The Brick Breakdown

Hello Brick Brief readers, 

Thank you for your continued support! Today we’re seeing Home Depot absorb tariffs to hold prices steady, Toll Brothers maintain full-year guidance despite housing headwinds, and grocery-anchored retail remain resilient

📦 Home Depot Holds Prices to Win Loyalty as Rivals Raise Costs
Home Depot reaffirmed its full-year outlook and said it will absorb tariff costs rather than raise prices, leveraging its scale and supplier diversification to defend market share. The strategy contrasts with Walmart’s, which warned of imminent price hikes, signaling diverging approaches as consumers grow more price-sensitive.

🏘️ Toll Brothers Beats Estimates but Housing Headwinds Persist
Toll Brothers topped Q2 expectations and reiterated full-year guidance, citing strong long-term demand from demographic trends and tight supply. Still, elevated rates and rising recession fears are weighing on buyers, as U.S. home prices fell in April for the first time since 2022.

🛍️ Retail Realigns as Cities and Consumers Adjust to New Pressures
Cities are boosting small business incentives to backfill empty downtown storefronts, while foot traffic at dollar stores surges ahead of expected tariff-driven price hikes. Investors are leaning into grocery-anchored retail, where stable demand and low vacancy offer a hedge against broader retail volatility.

This Week in Real Estate: Key Events & Data

Quick Markets

30Y Mortgage: 6.99%
10Y Treasury Yield: 4.49% (+4 bps)
FTSE NAREIT Index: 773.13 (-0.56%)
30-day SOFR Average: 4.33%

Market Pulse

Sticky inflation and tariff uncertainty may delay rate cuts, keeping borrowing costs elevated and pressuring real estate financing and development

St. Louis Fed holds firm – President Musalem said current restrictive policy remains appropriate amid strong labor market and above-target inflation (StLouisFed)

Tariffs raise inflation risk – Ongoing trade tensions may dampen growth and fuel persistent price pressures, complicating the Fed’s path forward (StLouisFed)

Brick by Brick: Home Depot Holds Prices Despite Tariffs to Defend Market Share

 Home Depot reaffirmed its full-year outlook and said it will not raise prices in response to new tariffs, positioning itself as a stable alternative as competitors like Walmart prepare for broad consumer price increases.

• Q1 revenue rose to $39.86B, slightly above expectations, though adjusted EPS of $3.56 missed estimates due to margin pressure and soft demand for big-ticket DIY projects
• Comparable sales fell 0.3% companywide but turned positive in the U.S. at +0.2%, with improved trends in March and April following a weak, weather-impacted February
• CFO Richard McPhail said Home Depot will not pass on tariff costs to consumers, citing its scale, domestic sourcing, and supplier diversification
• More than half of Home Depot’s goods are U.S.-sourced, and no single country will represent more than 10% of imports by next year
• With higher interest rates and home prices limiting renovation activity, consumers remain cautious, especially on large remodels and upgrades
• Home Depot is betting that holding prices steady, even as costs rise, will help build customer loyalty and capture market share from smaller rivals that are more exposed to inflation
• The strategy contrasts with Walmart’s, which warned last week that tariff-driven price increases will begin hitting consumers by June

Takeaway: Home Depot faces headwinds from weak housing turnover, soft DIY spending, and persistent rate pressure, but it is using pricing discipline to strengthen its long-term positioning. By avoiding near-term price hikes, the company is prioritizing customer retention and loyalty and its competitive advantage, even as tariff costs begin filtering through the broader retail sector.

Policy & Industry Shifts

GSA trims federal office space by 0.08% in April – Total GSA-leased office space dipped to 148.84M SF, while rent tied to termination rights edged up to $5.24B as major cuts remain pending (Trepp)

Residential

Rising recession fears and softening demand are cooling the housing market, putting downward pressure on prices as inventory climbs

U.S. home prices dip 0.1% in April – First monthly decline since 2022 as buyer demand softens and listings hit a five-year high, with prices falling in half of major metros (Redfin)

Recession fears rise among homebuyers – 63.4% expect a downturn within a year, marking the third-highest concern level since 2019 (Realtor.com)

Office

Vacancy surged but now easing – Over 251M SF of office space was returned from 2020 to 2024, pushing vacancy rates to 21% before modest improvement began in late 2024 as return-to-office policies gained traction (Colliers)

Bay Area office market stabilizes in Q1 – Vacancy hits 21.5% with net absorption improving to -853K SF, led by AI-driven demand in Silicon Valley (Colliers)

Industrial

Tariff cut triggers early import surge – Eastern rail ramps face strain as shippers frontload Chinese goods ahead of peak season (FreightWaves)

Market Mix

Grocery-anchored retail remains resilient as tariffs pressure broader retail sectors, driving investors toward necessity-based assets with stable foot traffic

Retail

Cities push retail to revive downtowns – With office vacancies still elevated, officials focus on filling ground floor and offering incentives and public-private programs to attract small businesses (CoStar)

Dollar Stores See Strong Start to 2025 – Dollar General visits rose 1.9% YoY in Q1 and surged 6.5% in April, while Dollar Tree visits jumped 4.8% in Q1 and 21.2% in April as both chains benefited from pre-tariff demand (Placer.ai)

Grocery-anchored retail outperforms amid tariff uncertainty – Vacancy dropped to 3.5% in 2024 as investors flock to high-traffic essentials while broader retail absorbs rising costs and negative absorption (CommercialObserver)

Regional

Austin loses tech talent as coasts rebound – Big Tech jobs fell 1.6% and startups 4.9% in 2024, while San Francisco grew 1.8% and 0.8% and New York rose 2.2% and 3.7% (WSJ)

Earnings & Real Estate Impact

Toll Brothers' earnings beat and full-year guidance reaffirmation point to ongoing strength in the luxury housing market, where tight supply and favorable demographics continue to support demand despite broader market softness. Home Depot’s decision to absorb tariff costs and maintain prices reflects a strategic effort to retain value-conscious customers and defend market share as housing-related spending slows

Toll Brothers’ shares jumped ~5% afterhouers after beating Q2 earnings expectations and reiterating its full-year outlook despite soft demand in its current quarter. The homebuilder believes that long-term trends for its luxury homes remain positive given a housing shortage and favorable demographics.

Home Depot missed Q1 earnings expectations but reaffirmed its full-year guidance. Despite headwinds from high rates, tariffs, and sluggish housing activity, the company aims to maintain prices to attract cost-conscious consumers and gain market share as competitors raise prices (CNBC) 

Financings

Loans

Metro Loft, David Werner secure record $720M loan for NYC office-to-resi conversion – Madison Realty Capital provided financing for the 1,600-unit redevelopment of the former Pfizer HQ (TheRealDeal)

Giuseppe Iadisernia secures $112M construction loan from S3 Capital for second Hallandale Beach, FL condo tower – Total project financing reaches $197M across both Oasis Hallandale towers (TheRealDeal)

Refinancings

Longacre JV lands $141M refi for Bronx portfolio – PGIM Real Estate provided the floating-rate loan for 2,021 rent-stabilized units across 34 buildings (MultiHousingNews)

M&A

Building & Portfolio M&A

Phoenix, AZ resort trades for $865M – Trinity sells JW Marriott Desert Ridge to Ryman Hospitality after $100M renovation, marking Phoenix’s largest resort deal (CoStar)

Ares Management buys Chandler, AZ multifamily for $137.5M – Firm acquired the 392-unit Zaterra luxury complex for $350K per unit in an all-cash deal from PB Bell and PCCP (MultiHousingNews)

Portland, OR’s U.S. Bancorp Tower hits market for $70M, down 80% from prior value – The city’s largest office building is now over half empty, as rising crime, tenant exits, and tax burdens push Portland’s CBD to a nation-leading 35% vacancy rate (WSJ)

Distress Watch

CRE CLO distress eased in April as borrowers and lenders adjusted to tariff-driven market volatility, with maturities extended and issuance surging 400% year-over-year to $11.4 billion 

CRE CLO distress rate falls 410 bps in April to 10.3% – Issuance surges 400% YoY to $11.4B as borrowers extend maturities and markets adjust to post-2021 valuations (CommercialObserver)

Proptech & Innovation

Proptech adoption accelerates as Vero expands AI-driven fraud screening in multifamily leasing and retail landlords deploy tools like Diald and MRI to optimize operations and capitalize on the rebound in brick-and-mortar demand

Multifamily fraud-screening startup Vero raises post-Series B round – New CEO and CTO join as the company expands AI-powered lease verification to combat rising rental fraud (CommercialObserver)

Proptech drives retail revival – Brick-and-mortar owners are adopting AI tools like Diald, Zoneomics, and MRI to boost leasing, streamline site selection, and track foot traffic as physical retail rebounds post-COVID (CommercialObserver)