The Brick Breakdown

Hello Brick Brief readers, 

Thank you for your continued support! Today we’re tracking a boost in consumer confidence from trade deescalation, surging data center investment, and a reaffirmation of federal guarantees for Fannie and Freddie.

📊 Trade Deescalation Lifts Consumer Confidence, but Uncertainty Persists

Consumer confidence jumped in May as tariff delays with the EU and India eased immediate trade pressure and lifted market sentiment. Still, weak capital goods orders and cautious Fed messaging suggest businesses remain hesitant to invest, and interest rates are likely to remain elevated in the short and medium term until inflation slows and trade policy becomes clearer.

⚡ Institutional Capital Pours Into Data Centers

Strong AI-related demand is driving a wave of institutional investment into data infrastructure, with Chamath Palihapitiya backing a $51M land deal, Harrison Street raising $1B in a month, and Prologis acquiring an 831-acre Georgia site for a planned $17B development. Energy providers like PG&E are reporting surging requests for large-scale power access, while new federal support for nuclear reflects growing urgency to expand capacity for this rapidly scaling sector.

🏠 Home Price Growth Cools as Inventory Climbs

National home price growth is slowing as rising inventory and a 19% supply surge weigh on momentum, with the Case-Shiller index up just 3.4% year over year in March, down from 4% in February. At the same time, the FHFA index shows a 4% annual gain in Q1, led by strength in the Northeast and Midwest, while luxury pending sales dropped nearly 10% as economic uncertainty sidelines high-end buyers.

This Week in Real Estate: Key Events & Data

Quick Markets

30Y Mortgage: 6.97%
10Y Treasury Yield: 4.47% (-2 bps)
FTSE NAREIT Index: 763.15 (+1.74%)
30-day SOFR Average: 4.31%

Market Pulse

Trade optimism lifted consumer sentiment in May, but weak business investment and Fed caution suggest rates will stay elevated until inflation eases and trade policy stabilizes

Consumer confidence jumps in May – Index rose to 98 from 85.7 on trade optimism, marking first increase in six months as hopes for U.S.-China truce lifted outlook across demographics (CNBC)

EU and India both take steps to ease US trade tensions – Trump delays 50% EU tariffs after progress in talks, while India offers tariff cuts to avoid 26% US levy although it continues to protect key farm sectors (FT & FT)

Fed’s Williams urges strong action if inflation deviates – Warns tariffs raise uncertainty, and central banks must anchor expectations to avoid inflation persistence (Reuters)

Fed’s Kashkari backs steady rates amid tariff uncertainty – Warns against downplaying inflation from trade shocks and urges patience to protect long-run expectations (Reuters)

Core capital goods orders fall 1.3% in April – Business equipment spending weakened as tariff uncertainty delays investment decisions, despite short-term boosts from front-loading (Reuters)

Brick by Brick: NYC Rent Board Lowers Proposed Hikes for 2-Year Leases Even as Rent Control Fuels Distress in Regulated Multifamily Market

NYC Rent Board lowers proposed hikes for 2-year leases to 3.75%–7.75% amid tenant pressure and political scrutiny. A final vote is scheduled for June 27.

 • The Rent Guidelines Board adjusted its preliminary proposal after backlash from tenant groups and criticism from Mayor Adams, who argued the original increases were too high
• Rent-stabilized landlords are grappling with rising costs, including inflation-driven maintenance expenses and annual property tax hikes exceeding 8% in some cases
• Under the 2019 rent law, landlords have limited ability to raise rents, which often prevents them from covering rising operational costs
• When rents cannot keep up with expenses, owners are forced to either defer maintenance, keep units vacant, or enter bankruptcy
• Joel Wiener, one of the city’s largest multifamily owners, placed thousands of rent-stabilized units into bankruptcy after foreclosure proceedings from Flagstar Bank
• CMBS distress in New York's multifamily sector has more than doubled to 14.4%, with 90% of troubled loans tied to rent-stabilized assets
• Distress is especially severe among pre-1974 buildings, where 25% of loans are flagged, reflecting the collapse of renovation-based value-add strategies
• Investors are now steering away from regulated properties, favoring market-rate assets with stronger cash flow visibility and pricing flexibility

Takeaway: Rent control restricts rent growth even when expenses surge, making many buildings financially unsustainable. The resulting wave of bankruptcies and CMBS stress is reshaping investor behavior, reducing capital flows into rent-stabilized housing and raising broader questions about the long-term viability of the city’s affordability model.

Policy & Industry Shifts

Trump signed executive orders in May to accelerate nuclear development and expand uranium mining, while separately affirming that Fannie and Freddie will retain government guarantees despite IPO plans

Trump backs GSE guarantees amid IPO push – Fannie and Freddie to retain government support as Trump affirms oversight role despite privatization plans, easing MBS market fears (Bloomberg)

Trump signs May executive orders to boost nuclear power – AI-driven energy demand sparks push to fast-track reactors, expand uranium mining, and build on federal land (Bisnow)

NYC Rent Board lowers proposed hikes for 2-year leases – New range cut to 3.75%–7.75% amid tenant pressure and political scrutiny, final vote set for June 27 (CommercialObserver)

Chicago CRE tax burden drops amid appeals – Commercial owners now cover 46% of city property taxes, down from 49%, as Board of Review slashes valuations by 17% (Bisnow)

Residential

Home price growth is slowing amid rising inventory, with luxury sales falling and regional gains concentrated in the Northeast and Midwest as economic uncertainty tempers demand

Case-Shiller national home price index growth slows in March – Home prices rose 3.4% YoY, down from 4% in Feb, as rising inventory and a 19% supply surge led to more price cuts and weaker momentum (Zillow)

U.S. home prices rise 4.0% YoY in Q1 2025 – FHFA index shows 0.7% quarterly gain, with strongest growth in the Northeast and Midwest as Pacific markets lag (FHFA)

Luxury pending sales hit 10-year April low – Sales fell 9.9% YoY as stock market volatility and economic uncertainty sidelined high-end buyers, despite 6.5% price growth to $1.35M (Redfin)

Top rental markets for grads offer affordability and jobs – Austin (18.9% rent-to-income), Raleigh (30.4% grad-friendly jobs), and Richmond (3.3% jobless rate) lead 2025 list (Realtor.com)

Office

Manhattan led a Q1 office rebound with 3.6M SF absorbed as tenants prioritized Class A space and modern amenities, while sublease supply fell 20% year over year

Landlords ditch outdated office perks – BXP and Marx swap pools and boardrooms for lounges and cafes as tenant demand shifts to modern, hospitality-style amenities (CoStar)

Manhattan leads Q1 office recovery – 3.6M SF net absorption drives market rebound as national vacancy holds at 20.1%, with Class A space seeing gains and sublease supply down 20% YoY (Colliers)

Industrial

Trump tariffs unlikely to revive U.S. factory jobs – Wells Fargo says reshoring faces cost, labor hurdles, with manufacturing employment still 6.7M below 1979 peak (CNBC) 

GM shifts strategy with $888M investment in NY – Tonawanda plant will produce next-gen V8 engines amid cooling EV demand, replacing prior EV drive unit plans (Reuters)

Market Mix

CRE market sends mixed signals in Q1 2025 – Sales volume fell 4% YoY, but office and multifamily drew more capital as median office deal value jumped 25% and pricing held steady across most sectors (GlobeSt)

CRE finance sentiment plunged 30.5% in Q1 2025 amid stagflation fears – Tariff-driven inflation and policy volatility dimmed hopes for rate cuts, though trade deescalations in May are expected to lift sentiment slightly in Q2 (Bisnow)

Retail

Retail foot traffic declined in Q1 as tariffs drove shoppers to discount chains, with brands like Lululemon and Dick’s seeing year-over-year dips despite targeted marketing efforts

Retail foot traffic drops post-tariffs – Price hikes push shoppers toward discount chains, while apparel and specialty stores see declines amid growing macro uncertainty (CommercialObserver)

Lululemon and DICK’s visits dip in Q1 – YoY traffic down 3.4% and 5.9%, but DICK’s saw March Saturday spikes and lululemon boosted visibility via pro athlete events (Placer.ai)

Hospitality

Discretionary travel demand continues to weaken as economic uncertainty and tariff concerns drive a pullback in airline and lodging spending and a projected 8.7% drop in international arrivals

U.S. inbound travel faces headwinds – International arrivals expected to fall 8.7% in 2025 amid persistent sentiment-related pressure (IREI)

Consumers pull back on travel in April – Bank of America data shows continued declines in airline and lodging spending as economic uncertainty and tariff concerns weigh on discretionary travel (BankofAmerica)

Data Centers

California’s largest utility PG&E sees 40% surge in data center interest – AI boom drives demand for larger inland sites, with new proposals reaching up to 1,000 MW in capacity (Reuters)

Financings

Loans

13th Floor and Barings secure $125M construction loan for Miami, FL tower – Santander and TD Bank back 432-unit Cadence project at Link at Douglas, with 12.5% set aside for workforce housing (TheRealDeal)

DAC, Melrose secure $69M loan for Chicago’s South Loop apartments – BridgeCity backs 165-unit, 19-story project at 626 S. Wabash as rental demand stays strong in Chicago’s urban core (TheRealDeal)

Refinancings

Mani Brothers lands $125M JPMorgan refi for LA’s West Hollywood office – New loan replaces 2015 CMBS debt on Sunset Strip tower, now 79% leased amid elevated Westside vacancy (CommercialObserver)

Darwin Investment Group secures $100M Wells Fargo refi for Chicago industrial – 40-building, 2.2M sf portfolio valued at $200M as firm eyes expansion amid post-pandemic sector stability (TheRealDeal)

Barings provides $72M refi for Pittsburgh multifamily – Loan backs SomeraRoad’s 247-unit Park at SouthSide Works, a newly built waterfront project near the University of Pittsburgh (CommercialObserver)

Structured Finance

Blackstone secures $850M CMBS loan for NYC office stake – Morgan Stanley leads syndicate backing 49% acquisition of 1345 Avenue of the Americas, replacing maturing 20-year debt (CommercialObserver)

M&A

Building & Portfolio M&A

Data center momentum builds as Prologis moves to acquire Georgia’s 831-acre Project Sail and Chamath Palihapitiya invests $51M in Arizona’s Hassayampa Ranch, both targeting AI-driven infrastructure demand

VC Chamath Palihapitiya invests in $51M Arizona land deal for data centers – Hassayampa Ranch spans 2,100 acres with potential 1,500 MW power access, targeting resale to tech firms amid AI-driven demand (Bloomberg)

David Bistricer to buy Durst’s NYC East Harlem site for $50M+ – 1800 Park Avenue deal revives 680K sf project potential after years of stalled plans under multiple owners (TheRealDeal)

Prologis to acquire 831-acre site for $17B Georgia data center – Project Sail near Atlanta advances despite zoning moratorium and local opposition, with plans for 900 MW across 13 buildings (TheRealDeal)

Institutional Fundraising

Harrison Street raised $1B in one month for its 10th flagship fund, signaling strong investor appetite for data centers and student housing amid shifting real asset priorities

Alternative investment firm Harrison Street raises $1B in one month – 10th flagship fund targets data centers and student housing (PERE)

Distress Watch

$180M CMBS on San Francisco’s Sunvalley mall heads to special servicing – Despite 95% occupancy, Simon Property’s asset struggles with cash flow and value drop since 2012 (TheRealDeal)

Lord Abbett takes $60M loss on Kansas City, KS office CMBS in May – Aspiria loan sale at steep discount wipes out riskiest tranche, highlighting continued distress for older SASB-backed office assets (Bloomberg)