The Brick Breakdown

Hello Brick Brief readers, 

Happy Friday! Today we’re seeing billion-dollar real estate M&A, AI adoption in construction and real estate operations, and Blackstone forecasting a real estate recovery.

🏗️ Real Estate M&A Activity Heats Up
Union Pacific and Norfolk Southern are in talks for a $200B rail merger, while Elliott is taking City Office REIT private in a $1.1B deal amid ongoing stress in the office sector. Marriott’s $355M acquisition of CitizenM’s global hotel portfolio reflects a shift toward strategic consolidation across sectors as investors reposition for long-term growth.

🤖 AI Push Gains Ground in Real Estate Ops
AI adoption is accelerating across the industry, with over half of real estate professionals now using or piloting tools to cut manual errors and boost NOI. Startups like Trunk Tools and Further are drawing investor attention by targeting construction inefficiencies and the fragmented homebuying experience with AI-powered platforms.

📈 Blackstone Sees Real Estate Recovery Taking Shape
Blackstone raised $7.2B for real estate in Q2 and said the recovery is now a question of when, not if, as dealmaking picks up and investor inflows rise. The firm points to easing rates, declining supply, and stabilizing sentiment following pandemic office stress, elevated borrowing costs, and tariff-driven uncertainty.

This Week in Real Estate: Key Events & Data

Quick Markets

30Y Mortgage: 6.81% (+3 bps) 

10Y Treasury Yield: 4.39% (+1 bps)

WSJ Prime Rate: 7.50%

FTSE NAREIT Index: 781.99 (-0.41%) 

30-day SOFR Average: 4.35%

Market Pulse & Rate Watch

Labor market strength and rising service activity signal resilience in July, though slower manufacturing and persistent inflation highlight uneven momentum across the economy

Labor market strength persists as jobless claims fall to 217,000 – Sixth straight weekly drop marks lowest level since April, though high continuing claims may lift July’s unemployment rate (Bloomberg)

Chicago Fed index shows slower growth in June – CFNAI rose to -0.10 as production and housing improved slightly, but all four categories still dragged overall activity below trend (ChicagoFed)

US PMI signals faster growth in July – US Composite PMI hit a 7-month high of 54.6 as services surged, but manufacturing dipped into contraction and tariff-driven inflation worsened (S&PGlobal)

Insight: Based on PMI and Chicago Fed data, the service sector strength is driving U.S. growth in July. Service activity hit a 7-month high, while manufacturing slipped back into contraction as tariffs and demand uncertainty weighed on new orders.

Brick by Brick: $200B Rail Merger Talks Could Reshape Industrial Demand

Union Pacific and Norfolk Southern confirmed they are in advanced talks to merge in a deal that could create the largest rail operator in the U.S. The combined network would stretch from coast to coast and improve freight efficiency, though regulators may ultimately block the deal due to antitrust concerns.

• A unified rail network could reduce delays at interchange points and make freight more reliable, boosting the appeal of rail-adjacent industrial properties for logistics tenants

• Key distribution markets such as Dallas–Fort Worth and Memphis could see stronger demand for bulk warehouses as transcontinental shipping becomes more efficient

• Inland Empire and eastern Pennsylvania may benefit from faster port-to-warehouse connectivity, especially for goods moving inland from West and East Coast ports

• Tenants in sectors like auto parts, building materials, and agriculture may increasingly favor rail-served sites near consolidated lines to cut costs and reduce transit times

• The last merger of two major railroads, which created the present-day Canadian Pacific Kansas City, took around two years to secure regulatory approval after the companies announced the deal

• The merger still faces scrutiny from regulators, labor unions, and Amtrak, with no formal application submitted to the Surface Transportation Board

Takeaway: A Union Pacific and Norfolk Southern merger could reshape freight logistics and drive industrial demand in key inland hubs. But realistically it’s far too early to assess the impact on the industrial sector, as a mega-merger would likely take years to secure regulatory approval.

Policy & Industry Shifts

Bipartisan Senate bill targets restrictive zoning and development rules -- Marking a push for more transparent land use policies as NMHC and NAA back reforms to spur housing supply and affordability (ConnectCRE)

Insight: This bill aims to address the current housing crisis by pressuring localities to ease zoning and permitting rules that restrict new housing development, especially for high-density and affordable options.

Trump unveils AI plan to fast-track data center construction -- Marking a push for looser permitting, more on-site power, and expanded fossil fuel use as grid strain and climate backlash grow (Bisnow)

Residential

Rising inventory and sluggish new home sales are prompting more owners to rent out properties, intensifying competition for institutional landlords and reshaping supply dynamics in key Sun Belt markets

New U.S. home sales edge up 0.6% in June but remain 6.6% below last year -- Marking persistent inventory buildup as more builders cut prices to attract hesitant buyers (Zillow)

U.S. home prices drop 5–10% year over year for Russian, Japanese, and European buyers -- Marking a rare currency-driven discount as a weaker dollar offsets record highs for international cash buyers (Redfin)

U.S. asking prices rise just 2.2% YoY -- Marking the slowest pace in nearly two years as sellers cut prices and mortgage payments hit a five-month low (Redfin)

Active U.S. home listings jump 24.4% YoY and new listings rise 7.2% YoY -- Marking the 89th straight week of inventory gains as price cuts and slower sales signal a more buyer-friendly market (Realtor.com)

Rising home inventory and slow sales push more owners to rent out properties – New rentals are adding supply and increasing competition for institutional landlords in major Sun Belt markets (CNBC)

Multifamily

Multifamily starts surge 31% in June to a 414,000-unit annual pace -- Marking a sharp rebound even as permitting growth stays muted and completions lag well below last year’s levels (RealPage)

Regional

Los Angeles wildfires caused $52B in residential damage – Nearly 11,000 homes were affected in January, with most residents planning to rebuild (TheRealDeal)

Office

Leasing

Databricks signs 305K-SF lease at Cityline Sunnyvale -- Marking a major Bay Area office expansion as the AI analytics firm secures a full building in Silicon Valley, with occupancy expected in late 2026 (ConnectCRE)

Impact.com signs 41,000-SF, 10-year lease at NYC’s 470 Park Avenue South – The partnership platform more than doubles its NYC office footprint as Midtown South leasing holds steady (CommercialObserver)

JAB Holding, owner of Krispy Kreme, leases 11,600 SF at 520 Fifth Ave. in Midtown Manhattan -- Marking its first major NYC office as Rabina’s new tower lands initial tenants (Bloomberg)

Industrial

Trans-Pacific box rates stabilize in July – West Coast rates hold at $2,313/FEU after a 58% drop since June 1, while East Coast rates fall 7% to $4,314/FEU as trade route gaps widen (FreightWaves)

Market Mix

Retail

Starbucks traffic slips 0.1% YoY in Q2 2025 while Dunkin’ rises 1.7% and Dutch Bros surges 13.8% YoY -- Marking a shift as value menus and small-format expansion fuel competitive gains in the coffee sector (Placer.ai)

Earnings & Real Estate Impact

Blackstone and Digital Realty both beat Q2 earnings, signaling renewed investor confidence in real estate and data infrastructure. While Blackstone sees real estate recovery accelerating as rates fall and deal flow returns, Digital Realty is capitalizing on AI-driven demand that continues to boost data center growth

Blackstone beat Q2 earnings as real estate fundraising rose to $7.2B, led by inflows into debt strategies and logistics funds. The firm expects a recovery in real estate to accelerate in H2 2025, supported by falling supply, lower rates, and early signs of renewed deal flow (CoStar)

Data center REIT Digital Realty beat Q2 earnings expectations and raised its annual FFO and revenue forecast amid increasing AI-driven demand for data center services (Reuters)

Financings

Refinancings

Black Salmon, LD&D, IGEQ, and Bridge Investment Group secure $56M refinance for 224-unit multifamily in Miami, FL – Berkadia provided a Fannie Mae-backed loan for Wynwood Haus at 23 NE 17th Terrace (CommercialObserver)

M&A

Company M&A

Union Pacific, Norfolk Southern discuss $200B merger – Deal would create largest U.S. rail operator with transcontinental network, streamlining freight transfers and boosting logistics efficiency (WSJ)

Elliott’s MCME Carell takes Vancouver-based City Office REIT private in $1.1B all-cash deal -- Marking a 26% premium as Sun Belt office landlord exits public markets amid sector stress and record vacancies (Bisnow)

Insight: Though headquartered in Vancouver, City Office REIT focuses on Class B offices across secondary Sun Belt markets such as Tampa, Orlando, Dallas, Denver, and Phoenix. Elliott is likely betting on a rebound, seeing long-term upside in discounted assets within high-growth markets despite current sector headwinds.

Marriott acquires CitizenM's $355M hotel portfolio – 37 lifestyle hotels totaling 8,789 rooms span 20 cities across the U.S., Europe, and Asia-Pacific (CoStar)

Building & Portfolio M&A

Retail

Regency Centers acquires five Rancho Mission Viejo retail centers in Orange County, CA for $357M -- Largest pure retail trade in county history as demand for grocery-anchored, daily-needs centers remains strong (CoStar)

Industrial

Mini Mall Storage buys $143M+ Atlanta–Nashville self-storage portfolio – 7 properties sold by Childress Klein reflect strong investor demand for the niche sector (CoStar)

BKM Capital and Kayne Anderson buy $120M San Francisco, CA industrial portfolio – 16 small-bay warehouse assets totaling 176K SF traded across the Bay Area (CoStar)

Hospitality

Accelerated Assets acquires 250-key Virgin Hotel Chicago for $77.4M from Lionstone Development and Virgin Hotels – Historic Loop hotel may shift to timeshare model as Virgin continues to manage property (TheRealDeal)

Land

Generation Housing Partners buys 6.5-acre church site in Dallas for $70M to build 200-unit affordable apartment complex – Former Templo De Alabanza property will be redeveloped (TheRealDeal)

Multifamily

REIT Veris Residential sells $122.2M Worcester, MA multifamily asset – 145 Front at City Square traded as REIT offloads apartments to pay down debt (CoStar)

Distress Watch

CP Group’s 646K SF Paces West office in Atlanta, GA heads to special servicing – Piedmont Healthcare’s 250K SF exit leaves the building half vacant and a $102.7M loan at risk (Bisnow)

Falls Apartment Group faces special servicing on $90M in Houston, TX CMBS loans – Four Rao Polavarapu properties flagged despite stable performance (TheRealDeal)

Proptech & Innovation

AI adoption in real estate is accelerating across the value chain, with startups raising capital and firms deploying tools to cut costs, boost productivity, and personalize the buyer experience

AI adoption accelerates in real estate – Over half of industry professionals now use or pilot AI tools to reduce manual errors and boost NOI (CommercialObserver)

Insight: Real estate firms are using AI to improve operational efficiency, such as automating lease audits, streamlining rent collection, and reducing lead attrition to protect NOI and stay competitive. 

Trunk Tools closes $40M Series B, bringing total funding to $70M – The AI-powered construction data platform quintupled revenue in six months and plans to split funding between product development and market expansion (CommercialObserver)

Insight: Essentially, Trunk Tools is building a proprietary, project-specific AI system that turns messy construction documents (like PDFs of specs, drawings, RFIs) into a structured, queryable database. It functions like a ChatGPT-style assistant trained on each project's unique data

Startup Further launches AI homebuying platform – New tool offers personalized plans and real-time assistance for buyers at any stage using embedded virtual assistant Homebuyer AI (HousingWire)