1 00:00:02,720 --> 00:00:10,559 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,600 --> 00:00:14,560 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,600 --> 00:00:17,840 Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg 4 00:00:17,920 --> 00:00:21,040 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,360 --> 00:00:23,080 Speaker 1: or watch us live on YouTube. 6 00:00:23,760 --> 00:00:26,320 Speaker 2: All right, let's go to one of the deals stories 7 00:00:26,360 --> 00:00:29,960 Speaker 2: that had been you know, really supporting this idea that 8 00:00:30,040 --> 00:00:33,800 Speaker 2: deal making is back with a vengeance sday Lauder and Pooge. 9 00:00:34,280 --> 00:00:39,159 Speaker 2: It's a Spanish cosmetics company, luxury brands company really in 10 00:00:39,320 --> 00:00:42,760 Speaker 2: talks to merge. Those merger talks seem to have fallen apart. 11 00:00:42,800 --> 00:00:45,479 Speaker 2: Deb Acon is our Luxury Goes analysts joining us right 12 00:00:45,520 --> 00:00:47,760 Speaker 2: now from London. Deb What can you tell us about 13 00:00:47,800 --> 00:00:49,760 Speaker 2: why these discussions collapsed? 14 00:00:51,400 --> 00:00:56,080 Speaker 3: Bhie? The room is in the market, the comments in 15 00:00:56,120 --> 00:01:01,640 Speaker 3: the marketer around the brand which is seventy nine percent 16 00:01:01,720 --> 00:01:07,480 Speaker 3: owned by Pooh Charlotte Tilbury, and that there is you know, 17 00:01:07,520 --> 00:01:10,600 Speaker 3: there's a pot call option in place till twenty thirty 18 00:01:10,640 --> 00:01:15,039 Speaker 3: one with a view that perhaps more was expected in 19 00:01:15,160 --> 00:01:19,560 Speaker 3: terms of valuation from the original owner, but really we 20 00:01:19,600 --> 00:01:21,520 Speaker 3: don't know that it is that and there was a 21 00:01:21,560 --> 00:01:25,319 Speaker 3: lot riding on this deal coming together really given that 22 00:01:25,480 --> 00:01:30,040 Speaker 3: esdal Order was amid a big strategic overhaul under its CEO, 23 00:01:30,840 --> 00:01:33,800 Speaker 3: Stephan Della Feverrary, so you know that there are a 24 00:01:33,800 --> 00:01:36,840 Speaker 3: lot of things going on. Also, the added risks in 25 00:01:36,880 --> 00:01:40,240 Speaker 3: the market, to with what's happening in Iran, the knock 26 00:01:40,280 --> 00:01:43,080 Speaker 3: on impact onto travel Retail, which has been with us 27 00:01:43,080 --> 00:01:47,279 Speaker 3: since the middle of March, so many different things. 28 00:01:47,319 --> 00:01:50,720 Speaker 4: Really, where does ste latter go from here on out? Then, 29 00:01:50,800 --> 00:01:53,680 Speaker 4: because they're left to focus on reviving their company and 30 00:01:53,760 --> 00:01:57,760 Speaker 4: they reported three years of animal sales drop they did. 31 00:01:58,160 --> 00:02:01,040 Speaker 3: I think if I look at both companies, the reason 32 00:02:01,080 --> 00:02:03,640 Speaker 3: for them coming together was because if I think about 33 00:02:03,800 --> 00:02:05,880 Speaker 3: estill Order and where the market's been in the last 34 00:02:05,880 --> 00:02:08,959 Speaker 3: couple of years, estill Order only has about nineteen percent 35 00:02:09,000 --> 00:02:13,200 Speaker 3: of its business in Fragrance, whereas the majority of the 36 00:02:13,240 --> 00:02:16,800 Speaker 3: business of Pooge, although it's built in a makeup and skincare, 37 00:02:17,320 --> 00:02:24,000 Speaker 3: its history is in Fragrances with Jean Paul Gautier and 38 00:02:24,040 --> 00:02:28,079 Speaker 3: then also Carolina Herrera Pacaraban and others. So it was 39 00:02:28,120 --> 00:02:30,720 Speaker 3: a combination of the two of those coming together that 40 00:02:30,840 --> 00:02:33,720 Speaker 3: if there was some excitement, that was it. But overall, 41 00:02:33,760 --> 00:02:37,239 Speaker 3: if we think about estill order. They are doing more 42 00:02:37,240 --> 00:02:40,440 Speaker 3: in innovation, they are doing more in shifting online, they 43 00:02:40,440 --> 00:02:42,800 Speaker 3: are doing more in cost savings. They have a huge 44 00:02:42,840 --> 00:02:48,240 Speaker 3: strategy running at the moment, the Profit Growth Program PRGP, 45 00:02:48,440 --> 00:02:54,280 Speaker 3: where they're looking actually for savings of one to one 46 00:02:54,280 --> 00:02:57,760 Speaker 3: point two billion to start to come through from next 47 00:02:57,760 --> 00:03:01,400 Speaker 3: fiscal year, so fiscal twenty seven. It's been at a big 48 00:03:01,520 --> 00:03:07,120 Speaker 3: upfront cost, and so a lot of the maybe risk 49 00:03:07,360 --> 00:03:10,640 Speaker 3: and analysis and the questions on these two companies coming 50 00:03:10,680 --> 00:03:14,640 Speaker 3: together were just when the growth and the profits are 51 00:03:14,680 --> 00:03:18,800 Speaker 3: supposed to come through, would Pooge have inhibited that in 52 00:03:18,840 --> 00:03:21,160 Speaker 3: that it would take them have taken them longer to 53 00:03:21,200 --> 00:03:25,040 Speaker 3: turn around. So certainly today Poosha's share price is down 54 00:03:25,200 --> 00:03:28,040 Speaker 3: and ester Lauders is up, and that's contrary to how 55 00:03:28,120 --> 00:03:29,959 Speaker 3: it was on the day when it was announced two 56 00:03:29,960 --> 00:03:30,760 Speaker 3: months ago. 57 00:03:30,919 --> 00:03:33,280 Speaker 2: Very quickly dead before we let you go? Is Poosh 58 00:03:33,280 --> 00:03:35,760 Speaker 2: still on the lookout for a merger partner? 59 00:03:37,480 --> 00:03:40,760 Speaker 3: The issue is going to be that if Charlotte Tilbury 60 00:03:41,000 --> 00:03:47,240 Speaker 3: is a part of the contested deal that carries forward 61 00:03:47,320 --> 00:03:49,920 Speaker 3: and so could be a bit of a poison pill. Potentially, 62 00:03:51,280 --> 00:03:53,800 Speaker 3: I would imagine that both of these companies that look 63 00:03:53,840 --> 00:03:56,400 Speaker 3: in for acquisitions that it could make sense for both 64 00:03:56,440 --> 00:03:58,720 Speaker 3: of them. You know, Pooge could find more of a 65 00:03:58,720 --> 00:04:04,520 Speaker 3: global platform and xtly Lauder needs for me more in fragrances. 66 00:04:04,560 --> 00:04:07,120 Speaker 3: I've said that for several years, so I think there 67 00:04:07,120 --> 00:04:09,360 Speaker 3: were ways forward for both of them within the M 68 00:04:09,400 --> 00:04:09,960 Speaker 3: and A field. 69 00:04:11,200 --> 00:04:11,840 Speaker 5: Stay with us. 70 00:04:11,920 --> 00:04:14,080 Speaker 2: More from Bloomberg Intelligence coming up after this. 71 00:04:17,760 --> 00:04:21,440 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 72 00:04:21,520 --> 00:04:24,599 Speaker 1: weekdays at ten am Eastern on Apple, Corplay and Android 73 00:04:24,640 --> 00:04:27,920 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 74 00:04:28,000 --> 00:04:31,120 Speaker 1: you get your podcasts, or watch us live on YouTube. 75 00:04:31,960 --> 00:04:34,960 Speaker 4: Let's shift gears a little bit our shift planets. I 76 00:04:35,000 --> 00:04:37,479 Speaker 4: guess I was trying to make a smart segue yeah 77 00:04:37,520 --> 00:04:40,120 Speaker 4: versus Yeah, yes, let's not bring in George Ferguson. He's 78 00:04:40,160 --> 00:04:44,480 Speaker 4: Bloomberg Intelligence senior aerospace, defense and airline analysts to discuss 79 00:04:44,560 --> 00:04:47,159 Speaker 4: with us all things SpaceX. I feel like all this 80 00:04:47,279 --> 00:04:50,040 Speaker 4: week has been all about SpaceX, So George, thank you 81 00:04:50,080 --> 00:04:53,159 Speaker 4: for joining us. Talk to us about the slow launch 82 00:04:53,279 --> 00:04:55,839 Speaker 4: revenue gain of SpaceX. We know that they dominate in 83 00:04:55,839 --> 00:04:59,520 Speaker 4: global spaceflight, but I guess most missions support their own 84 00:04:59,560 --> 00:05:03,080 Speaker 4: satellite internet business rather than external customers. Can you please 85 00:05:03,160 --> 00:05:04,440 Speaker 4: unpack that for us? 86 00:05:05,120 --> 00:05:07,719 Speaker 6: Yeah, so we in the filing this week, we got 87 00:05:07,760 --> 00:05:12,560 Speaker 6: a chance to look at their businesses and it was 88 00:05:12,760 --> 00:05:17,159 Speaker 6: pretty remarkable. I thought, the percent of space launch that 89 00:05:17,279 --> 00:05:22,520 Speaker 6: actually is just supporting their low Earth orbit constellation business, 90 00:05:22,720 --> 00:05:28,400 Speaker 6: it was like seventy four seventy five percent of all launches. Again, 91 00:05:28,440 --> 00:05:32,640 Speaker 6: we're supporting their LEO constellations, about nine thousand, six hundred 92 00:05:32,640 --> 00:05:35,520 Speaker 6: satellites up there, and in the first quarter of the 93 00:05:35,560 --> 00:05:38,920 Speaker 6: new year even a bit larger it was up in 94 00:05:38,960 --> 00:05:44,240 Speaker 6: the eighties. So when you look at the businesses, their 95 00:05:44,320 --> 00:05:48,400 Speaker 6: launch business actually only comes in around four billion ish 96 00:05:48,520 --> 00:05:56,279 Speaker 6: a year, much smaller than the connectivity business, which is 97 00:05:56,279 --> 00:06:00,480 Speaker 6: that low orbit satellite business. But we think that they 98 00:06:01,160 --> 00:06:03,520 Speaker 6: if they accounted for it correctly, if they did some 99 00:06:03,560 --> 00:06:06,400 Speaker 6: sort of transfer pricing and showed revenue because they don't 100 00:06:06,440 --> 00:06:11,120 Speaker 6: show revenue, they don't show sort of earned revenue for 101 00:06:11,560 --> 00:06:15,599 Speaker 6: the flights for their lower urban constellation. They showed revenue 102 00:06:15,600 --> 00:06:17,480 Speaker 6: for it, we think it'd be a twelve billion dollar 103 00:06:18,240 --> 00:06:20,480 Speaker 6: business and there's a lot of technology in that business. 104 00:06:20,480 --> 00:06:21,640 Speaker 6: Interesting business to us. 105 00:06:22,400 --> 00:06:25,360 Speaker 2: George, when you looked at the IPO filing, what did 106 00:06:25,440 --> 00:06:30,240 Speaker 2: you learn about SpaceX's competitors the rest of the space economy, 107 00:06:30,360 --> 00:06:34,440 Speaker 2: those companies that also purport to be at the cutting 108 00:06:34,520 --> 00:06:36,440 Speaker 2: edge of this industry. 109 00:06:37,160 --> 00:06:40,120 Speaker 6: Well, I think we learned and it confirmed for us 110 00:06:40,160 --> 00:06:44,880 Speaker 6: that their competitors are really far behind now, you know. 111 00:06:44,920 --> 00:06:47,520 Speaker 6: I think one of the things I took away from 112 00:06:47,520 --> 00:06:50,760 Speaker 6: the filing was, you know, SpaceX did something like one 113 00:06:50,839 --> 00:06:56,320 Speaker 6: hundred and sixty some launches last year. Lots of other competitors, 114 00:06:56,560 --> 00:07:00,280 Speaker 6: most of the competitors aren't you over fifty, so they're 115 00:07:00,400 --> 00:07:07,080 Speaker 6: far and away sort of the most repetitive launch company 116 00:07:07,080 --> 00:07:09,720 Speaker 6: in the world. Again, I was kind of surprised how 117 00:07:09,800 --> 00:07:13,000 Speaker 6: much was for their own constellation because we kind of 118 00:07:13,000 --> 00:07:16,200 Speaker 6: felt like demand was really growing for LEO satellites and 119 00:07:16,280 --> 00:07:19,280 Speaker 6: it is. But the sense I get from the filing 120 00:07:19,440 --> 00:07:22,520 Speaker 6: is they're growing most of the demand for these low 121 00:07:22,920 --> 00:07:28,240 Speaker 6: orbit satellites. I think more folks, more governments, more companies 122 00:07:28,280 --> 00:07:31,560 Speaker 6: will be launching low Earth orbit satellites, and this space 123 00:07:31,640 --> 00:07:35,440 Speaker 6: business will be a really important business. But I think 124 00:07:35,440 --> 00:07:40,000 Speaker 6: that was one of the bigger takeaways from the filing. 125 00:07:40,200 --> 00:07:43,280 Speaker 4: And many, at least some of the people I spoke to, 126 00:07:43,400 --> 00:07:46,120 Speaker 4: said that the entire base case depends on Starship operating 127 00:07:46,120 --> 00:07:49,480 Speaker 4: at a cadence by twenty twenty seven. But if Starship 128 00:07:49,520 --> 00:07:52,760 Speaker 4: slips materially beyond that timeline, what do you make of that? 129 00:07:52,800 --> 00:07:57,560 Speaker 4: Does that still support the current valuation of SpaceX. 130 00:07:58,280 --> 00:08:01,680 Speaker 6: Yeah, so look, I mean the value is astronomical. I 131 00:08:01,680 --> 00:08:07,679 Speaker 6: guess maybe pun intended. You're really buying into a big, 132 00:08:10,240 --> 00:08:16,360 Speaker 6: glorious vision of the future of data centers and communications 133 00:08:16,400 --> 00:08:19,520 Speaker 6: on the Earth. Right, You're buying into data centers being 134 00:08:19,560 --> 00:08:25,560 Speaker 6: in space, using the Sun's energy, solar panels to power them, 135 00:08:26,040 --> 00:08:28,680 Speaker 6: using space to cool them fixes a lot of problems 136 00:08:28,680 --> 00:08:31,880 Speaker 6: that data centers have here on the Earth. Traditionally, there's 137 00:08:31,920 --> 00:08:33,560 Speaker 6: a lot of work to be done to get that 138 00:08:33,679 --> 00:08:36,320 Speaker 6: to happen. You're also sort of buying into a world 139 00:08:36,400 --> 00:08:39,199 Speaker 6: where we're using devices on the surface of the Earth 140 00:08:39,240 --> 00:08:42,559 Speaker 6: to communicate into space and do some of our internet 141 00:08:43,679 --> 00:08:48,439 Speaker 6: and telecommunication work. That's already happening. So you're sort of 142 00:08:48,480 --> 00:08:52,120 Speaker 6: buying into that big glorious future. Starship is all about 143 00:08:52,240 --> 00:08:57,080 Speaker 6: lifting more of that equipment into orbit. You need sort 144 00:08:57,120 --> 00:09:00,200 Speaker 6: of starships one hundred to one hundred and fifty the 145 00:09:02,679 --> 00:09:06,600 Speaker 6: sorry a ton capacity to get into orbit. You need 146 00:09:06,640 --> 00:09:10,240 Speaker 6: them to drive down those costs of getting things into orbit. 147 00:09:10,320 --> 00:09:15,520 Speaker 6: So look, I don't think Starship not working by twenty 148 00:09:15,559 --> 00:09:20,040 Speaker 6: twenty seven crushes this sort of view of the of 149 00:09:20,080 --> 00:09:25,840 Speaker 6: the future. If you're buying into the IPO and you 150 00:09:25,840 --> 00:09:29,800 Speaker 6: know it becomes two or you know, one three quarter 151 00:09:29,840 --> 00:09:33,319 Speaker 6: two trillion dollar IPO and you've bought in it ninety 152 00:09:33,400 --> 00:09:37,840 Speaker 6: times revenue, there may be disappointment in the marketplace. I mean, honestly, again, 153 00:09:37,960 --> 00:09:42,400 Speaker 6: those valuations are crazy to me. But look, you're buying 154 00:09:42,440 --> 00:09:45,240 Speaker 6: into a big tech company. But if it doesn't happen 155 00:09:45,280 --> 00:09:48,600 Speaker 6: by twenty twenty seven, is at the end of this 156 00:09:49,240 --> 00:09:52,120 Speaker 6: sort of vision of how the future could unfold. I 157 00:09:52,160 --> 00:09:55,160 Speaker 6: don't think so at all. They're far and ahead in 158 00:09:55,800 --> 00:09:59,880 Speaker 6: launch SpaceX is. They're thinking about data centers in space. 159 00:10:00,080 --> 00:10:03,000 Speaker 6: No one else is even thinking about it. If it works, 160 00:10:03,480 --> 00:10:06,240 Speaker 6: it could be great. And holding them to a time 161 00:10:06,440 --> 00:10:09,040 Speaker 6: a tight timeline I think is a bit challenging because 162 00:10:09,040 --> 00:10:11,560 Speaker 6: they are really cutting edge and no one's competing for 163 00:10:11,600 --> 00:10:12,720 Speaker 6: them on that cutting edge. 164 00:10:13,960 --> 00:10:16,920 Speaker 2: The number that really got my attention in this ip 165 00:10:17,040 --> 00:10:20,360 Speaker 2: of filing was this idea of a total addressable market. Yes, 166 00:10:21,360 --> 00:10:24,000 Speaker 2: I mean it was like twenty nine eight and a 167 00:10:24,000 --> 00:10:26,200 Speaker 2: half trillion dollars twenty nine trillion. I mean, at this point, 168 00:10:26,240 --> 00:10:31,040 Speaker 2: what's a half of trillion dollars? How do you reverse 169 00:10:31,080 --> 00:10:31,599 Speaker 2: engineer that? 170 00:10:33,160 --> 00:10:36,120 Speaker 6: Look, all of the numbers are big, and I guess 171 00:10:36,160 --> 00:10:40,840 Speaker 6: the beautiful beauty about that is again, how do you 172 00:10:40,880 --> 00:10:44,480 Speaker 6: reverse engineer? And my view on it again, look as 173 00:10:45,280 --> 00:10:49,079 Speaker 6: clearly AI and data centers has to be a persistent 174 00:10:49,200 --> 00:10:52,959 Speaker 6: trend for those numbers to come true, right, and we're 175 00:10:52,960 --> 00:10:56,360 Speaker 6: seeing the beginning of AI and fold it looks interesting 176 00:10:56,400 --> 00:10:59,840 Speaker 6: in some areas. In some areas I use, AI looks 177 00:11:00,200 --> 00:11:04,320 Speaker 6: off base. It does consume a lot of energy, It 178 00:11:04,360 --> 00:11:07,240 Speaker 6: does have some folks that that aren't the happiest with 179 00:11:07,720 --> 00:11:11,040 Speaker 6: a future that's helping, you know, being driven by AI. 180 00:11:11,360 --> 00:11:12,880 Speaker 6: So I think you got a first that you got 181 00:11:12,880 --> 00:11:15,760 Speaker 6: to buy into. AI is the future. We'll do more 182 00:11:15,800 --> 00:11:19,520 Speaker 6: of our thinking, more of our processes, you know, take 183 00:11:19,559 --> 00:11:23,079 Speaker 6: the I guess the droll items off all our workplates 184 00:11:23,520 --> 00:11:25,600 Speaker 6: and then you got to buy into a world where 185 00:11:26,160 --> 00:11:28,959 Speaker 6: you can put that in space and the communication to 186 00:11:29,000 --> 00:11:32,240 Speaker 6: space gets faster so there's no latency. So to be 187 00:11:32,280 --> 00:11:35,640 Speaker 6: honest with that, we see those big numbers, I find 188 00:11:35,640 --> 00:11:40,720 Speaker 6: them interesting. Reverse engineering them is really difficult at this point. Again, 189 00:11:40,760 --> 00:11:44,440 Speaker 6: I think you really got to buy into this is 190 00:11:44,480 --> 00:11:48,960 Speaker 6: a cutting edge tech company. You think you know how 191 00:11:49,040 --> 00:11:52,400 Speaker 6: the future is going to and hold unfold. Elon Musk 192 00:11:52,440 --> 00:11:55,439 Speaker 6: looks like the guy that will be, you know, steering 193 00:11:55,720 --> 00:12:01,120 Speaker 6: these enterprises that will help this future unfold. But to 194 00:12:01,160 --> 00:12:03,679 Speaker 6: sort of round out all of his numbers on what 195 00:12:03,720 --> 00:12:05,559 Speaker 6: it means, I think it's kind of kind of difficult. 196 00:12:05,600 --> 00:12:07,959 Speaker 6: I think you're buying into Elon Musk his vision of 197 00:12:08,000 --> 00:12:10,640 Speaker 6: the future and his ability to execute over time. 198 00:12:11,400 --> 00:12:12,000 Speaker 1: Stay with us. 199 00:12:12,160 --> 00:12:14,520 Speaker 5: More from Bloomberg Intelligence coming up after this. 200 00:12:18,360 --> 00:12:22,079 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 201 00:12:22,160 --> 00:12:24,840 Speaker 1: weekdays at ten am. He's done on Apple, Cocklay and 202 00:12:24,840 --> 00:12:28,120 Speaker 1: Android Auto with the Bloomberg Business app. Listen on demand 203 00:12:28,200 --> 00:12:31,720 Speaker 1: wherever you get your podcasts, or watch us live on YouTube. 204 00:12:32,600 --> 00:12:35,560 Speaker 2: There's this weird bifurcation in the markets right now because, 205 00:12:35,559 --> 00:12:37,920 Speaker 2: as John was telling us, stocks are higher, s and 206 00:12:37,960 --> 00:12:40,280 Speaker 2: P five hundred gaining five tens of one percent. There's 207 00:12:40,320 --> 00:12:42,360 Speaker 2: going to be a lot of big IPOs coming out, 208 00:12:42,360 --> 00:12:46,199 Speaker 2: like SpaceX, like open AI, and then you look at 209 00:12:46,240 --> 00:12:50,760 Speaker 2: everything else. Oil prices are higher, bonials have actually given 210 00:12:50,840 --> 00:12:52,840 Speaker 2: up some of their losses and are now higher, especially 211 00:12:52,840 --> 00:12:55,840 Speaker 2: at the short end, because the Federal Reserve Governor Christopher 212 00:12:55,840 --> 00:12:58,760 Speaker 2: Waller now says he supports making clear that the Fed's 213 00:12:59,040 --> 00:13:01,640 Speaker 2: next move could be just as much a rate increase 214 00:13:02,160 --> 00:13:05,040 Speaker 2: as it could be a rate cut. So where does 215 00:13:05,080 --> 00:13:09,120 Speaker 2: that leave someone who invests in real assets like real estate? 216 00:13:10,040 --> 00:13:13,960 Speaker 2: Let's ask Liz Hart. I mean, it's a puzzling question. 217 00:13:14,120 --> 00:13:18,960 Speaker 4: That is true. Everyone just points to corporate earnings. But yeah, 218 00:13:19,200 --> 00:13:21,920 Speaker 4: I mean it's an interesting bifurcation in the Marcos. Everything 219 00:13:21,960 --> 00:13:24,360 Speaker 4: AI is great, but you see a lot of concerns 220 00:13:25,200 --> 00:13:26,839 Speaker 4: well when it comes to others. All right, Liz Hart 221 00:13:26,920 --> 00:13:27,520 Speaker 4: is joining us now. 222 00:13:27,559 --> 00:13:30,360 Speaker 2: She's president of Leasing for North America at Newmark and Liz, 223 00:13:30,400 --> 00:13:32,320 Speaker 2: I know you're eager to jump in, so give us 224 00:13:32,320 --> 00:13:33,920 Speaker 2: your take on how you see things out there. 225 00:13:34,640 --> 00:13:36,800 Speaker 5: Absolutely so. I think you're right. This is a very 226 00:13:36,840 --> 00:13:40,559 Speaker 5: selective recovery. We're seeing great demand in places like Manhattan 227 00:13:41,080 --> 00:13:44,720 Speaker 5: and in San Francisco, where AI is certainly driving the story. 228 00:13:44,720 --> 00:13:45,920 Speaker 5: As you just commented on. 229 00:13:46,840 --> 00:13:49,840 Speaker 4: How much of the sector's outlook in general depends on 230 00:13:49,880 --> 00:13:52,199 Speaker 4: the path of interest rates and how are you positioning 231 00:13:52,880 --> 00:13:55,880 Speaker 4: in lieu of the changing outlook minted by minute. 232 00:13:56,679 --> 00:13:58,840 Speaker 5: Absolutely so, it does seem that we will be at 233 00:13:58,840 --> 00:14:01,440 Speaker 5: a higher for longer environ But what we're seeing right 234 00:14:01,480 --> 00:14:03,840 Speaker 5: now is the demand is still surging. You still have 235 00:14:03,960 --> 00:14:06,600 Speaker 5: AI companies leasing more space in Manhattan in the first 236 00:14:06,640 --> 00:14:09,040 Speaker 5: quarter than they did all of last year. You have 237 00:14:09,080 --> 00:14:12,640 Speaker 5: San Francisco at record demand right now, mostly driven by 238 00:14:12,640 --> 00:14:15,880 Speaker 5: those AI companies. Again, so it does seem as though, 239 00:14:15,920 --> 00:14:18,480 Speaker 5: even though there may be a higher for longer environment, 240 00:14:18,760 --> 00:14:21,800 Speaker 5: that companies are really optimizing for productivity and talent and 241 00:14:21,840 --> 00:14:23,880 Speaker 5: how they can drive their businesses forward right now. 242 00:14:24,160 --> 00:14:26,160 Speaker 2: Okay, yeah, but New York and San Francisco are not 243 00:14:26,200 --> 00:14:28,680 Speaker 2: the rest of the country. These are kind of exceptional markets. 244 00:14:28,840 --> 00:14:30,520 Speaker 2: You are up in Boston right now, and when I 245 00:14:30,520 --> 00:14:32,440 Speaker 2: say up, it's because we're in New York, so you're 246 00:14:32,520 --> 00:14:35,760 Speaker 2: up plus. Yes, Boston is one of those places where 247 00:14:35,920 --> 00:14:40,120 Speaker 2: one of those cities where the government funding decreases for 248 00:14:40,360 --> 00:14:43,240 Speaker 2: universities in Boston has really been felt, especially in the 249 00:14:43,240 --> 00:14:46,600 Speaker 2: biotech sector. How do things look in places like Boston 250 00:14:46,720 --> 00:14:49,680 Speaker 2: which are so tied to universities and government funding. 251 00:14:50,720 --> 00:14:52,480 Speaker 5: Well, I think what you're seeing really is a recovery 252 00:14:52,480 --> 00:14:54,240 Speaker 5: that's starting at the trophy end of the segment. And 253 00:14:54,280 --> 00:14:56,880 Speaker 5: we've talked about this before, but the trophy segment still 254 00:14:57,040 --> 00:14:58,920 Speaker 5: appears to be pretty good in all of those major 255 00:14:59,000 --> 00:15:01,360 Speaker 5: markets right now. Where you're seeing more of an issue 256 00:15:01,600 --> 00:15:03,720 Speaker 5: is the bottom of the market where there isn't as 257 00:15:03,800 --> 00:15:05,360 Speaker 5: much activity or demand. 258 00:15:05,760 --> 00:15:09,360 Speaker 4: What about how are you seeing AI? In your note 259 00:15:09,440 --> 00:15:12,600 Speaker 4: you allude to how AI is not a space reducer, 260 00:15:12,640 --> 00:15:15,560 Speaker 4: it's a demand generator, but that's kind of hard for 261 00:15:15,600 --> 00:15:16,280 Speaker 4: some to believe. 262 00:15:17,360 --> 00:15:19,960 Speaker 5: Well, absolutely, but it really is driving the demand in 263 00:15:20,000 --> 00:15:22,720 Speaker 5: a lot of those major markets. You're seeing companies that 264 00:15:22,760 --> 00:15:26,080 Speaker 5: didn't even exist taking over one hundred thousand square feet 265 00:15:26,120 --> 00:15:28,720 Speaker 5: and often over three or four hundred thousand square feet, 266 00:15:28,840 --> 00:15:31,000 Speaker 5: and so that shows us something that's really interesting about 267 00:15:31,000 --> 00:15:33,520 Speaker 5: this next generation economy is that those people who are 268 00:15:33,560 --> 00:15:36,000 Speaker 5: on the cutting edge, they're choosing to be in the office. 269 00:15:36,040 --> 00:15:38,840 Speaker 5: They're really choosing to prioritize how they work, and we 270 00:15:38,880 --> 00:15:41,640 Speaker 5: think that's a very interesting signal of how other sectors 271 00:15:41,640 --> 00:15:43,840 Speaker 5: are going to start to adopt over time and how 272 00:15:43,880 --> 00:15:47,000 Speaker 5: they can drive their businesses. Because AI really will impact 273 00:15:47,040 --> 00:15:48,720 Speaker 5: all of us in all sectors. It's just going to 274 00:15:48,720 --> 00:15:50,040 Speaker 5: take some time to have that happen. 275 00:15:50,520 --> 00:15:53,040 Speaker 2: So when you see the buildout of some of these 276 00:15:53,080 --> 00:15:56,440 Speaker 2: AI companies, particularly in San Francisco, the Bay Area, and 277 00:15:56,480 --> 00:15:58,760 Speaker 2: maybe in places like in New York. Where else do 278 00:15:58,800 --> 00:16:01,800 Speaker 2: you see them going to If the real estate in 279 00:16:01,880 --> 00:16:04,000 Speaker 2: those cities are too expensive, then they want to be 280 00:16:04,040 --> 00:16:07,800 Speaker 2: able to keep their costs under control but still be 281 00:16:07,840 --> 00:16:11,200 Speaker 2: able to insist on a physical footprint. 282 00:16:12,000 --> 00:16:14,080 Speaker 5: Absolutely, So, I think there's two things that are happening 283 00:16:14,160 --> 00:16:16,920 Speaker 5: right now in those major markets you mentioned. Starting at 284 00:16:16,920 --> 00:16:18,840 Speaker 5: the beginning of last year, we actually saw a little 285 00:16:18,840 --> 00:16:21,720 Speaker 5: bit of a pop in good quality class B space 286 00:16:22,000 --> 00:16:24,280 Speaker 5: as long as it was ready for occupancy right away. 287 00:16:24,640 --> 00:16:27,120 Speaker 5: So because there's such a rush on AI right now, 288 00:16:27,160 --> 00:16:29,160 Speaker 5: people really want to build today. They don't want to 289 00:16:29,160 --> 00:16:31,400 Speaker 5: wait for tomorrow, so they're looking for stuff that they 290 00:16:31,400 --> 00:16:34,600 Speaker 5: can get really quick occupancy on, and that's definitely driving 291 00:16:34,640 --> 00:16:38,440 Speaker 5: different categories in those high talent metric markets. In terms 292 00:16:38,480 --> 00:16:41,480 Speaker 5: of other markets outside of San Francisco and New York, 293 00:16:41,720 --> 00:16:45,200 Speaker 5: we're starting to see AI companies go to Bellevue definitely, 294 00:16:45,760 --> 00:16:49,400 Speaker 5: a little bit in Boston. London, Singapore are great markets, 295 00:16:49,640 --> 00:16:51,160 Speaker 5: and even a couple that are starting to look in 296 00:16:51,240 --> 00:16:51,960 Speaker 5: Los Angeles. 297 00:16:52,720 --> 00:16:55,960 Speaker 4: You also write that the issue is not that office 298 00:16:55,960 --> 00:16:59,040 Speaker 4: space is tight, it's that the right space is increasingly tight. 299 00:16:59,080 --> 00:17:01,000 Speaker 4: Talk to us about what the right space it is. 300 00:17:01,040 --> 00:17:03,440 Speaker 4: I mean, Scarlet made a point that everyone probably wants 301 00:17:03,480 --> 00:17:06,120 Speaker 4: to be in the major cities like San Francisco, of Boston, 302 00:17:06,160 --> 00:17:08,760 Speaker 4: New York and others and may have missed and many 303 00:17:08,800 --> 00:17:11,000 Speaker 4: will be offended. But can you talk a little bit 304 00:17:11,000 --> 00:17:11,600 Speaker 4: more about that. 305 00:17:12,520 --> 00:17:14,200 Speaker 5: Yeah, I know they certainly want to be in high 306 00:17:14,280 --> 00:17:16,040 Speaker 5: quality office space and they want to have it as 307 00:17:16,080 --> 00:17:18,000 Speaker 5: soon as they can so that they can really focus 308 00:17:18,040 --> 00:17:20,639 Speaker 5: on driving their businesses forward. I mean, look, if you're 309 00:17:20,640 --> 00:17:23,200 Speaker 5: looking at the quality of space, typically that means having 310 00:17:23,280 --> 00:17:26,000 Speaker 5: good natural light, good open areas where people can collaborate 311 00:17:26,040 --> 00:17:28,719 Speaker 5: with each other. Just high quality space has really been 312 00:17:28,800 --> 00:17:31,280 Speaker 5: driving the story for quite a long time, and obviously 313 00:17:31,320 --> 00:17:33,879 Speaker 5: always a bonus if it's creative for the technology sector 314 00:17:33,880 --> 00:17:35,879 Speaker 5: as well. They tend to like those type of finishes. 315 00:17:36,080 --> 00:17:41,080 Speaker 4: It sounds like my apartment hunt, Scarlet, because I also want. 316 00:17:39,440 --> 00:17:42,879 Speaker 5: Good lights, and yeah, natural light and creative finishes, that's 317 00:17:42,920 --> 00:17:44,840 Speaker 5: what we all want, right, It's like the. 318 00:17:44,800 --> 00:17:48,840 Speaker 2: Holy grail, both for office space and for apartments. Liz, 319 00:17:49,080 --> 00:17:52,639 Speaker 2: we started off by saying how interest rates, especially in 320 00:17:52,640 --> 00:17:56,440 Speaker 2: the rates market, are moving higher. They're fairly elevated. You know, 321 00:17:56,720 --> 00:17:58,240 Speaker 2: not just in the US, but in the UK and 322 00:17:58,280 --> 00:18:02,000 Speaker 2: Japan as well. What concerned are you about mortgage rates, 323 00:18:02,040 --> 00:18:04,640 Speaker 2: about interest rates and how they will stay at these 324 00:18:04,640 --> 00:18:08,080 Speaker 2: elevated levels for longer than maybe a lot of people anticipated. 325 00:18:09,119 --> 00:18:11,240 Speaker 5: It's something that certainly is a factor. But again, I 326 00:18:11,280 --> 00:18:13,719 Speaker 5: think with what's happening with AI and this big you know, 327 00:18:13,960 --> 00:18:16,560 Speaker 5: change that we're having is really the companies we're talking 328 00:18:16,600 --> 00:18:19,359 Speaker 5: to are most focused on productivity. How do they position 329 00:18:19,400 --> 00:18:22,359 Speaker 5: their businesses for growth and moving through this That's something 330 00:18:22,359 --> 00:18:24,639 Speaker 5: that those companies don't control, right, So they have to 331 00:18:24,680 --> 00:18:27,160 Speaker 5: live within the environment and within the moment of opportunity 332 00:18:27,200 --> 00:18:30,040 Speaker 5: that they have today, and they have to place their bets. 333 00:18:30,720 --> 00:18:32,919 Speaker 4: Do you think we're near the bottom for commercial real 334 00:18:33,040 --> 00:18:34,919 Speaker 4: estate evaluations or do you think there's going to be 335 00:18:34,960 --> 00:18:35,639 Speaker 4: more pain ahead? 336 00:18:36,520 --> 00:18:39,720 Speaker 5: It's certainly bifurcated. I think we're definitely behind. I think, 337 00:18:39,720 --> 00:18:41,359 Speaker 5: you know, twenty twenty five was the real pivot in 338 00:18:41,359 --> 00:18:43,480 Speaker 5: the major markets, and we're starting to can see other 339 00:18:43,520 --> 00:18:45,720 Speaker 5: markets pivot over time. So I do think the bottom 340 00:18:45,760 --> 00:18:46,360 Speaker 5: is behind us. 341 00:18:47,119 --> 00:18:49,479 Speaker 2: If the bottom is behind us, which markets are lagging 342 00:18:49,520 --> 00:18:53,160 Speaker 2: behind and still have a little bit of consolidation to go. 343 00:18:54,119 --> 00:18:55,800 Speaker 5: Well, I mean, it's really all the ones that we're 344 00:18:55,800 --> 00:18:58,040 Speaker 5: not mentioning, you know, in New York, San Francisco, those 345 00:18:58,040 --> 00:19:00,680 Speaker 5: are the ones that are ahead. For sure. This piece 346 00:19:00,680 --> 00:19:03,600 Speaker 5: has been performing exceptionally well, so that's another bright spot. 347 00:19:03,760 --> 00:19:05,600 Speaker 5: But there's others who still need a little bit more 348 00:19:05,600 --> 00:19:07,720 Speaker 5: demand to come in, and I think that we'll start 349 00:19:07,720 --> 00:19:09,000 Speaker 5: to see that through the end of the year. 350 00:19:10,080 --> 00:19:14,760 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, 351 00:19:14,960 --> 00:19:18,440 Speaker 1: and anywhere else you get your podcasts. 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