Panel Discussion Explores Real Estate Market Concerns in South Carolina

The real estate market has had its share of ups and downs in recent years, and the uncertainty of tariffs and the war with Iran have added to the worries.

A panel discussion addressed the issue at the second annual Southeast Real Estate Expo, held May 6, 2026, in Greenville.

John J. Baczewski, president and founder of Real Estate Fiduciary Services LLC, moderated the discussion. The panelists were:

Elaine M. Worzala, Department of Finance professor, Clemson University

Jim Costello, chief economist, MSCI Real Assets

Brian Reed, intelligence director, CBRE

The conversation has been edited for brevity and clarity.

John J. Baczewski, president and founder of Real Estate Fiduciary Services LLC: I'm here today as part of my role as the global chair of the Councils of Real Estate. Councils of Real Estate is a 900-person global organization filled with strategic thinkers and problem solvers and thought leaders in the real estate industry. … We're going to go big picture, global, geopolitical. We're going to bring it down to some of the U.S. economic issues. We're going to try to focus on the Southeast for a bit. Elaine, why don't you get us started?

Elaine M. Worzala, Department of Finance professor, Clemson University: I work closely with the Councilors of Real Estate as well. … I've been a professor in real in real estate for over 30 years.

Jim Costello, chief economist, MSCI Real Assets: MSCI has been described as the most structurally important part of the financial markets. It was an outgrowth of Morgan Stanley about 25 years ago. The company made a fortune by creating all the logic behind ETFs. … And about 12 years ago, the CEO realized private assets are becoming much more important in investor portfolios. So they bought a company called IPD, Investment Property Data Bank, tracking the performance of real estate through appraisals. … I'm an economist, I love data. And the company has all this great real estate data, and I take it all and analyze it, try and make it coherent … to tell stories about the performance of the market to help clients understand the risks they face.

Brian Reed, intelligence director, CBRE: I am intelligence director with CBRE. I work with our Global Client Care Team. We help facilitate the needs of our largest clients, our largest institutional investors, our largest occupiers, our largest global corporate partners.

Baczewski: Jim, why don't you get started with a question of what's going on in the Middle East? How does that ripple through to all of us? Is oil going to go to $300 a barrel? And tell us a little bit about what that means and how it flows through to us.

Costello: It's one of these things nobody is quite sure where it ends up. In this kind of a world where there's a ton of uncertainty, it's making it harder for folks to make decisions because an investment in commercial real estate, that is a long-lived investment. You've got on average seven-year holding periods for commercial real estate. So is it the right time to buy in that kind of uncertainty? The answer is you have to buy the money. You have to put it to work someplace. You just have to figure out how to constrain the risks. And am I comfortable with the pricing today relative to the kind of risks that are there? We have no sense yet of how much more this could go. So in this kind of world, what I've been advising my clients to do is don't think about what will the rent growth be and try and underwrite to a specific number today. I mean, you have to, but what I try and advise folks to do is think about scenarios.

What's a worst-case situation? What do I think about the probability that worst-case situation happening? If that worst-case situation happens, am I safe with that investment given the underwriting that I'm putting in place? Don’t think of it in a static sense, think of it as, here's a range of outcomes and probability for each, and then how comfortable am I taking on a little bit more risk at the far end. Yeah, it could spiral out of control, I mean, there's online all sorts of discussion. … Everybody's suddenly an armchair general and armchair economist talking about, oh, it's going to collapse. I do worry about the energy cost increases. Inflation has suddenly picked up because of it. One of the strongest parts of growth in the U.S. economy over the last years has been data centers. What's one of the biggest inputs to data centers? Energy costs. So, that risks stagnance and growth in that part of the economy overall that was so strong. But you can start going down a road like that of, oh, all these risks, fear, death, destruction, and start to think to yourself, I shouldn't invest in anything.

But you have to put something aside every year. You have to make a choice. Where do I put it? And if there is some uncertainty, at least in real estate, I've got a hard asset, as long as I'm not too leveraged. But the market itself, despite the risks we're seeing, the first quarter of this year, liquidity continued to improve. So there's all kinds of scenarios one can paint of things spiraling out of control. … But don't let yourself be driven by the fear. You got to address it. You got to address some of the risks that are there. But I think the way to think through this kind of uncertain time is just do a little bit of scenario analysis. What's the base case? What's the worst case? Where am I happy living in between those? And for the most part so far, people are still doing deals and getting stuff done.

Worzala: When you're doing those cash flows, you're making a bunch of assumptions. And again, as Jim just pointed out, doing the scenarios is really, really smart, and if you can't live with the assumptions, you do not have to buy. Jim's world, they have to buy to some extent because of the institutional money has to get put to work. But if you're doing your own small deal here in Greenville, just pay attention to those leases. Pay attention to that market condition. And if that building has great leases with good terms, you can buy. And particularly if you can get a good loan to do that. But if the building's half empty and the leases, you're responsible for all expenses, you better do a worst-case scenario that shows you might be having higher expenses and less income. And if that is the case, then you got to be less likely to buy. So that's my advice to my students, pay attention to the fundamentals of that cash flow. And right now, geopolitical risks are really high. And again, it won't matter if you got a good building with good places and good tenants, but if you don't, then you want to be careful.

Reed: We just wrapped up our semester in class. We’ve got market analysis students coming in, and I think this year was a little bit different in that the outlook of our students at the beginning of the semester had never been as negative as it had been. They’re thinking about everything that's going on in the world, uncertainty, and then the additional wrinkle of AI. But by the end of the semester, they were never as optimistic about their prospects based on the job interviews they've had, the conversations that they've had with practitioners in the industry. They’re very optimistic coming out. So I think in some ways there's a little bit of obsession about the negative headline risk that's out there. And particularly in the Southeast where the demographics are so compelling, it's easy for us to lose sight of the deck being stacked.

Costello: It doesn't surprise me that the students were negative at the beginning of the semester. There's still so much uncertainty. But also, how do you deal with uncertainty? We've seen change in the way information comes forward, both from official sources, online, and, early in the quarter, that jump in uncertainty, no one was sure what was going to happen next yet for two-thirds of students. Maybe optimism picks up a little bit at the end of the semester because, hey, I'm almost done with classes. But also, optimism can pick up in some cases, too, when folks are getting calls about getting jobs. And, you know, there still is some hiring. … Grad students seem to be all getting jobs. How are the undergrads?

Worzala: I would say it really depends. And part of it is those students learned through the semester, if you underwrite it, if you pay attention to market conditions and things, you can feel more confident. And therefore, until you look at the data and analyze it and throw it into cash flows and do those scenarios that we try to get our students to do … you are like a deer in the headlights. But then when you realize, OK, if there is cash coming out with good leases and the markets are good and the vacancy rates for this quality space aren't high, then it’s OK. But if you do the analysis and the vacancy rates are 35 percent in the B space office, or C space office, that's not one to touch. So students are getting jobs for sure. It’s a little bit slower. Companies seem to be not sure if they want to expand, and so they're kind of waiting to the last minute.

Costello: Something that I've been noticing, the office sector is starting to turn around, deal volume’s increasing, people are buying more. A lot of markets we've seen, just tracking the CB Vacancy Index, you don't have the big increases anymore. Institutional money is starting to kick the tires in the sector again, and institutional money is usually the last one in once it's shown that it's safe. But ARXR, we just tracked a fund that they've raised where they're going out — it's not quite buying equity in office buildings, but it's coming in and buying up the distressed assets that they think have legs, but it's institutional money behind it, pension funds, very risk-averse folks. So there is a change starting to happen there. It's not saying that everything's going back to exactly like it was in 2019, but you get a 50 percent reduction in CBD office prices, local investors are going to look at that and say to themselves, I can make this work. And if you don't have the ongoing uncertainty about what happens next, there's a certain number of folks who are coming back to the office now, but people can start making decisions on that. So it's not surprising that we're starting to see a little bit of traction in the office space.

Baczewski: All right, Brian, why don't you take this illustration? I run a medium-sized company. I employ 700 people and I need space. What should I be thinking about from an occupier perspective? What does your research show?

Reed: Probably one of the most important things for occupiers going on right now is that perpetual war for talent. We're probably 10 years into a 40-year period of which labor shortages are going to be perpetual. If we have occupiers who are like, don't worry, the next recession there's going to be some shedding of talent, we're going to be able to find what we're looking for. But a lot of that is recency bias. You've got Covid, you've got the great financial crisis. Those were two astronomically horrible periods. Typically during the recession I've got unemployment moving maybe 150 basis points. So the prospect that you're just going to be able to absorb all of this talent is a little bit of a fiction. With that being said, one of the strengths we have here is that we constantly have people coming in. So what that means is a lot more occupiers are starting to look at markets like Atlanta, like Charlotte for their major corporate headquarters locations simply because they've got the demographic growth. If you're trying to recruit people to Chicago, that's one thing. But if you're trying to recruit them to Atlanta, they're already getting this massive flywheel of talent that's moving into the market. So what that means is their ability to grow and find really great people, and that market is just so much more compelling. And it's something that is kind of universally felt throughout the Southeast. South Carolina is the fastest-growing state in the country. With that being said, one of the fastest-growing counties is a suburb of Charlotte. One thing to appreciate is we have the wind at our back, and it's not really going away. So that covers my ability to attract employees.

Baczewski: How do I get them to come to work and show up in the office?

Reed: What do I have to do? Here's one thing that's really interesting. With my students, I asked them which of you want to go to the office and which of you want to work from home? Without a doubt, every single one of them wants to work in the office. So this notion that people just want to sit at home and not really do any work, I think that's a lot more negative headline risk. The reality is there's an expectation of flexibility. There's an expectation of, you're going to get work done at a high level when you have the ability to do so. But it's not necessarily, we just want to stay away from the office. One of the things particularly about Greenville is after the pandemic, it was one of the first markets to hit office vacancy rates pre-Covid levels within six to 10 months. That return was so compelling because people just wanted to get back to work.

Worzala: I get it, Brian, particularly here in South Carolina where we do not have an hour commute. So again, those of you that are investing here in town, in the region, you're fine, but you gotta realize the cultural differences from place to place. … (Companies that insist on having employees work in the office rather than remotely) are going to potentially lose their top talent. … You have to be careful. And the next thing we're going to talk about, people. The demographics matter. If you're a young family with small children and you have to commute an hour each way, somebody's probably going to say, "I'm going to stay at home." Because this is too much. … So flexibility, I agree 100 percent, is super important. And this idea that you have to have your butts in seats from 9 to 5, makes no sense. And I hope we can try to fight, push back against that because it's not good for our society, it's not good for the families, and it's not good for the businesses.

Costello: Here's how I've been thinking about this issue of people coming to the office: social capital. That's what you get for being in the office. That's what you get for talking to folks and sharing ideas. And it doesn't matter if you're an economist or a salesperson or a developer. It's that informal chit-chat where you learn things, you build ideas, you make connections that you can leverage later when you have a need. As an example, right after the pandemic ended … 2021, the company I was with, Real Capital Analytics, we got bought by MSC. I started going back to the office right away because I have a tiny little apartment in Brooklyn and I ruined my couch sitting on it during the pandemic. ... But I start going to the office. Nobody mandated it. Our CEO has said it's the right way to run a firm, identify the right people, give them the resources they need. Hold them accountable to results. Nowhere in there does it come down to chaining someone to a desk like a wool mill in Lowell, Massachusetts, in the 1800s. ... It’s just, get stuff done, we're going to hold you accountable for that. But you can get stuff done more if you've got allies to help you and support you. And so like myself, I would be going to the office, there was hardly anybody there at first, and one day a guy with some really interesting cufflinks is there at the coffee machine. I go get some coffee and start talking to him. … Turns out he was managing director of the firm, head of fixed income research, someone I had never met. And we developed a bit of a relationship. And then from it, I started asking ideas about fixed income indexes. And before I know it, he developed a counter to Moody's corporate bond index. And I've used it in my models now. And all from conversations at the coffee machine. But that kind of social interaction, that's what people get from being in the office.

Baczewski: Let's talk a little bit about the lending market. What kinds of things are you seeing in the real estate lending market? Where's the money coming from? How much does it cost today? And what kind of terms can you get?

Costello: Well, liquidity is improving. I talked earlier about how we had deal volume increasing. Lenders are active again, too. There's a bit of a kerfuffle in the private credit market recently. Debt funds. There's some uncertainty around that, but I think it's a tempest in a teacup. The honest truth is that those debt funds use less leverage than banks. That's where people get in trouble in the lending world when there's too much leverage involved. But the back leverage for banks is much higher than that for debt funds. So if something goes wrong, it's not like those investors are going to have trouble. The tempest in a teacup really gets down to some of the debt funds started imposing gates, like a 5 percent gate, 5 percent of capital can be withdrawn per quarter. But in my sense, it's like, five years is the typical long term for debt funds. So over five years, that's 20 quarters. It's 1 divided by 20 is 5 percent. So we're limiting withdrawals to the loan maturities, which kind of makes sense to me. But the debt funds are backed — the banks are backing it. Banks of all scale.

A couple years back, everybody was worried about the banking sector when Silicon Valley Bank went belly up. We had a couple other small bank failures, but we've turned around on that. Prices were falling, and everybody was underwriting as if we were going to go through another financial crisis. So the banks started pulling back, not lending as much, limiting how much they would put forward. But they had a bunch of reserves set aside to take care of losses that never materialized. So suddenly they can originate again. And that's both on the existing properties and for construction. Now it's available, but it's not cheap. It’s not where it was in 2019, let alone 2021, when the 10-year Treasury was at 60 basis points. We're in a higher cost of capital environment. There's just no two ways around it. Then at the CREFC conference the other year, there were senior people in our industry talking as if the 10-year Treasury's going back down to 2 percent because that's what it's always done. I heard one person say that, but this was a person who entered the industry after 2007.

We have too many young folks in our industry these days. They don't have memory of everything before the QE process started. And so we are in a higher rate environment than we have been. Since 2009 when all that started, but it's not unusually high. It's like everything before the financial crisis. So we're getting back to, this is more of a normal period than what we've been dealing with after the financial crisis. So there's debt. It's not as cheap as it was. I'm not sure it gets much cheaper … because then that means other fixed income instruments are down. And you have the 10-year Treasury at 60 basis points. That's not a sign of a healthy economy.

Reed: Kind of piggybacking on this, this more normal interest rate environment, the reality is people just have to get through the next three months of how they make that transition. … There are solutions coming, and they're just materializing from the market. But I think the big thing here is the expectation that as an investor, you can just ride that capital wave, that is not necessarily a clean assumption that you're using. So what that means is in order to be highly profitable, you have to be really good. You can't just set it and forget it. You have to operate better, you have to operate cleaner, you have to operate safer, you have to create environments that attract people. To Elaine's point of talking about mandates and things like that, that's not what it's about. It's about creating compelling places that attract people, because ultimately you are competing against somebody's couch or somebody's home office. And the ability to generate revenue from commercial real estate is more of an operational play as opposed to a capital. And of course, that debt is a huge part of that cash flow.

Worzala: It’s great to hear people are out lending again. And again, it's higher interest rates. So those folks that have the horrible job trying to refinance in this market, it is difficult because the rate’s much higher than the rates that they got three years ago. So going forward, anybody looking at investing, that's something you have to pay attention to as far as the new rates. … My sense is the debt service coverage ratio and the loan-to-value ratio are both less favorable. But the debt service coverage ratio is the one that's kind of killing a lot of deals.

Baczewski: Let's talk a little bit about the flow of people. I know people are coming into the Southeast … how that impacts us. They're coming here, it should be leading to job growth, and it should be supporting the housing markets.

Reed: I think one thing that's important is tied back to the value of the office, a maniacal focus on quality of life. People have options, we call them choices. If you're going to attract talent, that's an important component. One thing that I do think is … the economic growth story of Greenville, of the entire Southeast, it is a migration story. It is not necessarily an organic, oh, we've got all of these people here and they're doing so much better financially. It is people are moving here, and as a result, it is growing the economy. … Go to a market that is losing people. They would much rather have what we have, but just recognize that there is definitely a difference in terms of, hey, there's a lot of growth, but it's not necessarily universally felt. But it definitely has huge dividends.

Costello: Don't count out places like Syracuse, California, and all that. And in fact, it's bad for Greenville if other areas are having trouble. We're one country, we've got networks of businesses. If your trading partners are having trouble, you're going to have trouble, too. Don't ever wish for some other city to be having trouble because then you don't have potential for good clients. So it's demographic, there's an element of the whole Southeast is benefiting from the aging of the baby boomers. I know certain folks who've left the cold and problems of the Northeast behind to move down this way. And so that's one boost for the region. And that brings some remarkable talent to the whole Southeast, folks who built tremendous businesses and built up expertise.

But if you're only dependent on imported labor, it'd be hard to build a lot of long-lasting activity because at some point everything kind of stabilizes. When I go to St. Petersburg and talk to locals there, they're like, "Oh, one of you." These folks, they're not economists. It's more that, you people are coming in and making it expensive for folks to live here. And I argue it's not that I'm making it expensive. I argue that it's restrictive zoning laws, not allowing developers to build what the market actually needs. I'm a market guy. My attitude is if you let developers develop, you don't have housing shortages. But … if you want to do one thing to help the region grow organically and generate new jobs, not be dependent on importing labor, support places like Clemson. Help invest more in your local education systems. The economy moving forward is a knowledge economy.

That's where we've seen the best returns over the last 20 years. People figure out new ways of doing things, building new tools, and AI, anybody can do anything. It's not quite true. You need domain knowledge. There's a lot of buzz around that right now. To me, it feels a little bit like the period from '96 to '99 when we had the internet boom underway and everybody thought they could just launch a website and become a billionaire. A lot of failed dreams in that, and I have a feeling some of the same kind of excess optimism is in place. Yet those tools are going to be incredible. … But you got to build the domain knowledge first, and you build the domain knowledge in schools. So contribute to local universities.

Worzala: I am worried about the university sectors across the country. I think we all need to be paying attention to our local markets. And of course, Clemson's the big one here, but there is a potentially large cliff of students, and that means we're going to have lower enrollments. But with lower enrollments, that means lower revenues, that means lower income coming into the schools, that means potential layoffs. Our board has called for a 10 percent cut in our expenses at Clemson. … But it's people. … And you say, why does it matter? The classes are already huge up there. We have grown, and it's a great, great school. And it's going to be tight. And we're not the only one. We're doing a search right now for an instructor. And two of the leading candidates, their schools are getting shut down. … It is really important because it's our future labor force, and knowledge is going to be the thing that people need to know. I was wondering when our AI conversation was going to start, but I have a professor who said AI — his textbook, major textbook in finance, real estate finance— he said AI got it wrong. But he knew what to look for. He knew how to read the income statement, read the discounted cash flow, and realize AI hadn't put in the expense escalations.

AI hadn't done numerous things. But somebody coming out, they're not gonna be able to figure that out right away. He's got 40 years’ experience. So again, we have to try to make sure we're watching these younger folks coming out to make sure they're getting those critical thinking skills so they can piece that apart. Because you'll feel pretty bad if your analyst hands you a PowerPoint and then it's completely wrong, right? And you don't have time to check it because that's why you gave it to them, and then they went to AI and didn't check it because they didn't know what to do.

Baczewski: Let's pick up the AI piece for a minute. … I sat in a conference where there were 100 representatives of institutional investors and institutional investment managers, and we had a discussion about AI. … And as we went through it, almost everyone was using it at some level. There were two things that stood out to me. One was from a CEO who said, you can feel comfortable that you have a job in this company. We don't have any plans to let anyone go because of AI. But do not be comfortable with the notion that your job today will be the same six months or a year from now.

… That led to a question about how are people implementing it. And one of the others who was a CEO of a smaller company, he said, in truth, we have no idea what to do. So he had a company meeting – he's got 35 people in the company – he said, we asked everybody to play with it for two or three weeks in their job, and then we had another company meeting and we tried to identify things that were working. So what this guy did was he decentralized the whole approach. He didn't put a mandate beyond, play with it and let us know if it can help. But he made sure that everybody had the tool. And the truth is, if you're not thinking about AI, you're going to be missing the next wave. So I would encourage everyone to sit down and play with it.

Reed: I can see it. One thing we did differently this year in the market analysis class is we incorporated AI and we pushed the students to use it as much as possible. But we start with the statement of … if you submit something and it's wrong and your defense is, "Oh, well, I got this out of AI," in my opinion, that is a fireable offense. That is you basically outsourcing responsibility for your own tasks. You are no longer owning your work. And I think that is a mental shift for people who are using it routinely. I talk to my kids, they're all like, adults, they use it. Sometimes they use it and assume it has more accuracy and gravitas than it really should. But I caution them, just explore. Try to figure out what's wrong. Make sure that you know with absolute certainty that what it is spitting out is actually valid.

Worzala: I had a student assignment, and they were supposed to do two pages just analyzing the practice presentation of their group. One of the groups, it's clear they used AI. It was three pages long, formatted in a formal memo. Those of us that have been reading AI stuff, we know pretty quickly. They didn't even read it and take out some of the stuff that should have been taken out. So I'm worried that that's what our students are getting, thinking that's what they're supposed to do. People that are employing people and they're starting to use it, they have to be reading it. And I'm afraid they're not. And that's worrisome.

Costello: The way I think of it (is) the way I think of the tools in workflow; I'm not mandated to use it every day. … It's supposed to be a labor enhancer … incredibly diligent, remembers every academic journal you feed to it … but its common sense is zero. But think about that notion that someone may have said that I got it out of AI. If you gave a task to an intern and they gave you some results and you threw them under the bus by saying, oh well, my intern gave me that, so I thought it was right, that's a sign of a weak leader right there, throwing your own people under the bus. So you can throw your own tools under the bus the same way. … You’ve got to check everything. But for my work, it's not about writing, it's about math and analyzing data and getting stuff done more quickly. And it's the kind of things that in the past I may have had three or four junior folks helping me. So now does that mean, Jim does need to hire three or four more people? No, it means that I'm being asked to do way more, and I'm trying to put a budget in place to hire more folks because there's more of a flow of stuff that comes through. There’s always a tendency, especially on a lot of futurists, they make a small fortune by taking a small thing and blowing it out of proportion. And they think of the world in a linear context that it's going to get rid of labor and then you're not going to need that anymore.

But it makes some people much more productive. And then there's a secondary effect that as they become more productive, they have to do more. They have to hire more. For the folks who I think are going to get it right, that's where you're going to see it.

Baczewski: We've got a few minutes remaining. Let's give each of the panelists a chance for their last word.

Costello: The one thing I take away is if you want this area to continue to grow, invest in local institutions. This notion that AI gets rid of everything, nobody needs to work with each other — build social capital. That's the second thing I'd suggest, more investment there. There are some uncertain things in the economy today. But relative to other asset classes, at least in real estate, you've got something there. Just don't go into leverage at times. Just take some extra caution. If you can't underwrite to the worst-case scenarios you fear about, consider whether you have to do that deal.

Worzala: My big takeaway is real estate is local. Real estate is the market conditions and that asset that you're thinking about investing in. We talked a lot about office, but there's retail out there, there's industrial, there's all these other assets, and they all depend on people, and they all depend on those people's incomes and their ability to pay. So watch for this potential ugly head of inflation. It could get bad, particularly if this war does continue. … Don’t have the rosy glasses on. Those that put the rosy glasses on because they've never seen a downturn and they're like, it can't happen to us. It can happen. So be very careful. … Don't get yourself overleveraged. Costs are going to rise.

Our energy prices are going up, so just be cautious. Real estate's a long-term play, and if you've got good leases or a good neighborhood you're in, you'll be fine. Don't panic, but again, don't have the Pollyanna rose glasses on, because that's typically what tips our markets, unfortunately.

Baczewski: I want to thank the panel for being willing to come today. Thank you all.