Hello Brick Brief readers, 

Happy Monday. In recent news, a weak jobs report and revisions to previous employment data significantly boosted September rate cut odds, industrial demand is shifting under pressure, and CRE lending jumped in Q2. 

After last week’s volatility, this week is shaping up to be a quieter one.

On another note, I’ve been tracking real estate news every day for a few months now, and some clear themes are starting to emerge, which you can find under The Brick Lens. If you’re finding The Brick Brief helpful, I’d really appreciate you sharing it. I put a lot of time into this newsletter every day, and I’m working hard to make it better each week.

📉 Weak Jobs Boost Rate Cut Odds
July’s report delivered just 73,000 new jobs and sharp downward revisions to May and June, pushing unemployment to 4.2% and prompting Trump to fire the BLS chief. Treasury yields and mortgage rates plunged as markets now price in an 80% chance of a 25bps cut in September, reflecting bets on a cooling labor market and softer Fed stance.

🏭 Industrial Demand Shifts Under Pressure
Logistics leasing remains resilient, with rising product returns, projected to hit $1T in 2025, boosting demand for reverse logistics space. But rising vacancies, falling factory output, and the potential $250B rail merger could redraw supply chain routes and intensify the split between modern and outdated facilities.

🏢 CRE Lending Climbs Amid Uneven Recovery
CRE lending surged in Q2, led by a 140% YoY jump in office originations and strong activity in healthcare and industrial. Still, prices remain down 13–21% from mid-2022, and policy-driven construction delays are forcing investors to act more selectively as the recovery unfolds.The Brick Breakdown

30Y Mortgage: 6.63% (-12 bps)

10Y Treasury Yield: 4.22% (-14 bps)

WSJ Prime Rate: 7.50%

FTSE NAREIT Index: 753.55 (-0.20%) 

30-day SOFR Average: 4.34%

July’s weak jobs report and downward revisions sent Treasury yields and mortgage rates plunging, as unemployment rose to 4.2% and markets priced in higher odds of a September Fed rate cut

U.S. job growth slowed sharply in July with only 73,000 jobs added – Revisions cut May and June gains, unemployment ticked up to 4.2%, and tariffs plus government cutbacks weighed on hiring (WSJ)

NY Fed President John Williams sees a solid but cooling labor market – Expects 1% GDP growth in 2025 and says the Fed will stay cautious on rate cuts until inflation slows and labor risks subside (WSJ)

Consumer sentiment edged up in July – Current conditions improved to a 5-month high, but expectations slipped and inflation expectations dropped to 4.5% for one year and 3.4% long-term (UMichSCA)

Treasury yields plunged after July jobs data missed badly and Fed Governor Kugler resigned – Treasury yields and the 30Y mortgage rate plunged as bets on a September rate cut rose (CNBC)

Insight: The Fed’s dual mandate of maximum employment and 2% inflation came under pressure as very weak jobs data (and downward revisions of previous months) raised expectations of a September rate cut, triggering a bond rally and sending treasury yields lower. That being said, 90% probability of a 25 bps cut is too high

$65B US rail company CSX is evaluating potential M&A moves following Union Pacific’s planned $72B acquisition of Norfolk Southern, a megamerger that would reshape the competitive landscape of U.S. railroads and force remaining players to consolidate.

• The Union Pacific–Norfolk Southern deal would create the first coast-to-coast freight network in U.S. history, putting pressure on CSX and BNSF to match scale, reach, and pricing efficiency
• CSX operates over 20,000 miles of track across 26 states, DC, and parts of Canada, but lacks transcontinental service, which could disadvantage it as shippers consolidate with integrated operators
• Rail consolidation allows operators to streamline long-haul logistics, reduce costly handoffs, and better compete with trucking and intermodal alternatives
• Scale supports larger capital investments in automation, terminals, and digital tracking tools that improve service and reduce long-run costs
• Real estate implications are significant: faster, unified cross-country service could increase demand for large distribution hubs and rail-served industrial assets in Southern California, especially in the Inland Empire, where West Coast imports begin their inland journey
• CSX CEO Joe Hinrichs has signaled openness to M&A as rail networks adapt to shifting trade flows, rising service expectations, and investor scrutiny
• Activist investor Ancora Holdings has built a stake in CSX, citing underperformance and potential upside through consolidation or operational transformation
• Opposition is mounting: shipper groups representing chemicals, agriculture, fuel, and manufacturing warn the merger could reduce service quality and raise prices
• Critics fear the UP–NS merger could trigger a second consolidation between CSX and BNSF, further reducing competition among the six remaining Class I railroads
• The Surface Transportation Board will likely take two years to evaluate the deal, and could impose strict conditions or block it entirely amid growing antitrust concerns

Takeaway: The Union Pacific–Norfolk Southern merger is forcing a new wave of rail realignment, and CSX’s engagement with Goldman Sachs shows that scale is becoming essential to stay competitive. However, the move also highlights growing tension between network efficiency and customer choice. As freight networks consolidate, the real estate footprint behind them, from ports to inland hubs, may see significant ripple effects.

Trump meets with bank CEOs on Fannie, Freddie privatization – Talks spark stock surge as plans to sell government stakes advance, raising concerns over affordable housing safeguards (Bisnow)

Major banks maintain appraisal review standards – Lenders keep Biden-era protections despite Trump rollback, amid ongoing concerns over bias (Bloomberg)

U.S. single-family home construction spending fell 1.8% MoM in June – Elevated mortgage rates and rising inventory slowed new development (Reuters)

Millennials buying homes later often end up house rich, cash poor – Most savings go toward the down payment, leaving little cash for expenses (WSJ)

Multifamily rent growth recovers modestly in H1 2025 – Vacancy nears 4%, but high-supply Sun Belt and Mountain markets lag national average as recovery timeline for rent growth extends to late 2027 (CBRE)

Prime office demand remains resilient in 2025, as leasing concentrates in Tier 1 metros and top-tier Sun Belt markets, widening the vacancy gap between high- and low-quality space

Sun Belt office landlords boost 2025 outlook – Strong leasing, rising rents, and higher in-office mandates drive top-tier Sun Belt markets ahead of national office recovery (CoStar)

Insight: On Friday, The Brick Brief featured a piece on mid-tier Sunbelt offices underperforming, so how can Sun belt office landlords be boosting their outlook? Highwoods and Cousins are thriving in the Sunbelt by leaning into Class A trophy offices, while Franklin Street and City Office REIT are stuck battling vacancies and steep losses from mid-tier assets. The Sunbelt may be strong, but that strength is flowing to the top as tenants flock to high-end buildings and leave everything else behind. It’s the multinational, Fortune 100 companies driving RTO, and these companies are leasing premium office space. 

Manhattan office leasing jumped 11% above average in July – Availability rate tightened to 15.2%, sublet supply hit a five-year low, and average asking rent edged up to $73.97/SF (Colliers)

Prime office demand holds up despite economic uncertainty – Vacancy rate gap between prime and non-prime widens in 2025, with leasing led by Tier 1 metros and Sun Belt markets seeing most new supply (CBRE)

AssetMark signs 48K SF office lease in Marsh Properties’ Charlotte, NC office building – Establishes East Coast hub in newly built finance corridor asset (CoStar)

Brown & Brown leases 41K SF at Legacy Town Center in Plano, TX – KBS owns the three-building office park, as Dallas suburbs lead DFW office demand (TheRealDeal)

Industrial demand outlook weakens for H2 2025 – Rising vacancies and slower leasing of new supply signal tenants are scaling back space needs (CoStar)

Businesses brace for $1T in product returns in 2025 – Savills says global ecommerce growth is driving new reverse logistics demands as returns surge (CoStar)

Insights: Why can’t retailers just process returned items in the same warehouse they ship from? Returns are messy, unpredictable, and labor-intensive, and mixing them with outbound operations clogs up workflows and cuts efficiency, so companies are reworking logistics to keep the two separate.

Rail customers urge regulators to block $250B Union Pacific–Norfolk Southern merger – Shippers warn the deal would cut competition, raise prices, and reduce service (FT)

Industrial leasing stays resilient as third-party logistics providers (3PLs) drive demand – Tariff and supply chain uncertainty slows new construction and pushes vacancy to 7% by year-end, with quality assets outperforming obsolete facilities (CBRE)

Insight: Flight to quality isn't just playing out in offices and malls. Industrial tenants are favoring newer facilities that support automation, sustainability, and faster delivery, leaving outdated warehouses behind.

U.S. manufacturing PMI fell to 48.0 in July – Sector contracted for a fifth straight month as tariffs weighed on demand and factory employment hit a five-year low (Reuters)

REIT Prologis powered $3.2T in global goods movement in 2024 – Activity through its facilities spanned 1.3B square feet across 20 countries and supported $348B in economic output and 3.6M jobs (Prologis)

CRE lending surged in Q2, even as prices remain 13–21% below peak and policy volatility continues to delay construction and reshape investor strategy

CRE lending surged in Q2 2025 – Office originations jumped 140% YoY, with strong gains in healthcare and industrial, while multifamily and hotel lending lagged last year’s levels (Bisnow)

CRE prices have dropped 13–21% since mid-2022, creating rare opportunities for selective buyers in core office and multifamily – Cushman & Wakefield urges investors to act patiently as the sector enters a gradual recovery phase (GlobeSt)

Policy volatility disrupts U.S. construction – JLL reports rising project delays, downward spending forecasts, and fewer contractor bookings as uncertainty reshapes the industry (IREI)

Retail availability remains tight at 4.9% – Limited new supply and strong demand for grocery-anchored and open-air centers keep rent growth positive, while bankruptcies add obsolete space in weak locations (CBRE)

Planet Fitness visits up 10% YoY in Q2 2025 – Life Time slips 0.6% but maintains steady traffic as both chains pursue expansion (Placer.ai)

High-end veterinary practices are taking over vacant retail spaces – Corporate chains and private equity are driving sector growth as pet owners demand hospital-like care, fueling real estate opportunities (Bisnow)

U.S. hotel RevPAR fell 0.8% last week as soft business travel and lower rates kept demand below last summer – Houston and L.A. posted the steepest declines, while Las Vegas surged on concert-driven leisure (STR)

Luxury hotels led the sector with 1.9% RevPAR growth last week – the only segment to post gains as strong demand offset broader industry weakness (STR)

Columbia Heights Village Tenant Association secures $114M financing for affordable housing project in Washington, DC – Harvard Court Apartments will offer rents for residents earning 30%–50% of area median income (CommercialObserver)

$65B US railroad company CSX explores merger options – Union Pacific’s $72B Norfolk Southern deal pressures rivals to consider consolidation (Bloomberg)

Kaizen Development sells Class AA Dallas, TX office to Cousins Properties for $218M – The highest sale price for an office asset in Dallas-Fort Worth this year (IREI)

Clarius Partners sells 1M SF Phoenix, AZ industrial warehouse to JLL REIT for $140M – Facility at 8900 North Sarival Avenue is fully leased to Puma as a regional distribution center (CommercialObserver)

Macerich sells Queens, NY shopping center to Ashkenazy Acquisition Corporation for $72M – The Shops at Atlas Park is 85% leased and anchored by national retailers (CommercialObserver)

J.P. Morgan Chase sells 207-unit San Diego, CA multifamily complex to Lowe for $71M – Tenth & G in the Ballpark District will undergo renovations after the $343K/unit acquisition (CommercialObserver)

Prairie Ridge Development acquires People’s Gas mixed-use site in Chicago for $120M – New plan includes 253 units, 20% affordable, plus retail and parking (TheRealDeal)

Weak returns are prompting institutional investors to pull back from real estate, with most underallocated in H1 2025 and CalSTRS reporting a -3% annual return

CalSTRS real estate portfolio posts -3% return for fiscal year ended June 2025 – Performance lags benchmarks as tariff-related volatility weighs on asset values (Bloomberg)

Private real estate allocations fell for most investors in H1 2025 – 63% were underallocated, with 31% reducing exposure and only 18% increasing allocations (PERE)

US CMBS delinquency rate rose to 7.23% in July 2025 – Fifth straight monthly increase, led by a 24 bps rise in multifamily delinquencies, while office, lodging, and retail showed modest declines (Trepp)

NJ’s American Dream megamall’s tax assessment cut by $850M for 2025 – Judge’s ruling slashes property value nearly 50%, reducing PILOT payments to bondholders and extending debt repayment timeline (CoStar)