Coming Up: Optimism about a continued real estate rebound in 2026

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Spencer Levy
We've asked a lot of questions this year, but for our audience of occupiers, investors, lenders, and developers, we hear that there are some fundamental issues that we all wonder about when it comes to making real estate decisions. How do you feel about the market? What assets or areas are you looking at to find value? Where do you see the business heading? This time of year seems like a good one to reflect and explore such bottom line basics. So on this episode, we head back to the recent ULI conference in San Francisco, where a major investment leader opens up with his assessment of the moment and his positive outlook for what's in store. 

Josh Myerberg
Our perspective is your entry point matters a lot. You've got to choose the right sectors, you've got to choose the right operators, and you've got to choose the right assets. 

Spencer Levy
That's Josh Myerberg, a Managing Director at JP Morgan Asset Management and Head of Portfolio Strategy for Core and Core Plus Real Estate in the Americas. Josh and the platform's global team oversee around $79 billion of assets, the company's flagship real estate business. Coming up: on stage at the ULI in San Francisco with portfolio Insights from a real estate leader at one of the most recognizable and influential brands in the banking world. I'm Spencer Levy, and that's right now on The Weekly Take. 

Spencer Levy
Welcome to a live taping of The Weekly Take podcast, and I am delighted to be here in San Francisco with my friends of Retail ULI and my good friend Josh Myerberg from JP Morgan. Josh, welcome to The Weekly Take. 

Josh Myerberg
Thanks, Spencer. Great to be here. 

Spencer Levy
Great to have you here today, Josh. Right now, interest rates are coming down, albeit slowly. The market environment seems to be getting better. Big picture right now, portfolio strategy, what's your first thought in the morning when you're thinking about how do I best construct this portfolio? 

Josh Myerberg
Look, it's a very dynamic time in the market, and we'll get into this later. I gotta tell you, I'm very optimistic about twenty twenty six. So it is all about making sure that our portfolio matches the market today. I inherited a portfolio when I joined JP Morgan. I could not be more pleased about what we own. I think the market has really come to us. We'll talk about the growth in alternative asset classes. That's a key theme in our business right now. But there's a lot of really good stuff that we already have in our portfolio, and I think it's just a matter of making sure that we continue to meet the market for our tenants and in the capital markets. 

Spencer Levy
Well, I was gonna wait till later in the show for this drop the mic moment, but I'm just going for it right now, Josh, because I'm kind of like in that mood. I’ve got a lot of very good friends in this room and they will back me up on what I'm going to say. Six or seven years ago, I was walking into great clients like, Morgan Stanley, where you're from. And I used to say open-air retail is the most undervalued asset class in real estate. And you know what you did, Josh? You threw me out of your office. Times have changed. That's now our number one investment idea. Since we have a bunch of retail folks out there, let's go right to the heart of it. Where's retail in your point of view? 

Josh Myerberg
I am thrilled about what's going on in the retail space right now. 

Spencer Levy
And that's the end of The Weekly Take, folks. Thank you very much for coming out today. 

Josh Myerberg
Well said. Look, we actually have a great retail portfolio. We are having great results across our retail portfolio. We own mostly strip centers. We also own some very high end malls. We are seeing double-digit lease trade outs. So that's rents on new leases relative to the leases that are rolling over, sort of mid teens lease tradeouts across our strip centers. We're seeing similar results across our malls. Retail is really hitting its stride. And to your point, Spencer, I would never kick you out, by the way. 

Spencer Levy
You'd be the only one, but okay. 

Josh Myerberg
I would never kick you out. But the world's really come back to retail and it's great. I remember sitting with one of our LPs in my Morgan Stanley days, probably six or seven years ago, and he said to me, I don't think retail will ever be an institutionally investable asset class again. And in the last twenty-four months, retail has been the best performing sector in ODCE. So the world's turned. The world has come to everybody in this room. I think it's great news. 

Spencer Levy
What's changed in the core outlook that's making so many people move beyond the big four or the big three and a half? 

Josh Myerberg
Yeah. Look, retail is one of the OGs, and I'm glad that it's finally coming back. My gut is you're actually gonna see core funds coming back into retail for lack of opportunities in other sectors. We'll get into office later, I hope. The office story is a very intriguing one, but that has been out of favor and has replaced retail as the underinvested and out of favor asset class across ODCE. And I think for a variety of reasons, people have chosen to get into alternatives. First of all, I think the broader theme in alternatives going back more than a decade is that there's a risk premium in alternatives that is ultimately going to collapse as those asset classes institutionalize. That risk premium for the most part has compressed. And if we are intellectually honest with ourselves, alternatives are priced pretty dearly right now. A lot of people in this room probably gotten into ethnic retail. Our observation about ethnic retail is it now trades inside of regular way strip centers. It's harder to buy alternatives. And so when it comes to alts, our perspective is your entry point matters a lot. You gotta choose the right sectors, you gotta choose the right operators, and you've got to choose the right assets. And if you're just gonna go buy regular way alts, and this is the strategic direction in portfolio construct land, this is window dressing at some level if you don't execute it right. 

Spencer Levy
I was a big fan of ethnic retail for the same reasons it’s doing well today. And the reason why was it was when people looked at traditional credit metrics, a lot of the ethnic retail didn't pencil because the credit was not there. But the sales per square foot were far in excess of what you were getting in traditional retail. So when you look at what I call alternative credit metrics, meaning underwriting it based on performance, not based upon what the rating agencies think, that's where you might find opportunity in ethnic retail, but in other places. Would you agree with that? 

Josh Myerberg
Yes, I agree. And I think that's true of most alts. You are part of that risk premium that was observable is one it was not an institutionalized asset class, but two, you are making trade offs in the credit that you are underwriting. Yeah, whether it's ethnic grocers, whether it's mom and pop operators, whatever else it is, you're making trade offs in the quality of the credit that you're getting. 

Spencer Levy
Are you solely in the United States or do you look more broadly than that? 

Josh Myerberg
In terms of the funds that I oversee our mandate is in the US, our investor base though is global. 

Spencer Levy
Okay. And for your global investor base, I say all the time your city is immobile, but capital and labor will go to where the best opportunity is. What do you say to those foreign investors trying to come here versus Europe or Asia? 

Josh Myerberg
That was a good softball for me. I give them the same speech I give domestic investors, but look, 2026 is set up to be a very good year. Good news is there's only been three material repricings of commercial real estate in the last 50 years. We've just lived through one of them. And the other good news is the bottom of the market has kind of been achieved at this point. ODCE over the last five quarters, and I'll use ODCE a lot, so that's the core index, open and diversified core equity index. ODCE turned positive five quarters ago. So we're bouncing along the bottom at this point. There hasn't been a ton of appreciation. We've looked at the last two downturns because there's consensus that the market is down here. But the question is what is the shape of the recovery going to be? So we studied the early 90s and we studied the GFC. Those are the last two downturns. In both cases, the common thread was too much supply and excessive leverage. And we can debate whether either of those manifested in this cycle, but I don't really think so. Generally not. What manifested this cycle was rates. Historically, weirdly, real estate returns have been relatively uncorrelated to rates. But in this downturn, they were almost perfectly correlated to higher interest rates. So the reason why I'm so optimistic about 2026: Fundamentals are good, and the thing that has been holding us back as an industry has been higher interest rates. Well, we've gotten two Fed cuts in the last month plus. Our house view is that we're gonna get another two to three Fed cuts by the middle of next year. The last point is we've looked at a bunch of really wonky forward-looking metrics like inflection points and debt mark to market in ODCE and the Move Index. You know what the Move Index is? 

Spencer Levy
I do not know what the Move Index is. 

Josh Myerberg
I don't either, but it is a measure of bond market volatility. 

Spencer Levy
It sounds fancy. 

Josh Myerberg
It does, I agree. The Move Index is a measure of bond market volatility that I'd never heard of before a couple weeks ago. We've looked at a bunch of these leading indicators. Most of them seem to point to appreciation accelerating by the middle of next year. So lots of reasons to be optimistic for 2026. 

Spencer Levy
Great, well, you keep bringing up the office word and and I'm seeing all the institutions now coming in buying. Does this remind you of where retail was six years ago? 

Josh Myerberg 
Absolutely. And by the way, we've used the mall analogy for what happens to the lower end of the barbell. I'll give you a quick office quote that I'm sure you've used before as well, Spencer. 

Spencer Levy
If it's good I'm gonna use it again. 

Josh Myerberg
60% of the office vacancy in this country is in the bottom 10% of buildings. The top 40% of office buildings in this country have almost no vacancy. And does this sound familiar to everybody in this room? Sounds a lot like the mall world to me, you know, six, seven, eight years ago and what we've lived through. We clearly need to get rid of some office buildings in this country, but there are so many good green shoots in the highest quality buildings. We are seeing leasing momentum pick up across our portfolio nationally in office. It's a great sign. I know we want to talk about San Francisco a little bit as well. We are seeing so many good positive signs in office leasing in the Bay Area and in San Francisco. I met with one of our leasing teams yesterday, and a metric that I pay attention to is I call it Years of Supply in office. So that's a very simple metric. It's what is my demand at any moment in time relative to the vacancy in that market. Years supply in San Francisco topped out at about six to seven years. Today, we're about three years. Demand is at pre-COVID normalized levels, and we're just seeing such great momentum. And the same thing is true in New York. We're seeing very positive signs in Boston as well. The market has really come back very quickly. 

Spencer Lev
San Francisco, like New York, has irreplaceable, durable demand drivers. Very simple. Infrastructure, capital talent, intellectual talent, and dare I say it, the cool factor. And I knew San Francisco would come back for those reasons, because it was disfavored by institutions, and New York is now facing that same challenge because a lot of institutions are scared away. What do you think? 

Josh Myerberg
Yeah, look, we've seen kind of a renaissance in New York. One of my first trips when I joined JP Morgan was to tour our New York office portfolio. And I hadn't seen office leasing brokers happy in like two years. And they were practically giddy at the momentum that they were seeing in their leasing, and again, that was 15 months ago. I think there has been incredible capital markets momentum around New York office as well. But look, it takes real courage to invest in office right now, and you only want to own the best. But we're bullish on the high-quality office that we own.

Spencer Levy
You mentioned earlier on how big of a piece of your portfolio is now alternatives right – and I'm trying to remember the term you used about alternatives in terms of the risk premium and your adjusted return – but there's another aspect of alternatives that I think needs to be addressed, which is the operational aspect of it. And when I say the operational aspect of it, and by the way, I don't work for this company, I always use the example of Buc-ee’s. Because Buc-ee’s, who here knows who Buc-ee's is? It's a retailer, of course they do. I was in San Antonio recently with my kids, and we're staying at some fancy golf resort, and you know, fancy pool, big water slides, $20 piña coladas. What did they want to do every day? They wanted to go to the gas station. And I'm like, why? And I went there, and I dare I say it, my Texas friends in this room, I apologize for this. The best brisket sandwich I've ever eaten at a gas station. Well, period. It happened to be at a gas station. Here's my point. Buc-ee’s took a sad song, gas stations and convenience stores, and made it better by operating better. I think it's a lesson we can learn in other forms of real estate and why we're going into alternatives. Now, Buc-ee’s may not be your example, but operational risk. 

Josh Myerberg
Yeah, look, I keep hearing this by the way, that all of a sudden operational excellence matters. Operational excellence has always mattered. I was at PREA a couple weeks ago, and this I think tells the story very well. On the main stage, one of the big LPs said, coming out of COVID, a monkey could have invested in commercial real estate and made money. And the math proves that out. All you had to do was own more industrial and more residential than you own retail and office, and you are good. Well, and by the way, you go back and you look at the history of capital markets during zero interest rates, and there was no differentiation in quality, right? Quality of management teams, there's no differentiation of quality of assets. This is true in the stock market, it's also true in the real estate market. So I think that's why people are saying operational excellence matters again. Operational excellence has always mattered. 

Spencer Levy
But here's the other thing. When you take a look at those asset classes that have been institutionalized over the last 20 years, you point to things like self-storage, SFR-BTR. Now we're looking at IOS, industrial outdoor storage is another area. Why weren't they institutionalized before? Two reasons. One, small and gritty. And number two, operational costs were too high. Once you institutionalize them, that operational cost deferential changes. Is that kind of how you see it? 

Josh Myerberg
I completely agree. And I agree with your premise. Operational excellence has mattered for the big four forever. I think it matters more given the esoteric risks that you take on with alternative asset classes. 

Spencer Levy
Got it. Well, there's a lot of other I guess you could consider data centers an alt. And it is probably the one area right now where I would say when people say, Well, we're gonna do something other than the big four, that's where the bulk of their money is going. Any point of view on that? 

Josh Myerberg
Yeah, my point of view is number one, I don't have the IQ to assess what's inside a data center. That's why I'm in real estate. Number two is, you know, as we do the math, and this is back of the envelope, the vast majority of value in a data center is actually the stuff that's inside the four walls. It's not the real estate. The third point is when I joined JP Morgan, I went on a listening tour of maybe 30 or 40 LPs that were investors in our funds. And I don't think I have ever seen a more polarizing topic among LPs. Half the investors said, I love this stuff. The demand's off the charts, I think this is just gonna fly off the shelf. The other half said, I wouldn't touch this with a 10-foot pole. I don't see the liquidity, I don't know what the capital cycle is going to be given the guts of the building. So we have not been investors in data centers. 

Spencer Levy
 I think that Josh brings up a key point here. Data centers right now are one of the more controversial areas within traditional real estate investors. In fact, we had on the show the other day the gentleman who runs triple net for New Mountain Capital. He wasn't buying data centers, but you know what he was buying? He was buying manufacturing sites, actual manufacturing sites, because for the same reason – and again, the reason why when I go to events, I always talk about all asset types, because you see analogies. I see analogies to ethnic retail. Why? Because you're dealing with a form of asset that might be in a secondary market, it might be a high capital cost, there might be no alternative use. So if you use traditional credit metrics, you're not touching manufacturing. But you know what? If it's mission critical, which is what this guy said, more real estate investors should look at it. What do you think? 

Josh Myerberg
We are all in on this thesis. And you're very good at prompting me for long monologs, so I'm gonna go off on another one right now. 

Spencer Levy
You have me monologuing again. You know what movie that's from? 

Josh Myerberg
No. 

Spencer Levy 
Anybody? Come somebody knows it. Who said it? The Incredibles? Thank you. See that? This is 

Josh Myerberg
Amazing. Okay. I'm going to monologue then. Look, high-powered industrial is fascinating to me. I've been buying industrial for 20-plus years. I've done multiple studies during the course of my career about what drives returns in the industrial sector. And when I say high-powered industrial, by the way, we are talking about advanced manufacturing. We're not talking about data centers. The power requirements are vastly different. Over 20 plus years, we've done studies. We've looked at dock doors, we've looked at clear heights, we've looked at truck courts. The only thing that has predicted success in industrial historically has been proximity to people. And what adjunct to that would be proximity to skilled labor, depending on where you are. As a country, over the last 20 years, we have decided to build 4.5 billion square feet of warehouses and about 400 million square feet of manufacturing. Demand for manufacturing space has gone up 50% every year for the last five years in this country. We talked about it a little bit, but it is a bunch of policies out of DC, the onshoring of critical industries that's really driving this. And so what is fascinating to observe, and again, I don't have the IQ to assess the inside of data centers, I also don't have the IQ to assess what good power is, but we run the numbers. There's a line at 4,000 amps of power in a building. Above 4,000 amps, in our portfolio, we have seen returns in the low double digits over the last year. Below 2,000 amps. So those are going to be buildings that are basically for warehouse and distribution. They're the buildings that we imported goods from overseas, we put them in a box for a week or a day or whatever else it is, and then we shipped it out to somebody's home. Those buildings have returned two to three percent. So when you start hearing noise about industrial, it is a bifurcated market. And I think you know, to the point we talked about in an office, quality matters however you measure it right now. And the measure of quality in industrial is proximity and power right now. 

Spencer Levy
So let's turn now to portfolio versus individual again. I'm fascinated by this topic. And the reason why I'm fascinated by this topic, not necessarily for good reasons, is because my hobby is horse racing. And I use horse racing. 

Josh Myerberg
We have a shared passion for horse racing. 

Spencer Levy
I did not know this. The show has just taken a turn to Churchill Downs, folks. But the reason why I like horse racing isn't the gambling, it's not the racing. I love the statistics. And I think that by looking at the statistics over – and by the way, there's hundreds of PhD level articles written on the psychology of it. I think it's portfolio theory. Because what it is is how do you hedge this against that and which data matters to be able to make that choice? Because the portfolio is, well, we might violently agree that open air retail is a great place to be, but if you just have open air retail, that's not good enough for you. You need to hedge it against others. What do you think? 

Josh Myerber
I completely agree. You can have a collection of the best hundred assets in the world, and if the pieces don't fit together, you're gonna have a lot of volatility over time. Your investors are gonna go through periods where they're really happy and periods where they're really sad. And the diversification that comes from portfolio strategy matters a lot. Now, my lesson from horse racing, though – because my parents took me to the track starting really young. And I learned about statistics at a very young age and that stuck with me. But my system was about betting the jockey, not the horse. And I think the same thing is true in real estate. We talked about operational excellence. We got a bunch of really good jockeys in this room. You gotta bet a good horse too, but the thing that I've found about good jockeys is they know the good horse. They're getting paid to ride the best horse. And so that's what they're going to do. So we want the best operators. This is another story about operational excellence. 

Spencer Levy
Well, I think that's a key point. I've heard it if there's any one key theme I've heard from my thirty-plus years in this business, that the operator matters more than the real estate itself. You can always get a better operator that can make mediocre real estate better. The reverse may not be true. I mean the bottom line is operators matter a lot, but if you're much more bullish next year than this year. Why? 

Josh Myerberg
Look, this year has been an interesting one. There's been a lot of policy uncertainty coming out of Washington. We have heard that from our LPs. I think we were building momentum in the first quarter. We were starting to hear more optimism from the LP base. I think the uncertainty coming out of DC has really put a pause on LP commitments. And ‘25 has been another year of kind of muddling along. If you look at ODCE returns over the course of the year, it has mostly been driven by income. There's been very little appreciation. Twenty-six, we have this tailwind though of lower rates. And I'd like to think that you're gonna have less volatility in policy coming out of Washington going into the midterm elections. 

Spencer Levy
I would say that we had a shock in April. Because we had, I thought, great momentum, January, February, March, and then we had the tariff shock. And the shock really manifested itself not in just the stock market correction. It manifested itself in foreign investors and endowment interest in investing. In fact, because of that shock, I think it's caused a shift in our capital markets. Now I think the foreign investors are coming back, but I think the endowments are still weak in the sense that they've had to deal with liquidity issues there. But also we're seeing the shift now to go to non-accredited investor monies, things like 401k money. The President has endorsed that verbally. And so do you think the shock that we had in April is a permanent shift or a temporary shift to different forms of capital? 

Josh Myerberg
I don't think it's permanent by the way. And to your point I have spent time fundraising overseas. There is definitely building momentum from foreign capital sources. One of the things that I love though about working at JP Morgan, our distribution capabilities are second to none. We have hundreds of people who every day wake up and think about how to cover corporate pension plans, how to cover public pension plans. And these are individual silos with research teams supporting them. So I'll give you a couple of observations as we think about our business. Historically, our business domestically has been very pension fund heavy. Corporate pension funds today are as well funded as they have been since the GFC. Typical corporate pension fund is over a hundred percent funded. So you're gonna hear things like de-risking when you meet with corporate pension fund managers, because what they're doing is they're taking money out of risk assets, which real estate happens to be one, and putting it into fixed income because their liabilities have been met for the pensioners. Public plans are about eighty percent, eighty, eighty-five percent funded. The last number is I saw. This is what's happened with the stock market running up. So there's still some room in public pension land. The DC market is a huge and emerging market. 

Spencer Levy
By the way, what does DC stand for? 

Josh Myerberg
Sorry, defined contribution. So 401ks. Gratefully, again, I love working at JP Morgan. We have a 20-year history in the defined contribution space of putting private real estate into DC plans. Then you talked about high net worth individuals, you talked about endowments. Those tend to seek higher returning strategies than the core that we've talked about for the most part today. They tend to drift more towards value-add investing. Yeah, there's lots of opportunity to raise capital in that world. 

Spencer Levy
I had this debate yesterday with a large investor that was saying that you know value add is still king, so to speak, in terms of raising money. Are there still some redemption cues in the core sector? Is 2026 the year that core comes roaring back? 

Josh Myerberg
I think so. And I'll give you several data points here. Coming out of the GFC, the recovery was very sharp. We alluded to this before. GFC, it took six quarters to go from peak redemptions down to zero. We are five quarters in after peak redemptions, and we are still at thirty–we're down about 35% from those peak levels. It's good, but we are not to a point where you're seeing capital formation in excess of the amount of people that want to get out. 

Spencer Levy
I'm gonna give you one word that I think defines why I believe core and core plus is gonna come roaring back next year: math. Really, it's a complicated word, but the word math means this. The US dollar got devalued by 10% since April. But I think because of the devaluation of the dollar, because the US is still a safe haven, because there's so much pent-up demand to buy real estate, because too much money has been allocated to traditional fixed income, I think all these things add up to a lot of money coming back into core.

Josh Myerberg
I agree with that. And so that's a very top-down perspective, and I agree with everything you said. The bottom-up perspective on why core is that we are going back to a place where quality matters. We've talked about office, right? We've talked about retail. We've talked about alts. We've talked about industrial. In every case, quality matters. It has not mattered post-COVID. All that mattered were your sector allocations. The way to access quality is through funds that have existed for 15, 20, 30, 40, 50 years and have been able to curate a portfolio of the highest quality assets. You're not going to get that in a new core plus fund. You're not going to get that in a closed-end value-add fund that's being raised today. Right? The place to find that are in the high quality core funds, in public REITs. And our thesis is quality is going to drive returns. NOI growth is what ultimately matters. You're gonna see more NOI growth in high quality assets than you are in second-tier and secondary markets. End of story. So I think that realization is going to come to the market next year. I think there's been a lot of focus on starting new funds. I'll give you one other quick comment on this. There are, rough math, about a hundred open-end funds in this country, and we hear there is rumored to be another 30 that are being formed. Now, there's a lot of really good ideas in real estate. I'm not sure there's 130 good ideas in real estate, right? So to me, I think that realization is gonna dawn on people, and you're gonna see a flight back to quality.

Spencer Levy 
I differ a little bit from what you just suggested. I'm totally down with quality, but again, I'm not saying there aren't quality IOS assets out there, but I'm just saying that the IOS definition of quality is very different than the definition of JP Morgan's new headquarters on Park Avenue, which is beautiful. But I think when you go from core to core plus, my definitional difference between the two is it's a core asset in a secondary market. That's kind of the basic definition of it. But even if interest rates are coming down, which they are, and we both agree, speed may differ. I think they're not coming down by a lot. And I think that because of that, getting the premium yield from a secondary market looks a lot more attractive now than it did a year ago. So even though I'm a huge fan of San Francisco and New York, I'm a big fan of Columbus, Ohio. I'm a big fan of Nashville, I'm a big fan of Salt Lake City. I can go right down the list of why it's not every place in these markets, it's certain submarkets within these markets. But nevertheless, I think the case for secondary markets has never been stronger in a place where you have to be a good operator. What do you think? 

Josh Myerberg
I disagree. I think quality is gonna be the order of the day. I think with yield – and you said this on one of your prior podcasts – I think you used the word yield trap. I would use the word value trap. 

Spencer Levy
Yeah. 

Josh Myerberg
I think that is a risk in these secondary markets. What you're trading off historically has been income for the prospect of appreciation. And these days, look, a typical core fund over the long term is supposed to return 8 to 10%. Less than half of their return is income. Right? You have to bet on appreciation. And what drives appreciation over the long term is NOI growth. And so I think you need to put yourself where tenants want to be. And maybe there are some locations in secondary markets that would qualify, but you want to put yourself where tenants want to be so that you can harvest NOI growth over the long term and drive appreciation. 

Spencer Levy
Okay, well, this is where we're going to disagree again, because I've had this debate now for 30 years, and it's the debate over fundamentals versus fund flows. You're making the fundamentals argument, and I'm not going to argue with you that we're entering into an NOI growth market where that matters more. What I am arguing – and I've said this many times – I believe the single most overpaid-for factor in our whole business is the illusion of exit liquidity, the illusion of exit cap rate compression. And I say illusion, not that it doesn't exist. It does exist. But in a world with high interest rates, it's going to exist less as a percentage of your overall return. And because of that, makes the – if I want to get higher returns, I need higher NOI – I might as well get 150 basis point discount buying a multifamily deal in Chicago versus buying it in New York. 

Josh Myerberg
Look, I think exit liquidity, you make some interesting points. It depends on the nature of your capital. You may or may not value it. But what's so fascinating as you stitch all these things together, there's this preference right now for value add. Value add doesn't exist without exit liquidity, right? That is something that if you're running a closed-end fund, you should put value on. And most of that liquidity is dependent on a healthy core market. Right? Core tends to gravitate towards whatever our LPs want. But also higher quality assets. And so I think when you're trying to build a strategy and drive long term returns I think it all comes back to fundamentals. 

Spencer Levy
So if it all comes back to fundamentals, one of the best secondary markets is not to throw Austin, Texas under the bus. Maybe one of the most overbuilt markets right now for multifamily. 

Josh Myerberg 
Yeah. 

Spencer Levy
Right. And we've seen some overbuilding in industrial and some great industrial markets. Dare I say it? Southern California, another place. So to me, emerging markets with good infrastructure, right? I just flew into San Diego and listen, I'm an expert in nothing except for airports. And people who follow me on LinkedIn know exactly what I'm talking about. And I was pleased to see the new San Diego airport, what they redid, because I was sick of eating at that bagel store in this crummy little space. But the other market I'm looking at, because of the airport? Kansas City. Because Kansas City has always punched below its weight. Why? The worst airport in America until six months ago when they built a new airport. Now it's beautiful. You used to have to go outside of security to get a cup of coffee in Kansas City. So isn't that what alpha is? Finding these places that had a material change in a demand driver and said, you know what? Maybe it is undervalued. 

Josh Myerberg
Yeah, look, the Midwest is an interesting case study, and we recently put out some research about housing in the Midwest. I think it's a very interesting thesis, right? It has gone out of favor. I think it's a different thesis in the secondary market. You're making the argument that an out of favor market is a place to go. And– 

Spencer Levy
And out of favor of a market that had a material change in something. 

Josh Myerberg
Yeah. And you know, we've made this argument about office, right? Yeah. We've made this argument about retail. And by the way, I think owning retail, you can own retail in Kansas City if you own the right retail, right? That's a very different asset class than office, let's say. You can own resi in the right places. I'm not sure you can do it in industrial. I think it's harder. It depends on what type of industrial. It's very specific. So I'd say it's very much asset class specific, to square the circle here. 

Spencer Levy
So let's go down to another place that I wouldn't go so far as to say is disfavored, but I would say is controversial. Border industrial, port industrial. Places that are more subject to policy changes than others. I note that some states have put foreign level capital restrictions. Texas has just done it with China. Florida is doing with China. And guess who was one of the biggest investors in manufacturing? China. China was the number one investor in manufacturing in Mexico a couple years ago. And now we have this challenge, which to me creates opportunity. And the reason why is because a lot of people are scared of that, like they're scared of some of the political changes in some of the big markets. What do you think about the borders? 

Josh Myerberg
In my career, two risks that I generally want to stay away from are litigation and stroke-of-the-pen, because you just can't read the tea leaves well enough.

Spencer Levy
I can underwrite supply and demand risk. I can't underwrite legislative risk. Certainly not as well.

Josh Myerberg
I've been on the wrong side of it several times in my career, it's not fun. 

Spencer Levy
So we only have a few minutes left and we're going to go to a risk mitigation topic for a moment. What are some of the key drivers of risk mitigation in portfolio management, whether it be pruning assets, operational, or otherwise? 

Josh Myerberg
This is an evolving topic. I think good portfolio management and portfolio theory has been around a long time. I think generally portfolios have been constructed in that way. There are emerging risks. We just talked about stroke-of-the-pen risk, but another emerging risk is stuff like access to power, right? Climate change's impact on our business, right? Is your building going to be flooded? Is your building going to be knocked over because of a wind event? These are newer risks. And they're manifesting themselves in insurance costs, they're manifesting themselves in the capital markets on the edges. And so those types of risks, I think as an industry, we are still grappling with how do we incorporate them? We know intuitively that they are risks, but if you take a perspective that is different than the capital markets on those key risks, you either may not buy or you may buy the wrong things. 

Spencer Levy
Well, we've had a lot of very cool guests on the show, you of course being one of them, Josh. And we get nominated for awards. You know which episode this year won the gold medal for our best episode of the year? Our episode on property and casualty insurance. Why? Because we delved into an area that most people in this room probably didn't put a whole lot of thought into until a couple of years ago, particularly if you owned Florida multifamily when your insurance risks went up, costs went up 4x in certain markets. What are you doing when you're thinking about issues like insurance as you've probably thought about over the years, but now seems like a completely new ballgame. 

Josh Myerber
I agree. Look, it's a risk that is harder to underwrite. I think you have to be more conservative. To be clear, insurance risk, or insurance costs are still a relatively small part of the P&L of just about any property. Even in earthquake and hurricane prone areas. The risk that's emerging in insurance is the risk of uninsurability. And I don't know that this is necessarily a near-term problem for institutional real estate, but it sure is for residential real estate. Right? We have seen communities that have become uninsurable. And if you just do the math from an institutional standpoint, this is just rough math. If a building goes from being insurable to uninsurable, the value destruction could be 60%, could be 80%. You know, as a portfolio manager, portfolio strategist, I can't put an uninsurable building into my portfolio and risk that it's going to be worth nothing someday. It’s not a thing. 

Spencer Levy
So as a portfolio manager, when you're going through these litany of risks, you have those that you run for the hills from what you call the stroke-of-the-pen risk. There's those that you can manage, like insurance. What are some of the other big risk things that go through your mind? 

Josh Myerberg
Most of it is the stuff that we think about every day, right? Is the building going to be leasable? Well, I think generally in the core space, you are trying to buy buildings that tenants want to be in. This is the debate on fundamentals. You're trying to find buildings that tenants want to be in over the long run. And what I love about our business, you know, there's going to be disruption from AI, there's going to be a disruption from other forces in the economy. I believe that our business is still an inherently human business. We're in the business of making places. And when it comes to risks like, am I going to get the space leased? It's the creativity of the people in this room and the people in our industry that really matters in mitigating those risks. 

Spencer Levy
When I meet with rising professionals in the space, I say the same thing. I was like, you wanna be in this business long term? Find out what creates value. What truly creates value? Lowering insurance costs mitigates risk. Value is getting an incremental tenant in your building, having faster leasing velocity. But the bottom line is how do you get those people there? 

Josh Myerberg
It is what I love about our business, right? You can walk into a building and you know it's a good building. You and I have been in enough buildings, you know when you've walked into a place that people want to be. Yeah. And that's special, right? It's a combination of good architecture, good interior design, good placemaking, good operations. I mean, I just love this about our business. And I don't know what the secret sauce is, but I just think it's a fascinating part of our business and you know, we want a partner to our point on jockey or the horse, we want to partner with the right jockeys that can can create the right places that tennis want to 

Spencer Levy
Well, that's a good way to end it. And I want to say thank you very much for coming out today. Josh Myerberg, Managing Director and the Head of Portfolio Strategy, JP Morgan. Well done. And thank you all for listening to a live taping of The Weekly Take it. Hang on, I gotta play the song or my producers get really mad. 

Spencer Levy
And there it is, one of our final outros of the year. Look for more to come during your holiday break. But above all, get ready for our 2026 Market Outlook episode in January, along with more from the top minds in the real estate business and beyond. Check out our website and subscribe to our feed to find and share our current episodes, our vast archive, and of course, news about what's coming up. You can do all that at CBRE.com/TheWeeklyTake, and on any podcast platform where you listen. I'd like to take this opportunity to thank all the folks at CBRE and the Global Marketing Group for their support this year, and a big shout out to our production team at Foglight Entertainment, which brings the show to life each week. And of course, thank you, our loyal listeners, for tuning in week after week and making us a must-listen industry-wide. Thanks again for joining us. I'm Spencer Levy. Be smart. Be safe. Be well.