Hello Brick Brief readers, 

Thank you for your continued support! Today we’re seeing renewed inflation concerns, mixed housing signals, and utilities moving to buy existing gas-fired power as electricity demand accelerates.

🏦 Tariffs May Cool Inflation Before Reigniting It
A study by the San Francisco Federal Reserve concluded that tariffs can lower inflation in the short run by raising business uncertainty and unemployment through a demand shock that suppresses pricing power, while in the long run higher input costs gradually work their way through supply chains and push consumer prices higher. There are clear parallels to the 2025 economy where tariffs and softer labor conditions are already visible, making a case that inflation may stay muted near term before pressures rebuild over the next few years.

🏠 Housing Signals Are Turning Mixed
Home Depot visits rose 3.8% YoY in November and Inman’s December survey shows agents reporting stronger pipelines and rising expectations for a 2026 housing recovery, pointing to early signs that housing demand and home improvement activity are stabilizing. On the other hand, Zillow expects only modest 2026 growth, which is pushing the company deeper into transactions and commission-based fees as affordability keeps home sales near multi-decade lows.

⚡ Power Has Become The AI Growth Constraint
U.S. utility Vistra agreed to acquire Cogentrix for $4.7B, adding 10 gas-fired plants totaling 5.5GW as buying existing generation becomes the fastest way to secure power amid surging AI demand. Data center REIT Equinix says power availability now limits AI growth, leading the company to expand into nuclear, fuel cells, and grid upgrades as electricity demand accelerates.

Fed’s Kashkari says rates are near neutral - Resilient growth suggests policy is no longer restraining the economy, leaving inflation and labor data to guide the Fed’s next move (Bloomberg)

SF Fed finds tariffs may lower inflation – Historical research shows large tariff hikes can raise unemployment while putting downward pressure on inflation, suggesting rate cuts could be the appropriate policy response (Reuters & FRBSF)

The authors conclude that in the short run, tariffs raise business uncertainty and unemployment through a demand shock that suppresses pricing power and pushes inflation lower, while in the long run, higher input costs slowly work their way through to consumers and lift inflation. There are interesting parallels to the 2025 economy, where tariffs, business uncertainty, and softer labor conditions were clearly visible, so there’s an argument to be made here that inflation may begin to tick higher in the next year or two.

Mortgage REITs rose 16% in 2025, leading public real estate performance – Late-year rate cuts lifted residential mortgage returns, leaving equity REITs trailing at just 2.3% (TheRealDeal)

Mamdani advances tenant protection push in NYC – Mayor Zohran Mamdani elevated the Mayor’s Office to Protect Tenants as a central housing authority (Bisnow)

Zillow braces for another slow housing year – CEO Jeremy Wacksman expects modest 2026 growth amid affordability constraints and is pushing Zillow deeper into transactions and commission-based fees as home sales remain near multi-decade lows (Bloomberg)

Buyer demand rebounded late in 2025 – Inman’s December survey shows real estate agents reporting stronger pipelines and rising expectations for a 2026 housing recovery (Inman)

Mortgage spreads narrowed late in 2025 – Increased mortgage-backed securities purchases by Fannie Mae and Freddie Mac helped compress the gap between 10-year Treasury yields and 30-year fixed mortgage rates (NationalMortgageNews)

UCSF Health leases 280K SF at Kilroy Oyster Point from Kilroy Realty Corporation in South San Francisco, CA – The 16.5-year lease makes UCSF an anchor tenant at the life sciences campus (TheRealDeal)

xAI leases over 100K SF of office space from Hudson Pacific Properties in Palo Alto, CA – The leases expand the firm’s footprint near its existing Page Mill Road offices (TheRealDeal)

U.S. manufacturing contracts for 10th straight month – ISM PMI fell to 47.9 in December as tariffs pushed input costs higher, demand weakened, and factory employment declined for an 11th month (Reuters)

U.S. trucking sees strongest peak retail season in years – Holiday demand and winter disruptions drove tender rejections to 13.2% and pushed spot rates up nearly 19% from mid-November to late December (FreightWaves)

Home Depot visits rose 3.8% YoY in November – Traffic stabilized after years of decline as late-2025 visit gaps narrowed to near flat, pointing to a delayed but emerging recovery after tariff-driven disruptions (Placerai)

This bounce-back in traffic may be a leading indicator that demand for home improvement projects is slowly stabilizing. During its Q3 earnings call on November 18, management cut its full-year outlook, citing delayed project starts amid high borrowing costs, though narrowing traffic declines suggest conditions may be bottoming as affordability slowly improves.

Starbucks visits rose 1.6% YoY in late 2025 – Traffic flipped from a 0.6% decline earlier in the year as calendar-driven promotions and brand-led launches drove a sustained rebound (Placerai)

Benihana plans 10 new Bay Area locations after record $8M store performance – Parent One Group Hospitality is expanding through franchised, JV, and express concepts following the chain’s strongest-ever unit in San Mateo (CoStar)

Ray Dalio warns AI boom entering early bubble phase – The Bridgewater founder said surging investor demand has driven U.S. tech stocks to stretched valuations after three years of outsized gains (Reuters)

Data centers added $6.5B to PJM power costs – Forward capacity auctions locked in $23.1B of data-center-related power costs for 2025–2028, nearly half of total procurement, intensifying energy inflation pressures (Bloomberg)

Data center REIT Equinix says power is now the binding constraint for AI growth – U.S. data centers already consume over 4% of national electricity demand; usage is projected to rise 133% by 2030, pushing Equinix toward nuclear, fuel cells, and grid upgrades to support AI demand (Colliers)

Prologis is planning a 576-acre Indiana data center campus – The industrial REIT is proposing a 13-building development near Indianapolis as part of its expanding data center push (Bisnow)

Vistra makes $4.7B data center power bet with Cogentrix acquisition - The deal adds 10 gas-fired plants totaling 5.5GW across PJM, New England, and Texas as Vistra expands generation to meet surging AI-driven electricity demand (Reuters & Bloomberg)

Bloomberg reports that new gas turbine orders will not be delivered until at least 2030, which makes the purchase of existing gas-fired plants an increasingly attractive way to add power generation capacity immediately. Equinix says power availability is now the binding constraint on AI growth (see data centers section) and is expanding into nuclear, fuel cells, and grid upgrades as electricity demand accelerates.

Apollo Global Management leads $1.2B investment in building-products consolidator QXO – The convertible preferred financing backs Brad Jacobs’ acquisition-led roll-up strategy following QXO’s $11B Beacon Roofing deal and funds further consolidation (Bloomberg)

This investment appears to be more of a company-specific, strategy-driven bet than a directional call on building materials or construction activity. Apollo’s 2023 preferred equity investment in Carvana comes to mind here.

CMBS delinquency rate fell to 7.7% in December, but overall CMBS distress rose to 10.6% – Industrial loans recorded one of the largest increases in delinquency and distress; $1.3B of CMBS loans entered distress across retail, office, and multifamily (ConnectCRE)

Copper Property CTL Pass Through Trust pulls $997M sale of 119 JCPenney stores to PE firm Onyx Partners – The lender-backed trust took the portfolio off the market after the buyer missed the closing deadline (Bisnow)

Mack Real Estate Group takes control of development site at 545 West 37th Street from Chetrit Group in Manhattan, NY for $94M – The title transfer follows a prolonged loan dispute tied to an $85M default and gives Mack control of roughly 172K buildable SF near Hudson Yards (TheRealDeal)

Five Holdings buys entertainment site at 140 Stewart Avenue from Avant Gardner in East Williamsburg, Brooklyn for $110M – The former Brooklyn Mirage complex will be redeveloped into Pacha New York following years of operational and regulatory issues (CommercialObserver)

Bank OZK sells $265M construction loan on a largely vacant life sciences campus in San Diego, CA to Strategic Value Partners – The recently completed property remains mostly unleased (Bisnow)

Proptech funding totaled $16.7B in 2025 – Capital flowed into infrastructure-focused platforms across financial systems, construction technology and AI-driven real estate operations (CommercialObserver)