Hello Brick Brief readers, 

Thank you for your continued support! Today we’re seeing home prices ticking higher, office demand strengthening, and commercial property values rising into early fall.

🏡 Regional Resilience in Home Prices
U.S. home prices rose 0.4% MoM and about 2% YoY in August as gains in the Northeast and Midwest offset weakness in the Sun Belt. High inventory and affordability pressures kept demand soft in southern metros, while tighter supply and stronger job markets supported steady appreciation in northern regions.

🏢 Office Market Finds Its Footing
U.S. office absorption reached 10.6M SF in Q3, the strongest quarter since 2019 as Manhattan and Dallas led leasing activity. With 60% of markets posting positive absorption and vacancy edging down to 18.3%, the sector shows early signs of stabilization after years of contraction.

🏬 Commercial Property Values Turn a Corner
CRE prices climbed 2.6% YoY in September, led by retail and office gains that signaled improving investor confidence. Sales volume rose 17% YoY in Q3 as office transactions rebounded 38%, helping drive both price appreciation and transaction momentum across the CRE. 

30Y Mortgage: 6.13% (-6 bps)

10Y Treasury Yield: 3.99% (+1 bps) 

WSJ Prime Rate: 7.25%

FTSE NAREIT Index: 770.63 (-2.12%) 

30-day SOFR Average: 4.20%

U.S. consumer confidence hits six-month low – The Conference Board index fell to 94.6 in October as job availability concerns rose and inflation expectations ticked up, reinforcing expectations for another Fed rate cut this week (Reuters)

Amazon and UPS cut a combined 62,000 jobs – Amazon is eliminating 14,000 corporate roles to fund $118B in AI data center spending, while UPS has shed 48,000 positions and closed 93 facilities as part of a turnaround after reducing Amazon shipments (FT, AP)

Insight: Although Amazon’s CEO has said AI will eventually shrink its workforce, these cuts look more like a move to slim down management and run leaner to free up resources to fuel its $118B data center expansion. That being said, these headlines show us that the job market is clearly losing momentum.

Private payrolls rose by an average of 14,250 in four weeks to Oct. 11 – ADP will now publish weekly U.S. payroll estimates to provide high-frequency insight amid the government data blackout (Reuters)

A joint venture between Remedy Medical Properties and Kayne Anderson Real Estate is acquiring 296 outpatient facilities totaling 18M SF across 34 states from Welltower for $7.2B. The 94% occupied portfolio will transfer in multiple tranches through mid-2026, with the first $2B closing scheduled for October. Financing is split between two bank facilities led by Capital One, Citigroup, J.P. Morgan, and others, while Remedy will assume operations and Welltower will retain preferred equity.

🧱 Portfolio Scale and Market Position
The acquisition expands the joint venture’s footprint by 60% to 52.4M SF across more than 1,100 properties in 44 states, making it the largest private owner of outpatient medical real estate in the U.S. The portfolio’s tenant mix is anchored by hospital systems and physician groups that provide stable income streams and defensive yields through economic cycles.

🧱 Welltower’s Capital Reallocation
Welltower is shifting focus toward senior housing, citing powerful demographic trends as baby boomers enter retirement and drive demand for assisted living and memory care. With limited new construction and rising occupancy, the REIT believes senior housing offers stronger long-term NOI growth than outpatient facilities, which it views as a mature, lower-growth asset class. CEO Shankh Mitra described the sale as part of a disciplined capital reallocation strategy focused on higher-yield opportunities in senior housing.

🧱 Why Remedy and Kayne Anderson Are Buying
The joint venture is betting on outpatient care’s durable fundamentals, supported by hospitals moving procedures to lower-cost community facilities and a population that increasingly relies on recurring healthcare services. The portfolio is 94% occupied and anchored by long-term leases with strong health-system tenants, allowing it to deliver steady income and meaningful scale in a resilient, needs-based sector.

Takeaway: It’s always important to understand what each party in the deal is trying to achive. In this case, Welltower is selling out of a mature, slower-growth sector to focus on senior housing, where 11,000 baby boomers are turning 65 every day and limited new construction is tightening supply. Remedy and Kayne Anderson, on the other hand, are expanding in outpatient medical real estate that has maintained 90%+ occupancy for years and provides stable, health system–anchored income. 

Commercial property prices rise across most sectors – MSCI’s September index shows CRE values up 2.6% YoY, led by retail (+5.5%), CBD office (+5.1%), and suburban office (+4.5%), while apartment prices fell 0.8% amid ongoing correction from 2022 peaks (ConnectCRE)

U.S. CRE sales rise 17% YoY in Q3 – Transaction volume climbed $18B, led by a 38% rebound in office sales while industrial rose 7.5% and distressed office deals declined modestly (CushmanWakefield)

Los Angeles fast-tracks commercial rebuilding after fires – Mayor Karen Bass issued an executive order to expedite Pacific Palisades recovery through streamlined reviews, extended permits, and waived bond requirements for small repairs (CoStar)

U.S. home prices rose 1.5% YoY and 0.4% MoM in August – S&P Case-Shiller data show the weakest annual gain in over two years as affordability pressures and cautious sentiment limit demand, with Northeast and Midwest metros outperforming while Sun Belt markets soften (Realtor.com)

U.S. home prices rise 0.4% in August and 2.3% YoY – FHFA data show regional gains led by the Middle Atlantic (+1.2% MoM, +6.3% YoY) while the Pacific division declined 0.8% month over month (FHFA)

Insight: Both the S&P Case-Shiller and FHFA home price indexes show stronger gains in Northeast and Midwest markets, while Sun Belt metros continue to lag, largely due to elevated inventory levels and softer demand. These regional gains are likely tied to recent declines in mortgage rates, which have boosted buyer activity in markets with tighter supply and stronger employment fundamentals.

Bay Area housing market surges amid AI boom – San Francisco pending sales rose 17% YoY as tech hiring, rising incomes, and shrinking supply drive faster sales and tighter competition (Redfin)

Multifamily vacancy rises to 4.4% in Q3 – New deliveries outpaced absorption for the first time in six quarters as rent growth slowed to 0.5% YoY and net absorption dropped 73% to 43,200 units (CBRE)

Multifamily investment volume hits $108B YTD – Transaction volume climbed 7.5% YoY and 19.4% excluding Blackstone’s AIR Communities deal, even as job growth and tenant demand softened (CBRE)

U.S. apartment demand trails supply by 63K units in Q3 – Only 42K units were absorbed versus 106K delivered, one of the widest gaps on record as hiring slowed and economic uncertainty weakened leasing (RealPage)

Rising insurance costs stall multifamily deals – Premiums up 11.8% YoY and stricter coverage terms are delaying closings as smaller landlords face escrow and premium costs exceeding $1M per property (GlobeSt)

U.S. office absorption hits 10.6M SF in Q3, the strongest quarterly gain since 2019 – Manhattan and Dallas led leasing activity, pushing vacancy down to 18.3% and rents up 0.4% to $37.27 per SF (Colliers)

31.2M SF of office space is under construction nationwide, the first quarterly increase since 2020 – Development remains far below the 2019 peak of 158M SF (Colliers)

60% of U.S. markets posted positive absorption in Q3 – Class A vacancy fell 20 bps to 21.2% as leasing demand broadened beyond core metros, signaling a slow but steady recovery (Colliers)

U.S. office outlook brightens as tenant demand rebounds – CoStar upgraded its sector forecast after Q3 leasing gains and positive absorption, with Manhattan leading the recovery though vacancy risks remain (CoStar)

USPS leases 141K SF industrial facility in Miami, FL – The postal service signed for a full-building lease at 11150 NW 122nd Street in Medley, which was developed by Prologis in 2023 (CommercialObserver)

Wendy’s traffic falls 6.3% YoY in Q3 – Simplified promos like its $1 breakfast biscuit deal lifted August breakfast visits 11.6%, showing early success for the chain’s new focused value strategy (Placer.ai)

Carter’s to close 150 stores, cut 15% of staff – The retailer expects up to $250M in added tariff costs and plans layoffs, store closures, and price hikes to offset margin pressure from Trump’s import tariffs (Bisnow)

Brookfield partners with U.S. government on $80B nuclear plan – The deal with Cameco and Westinghouse aims to expand reactor capacity to meet rising AI power demand (Bisnow)

Oracle says AI demand far exceeds supply – CEO Mike Sicilia dismissed fears of an AI bubble, highlighting the technology’s real economic value at Riyadh’s Future Investment Initiative summit (Reuters)

Eli Lilly partners with Nvidia on AI supercomputer – The Nvidia-powered system will speed up drug discovery and development by training proprietary AI models on millions of experiments (Reuters)

Alexandria Real Estate Equities, the nation’s largest owner of life sciences office space, saw its shares plunge 19% after missing Q3 FFO and revenue estimates despite stronger-than-expected leasing activity. Management attributed the weak results to pandemic-era overbuilding in the life sciences sector and growing strain on federally funded tenants amid the prolonged government shutdown (CommercialObserver)

Insight: Unfortunately, the overbuilding might just be the start of Alexandria’s concerns. As I’ve discussed in previous Brick-by-Bricks, with Google DeepMind and Yale identifying new cancer pathways and Eli Lilly deploying its Nvidia-powered platform for drug discovery, virtual R&D could further erode long-term demand for physical wet lab space.

At the same time, the next generation of trophy research facilities may need to integrate wet lab infrastructure with high-performance computing suites that can support AI modeling, data processing, and advanced simulation.

Office landlord BXP reported Q3 FFO of $271M, down from $280M a year earlier, as rising financing costs offset strong leasing demand in New York and San Francisco while Los Angeles continued to lag amid elevated vacancy (Reuters)

MBA forecasts $827B in CRE lending for 2025 – Total originations are expected to rise 24% YoY, with multifamily loans up 16% to $417B, driven by stronger activity across asset types and further Fed rate cuts (GlobeSt)

Hines secures $380M construction loan for mixed-use project in San Diego, CA – Bank OZK and Related Fund Management provided financing for the first phase of the 200-acre Riverwalk San Diego development (CommercialObserver)

13th Floor Investments and partners secure $139M refinancing for 420-unit Savio apartments in Delray Beach, FL – CIBC USA provided the loan for the first phase of the 747-unit Parks at Delray project, which delivered in 2024 (TheRealDeal)

Global Holdings secures $130M refinancing for Netflix’s Union Square offices in New York, NY – DekaBank and Crédit Agricole provided the loan for 888 Broadway following a recap with Cannon Hill Capital and Williams Equities (TheRealDeal)

Remedy Medical Properties and Kayne Anderson acquire 296 outpatient facilities across 34 states for $7.2B – Welltower sold the 18M-SF portfolio, 94% leased, in multiple tranches through 2026, marking one of the largest U.S. healthcare real estate deals of the year (CommercialObserver)

Bridge Logistics acquires two industrial buildings in Los Angeles, CA for $109M – Blackstone’s Link Logistics sold the 449K-SF City of Industry portfolio at 18501 and 18385 San Jose Avenue (TheRealDeal)

AmTrustRE acquires 260 Madison Ave office tower in New York, NY for $217M from Sapir Organization – The 22-story, 570K SF property is 68% leased; AmTrust plans to invest up to $70M to stabilize and lease the asset (TheRealDeal)

Sapir Corp files for insolvency and sells Nomo Soho hotel for $125M – The Alex Sapir–owned firm collapsed under bond defaults and operating losses, with Dan Hotels set to acquire and renovate the 264-key Manhattan property in its first U.S. expansion (TheRealDeal). 

Cushman & Wakefield launches Quantitative Insights Group to expand AI-driven forecasting – The team will integrate machine learning and big data analytics to enhance CRE investment and leasing decisions (CommercialObserver)

Insight: I question whether this can really be called AI-driven forecasting, or if it’s simply big data and quantitative analysis under a new label.

90% of real estate firms are piloting AI, but only 5% met all goals – A global survey of CRE leaders found most are testing high-impact AI use cases, though adoption and maturity remain low (IREI)