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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube as.

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Speaker 2: Christina Quino sitting in for Scarlet for I'm Paul Sweeney

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Speaker 2: live here on our Bloomberg Interactive Brokers Studio. I always

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Speaker 2: love chatting with Kim Farrest, founder and Chief Bestment Officer,

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Speaker 2: Bok Partner.

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Speaker 3: We love talking to.

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Speaker 2: Kim about markets, about technology, AI and maybe I want

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Speaker 2: to run this one by Intel. The news on Intel

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Speaker 2: shares fell after report said that Nvidia halted a test

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Speaker 2: to use Intel's production process to make advanced chips. Kim,

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Speaker 2: you mentioned in the notes that your firm is an

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Speaker 2: investor in Intel. How do you view this news? Is

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Speaker 2: a big news game changer? Don't worry about it kind

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Speaker 2: of thing?

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Speaker 4: Oh?

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Speaker 5: I think you know, as a portfolio manager managing other

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Speaker 5: people's mine, you always worry about everything, But on this

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Speaker 5: I'm not terribly worried about it. It's a new process

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Speaker 5: for Intel. They've been trying hard to compete against Taiwan

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Speaker 5: Semi and I think this is a setback for sure,

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Speaker 5: but maybe in video really wasn't going to ever use

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Speaker 5: Intel's processes.

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Speaker 3: We have to think about that.

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Speaker 5: And it's good that they tried it against the absolute

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Speaker 5: pinnacle of chips at this point, or at least the

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Speaker 5: pinnacle of chip makers at this point. So I think

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Speaker 5: that the CEO of Intel is someone who actually learns

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Speaker 5: and changes, and I believe that this is probably a

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Speaker 5: good thing ultimately, as they probably gain Intel probably gained

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Speaker 5: a lot of knowledge about what's right and what's wrong

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Speaker 5: with the process.

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Speaker 6: Yeah, caam, well, very interesting. That seems like really the

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Speaker 6: AI trade at this point a lot of discussions around chips, right,

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Speaker 6: and the diversification of where these companies are going to

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Speaker 6: be getting their chips in Vida no longer perhaps the

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Speaker 6: only player in the game. But yeah, what does that

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Speaker 6: tell you about where we are in the AI trade cycle?

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Speaker 6: Is it a good thing that we are starting to

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Speaker 6: see more producers stepping up and saying like, hey, we

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Speaker 6: can make these chips too, if you want to take

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Speaker 6: a look at our business.

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Speaker 7: I do.

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Speaker 5: Actually, I think I'm a big fan of capitalism, which

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Speaker 5: should be no one not a surprise in anyway. And

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Speaker 5: what the very best thing that capitalism does is create

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Speaker 5: a competitive environment. And even last year at this time,

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Speaker 5: well maybe especially last year at this time, because twenty

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Speaker 5: twenty four was the year of Nvidia, I think everybody

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Speaker 5: thought it was game over. There was no way for

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Speaker 5: any company to be able to compete with them. And

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Speaker 5: yet here we are looking at a whole slew of

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Speaker 5: not only new competition for the training kind of chips,

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Speaker 5: but there's we're broadening out. We're understanding that AI may

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Speaker 5: not just be asking chat GPT things, but there's other

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Speaker 5: uses for it. And guess what we're going to need

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Speaker 5: other chips. So vendors are lining up to try to

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Speaker 5: figure out how to best serve this market. Again an

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Speaker 5: advertisement for capitalism.

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Speaker 2: So Kim has the discussion around AI, to what extent

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Speaker 2: has it evolved? If it has it all, it feels

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Speaker 2: like now we've got to ask some different questions, like

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Speaker 2: maybe the return on some investment, like maybe what's it

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Speaker 2: really going to do for productivity? Asking some harder questions,

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Speaker 2: how do you think where do you think we are

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Speaker 2: in that evolution?

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Speaker 5: I think we're just beginning to scratch our head and

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Speaker 5: it's disappointing to me. I came from software and the

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Speaker 5: reason why I sit before you is because I worked

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Speaker 5: at AI companies that weren't asking the question how much

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Speaker 5: does my solution cost? And what problem am I solving

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Speaker 5: and what's the cost of that problem?

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Speaker 8: Right?

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Speaker 5: So, how technology has to work. Sorry to tell people

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Speaker 5: that it has to solve a problem less expensively than

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Speaker 5: the problem itself. That's just it. And I don't think

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Speaker 5: we're asking that the price of training these large language

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Speaker 5: models is incredible, And I'm not sure that investors are

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Speaker 5: really asking the questions that need to be asked, like

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Speaker 5: who's going to pay for this? And what's the return

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Speaker 5: and all of those kind of good things. Will this

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Speaker 5: cause a train wreck? Maybe, but I think it again,

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Speaker 5: I'm such an optimist. I think it would be a

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Speaker 5: good thing because then would narrow down on how we

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Speaker 5: can use this technology to actually get a benefit from it,

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Speaker 5: not just because it's cool, interesting, or whatever drives people

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Speaker 5: to look at tech.

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Speaker 6: Yeah, well, game your question of who's going to pay

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Speaker 6: for it? That was definitely the question that Marcus we're asking.

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Speaker 6: A few weeks ago, if you recall when we did

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Speaker 6: get a little bit of that AI bubble worry of

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Speaker 6: permeating the markets. Where do you stand on that? Is

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Speaker 6: that actually a good worry for markets to have at

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Speaker 6: this stage? And who do you think is going to

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Speaker 6: be the winners and losers coming out of that?

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Speaker 4: Sure?

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Speaker 8: I do.

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Speaker 5: I think it's a great question. I think it's the

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Speaker 5: only question an investor, not a technologist, an investor should ask,

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Speaker 5: is you know who benefits and where should I put

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Speaker 5: my money? Yes, it is early days, but I'm looking

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Speaker 5: at companies that are very much married to the large

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Speaker 5: language model. Most of them are private, and you know

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Speaker 5: they're talking in their own book over and over again,

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Speaker 5: and I think that should serve as a warning to investors.

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Speaker 5: So I think the bubble thing still is out there.

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Speaker 5: But ultimately I strongly believe that AI is productive when

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Speaker 5: targeted correctly, when asking the right questions, and when delivering solutions.

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Speaker 5: But I hate to tell investors this, especially on Christmas,

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Speaker 5: because I am an optimist. It's going to take way

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Speaker 5: longer than anybody thinks, way longer.

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Speaker 3: Way longer. The good things usually waiting for that. They

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Speaker 3: say as well.

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Speaker 2: Kim Farres, thank you so much, we appreciate it. Kim

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Speaker 2: far She's a founder and chief investment officer Bok Capital Partners.

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Speaker 2: She's out there in Pittsburgh, one of my favorite towns.

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Speaker 3: It's a great town, Pittsburgh. Stay with us. More from

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Speaker 3: Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: Hi, Christina Quino sitting in for Scarlett film Paul Sweeney

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Speaker 2: Live here in our Bloomberg inenrective brokers studio, streaming live

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Speaker 2: on YouTube. Well, a federal judge so the Trump administration

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Speaker 2: can move ahead with a one hundred thousand dollars fee

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Speaker 2: on new h one B visa application, providing setback for

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Speaker 2: US technology companies. To get some more color there, were

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Speaker 2: joined by Eric Larson. He is a US legal reporter

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Speaker 2: for Bloomberg News, joining us live here in a Bloomberg

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Speaker 2: inactive broker studio. I mean there's like a handful of

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Speaker 2: people in this buildings. Eric's one of them.

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Speaker 3: Eric, what's what?

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Speaker 2: Just give us the background of this one hundred thousand

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Speaker 2: dollars each would be visa thing.

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Speaker 9: Sure, so the president put this fee in place, sort

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Speaker 9: of surprised everyone with it. One of his many rules

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Speaker 9: that he put in place, sort of slowing immigration, targeting immigration,

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Speaker 9: saying that individuals who were using these particular visas were

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Speaker 9: taking jobs from skilled American workers who could do those

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Speaker 9: jobs but get paid more. Essentially, so they accuse these companies,

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Speaker 9: these industries of basically profiting.

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Speaker 4: From importing cheaper labor.

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Speaker 9: And there are several lawsuits were filed and we've got

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Speaker 9: our first ruling.

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Speaker 6: Yeah, Well, given the popularity of these visas, particularly in

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Speaker 6: a tech sector, Eric recom for audience, kind of what's

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Speaker 6: been the response from these companies involved and how do

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Speaker 6: they envision moving forward with the labor supply.

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Speaker 9: Well, I mean, it remains to be seen what will

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Speaker 9: actually happen with this one hundred thousand dollars.

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Speaker 4: This is one ruling.

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Speaker 9: There's a couple of other big lawsuits out there where

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Speaker 9: there haven't been rulings yet. So notably, none of those

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Speaker 9: lawsuits are filed by the big corporations who use these visas.

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Speaker 9: Maybe perhaps they're waiting it out to see what happens

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Speaker 9: with the lawsuits, but at any rate. There is another

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Speaker 9: big lawsuit filed by a Democratic led states, led by

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Speaker 9: California's attorney general. There's another big lawsuit filed by unions

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Speaker 9: and a group of nurses, and we haven't gotten any

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Speaker 9: rulings on those yet. So theoretically we could get a

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Speaker 9: ruling that goes the other way. This could be one

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Speaker 9: of the many cases that goes up to the Supreme

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Speaker 9: Court eventually.

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Speaker 2: What is the reality or what is the data show

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Speaker 2: about the need for H one B VISA workers. Is

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Speaker 2: there a lack of high tech workers coming out of

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Speaker 2: the US, Is there in fact a need for these people?

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Speaker 9: Well, it depends who you ask. Each of these lawsuits

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Speaker 9: gave a slightly different perspective. The Chamber of Commerce lawsuit,

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Speaker 9: which is the one we just had the ruling on

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Speaker 9: representing the ideas of businesses. The States are saying that

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Speaker 9: this fee harms the states in the capacity of hospitals

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Speaker 9: needing H one V VISA employees, teacher like universities, things

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Speaker 9: like that. And they're saying that pretty much every part

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Speaker 9: of American society somehow uses these visas.

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Speaker 4: So it depends on who you ask.

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Speaker 9: The government says you can find these skilled workers here

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Speaker 9: in the US, you're just going to have to pay

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Speaker 9: them more. But that is not at all how these

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Speaker 9: plans see it. They say that there's just a huge shortage,

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Speaker 9: especially when it comes to hospitals, nurses, and these tech

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Speaker 9: companies say that this creates innovation and having more diverse

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Speaker 9: views from backgrounds coming in from around the world.

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Speaker 4: That are people who are are.

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Speaker 9: Deeply you know, steeped in this in the tech sectors.

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Speaker 9: It's impossible to really say, you know, both sides are

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Speaker 9: pushing pretty hard here.

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Speaker 6: Do we have a sense of what's been going on

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Speaker 6: in the ground in terms of companies and workers involved

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Speaker 6: in in the process currently of trying to obtain an

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Speaker 6: age one B. I imagine there's a lot of confusion and

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Speaker 6: maybe delays in the process.

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Speaker 4: Now, yes, I would think so.

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Speaker 9: I've spoken immigration lawyers who say that this is a

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Speaker 9: huge problem for them and their clients and expectations of

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Speaker 9: people who thought they might be able to use this visa.

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Speaker 4: But for now, I mean, this ruling.

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Speaker 9: Makes it pretty clear that this might be the law

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Speaker 9: of the land for a while. This was an Obama

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Speaker 9: appointed judge who said that the president has this broad

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Speaker 9: authority that Congress gave him. In the Immigration and Nationality

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Speaker 9: Act gave the president this type of authority when the

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Speaker 9: president believes that someone is or a group of people

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Speaker 9: are a threat to the economy, that that's in the

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Speaker 9: Immigration and Nationality Act. So this Democratic appointed judge who's

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Speaker 9: ruled against Trump on other things is saying he has

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Speaker 9: this authority. And that's kind of not saying that every

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Speaker 9: other judge will rule the same way in these other cases.

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Speaker 9: But that is how these individuals are gonna have to

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Speaker 9: look at it, these companies in terms of planning for

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Speaker 9: the future and as well as workers.

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Speaker 3: Yeah, I don't see this just personally. I don't see

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Speaker 3: this as a big issue for the big tech companies.

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Speaker 2: They can afford it. They can whine, they can afford it.

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Speaker 2: But you mentioned healthcare, and I'm thinking I keep hearing

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Speaker 2: and reading about nursing shortages and things like that, and

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Speaker 2: I would think they try to fill some of the

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Speaker 2: shortages with non US workers via the H one B

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Speaker 2: visa situation. That could be a problem if you're a

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Speaker 2: hospital and now you're saying it where I'm a you know,

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Speaker 2: I got to pay more to get my nurses in

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Speaker 2: from wherever I get them.

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Speaker 4: That would be a child problem.

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Speaker 9: I would think absolutely, And that was a highlight of

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Speaker 9: the case filed by the nineteen or twenty Democratic attorneys general,

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Speaker 9: most of them in the country said that, you know,

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Speaker 9: this is a particular problem, and that's how they the

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Speaker 9: states in one of the ways they said they have

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Speaker 9: standing to sue. You know that they have a right

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Speaker 9: to sue, is saying that the threat to the healthcare

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Speaker 9: industry in particular makes it a public issue that the

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Speaker 9: states have responsibility to sue over essentially saying that they

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Speaker 9: need to keep the flow of these skilled healthcare workers

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Speaker 9: coming in.

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Speaker 2: Is that also for students as well? How do I

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Speaker 2: get that student visas are different?

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Speaker 4: I guess yeah, that's a different different because that's.

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Speaker 2: Also been a challenge for universities all the uncertainty about immigration.

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Speaker 2: A lot of their international applicants are down significant because

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Speaker 2: those people are unsure about what the policy is going

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Speaker 2: to be in the US, and that's hurting the universities

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Speaker 2: who depend upon them to some degree.

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Speaker 3: Eric, thanks so much, appreciate it.

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Speaker 2: Eric Larson, us legal reporter for Bloomberg News, joining us

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Speaker 2: in our Bloomberg Interactive Brokers Studio Extra Star today. Eric

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Speaker 2: for coming in on Christmas Eve.

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Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto

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Speaker 1: with the Bloomberg Business App. Listen on demand wherever you

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Speaker 1: get your podcasts, or watch us live on YouTube.

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Speaker 2: Chicken with Smasha. She's a vice president Research and Insights

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Speaker 2: at Censor Tower. Sema, thanks so much for joining us here.

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Speaker 2: What are you seeing out there in I mean it's

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Speaker 2: Christmas season here? What are you seeing out there in

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Speaker 2: the marketplace?

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Speaker 7: I mean I would say, like we're talking about retail,

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Speaker 7: I will say that, you know, our figures are slower

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Speaker 7: than they were in the prior years in terms of

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Speaker 7: monthly active users and in terms of traffic we're seeing

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Speaker 7: and some of the mobile apps has definitely been a

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Speaker 7: little bit slower. And we're also seeing a sort of

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Speaker 7: a skew to value. So if you think of like

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Speaker 7: the team Moves of the world as have sort of

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Speaker 7: seen a resurgence, but also life Polesale and other value players,

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Speaker 7: that's what we're sort of seeing in their retail landscape.

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Speaker 7: But I think from a broader step back if we

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Speaker 7: just look across categories in the US, I would say

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Speaker 7: that there's still this pressure on discretionary sort of expenditure.

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Speaker 7: So based on how we look at the mobile app universe,

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Speaker 7: if you look at like dating app, subscriber revenue and

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Speaker 7: interaction is down, same with streaming as a whole. So

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Speaker 7: that's kind of what we're seeing at like a fifty

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Speaker 7: thousand fut level.

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Speaker 2: I mean, net how is this season going to be

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Speaker 2: in terms of the Christmas season?

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Speaker 3: And that just a holiday season.

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Speaker 2: I mean there's lots of reports out there that the

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Speaker 2: consumers stretched and all that type of stuff.

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Speaker 7: Yeah, and our data sort of confirms that, both our

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Speaker 7: mobile and our web data. And the other thing that

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Speaker 7: we saw is when we looked at the advertising spend

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Speaker 7: in prior years versus this year, we can already see

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Speaker 7: that in this fourth quarter there's been a slow down

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Speaker 7: in overall ad spend, which typically means that presumably the

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Speaker 7: advertisers think that there'll be a pullback and spending. And

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Speaker 7: we've sort of seen that slow down across the metrics

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Speaker 7: that we follow and that we sort of used to

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Speaker 7: infer how people are spending. What our metric don't take

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Speaker 7: into account that would be inflation and anything to do

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Speaker 7: specifically with price. So I think when we get the

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Speaker 7: retail sales numbers and other sort of comp numbers, we

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Speaker 7: should be cognizant to see how much of that was

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Speaker 7: price versus traffic, because from our end, the traffic part

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Speaker 7: seems to definitely be weaker.

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Speaker 2: All right, seem I was throwing for a loop here

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Speaker 2: because I know you in the context of talking about retail.

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Speaker 2: But yes, so now, okay, so now you've brought your

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Speaker 2: remit here and you can talk about I guess some

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Speaker 2: of these.

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Speaker 3: Media deals out there.

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Speaker 2: I love to get your thoughts on kind of what's

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Speaker 2: happening in Warner Brothers Discovery.

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Speaker 7: Yes, absolutely so. As everybody knows, there's two competing bids,

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Speaker 7: Netflix versus Paramount Skydance, and from our perspective, the results

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Speaker 7: of each merger, if they were passed, are very different,

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Speaker 7: and what Warner Brothers brings to each group is very different. Right.

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Speaker 7: Netflix is the leader by far, oh nearly fifty percent

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Speaker 7: of all monthly active users globally are on Netflix. For Paramount,

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Speaker 7: on the other hand, it's only four percent, with HBO

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Speaker 7: around ten percent. So if Netflix acquires Warner Brothers it

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Speaker 7: becomes even larger and more likely that people will not

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Speaker 7: be able to get caught up with them. For paramount,

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Speaker 7: the addition of HBO is huge. It jumps them up

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Speaker 7: to the same level of active user penetration as Disney

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Speaker 7: plus an Amazon Prime. It gives them access to tent

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Speaker 7: pole content, you know, like The Game of Thrones, White Lotus.

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Speaker 7: It kind of puts them into the higher sphere of

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Speaker 7: streamers in terms of content. For Netflix, it gives them

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Speaker 7: the opportunity to maybe jumpstart their subscriber growth. Right, it's

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Speaker 7: been pretty stagnant to down because they're so large, but

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Speaker 7: HBO is really the fastest growing international streamer that we follow,

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Speaker 7: So this would be an opportunity for Netflix to pick

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Speaker 7: up those users potentially, but also to leverage its content creation.

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Speaker 7: You know, Bohemoth that they can make local language content

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Speaker 7: and apply that to HBO's content. So I think there's

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Speaker 7: a lot of opportunity, but it just to really depends

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Speaker 7: on who ends up getting the deal or not what

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Speaker 7: it does for each player.

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Speaker 6: Yeah, we'll see that. It sounds like we're nowhere close

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Speaker 6: to finding who end up getting the deal because you know,

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Speaker 6: Warner Brothers leadership very clear they want to push their

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Speaker 6: investors to go with Netflix here, but then Larry Ellison

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Speaker 6: waiting into this battle in personally guaranteeing some of that

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Speaker 6: bid from Paramount. So where do you think these firms

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Speaker 6: stand in terms of who's closer to be able to

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Speaker 6: finally clinch the deal at the end of the day.

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Speaker 7: Well, I think just generally because the Warner Brothers board

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Speaker 7: is on board with Netflix, that definitely makes that seem

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Speaker 7: like a more likely deal. However, and I think that

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Speaker 7: if Paramount wants to get the deal, they have to

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Speaker 7: continue to increase their bid. I know that they recently

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Speaker 7: offered the same breakup fee as Netflix, but I think

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Speaker 7: there might be some other fees that they would have

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Speaker 7: to increase the value of that bid in order to

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Speaker 7: make it worth their while, you know so? And I

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Speaker 7: think it also depends on the value of discovery, which

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Speaker 7: I have heard valuations from one dollar to almost four

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Speaker 7: dollars per share for that portion of the business for

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Speaker 7: the linear TV. So I think it really depends on

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Speaker 7: how people view that because the Netflix bid does not

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Speaker 7: include that.

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Speaker 2: What do you think the regulators are going to say

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Speaker 2: about this deal going forward?

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Speaker 3: Yeah?

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Speaker 7: So, I mean to be fair, Look, Netflix is so large.

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Speaker 7: If they acquired Warner Brothers and they had HBO, they

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Speaker 7: would be by far the largest. But in the grand

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Speaker 7: scheme of life, like HBO is only ten percent of MAUS,

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Speaker 7: Netflix is already almost fifty percent. So it does make

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Speaker 7: it a little bit more difficult, I think, for the

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Speaker 7: average streamer to try to catch up to them. But

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Speaker 7: I don't think it's completely uncompetitive for I mean, but

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Speaker 7: I think that it'll be viewed potentially as uncompetitive just

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Speaker 7: because if other streamers also start consolidating, there's or fewer

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Speaker 7: options for consumers. And we're already seeing pricing issues for

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Speaker 7: subscribe for subscriptions both ad supported and non ad supported,

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Speaker 7: So I think that will be a concern, you know,

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Speaker 7: for regulatory purposes. For Netflix pre paramount, I don't really

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Speaker 7: see an, uh, you know, a real regulatory issue given

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Speaker 7: that its size is very small, and even with HBO,

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Speaker 7: it would just be on par with Disney Plus and

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Speaker 7: Amazon Prime, so it seems like it would have less

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Speaker 7: of an impact from a regulatory perspective.

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Speaker 3: And we'll see that.

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Speaker 6: You make an interesting point about kind of how this

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Speaker 6: could potentially change the streamer landscape, right and especially when

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Speaker 6: it comes to consolidation. Where do you see that going.

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Speaker 6: Which other streamers do you think might be prime for

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Speaker 6: a similar deal like this?

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Speaker 7: Well, you already saw Disney Plus sort of buy out

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Speaker 7: the rest of Hulu, So that is one form of consolidation, right,

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Speaker 7: they're all own together. I'm not sure if the other

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Speaker 7: streamers are are part of some of these larger companies,

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Speaker 7: so they are less likely to be acquired. But I

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Speaker 7: do think that if we're thinking from a competitive standpoint,

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Speaker 7: if you really want to understand this, you have to

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Speaker 7: realize that the streamers are not just competing with themselves.

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Speaker 7: They're basically competing with anything else that takes time. And

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Speaker 7: so we view that as like short form video and

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Speaker 7: social media. So if you broaden the landscape to include those,

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Speaker 7: neither deal is really anti competitive, right because users have

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Speaker 7: so many options on the ways to get content and

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Speaker 7: the way that they view content. And I think so

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Speaker 7: short form video and streaming, social storry, social media are

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Speaker 7: very growing, and you know, competitors that the streamers need

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Speaker 7: to look for. So I so on the consolidation question,

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Speaker 7: I don't think that's necessarily going to be a roll

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Speaker 7: up of the industry. But and I think from the

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Speaker 7: anti competitive spart portion. We should really look at the

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Speaker 7: broader space of how consumers spend their time.

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Speaker 4: Yeah.

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Speaker 6: Well, speaking of the broader space, then what's all look

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Speaker 6: for twenty twenty six? How do you think, Yeah, the

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Speaker 6: media space is going to shape up. Are there kind

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Speaker 6: of any underestimated risks or surprises that perhaps investors aren't

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Speaker 6: necessarily paying attention to.

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Speaker 1: Yeah.

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Speaker 7: I think that one thing that we've noticed has been

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Speaker 7: sort of an acceleration of what we called the fast

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Speaker 7: the free ad supporter streamers. Think of the two B's

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Speaker 7: of the world that have increased their live sports content,

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Speaker 7: which is really great for grabbing subscribers.

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Speaker 4: They're free.

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Speaker 7: Everybody knows that they come with ads. I don't think

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Speaker 7: there's any confusion as to the subscription that they have

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Speaker 7: or what they're getting, And I think that probably resonates

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Speaker 7: with a lot of the younger consumers like gen Z,

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Speaker 7: where finances might be a little bit tighter and you

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Speaker 7: really can't have all these subscriptions. So with these free

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Speaker 7: ad supported players improving their content and their live sports,

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Speaker 7: I think that's something to look for as we go

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Speaker 7: into twenty twenty six.

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Speaker 2: They seem if Paramount doesn't get Warner Brothers. What do

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Speaker 2: they do then, because boy, they're left kind of holding

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Speaker 2: their back here.

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Speaker 3: Yeah.

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Speaker 7: I mean, like from all aspects of our data, they

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Speaker 7: are very far one of the smallest. They only have

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Speaker 7: four percent of advertising dollars in the US compared to

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Speaker 7: the other streamers four percent of active users. I think that,

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Speaker 7: you know, it's going to be very hard for them

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Speaker 7: because people have so many subscriptions already it's hard to

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Speaker 7: add another one. So unless they really bump up their

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Speaker 7: content and have you know, a show that's in the

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Speaker 7: zeitgeist like Stranger Things or White Lotus, it's going to

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Speaker 7: be very difficult for them to sort of move out

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Speaker 7: of their positioning regardless of whether or not the Netflix

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Speaker 7: deal goes through.

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Speaker 2: Sema, thanks so much for joining us. I appreciate chatting

445
00:22:32,119 --> 00:22:34,800
Speaker 2: with you, Sima Shaw. She's vice president Research and Insights

446
00:22:34,800 --> 00:22:36,160
Speaker 2: at Sensor Towers.

447
00:22:36,480 --> 00:22:37,120
Speaker 8: Stay with us.

448
00:22:37,240 --> 00:22:39,560
Speaker 3: More from Bloomberg Intelligence coming up after this.

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00:22:43,520 --> 00:22:47,200
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch US Live

450
00:22:47,280 --> 00:22:50,360
Speaker 1: weekdays at ten am Eastern on Apple, Coarclay, and Android

451
00:22:50,400 --> 00:22:53,679
Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

452
00:22:53,760 --> 00:22:56,480
Speaker 1: you get your podcasts, or watch US live on.

453
00:22:56,400 --> 00:23:00,360
Speaker 2: YouTube Christina Kuino sitting in for Scarlett Foo. I'm Paul

454
00:23:00,400 --> 00:23:03,680
Speaker 2: Sweeney live here in our Bloomberg Interactive Brokers studios. Let's stay,

455
00:23:04,200 --> 00:23:07,639
Speaker 2: let's focus on commercial real estate these days. I'm going

456
00:23:07,720 --> 00:23:11,399
Speaker 2: to call it better than stabilized. It feels like it's

457
00:23:11,480 --> 00:23:13,280
Speaker 2: kind of back and for a lot of sectors and

458
00:23:13,359 --> 00:23:15,800
Speaker 2: a lot of parts of the country here. Now we've

459
00:23:15,800 --> 00:23:18,680
Speaker 2: got interest rates coming down, should be another support being

460
00:23:18,760 --> 00:23:21,080
Speaker 2: for our commercial real estate. But Liz Hard, she's the

461
00:23:21,119 --> 00:23:24,800
Speaker 2: pro president of leasing for North America at Newmark based

462
00:23:24,840 --> 00:23:25,679
Speaker 2: in San Francisco.

463
00:23:25,760 --> 00:23:27,399
Speaker 3: I have no idea where she is now. I'm not

464
00:23:27,400 --> 00:23:28,200
Speaker 3: sure I want to know.

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00:23:28,640 --> 00:23:32,359
Speaker 2: Liz characterized kind of you would right now, how's a

466
00:23:32,359 --> 00:23:34,520
Speaker 2: commercial real estate market in this country?

467
00:23:36,119 --> 00:23:38,159
Speaker 8: Well, I think you nailed it. Twenty twenty five was

468
00:23:38,160 --> 00:23:40,040
Speaker 8: really the pivot year. It was the year that we

469
00:23:40,040 --> 00:23:42,640
Speaker 8: started to have positive absorption across the country halfway through

470
00:23:42,680 --> 00:23:45,000
Speaker 8: the year, and we're heading into twenty twenty six on

471
00:23:45,080 --> 00:23:49,199
Speaker 8: quite the optimistic note. Trophy performing exceptionally well in New

472
00:23:49,280 --> 00:23:51,920
Speaker 8: York City where you guys are today, four point six

473
00:23:52,000 --> 00:23:55,240
Speaker 8: percent availability at the top of the market, demand double

474
00:23:55,280 --> 00:23:57,960
Speaker 8: that right now and with no supply expected until the

475
00:23:58,000 --> 00:23:59,080
Speaker 8: early twenty thirties.

476
00:24:00,080 --> 00:24:02,760
Speaker 6: Yeah, well, you know, the Trophy A space in Manhattan

477
00:24:02,920 --> 00:24:05,800
Speaker 6: especially very much thriving here, as you mentioned, Liz, do

478
00:24:05,840 --> 00:24:08,720
Speaker 6: you think that means that rent will continue to stay

479
00:24:08,720 --> 00:24:12,240
Speaker 6: elevated while even if overall they can see.

480
00:24:12,119 --> 00:24:13,760
Speaker 3: Is also still elevated.

481
00:24:14,600 --> 00:24:17,040
Speaker 8: Well, certainly in that part of the trophy market. We

482
00:24:17,040 --> 00:24:19,159
Speaker 8: would expect it to be elevated in New York City

483
00:24:19,440 --> 00:24:22,639
Speaker 8: and across the markets. But as you're kind of referencing,

484
00:24:23,000 --> 00:24:25,720
Speaker 8: rents aren't going to be going up across every single

485
00:24:25,760 --> 00:24:28,399
Speaker 8: sector at the Trophy definitely, and in the Class A

486
00:24:28,560 --> 00:24:31,160
Speaker 8: market where we see that we're doing, you know, one

487
00:24:31,280 --> 00:24:34,280
Speaker 8: third of the product inventory is doing half of the leasing.

488
00:24:34,560 --> 00:24:36,960
Speaker 8: We'd expect rents to increase there, but it's not going

489
00:24:36,960 --> 00:24:39,119
Speaker 8: to happen across every single part of the category. In

490
00:24:39,160 --> 00:24:40,720
Speaker 8: the lower end, we're still struggling.

491
00:24:41,640 --> 00:24:44,920
Speaker 3: How about retail here, how's that looking these days?

492
00:24:46,160 --> 00:24:48,920
Speaker 8: Retail's looking pretty strong again. It's a story of outperformance

493
00:24:48,920 --> 00:24:50,879
Speaker 8: at the top of the market. But what's looking like

494
00:24:50,880 --> 00:24:52,320
Speaker 8: it's going to be very interesting in the beginning of

495
00:24:52,359 --> 00:24:55,920
Speaker 8: the year, particularly for those New Year's resolutions. Wellness whileness

496
00:24:56,000 --> 00:24:58,240
Speaker 8: is really expected to be a standout in twenty twenty six.

497
00:24:59,440 --> 00:25:02,199
Speaker 6: Yeah, well, I'm definitely seeing a lot of what like

498
00:25:02,320 --> 00:25:06,200
Speaker 6: yoga studios, pilate studios, climbing James popping up in the neighborhood.

499
00:25:06,600 --> 00:25:10,240
Speaker 2: So very much about on the industrial side there, we've

500
00:25:10,320 --> 00:25:14,320
Speaker 2: got this reshoring near shuring, near shoring mandate. Is that

501
00:25:14,840 --> 00:25:16,439
Speaker 2: make industrial a good place to be?

502
00:25:17,720 --> 00:25:20,520
Speaker 8: It's showing up in the data. That's what's showing up well.

503
00:25:20,600 --> 00:25:23,280
Speaker 8: Is the new construction so certainly doing well. And then

504
00:25:23,320 --> 00:25:26,520
Speaker 8: also intermodial cities, So think of areas like Dallas and

505
00:25:26,560 --> 00:25:29,720
Speaker 8: Phoenix very close to Mexico. They're showing to be very

506
00:25:29,760 --> 00:25:32,160
Speaker 8: strong performers and expected to do so in twenty six

507
00:25:32,200 --> 00:25:32,679
Speaker 8: and beyond.

508
00:25:33,440 --> 00:25:36,200
Speaker 6: Yeah, what do you think is well moving to kind

509
00:25:36,200 --> 00:25:39,560
Speaker 6: of like the less optimistic part of commercial real estate? Liza,

510
00:25:39,880 --> 00:25:43,040
Speaker 6: do you think there are kind of sectors that will

511
00:25:43,040 --> 00:25:44,560
Speaker 6: be challenged heading into next year?

512
00:25:45,840 --> 00:25:47,600
Speaker 8: Well, I think when you look at the vacancy that's

513
00:25:47,600 --> 00:25:50,159
Speaker 8: been on the market for a long time, there's parts

514
00:25:50,160 --> 00:25:52,560
Speaker 8: that are just not really moving, particularly in retail. So

515
00:25:53,119 --> 00:25:55,800
Speaker 8: for space that's been on the market for greater than

516
00:25:56,119 --> 00:25:58,480
Speaker 8: you know, twenty four forty eight months, it's time to

517
00:25:58,560 --> 00:26:01,040
Speaker 8: reinvent and I think if your space has been on

518
00:26:01,080 --> 00:26:02,879
Speaker 8: the market for you know, a couple of years, you

519
00:26:02,920 --> 00:26:05,840
Speaker 8: really have to look at repositioning it and reconsidering it.

520
00:26:06,760 --> 00:26:09,159
Speaker 8: You know, if it's not moving, it's probably for a reason.

521
00:26:09,600 --> 00:26:12,800
Speaker 8: Demand is moving when there is space that matches it.

522
00:26:14,280 --> 00:26:16,680
Speaker 2: So tell us about San Francisco. I know you're based

523
00:26:16,680 --> 00:26:18,800
Speaker 2: in San Francisco. Give us kind of where we are

524
00:26:19,280 --> 00:26:22,720
Speaker 2: in San Francisco. No city city was in great, great,

525
00:26:22,720 --> 00:26:25,560
Speaker 2: great shape before the pandemic, and then maybe no major

526
00:26:25,640 --> 00:26:29,159
Speaker 2: uscit got hurt more during the pandemic than San Francisco.

527
00:26:29,640 --> 00:26:32,280
Speaker 2: But there's some real signs that it's been coming back.

528
00:26:32,359 --> 00:26:33,880
Speaker 2: Give us a kind of an overview.

529
00:26:34,880 --> 00:26:35,000
Speaker 7: Oh.

530
00:26:35,080 --> 00:26:38,359
Speaker 8: Absolutely, I mean the demand is back at pre pandemic levels,

531
00:26:38,680 --> 00:26:41,920
Speaker 8: mostly driven by the technology industry. The technology industry has

532
00:26:41,920 --> 00:26:45,280
Speaker 8: been an outperformer across the country, but certainly led by

533
00:26:45,280 --> 00:26:48,359
Speaker 8: the AI companies in San Francisco. You have Open Ai

534
00:26:48,480 --> 00:26:51,560
Speaker 8: Andthropic being two standouts there, but many others as well

535
00:26:51,760 --> 00:26:54,520
Speaker 8: who've leased well in excess of one hundred thousand square feet,

536
00:26:54,560 --> 00:26:56,960
Speaker 8: you know, several in excess of five hundred thousand square feet,

537
00:26:57,240 --> 00:27:01,239
Speaker 8: leading that demand curve rents increasing. So we'd expect San

538
00:27:01,280 --> 00:27:03,320
Speaker 8: francis going to be a strong performer than twenty six

539
00:27:03,320 --> 00:27:04,920
Speaker 8: and twenty seven as well.

540
00:27:05,080 --> 00:27:08,200
Speaker 6: Yeah, well you mentioned a pre pandemic situation, Liz, and

541
00:27:08,320 --> 00:27:10,879
Speaker 6: it's interesting because we'd still have about half of pre

542
00:27:10,960 --> 00:27:14,080
Speaker 6: pandemic office leases rolling. So do you think twenty twenty

543
00:27:14,080 --> 00:27:16,400
Speaker 6: six is going to be more about growth or are

544
00:27:16,400 --> 00:27:21,680
Speaker 6: we kind of hitting this right size sort of reality

545
00:27:21,800 --> 00:27:25,520
Speaker 6: now after we saw a few years of struggle in

546
00:27:25,520 --> 00:27:25,960
Speaker 6: that space.

547
00:27:27,119 --> 00:27:29,400
Speaker 8: Well, at the end of twenty five through twenty seven

548
00:27:29,480 --> 00:27:31,840
Speaker 8: is one about half of those pre pandemic leases are

549
00:27:32,000 --> 00:27:34,040
Speaker 8: set to expire. So we're tracking over a billion and

550
00:27:34,160 --> 00:27:36,880
Speaker 8: a half square a billion and a half square feet

551
00:27:36,880 --> 00:27:38,960
Speaker 8: of leases, and what we're seeing in the data is

552
00:27:38,960 --> 00:27:41,400
Speaker 8: that seventy two percent of those tenants are looking for

553
00:27:41,440 --> 00:27:44,280
Speaker 8: the same or greater amount of space. So what that

554
00:27:44,359 --> 00:27:47,000
Speaker 8: shows us is the contraction is mostly behind us, and

555
00:27:47,040 --> 00:27:49,840
Speaker 8: it looks like we're headed into a stabilization and growth cycle.

556
00:27:50,560 --> 00:27:52,800
Speaker 2: So how about just kind of out in Suburbia, Like

557
00:27:52,920 --> 00:27:57,359
Speaker 2: you drive around Suburbia, USA and any offs park, I

558
00:27:57,359 --> 00:27:59,679
Speaker 2: don't see a lot of cars. I'm talk to us

559
00:27:59,680 --> 00:28:02,280
Speaker 2: about that market because it just feels like that's got

560
00:28:02,320 --> 00:28:05,200
Speaker 2: a lot of vacancy there give us a suburban kind

561
00:28:05,200 --> 00:28:05,880
Speaker 2: of commercial.

562
00:28:06,840 --> 00:28:09,280
Speaker 8: Well, it's hard to say across every single market because

563
00:28:09,280 --> 00:28:12,439
Speaker 8: it does depend on which suburban market that you're talking about.

564
00:28:12,680 --> 00:28:15,639
Speaker 8: But certainly, you know the suburban markets outside of San Francisco,

565
00:28:15,680 --> 00:28:18,800
Speaker 8: the ones outside of Dallas there are some pretty strong performers.

566
00:28:18,880 --> 00:28:21,040
Speaker 8: So it depends on where that demand is and where

567
00:28:21,080 --> 00:28:23,159
Speaker 8: that job growth is, and if it's proximate to an

568
00:28:23,160 --> 00:28:25,359
Speaker 8: area that has it, then you know those those markets

569
00:28:25,400 --> 00:28:26,359
Speaker 8: are doing well as well.

570
00:28:27,000 --> 00:28:29,560
Speaker 6: Yeah, what's your up and cooming city for commercial in

571
00:28:29,600 --> 00:28:30,400
Speaker 6: twenty twenty six?

572
00:28:30,480 --> 00:28:33,160
Speaker 8: Liz, Well, I think the up and coming, even though

573
00:28:33,160 --> 00:28:35,040
Speaker 8: it's already there, is still going to be San Francisco

574
00:28:35,040 --> 00:28:37,120
Speaker 8: because that's set to be the outperformer in twenty six.

575
00:28:38,240 --> 00:28:41,280
Speaker 3: Is Dallas and Texas? Is that kind of peaked? Do

576
00:28:41,320 --> 00:28:41,640
Speaker 3: you think?

577
00:28:42,880 --> 00:28:44,760
Speaker 8: I don't think it's peaked yet. I think Dallas and

578
00:28:44,800 --> 00:28:46,880
Speaker 8: Houston still have quite a bit of way to go.

579
00:28:48,400 --> 00:28:51,080
Speaker 2: All right, Liz, thanks very much, appreciate it. Liz Hart,

580
00:28:51,080 --> 00:28:53,560
Speaker 2: President of Leasing for North America New Mark.

581
00:28:53,800 --> 00:28:58,480
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582
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583
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584
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