Key Insights

Tariffs, Trade Deficit, and IMF Recession Outlook

The US trade deficit shrank by $7.7B to $147.9B in February as exports rose and imports dipped, but the IMF’s review of Trump’s tariff plans warns of potential economic fallout for Canada and Mexico, even as it sees no US recession in its baseline forecast. While resilient US growth and a stable labor market (jobless claims at 224K) bolster optimism, tariffs could disrupt trade flows, increase costs, and pressure industries like lumber—already at pandemic-era highs—potentially offsetting gains in the trade balance with broader supply chain and inflationary risks.

Data Center Market Faces Uncertainty

The data center sector is showing mixed signals, with CoreWeave’s $1.5B IPO falling short of its original $4B target, Microsoft canceling 2 gigawatts of leased capacity, and Related launching an ambitious $8B AI data center venture, raising questions about whether this reflects a short-term sentiment dip or a larger shift away from hyperscalers’ aggressive capex plans. While Microsoft maintains its $80B AI investment commitment, the scaling back of leases and CoreWeave’s downsized IPO suggest potential overreach in prior projections, though Related’s move indicates sustained long-term optimism in AI-driven demand.

Consumer Spending Pullback Amid Economic Uncertainty

Recent earnings from Lululemon and Winnebago highlight a growing trend of US consumers cutting back on discretionary spending, from apparel to recreational vehicles, as inflation and economic uncertainty weigh on sentiment. Lululemon’s shares dropped over 10% despite strong Q4 results due to cautious guidance, while Winnebago slashed its 2025 outlook, citing high interest rates and inconsistent demand, signaling broader belt-tightening across consumer sectors.

This Week in Real Estate: Key Events & Data

Quick Markets

30Y Mortgage: 6.82% (+2 bps)
10Y Treasury Yield: 4.35%
FTSE NAREIT Index: 773.46 (-0.29%)
30-day SOFR Average: 4.33%

Market Pulse

Trump's tariff plans could disrupt trade flows, potentially harming Canada and Mexico, while the US economy shows resilience with a shrinking trade deficit and stable labor market, though federal spending cuts and trade policy shifts may increase localized layoffs.

US trade deficit shrank by $7.7B to $147.9B in February – Exports rose $7B to $178.6B, while imports dipped $0.6B to $326.5B (Census)

IMF reviewing Trump's tariff plans, sees no US recession – Tariffs could hurt Canada and Mexico but US growth remains resilient, with no recession in baseline forecasts (Reuters)

Wholesale inventories rose 0.3% MoM to $902.9B in February, up 1.1% YoY – Retail inventories edged up 0.1% MoM to $823.0B, marking a 4.6% YoY increase (Census)

US jobless claims dipped by 1,000 to 224K last week – The labor market remains stable, but layoffs tied to federal spending cuts and trade policy shifts are rising in Washington, D.C. (Reuters)

Policy & Industry Shifts

Treasury protects low-income lending program from Trump's elimination order – CDFI Fund maintains $300B in loans despite directive to minimize functions (Bloomberg)

Residential

Rising mortgage rates and record-high housing payments are straining affordability and dampening home sales despite increased inventory and buyer options, while potential tariffs contribute to lumber price volatility, which could further pressure construction costs and the multifamily market

US pending-home sales rose 2% in February – Rebound followed weather disruptions, with gains in the South and Midwest, though contract signings remain historically low (Bloomberg)

Monthly housing payments hit ATH of $2,807 – Rising home prices and 6.67% mortgage rates dampen sales, but new listings and buyer interest show signs of resilience (Redfin)

NYC rent-stabilized building owners see 8% NOI surge – Manhattan core experiences biggest gains despite landlord groups challenging data accuracy (Bisnow)

Active inventory up 29.2% YoY, with homes spending 3 more days on market – More options for buyers and increased negotiation leverage (Realtor.com)

Multifamily market anticipates construction slowdown with stabilizing sentiment -- 400K new units expected, vacancy rise to 6.7%, and modest rent growth amid economic volatility (Northmarq)

Lumber prices hit pandemic-era highs this week – Supply constraints, seasonal demand, and potential tariffs drive softwood market volatility (GlobeSt)

Arctos expands into real estate via Arctos Keystone – Firm owns stakes in the NFL’s Buffalo Bills and MLB’s LA Dodgers (Bloomberg)

Office

Peak office occupancy reached 63.1% last Tuesday – The weekly average fell to 53.3%, with Class A+ buildings at 73.9% occupancy (Kastle)

Market Mix

The data center market is sending mixed signals: Related’s $8B AI data center venture signals robust optimism for hyperscale growth, while CoreWeave’s downsized $1.5B IPO and Microsoft’s cancellation of 2 gigawatts of leases amid a maintained $80B AI investment suggest caution and potential oversupply concerns in the AI infrastructure space

Data Center

Related launches $8B AI data center venture – NY developer debuts Related Digital to build hyperscale facilities across North America (Bloomberg)

CoreWeave raised $1.5B in a downsized IPO below its target – The cloud computing firm building AI-focused data centers using Nvidia chips was seeking to raise $4B (Bloomberg)

Microsoft scales back data center leases amid AI infrastructure slowdown – Cancels 2 gigawatts of capacity but maintains $80B AI investment plan (Bisnow)

Retail

Off-price visit share grew from 28.1% to 35.1% and thrift from 9.4% to 12.2% from 2019 to 2024 – Value-focused shopping grew as department stores lost ground (Placer.ai)

Earnings

Lululemon and Winnebago’s disappointing outlooks despite earnings beats highlight a broader consumer pullback driven by economic uncertainty, inflation fears, and high interest rates, which could dampen demand for real estate tied to discretionary spending, such as retail spaces and vacation home markets

Lululemon shares fell over 10% after-hours despite beating Q4 earnings expectations due to disappointing guidance as US customers cut back spending due to economic and inflation concerns (CNBC) 

Winnebago beat Q2 earnings expectations, but the RV maker cut its fiscal 2025 revenue and earnings outlook due to high rates, inconsistent consumer sentiment, and falling dealer inventory levels (Investopedia)

Financings

Newmark provides $110M refinancing for Cityfront Place in Downtown Chicago – 39-story luxury tower with 95% occupancy benefits from 2020 renovation (CommercialObserver)

Jamison lands $60M loan for Koreatown, LA office-to-resi conversion – Plans 210 apartments with rooftop amenities despite recent financial struggles (TheRealDeal)

M&A

Hamilton Lane buys $74M Manhattan mixed-use portfolio – Dalan Real Estate retains 15% stake in four-asset SoHo and West Village deal (GlobeSt)

Public Storage buys two Plantation, FL self-storage sites for $57M – Expands South Florida portfolio with 278K sq. ft. of storage space (TheRealDeal)

Institutional Fundraising

3650 Capital raised $215M from Mubadala and CalSTRS – Capital will CRE lender and loan manager’s lending strategies (GlobeSt)

Distress Watch

Pappas Restaurants bids to acquire On The Border in bankruptcy sale – Tex-Mex chain filed for Chapter 11 on March 4, citing labor costs, falling traffic, and inflation pressures (Bloomberg)