The Brick Breakdown

Hello Brick Brief readers, 

Thank you for your continued support! Today’s highlights: stagflation risks amid a fragile recovery, deepening housing affordability issues, and early signals of a new CRE investment cycle.

📉 Stagflation Signals Undermine Fragile Recovery
Business activity ticked up in May as tariff pressures eased, but warnings from JPMorgan’s Jamie Dimon and the NY Fed underscore growing risks from stagflation, rising deficits, and money market stress. While easing rate expectations are fueling short-term optimism, economic indicators point to a fragile recovery that could derail if inflation expectations rise again.

🏠 Affordability Crunch Freezes Spring Housing Market
The housing market is buckling under affordability strain, with April existing home sales hitting a 16-year low and cancellation rates spiking to near-record levels. Rising inventory, seller concessions, and a forecasted price dip suggest buyer demand remains weak as mortgage rates hover around 6.9%.

🏢 CRE Rebounds Uneven as Capital Returns and Risks Rise
CRE markets show early signs of rebound in retail, industrial, and multifamily sectors as rate cuts improve access to capital, though April saw the first pricing dip in five months. Private equity is returning to top-tier markets, but office distress and foreign lender pullbacks signal that volatility is still reshaping the landscape.

This Week in Real Estate: Key Events & Data

Quick Markets

30Y Mortgage: 6.94%
10Y Treasury Yield: 4.53% (-6 bps)
FTSE NAREIT Index: 749.87 (-0.45%)
30-day SOFR Average: 4.32%

Market Pulse

Business sentiment is improving, but weak growth data and rising financial market strain suggest the Fed may delay rate cuts despite easing tariff pressures

Business activity rebounds in May as tariffs ease – S&P Global Composite PMI rises to 52.1 in May, but falling exports, supply-chain delays, and surging prices signal fragile recovery (WSJ)

JPMorgan’s Dimon warns of stagflation risk – CEO backs Fed's pause amid geopolitical turmoil, rising deficits, and tariff-driven uncertainty weighing on inflation and investor confidence (Bloomberg)

NY Fed flags money market strain as QT continues – Roberto Perli says repo market pressure is rising, making the Fed’s Standing Repo Facility more critical for short-term rate control (Bloomberg)

Economic growth slows in April – Chicago Fed National Activity Index falls to -0.25, with broad-based weakness across production, housing, and consumption indicators (ChicagoFed)

Brick by Brick: OpenAI’s First Stargate Campus Advances with $7.1B JPMorgan Loan and Unmatched Buildout Pace

The first site in the $500B Stargate initiative broke ground in Abilene, Texas, where OpenAI, Oracle, and SoftBank aim to deliver a national network of AI-focused data centers faster than any hyperscaler has done before.

• The Abilene campus will span 900 acres and support 1.2 GW of capacity, with eight buildings running tens of thousands of Nvidia Blackwell chips to power OpenAI’s models
• JPMorgan led a $7.1B construction loan for phase two, following a $2.3B package for phase one, and Crusoe, Blue Owl, and Primary Digital Infrastructure formed a $15B joint venture
• Oracle signed a 15-year lease and will fill the site with servers, while OpenAI will serve as the primary tenant and operational lead through Stargate LLC
• The project includes an on-site natural gas plant developed by Lancium to address energy grid limitations and accelerate deployment timelines
• The campus is using innovative cooling systems that recycle liquid to reduce water use, which addresses one of the main sustainability concerns in large-scale data infrastructure
• No major hyperscaler (Amazon, Google, Microsoft) is involved in the project, and Stargate’s speed of execution far exceeds traditional cloud development timelines
• Local officials report surging real estate activity and infrastructure proposals since construction began, with expectations that Stargate will anchor future economic growth in the region

Takeaway: The Stargate buildout signals a major shift in how AI infrastructure is financed and deployed, and the $7.1B loan led by JPMorgan reflects the surging institutional confidence in compute as an asset class. By bypassing traditional cloud providers and building vertically integrated campuses with on-site power, OpenAI and its partners hope to create a new playbook for digital infrastructure. This model could reshape how investors, municipalities, and developers approach the next wave of data center development and energy-backed tech infrastructure. 

Policy & Industry Shifts

Privatizing Fannie and Freddie could raise mortgage rates and dampen housing affordability

Trump’s Fannie, Freddie IPO push could spike mortgage costs – Privatization may raise rates by 0.5%, adding $40K+ in lifetime loan costs for homebuyers (Bloomberg)

Federal buildings board recommends disposing of 7M SF across 12 properties – Sales could save $5.4B over 30 years and raise $346M, with key sites in DC, Miami, Boston, and Chicago (Bisnow)

Residential

Affordability pressures and economic uncertainty are cooling the housing market, with sales and pending deals falling even as inventory and cancellations surge across major metros

April existing home sales hit 16-year low – Sales fell 0.5% to 4M as affordability strains, economic jitters, and April's tariff rollout spooked buyers during a crucial spring season (WSJ)

Home purchase cancellations hit 14.3% in April – Buyers backed out at the second-highest April rate on record amid tariffs, affordability strain, and high inventory, with Florida metros leading the nation (Redfin)

Redfin forecasts 1% home price dip by year-end – Rising inventory and muted demand are expected to push prices lower, with mortgage rates hovering near 6.8% and sellers increasingly offering concessions (Redfin)

New listings surge to 3-year high – Listings jumped 8.4% year over year while pending sales hit a record seasonal low, as affordability constraints and economic uncertainty cause inventory to build and buyers to retreat (Redfin)

Builder activity tracks regulation – Flexible markets like Pittsburgh and Dallas outbuilt restrictive metros like Seattle and Boston during the pandemic demand surge (Zillow)

Regional

West Coast cities are seeing mixed signals, as San Francisco eases development barriers to spur growth while downtown LA’s residential demand surges despite broader urban headwinds

San Francisco streamlines permits to cut developer costs – New legislation removes fees and delays for signage, tenant improvements, and commercial use to revive growth (GlobeSt)

Downtown LA resi occupancy climbs to 91% – Demand for downtown living outpaces pre-pandemic levels despite office vacancies and safety concerns, pushing average rents to $2,838 (TheRealDeal)

Office

Office markets remain under pressure as vacancies rise and rents fall, but long-term AI leasing demand offers a potential lifeline in tech-driven metros like San Francisco

Central business district offices struggles deepen – Vacancy climbs to 19.2% with rents down 30% from pre-COVID as demand weakens, federal leasing shifts away, and new development hits lowest level since 2016 (GlobeSt)

AI fuels new wave of office demand – San Francisco could see up to 16M sq. ft. in AI leasing through 2030, potentially halving vacancy rates if momentum holds (CBRE) 

Industrial

Tariff uncertainty is stalling manufacturing growth while driving a surge in bonded warehouse demand as firms adapt logistics to hedge supply chain and cost risks

Manufacturing revenue expected to be flat in 2025 – Tariffs and weak demand cut growth outlook to 0.1% despite major U.S. expansion plans (Bisnow)

Bonded warehouse demand surges – Companies race to convert facilities amid tariff volatility, seeking to defer duties and manage supply chain risk as bonded storage costs quadruple over traditional space (GlobeSt)

Market Mix

Markets

CRE markets are showing early signs of recovery in industrial and multifamily sectors as capital returns, though pricing volatility and lender retrenchment highlight ongoing uncertainty

Colliers sees signs of CRE rebound – Retail, industrial, and multifamily values are rising as rates ease, drawing fresh private equity into markets like Boston, NYC, and San Francisco (GlobeSt)

CRE prices fall after five-month streak in April – RCA CPPI dipped 0.8% YoY, with retail up 4.2% and CBD office down 3.8% as economic uncertainty tempers pricing momentum (ConnectCRE)

CRE activity climbs to $98B in Q1 – Multifamily and industrial lead 11.3% annual gain in transactions as rate cuts boost access to capital, while office volume drops 17.8% (GlobeSt)

German bank halts new U.S. lending, may sell $4.6B loan book – Deutsche Pfandbriefbank cites U.S. economic volatility as reason for exit (Bisnow)

Retail

Retail space shortage stuns industry – Colliers reports soaring demand and limited new construction have created waitlists for prime retail space across the U.S (CoStar)

Earnings & Real Estate Impact

Urban Outfitters’ strong earnings and omission of tariff concerns suggest resilient demand in certain retail segments, defying broader trends of consumer caution and discretionary pullback

Urban Outfitters’ shares jumped ~23% after beating Q1 earnings expectations, reporting 11% revenue growth and 5% growth in same-store sales. The retailer continues to see strong demand for its products and did not mention tariffs in its earnings call (WSJ)

Financings

Loans

J.P. Morgan leads $7.1B loan for Oracle-leased AI data center in Texas – Financing supports second phase of 1.2GW project by Crusoe, Blue Owl, and Primary Digital at Lancium Clean Campus (CommercialObserver)

Dallas seeks $1B bridge loan from JPMorgan for convention center – City aims to fast-track the center’s overhaul ahead of 2026 World Cup, with long-term bond issuance planned by mid-2026 (TheRealDeal)

Empira lands $111M construction loan for Miami Brickell apartment tower from Goldman Sachs – Financing will support 310-unit, with completion slated for 2027 (TheRealDeal)

Refinancings

Global Student Accommodation secures $500M refi from Wells Fargo covering 23 student housing assets – Portfolio spans 14 states near major universities including ASU, Auburn, Purdue, and Illinois (IREI)

High Street and MetLife secure $186M refi for D.C. multifamily – Artemis provides debt on two residential towers at Central Armature Works totaling 640 units (CommercialObserver)

Structured Finance

Greystone closes $900M CRE CLO across 28 multifamily assets – Investors continue flocking to CRE-backed CLOs, which offer floating-rate protection and high credit ratings (Bisnow)

M&A

Building & Portfolio M&A

Florida Beachfront Pompano site hits market for $175M – 5.1-acre Beachcomber property marketed for luxury condo or hotel development (CommercialObserver)

Empire Capital to buy NYC Park Ave South offices for $130M – Deal includes 373 and 381 Park Avenue South, totaling 338K sf, as firm continues push into discounted NYC office assets (CommercialObserver)

PRP acquires $60.6M fiber optic facility in Hickory, NC – Corning-leased 265K-SF plant supports data center infrastructure (ConnectCRE)

Phoenix Realty buys 314-unit NYC Bronx complex for $55M – Acquires Carol Gardens from Camber Property Group, which had invested $20M in renovations since 2017 (CommercialObserver)

Distress Watch

Mounting financial strain in NYC’s rent-stabilized housing is triggering bankruptcies and warnings of systemic distress, as rising costs outpace regulated income and push properties toward default

Pinnacle Group files bankruptcy on thousands of NYC units – Joel Wiener’s firms seek Chapter 11 to halt foreclosures on properties with up to $1B in liabilities (Bloomberg)

Watchdog warns of NYC rent-stabilized 'death spiral' – Citizens Budget Commission urges NYC to raise rents with inflation and track building-level distress as maintenance costs outpace revenue (TheRealDeal)