandemic when there was the ultimate demand shock of working virtually and not seeing people come into the office. The office market has not had an overbuilding problem for a long, long time, and it's been a demand problem. The good news is that the daily attendance with companies insisting that workers come back into the office has improved the picture significantly, and it continues to improve. I mean, look at where on the left side of the equation, look at where the year-over-year increase in daily office visits are coming in, about a 10% increase. The market's way ahead of that. And on the right, you see where we are relative to a pre-pandemic level with a significant amount of improvement. I'm not sure that we'll ever get back to pre-pandemic daily attendance, but the trend is definitely moving in the right direction. And what I've always said in pretty much every media appearance, every opportunity that I get is to never judge the book by its cover. The office sector is not just one thing. There is so much variety of product and market trends. This graph was put together just to illustrate the vast difference in vacancies of older urban product, around 27%, versus smaller, newer product in the suburban markets at about a 10.5% vacancy rate. In so many ways, the office market, I view, is the diamond in the rough. We kind of said that over a year ago. You're seeing the significant discounts on distressed office becoming a catalyst for lots of distressed transactions. Again, healthy, performing office buildings are not trading for major discounts, and nor should they. On the industrial side, what has been quite remarkable to see is the post-pandemic surge in construction, as I mentioned before, really driving vacancies to the highest level we've seen in a long time. That's not been a shortage of demand. And there's a lot of transition happening in the industrial real estate market because of the need for modern facilities on the warehouse distribution front. It's a constant pressure to modernize the properties, their locations relative to the ever-evolving consumer trends on e-commerce and proximity to consumers with delivery efficiency. That change itself is basically rendering a lot of product obsolete. That is happening at a record speed within the industrial market. And there's also a big bifurcation toward where the vacancy pain is really concentrated. It's really the larger assets, which is where the concentration of new product is. The more private investor-owned, smaller to mid-size warehouse facilities or even light manufacturing incubator space has not seen in any way, shape, or form an overbuilding problem with vacancies at a very low level. And you see the sort of range of what we're seeing in the marketplace. Of course, energy is a huge topic related to data centers. Data centers have become a whole subset of the commercial real estate industry in the last five years or so. What is happening on the demand side of the equation and utility rates in consumption in general and what's happening with the niche that has emerged within commercial real estate is quite remarkable to see. That is a component of what we consider the industrial market that really has its own momentum and its own dynamics. At this point, let me just stop and bring Marc into the discussion. Marc represents NAIOP, which is an organization with over 20,000 members within the office and industrial marketplace. He has over 30 years of experience as well. We're very proud of our partnership with NAIOP. So, Marc, let me just turn it over to you with some general observations about the office and industrial market. And if anything, you can add to the data center discussion and add to Mark's perspective. Yeah, happy to do that. And by the way, it seems 30 is the magic number. It's your 30th year. Obviously, today your anniversary. Sharon and I both with 30 years' experience. Perhaps we don't want to go back to the Sesame Street counting up that high. But other than that, your slides paint an interesting picture. And let's start with office first because I think that that's when we look at a lot of commercial real estate, it's the asset class that's probably had the most attention drawn to it. Certainly when you look at the press, everything that the sky was falling, the sky was falling. I think Chicken Little is done running around saying the sky is falling. Now, that doesn't mean we're looking at market improvement yet. A couple of things that we're seeing here in NAIOP. First, we do twice a year an office demand forecast. We just released our most recent one in Q4 of 2025. What we saw in that looking forward is positive net absorption for the first time in a couple of years since we've been doing this. Now, part of that is actually looking at what happened most recently towards the tail end of 2025 when, again, for the first time in a while, we saw positive net absorption in all four of the major census areas, whether that's the Northeast, the South, the West, the Midwest. We finally saw some improvement there. And you showed a graphic that showed the industrial, excuse me, the suburban versus the inner office. But I think one chart too that would illustrate an interesting point is what's happening between the classes in that you look at Class A, you look at Trophy and Office. They're performing exceptionally well. And it doesn't really get all the press on that. Undoubtedly, B and C class buildings, sure, they're older. They don't quite have the amenities because it's amenities that are really helping change the narrative on that. It isn't that companies are using less space per se. They're just using the space differently. And I think that's part of the office narrative as we continue to go forward. I'll just add one more thing quickly on office because you did show the slide about where we're seeing better return to office, better usage of office. I believe we saw Chicago in there, certainly San Francisco. I mean, San Francisco was probably the one city immediately post-pandemic that we heard everybody talking about it. Oh my God, look at all the vacancy rates, particularly in the San Francisco CBD, but that's changing, and AI companies are undoubtedly helping to fuel that, but there are other cities, and you can see them right here on the chart, Chicago, Austin, continuing to do better than they had, seeing the noticeable improvement, and I think we're going to see that eventually in other markets as well too, but let's talk about industrial. That's one of the other areas you talked about, which is a little bit of the opposite of office. We saw this incredible boom in construction. I mean, just unheard of numbers of new industrial properties coming to market. But I don't think it takes Mark Zandi here, a type of economist, to tell you supply and demand. We had a lot of supply come online there. Well, the demand couldn't quite keep up. And we saw that, and we're still seeing that with the vacancy rates. We saw negative net absorption in the industrial market in, I believe it was Q3 last year. It was the first time in a long time. But again, the laws of supply and demand tend to work well. We have not had nearly as much product in the pipeline. What I'm seeing now in terms of product that's under construction, we're looking more at levels where we were pre-ecommerce boom. It's steady. It's not an insignificant amount. It's just not the salad days we saw in the post-pandemic time. But I do think we're getting back towards that equilibrium. I wouldn't say that this is the asset class quite yet where I think we're going to see the returns we saw a few years ago. But I do believe we're still looking at something that's pretty steady. And then there are data centers, the topic that everybody loves to talk about. You don't have to, I don't care what new site you choose, data centers is always going to be top of mind. And here we have an interesting thing. When I look at our sentiment survey, we ask people in the development community, what property type are you going to be working in in the next 12 months? And we really expanded this to include data centers beginning in the fall of 2023. When we did that in the fall of 2023, only 1.8% of our respondents said in the next 12 months they'd be involved in data centers. Just two years later, it's up to 12%. I expect that to continue to grow. It's still a strong performing asset class. There's a lot of demand for it. But there are headwinds out there. Energy, affordability, those issues. You have a public perception that it is the data centers that are driving up electrical costs. You mentioned it, Mark mentioned it, Sharon mentioned it, affordability, and affordability is going to come down partly to utility bills as well too. This is where data centers are really catching an awful lot of fire right now is because there is a perception out there that it is driving up the utility costs for homeowners, for renters, and it's a tough thing. It's an easy target to blame. And I also think there's a little bit of resistance nowadays on data centers. And I'd be curious if Mark has seen some research on this. But I believe there's a little bit of a perception when it comes to AI that it is data centers and AI's responsibility for taking away jobs that gives a little bit more of a negative perception to the data center as well too. They're not adding, let's say, the number of jobs a normal distribution warehouse would, but also that AI kind of fuels at least the perception out there of taking away jobs. So I know that's a lot in a short amount of time, but. Well, you covered a lot of the critical points, which we really appreciate. Mark, any comments about whether we're really seeing job displacement because of AI? It seems like AI is, at this stage anyways, boosting productivity, which is a good thing for the economy, but you could have a situation where you're getting a lot of output, GDP, profit growth, but not necessarily as many jobs, which is what drives demand for various kinds of structures in commercial real estate. Any quick thoughts on that, just very quickly? Yeah. I mean, I think to date, the impact on productivity from AI has been modest. There's some evidence that it's affected hiring rates. One reason the job market is as weak as it is is hiring rates are very low and particularly among larger companies where adoption rates of AI are higher, they're, I think, waiting to see how this plays out and what kind of impact it will have on their job labor market needs. You can also see it among young people and in the tech sector. So there's some evidence that there's been some small impact on productivity growth. But I would anticipate some significant increase here. I mean, certainly investors are expecting a significant increase. I mean, they're not going to get the earnings that they anticipate unless we get these big productivity gains. And so that's another risk to the job market and to the outlook, right? Because if we're not creating any jobs now and the AI effects have been small, what happens when the AI effects start to mount? So that's something we need to watch in 2026, another potential risk. Thank you, Mark. Let me just make sure we cover a couple of the aspects of the retail fundamentals. We have a lot of retail investors on the call. We're incredibly proud of our market leadership in both shopping centers and single tenant and net least retail. And I will say that when I was putting this slide together, I was happy to be able to reflect what I'm hearing from all of my travels, including yesterday here in Washington, D.C., at the Real Estate Roundtable of various product type rankings among investors, private and institutional, with retail still coming in as the top choice. Retail has had 15+ years to reinvent itself. The notion that retail was not really overbuilt, it was under-demolished, was accurate. And that demolishing of obsolete space and repositioning and reimagining of obsolete shopping centers and retail structures has occurred to a large extent. And now we have a consumer base that's not just driven by the higher-end consumer with luxury goods. Certainly, that's an important segment. Because retail has become so much more experiential and really the three Fs, food, fitness, and fun, driving foot traffic. If you look at restaurants and bars, for example, huge, huge trends on the positive direction, way outpacing grocery sales. The consumer in all categories is seeking the fun, fitness, and food component of retail, shopping center visits, and so on. The trends in retail have been very positive. Shifting gears toward pricing and investment trends and so on, I wanted to show the very important point of price adjustments and cap rate adjustments in the fact that we've seen a significant amount of movement in the cap rates somewhere around 100-150 basis points. Apartments, for example, showing cap rates moving up about 100 basis points. Office, 150 basis points and other product types somewhere in between. The price adjustments that are driving these cap rate movements, if you take a look at the spread between interest rates and cap rates, when they narrowed as much as they did versus the 10-year Treasury yield, we saw the market basically come to a halt as interest rates were going up and cap rates had come down so much prior to the Fed taking a sledgehammer and increasing rates by 500 basis points. That narrowing of the spread was a shock to the marketplace and needed 18-24 months of price recalibration and price resetting. That resetting has occurred to a large extent. And we're seeing a huge amount of interest by new buyers, experienced buyers, capital coming back into the market because we're now seeing the opposite of that narrowing with the trend showing a widening gap as cap rates have gone up and interest rates have come down. This is the most important indication of where trading volumes are headed, which I was interested to see how it would compare to the Mortgage Bankers Association and the ACE forecast of loan volume and financing activity, both refis and transaction-related financing, which is pointing to a 24% increase in their forecast for 2026. So with that, let me just do a quick reality check starting with Sharon. What are you hearing from your member base? NMHC is represented by private and institutional apartment owners. Are you seeing a return of capital and 2026 being a net buying period, or are you seeing more of a neutral stance or maybe even net selling? What are your observations about capital flows this year? Yeah, I think we'd all hope this would happen sooner. But I think you're increasingly seeing people, deals that have been on the shelves or deals that were coming up on maturities, that there was a little bit of extend and pretend. People are like, okay, the coast is clear. We're seeing a lot more activity now. People feeling like the capital markets have settled sufficiently for them to step back in. And plus, a lot of them are looking at exactly what you highlighted earlier, that incredible drop in new construction that's been happening over the last 11 or 12 quarters that we've been tracking it. So you've got opportunity for getting a return on your investment much sooner if you hit it right and your new acquisition or your new development hits during that time when we're going to see that shortage really come back to hit us. And I think it has the potential if demand remains strong and job growth picks back up, that it has the potential to be even worse than it was coming out of COVID. Interesting. It's also interesting to see how higher quality Class A, newer assets are getting multiple offers and actually seeing cap rate compression while the older Class B, B-minus assets have a very shallow buying pool, which means there's more price adjustment to come in the lower end of the market. Marc, let me shift gears to you on capital flows and investment trends expectations for office and industrial. Yeah, overall, our membership is a lot more positive and optimistic about the direction of cap rates than they've been in about a decade. Our latest sentiment index showed a real improvement with this. And there's a real expectation over the next 12 months for an increase in deal volume as well too. So I think we're at a much more favorable point now than we were when we met a year ago in regard to this. It's certainly reflected in where our members are seeing it going. And if you take a look at a lot of the other kind of sentiment forecasts within the industry, it's very much in line with where NAIOP is at right now. And I think there's a lot of good reason for that optimism as well too. Well, that's great to hear. I do think that the market is sort of past the worst of what we've seen related to tariffs, related to interest rates, related to all the volatility around what the Fed may do and then message all the confusion around lowering of rates and then messaging that that might be it for a while, yet following up with another reduction and rinse and repeat, which caused a lot of confusion in the marketplace. Given this slowing job market, given the inflation having come in quite a bit, I agree with Mark's viewpoint that at least two, maybe three rate reductions are to be expected this year. And more importantly, though, for so many real estate investors that have been waiting for the 10-year Treasury to come in significantly, which really drives more of our cost of debt for the industry, a miracle interest rate miracle on that is highly unlikely, which means that each asset should be evaluated on its own merit and really the portfolio position of each asset and the long-term strategy with each asset. And with that, those investors that moved into the market first have already benefited from that decisiveness. And our job is to really try and decipher each individual transaction and each individual capital deployment strategy, which we're very proud to be a part of with all of you. I want to take a minute to thank this amazing panel. Mark, Sharon, Marc, thank you very much for the time and the wisdom and the information that you shared. Please never hesitate to let us know how we can improve these sessions, how all of our professionals across North America can be of further help, and how our research content can be a part of your decision-making. With that, let me adjourn the session and thank you again for your time. Thank you. Thank you.