The Brick Breakdown

Hello Brick Brief readers, 

Today we’re watching the Fed brace for tariff-driven inflation lasting into 2026, immigration enforcement disrupt labor and retail dynamics, and industrial demand pick up despite broader uncertainty. 

Keep an eye out for a special weekend edition of The Brick Brief! I’ll be investigating🔎 an interesting trend: how homebuilder mortgage buydowns are propping up home prices and boosting new home sales (versus existing ones)

📉 Tariffs Fuel Sticky Inflation, Limiting Fed Cut Options
Producer prices stayed flat in June, but the Fed warns tariff-driven inflation could build steadily into 2026 as businesses phase in higher costs. With CPI rising to 2.7% and Bostic now expecting just one cut in 2025, rate relief may stay out of reach for longer than markets hope. Check out our Brick by Brick for the full breakdown of how tariff costs are quietly working through the supply chain. 

🧱 Immigration Crackdown Ripples Across Real Estate and Retail
Labor shortages tied to deportation efforts are raising construction costs, reducing foot traffic at ethnic grocers, and boosting warehouse values due to staffing constraints. Prologis cites replacement challenges while Placer.ai data shows foot traffic at LA grocers like H Mart and Northgate has fallen sharply during immigration raids.

🏭 Industrial Demand Rebounds Despite Tariff and Cost Pressures
Prologis beat Q2 earnings and saw a bounceback in leasing activity in June, though overall deal velocity remains subdued. Major tenants like Amazon and Home Depot are locking in long-term needs, while importers race to beat tariffs, supporting port volumes and keeping manufacturing output stable.

This Week in Real Estate: Key Events & Data

Quick Markets

30Y Mortgage: 6.83% (-2 bps) 

10Y Treasury Yield: 4.46% (-3 bps)

WSJ Prime Rate: 7.50%

FTSE NAREIT Index: 769.39 (0.97%)

30-day SOFR Average: 4.35%

Market Pulse & Rate Watch

Despite PPI staying flat in June, a drop in services prices masked rising goods inflation, as the Fed sees tariff-related costs building upstream and warns that producers may soon pass those costs to consumers

Trump eyes 10%–15% tariffs on 150+ countries – Calls notices “deals” and signals indifference to talks, injecting new uncertainty into global trade ahead of August 1 deadline (Bloomberg)

US producer prices flat MoM in June as travel costs drop – Services decline offset a pickup in goods prices, with annual wholesale inflation easing to 2.3%, the lowest since September (Bloomberg)

Trump says he’s not planning to fire Fed Chair Powell – Floats removal “for fraud” over costly renovations while pressuring for steep rate cuts ahead of Powell’s term ending in May (WSJ)

Fed sees tariff-driven inflation building – Businesses report rising costs and labor shortages tied to deportations, with the Beige Book showing a slightly pessimistic outlook despite modest economic growth (Reuters)

Fed’s Williams warns tariff impact just beginning – Says inflation could rise 1% through early 2026 as Trump’s import taxes filter through economy, adding that policy is appropriately restrictive for now (Reuters)

Fed’s Bostic warns inflation pressures may be building – June CPI rose to 2.7%, with tariff-driven price hikes spreading across imported goods; Bostic says only one rate cut may be justified in 2025 (Reuters)

Brick by Brick: Fed Flags Tariff-Driven Inflation Risk as Price Pressures Build

June inflation data shows price pressures are slowly spreading from goods to consumers, with the Fed warning that tariff-related costs could gradually intensify through 2026.

June CPI rose 0.2% from May and 2.7% year over year, as price increases extended across household furnishings, apparel, and recreational goods
• Import tariffs are paid by U.S. importers, but costs work through the chain as follows:
Exporter → Importer → Domestic Producer → (PPI) → Wholesaler → Retailer → (CPI) → Consumer
• The Producer Price Index (PPI) measures prices received by domestic producers when selling to wholesalers and retailers, capturing price movement before it reaches consumers
• In June, core goods prices rose 0.3%, while services prices fell 0.1%, led by a 4.1% drop in hotel rates and 2.7% decline in airline fares; these declines offset goods inflation and left headline PPI flat month over month
• Mostly flat PPI suggests that U.S. producers and wholesalers have not broadly passed tariff-related costs downstream, with many still absorbing the impact through reduced margins
• While some goods categories are showing modest price increases, services' larger weight in the index means overall wholesale inflation remains muted despite rising trade costs
• Businesses tend to avoid sharp one-time price hikes and instead phase in cost increases over time; during the 2018 tariff round, prices on affected goods rose gradually over 6 to 9 months to avoid consumer pushback
• Fed officials including Bostic and Williams say the tariff impact is only beginning to show, and inflation could rise another 1% by early 2026, limiting room for rate cuts

Takeaway: Inflation pressures are building quietly as firms absorb and slowly pass on tariff-related costs. With CPI and goods prices rising and consumer sensitivity delaying full passthrough, the Fed expects inflation to stay sticky well into 2026, making rate cuts likely to be pushed even further out.

Policy & Industry Shifts

Tariffs, political gridlock, and aggressive immigration enforcement are straining real estate markets, with deal activity slowing in Chicago and legal scrutiny intensifying around landlord compliance

Trump admin targets immigrants with landlord subpoenas in deportation push – ICE demands tenant records without judge approval, raising legal and privacy concerns (AP)

Senate passes VA foreclosure bill – New law lets the VA cover missed payments through “partial claims,” aiding 20K+ veterans at risk of losing their homes (HousingWire)

NAR defeats Utah brokerage Homie’s antitrust suit alleging rules inflated costs and barred low-fee competitors – Judge said claims were untimely and unsupported (Reuters)

Tariffs and politics stall Chicago CRE – 85% of professionals cite trade risks as major hurdle, while frustration with City Hall slows deals in H1 2025 (Bisnow)

Residential

Mortgage rates edge higher on inflation concerns – Tariff-driven price pressures may delay Fed cuts, keeping rates in the 6–7% range as buyer demand and home prices soften (Zillow)

Multifamily

Record Q2 demand has not translated into rent growth, as operators prioritize occupancy amid delayed deliveries, rising costs, and Fed-driven uncertainty

Multifamily rent growth forecast at 2.3% nationally through mid-2026 – Fed delays cuts amid tariff-driven inflation and job slowdown, with NYC, Phoenix, and LA set to lead new supply (RealPage)

US apartment market sees record Q2 demand but muted rent growth – Over 227K units absorbed amid rising occupancy, with operators prioritizing leasing over pricing as rent growth slows to 0.19% in June (RealPage)

Over 500K apartment units delayed since 2018 – Labor disruptions, tariffs, and rising costs stall projects in major markets like LA, NYC, Seattle, and Phoenix, straining future housing supply (RealPage)

Office

US office occupancy dips ahead of July 4th – Weekly average fell to 49.4% as NYC and Chicago saw 30-point drops, though Class A+ buildings hit 94.8% peak on Tuesday (KastleSystems)

Leasing

Sigma Computing inks 64K sf lease at SL Green’s One Madison in NYC – Move boosts tower occupancy to 78% as tech firms expand Class A office presence (TheRealDeal)

MyBambu leases 35K sf at Press Building in West Palm Beach – Fintech firm expands HQ to 2751 S Dixie Hwy as it phases out remote work and scales operations (CommercialObserver)

Industrial

U.S. manufacturing output rose 0.1% in June – Motor vehicle production dropped but gains in metals and energy offset losses; Trump tariffs continue to pressure costs and limit growth (Reuters)

Port of LA sets June record with 892K TEUs – Importers rush holiday goods early to avoid potential Trump tariffs, pushing inbound volumes up 10% YoY (FreightWaves)

Market Mix

Prologis CEO warns construction costs will rise sharply – Says labor shortages tied to immigration crackdowns are driving up costs and boosting warehouse values due to replacement difficulty (Bloomberg)

Insight: Rising labor costs may actually pose a bigger challenge to construction than tariffs, as deportations reduce the available workforce and make skilled replacements harder to find. Prologis says this pressure is already driving up warehouse values and could limit future development capacity. 

Retail

Michaels cements craft retail lead as JOANN exits – Mid-sized chains falter without scale or niche appeal, while Blick survives by targeting affluent, quality-focused shoppers (Placer.ai)

NYC retail rebounds as brands seek cultural presence – Tahari Realty says tenants now prioritize corner spaces, sightlines, and storefront impact to build cultural touchpoints, not just sell products (IREI)

Immigration crackdown hits ethnic grocers – LA foot traffic drops up to 8% as deportation push scares off Latino shoppers and strains staffing for expanding chains like H Mart and Northgate (Bisnow)

Vantage Data Centers invests $3B in Nevada AI campus – 224MW facility near Reno will employ over 1,200 as tech firms expand into fast-growing Tier II markets (IREI)

US hotel construction drops for sixth straight month – Rooms under construction fell 11.9% YoY in June to a 20-quarter low, with most pipeline activity concentrated in planning stages and southern markets (CoStar)

Data Centers

Vantage Data Centers invests $3B in Nevada AI campus – 224MW facility near Reno will employ over 1,200 as tech firms expand into fast-growing Tier II markets (IREI)

Hospitality

US hotel construction drops for sixth straight month – Rooms under construction fell 11.9% YoY in June to a 20-quarter low, with most pipeline activity concentrated in planning stages and southern markets (CoStar)

Earnings & Real Estate Impact

Prologis’ record build-to-suit activity and June leasing rebound signal resilient industrial demand, even as speculative projects lag amid cost and policy uncertainty

Prologis beat Q2 earnings and raised its outlook as build-to-suit development surged and deal activity rebounded in June. While speculative leasing remains weak, major tenants like Amazon and Home Depot are committing to new space, driving $1.1B in project starts this year, the strongest first half in company history (CoStar & WSJ)

Financings

Refinancings

Alterra refinances 64 industrial outdoor storage properties across 22 states for $344M – Truist and BMO arranged the facility for Alterra IOS Venture II, reflecting rising lender confidence in the asset class (ConnectCRE)

M&A

Company M&A

Circle K owner Couche-Tard drops $46B bid for 7-Eleven owner Seven & i – Says Japanese firm refused to engage meaningfully despite NDA and antitrust workarounds, ending nearly yearlong takeover effort (Bloomberg)

Starwood acquires Fundamental Income Properties from Brookfield for $2.2B – Deal includes 467 net lease assets across food, auto, and retail sectors totaling 12M sf; Starwood will assume $1.3B in debt (Bloomberg)

Insight: Starwood isn’t a major player in net lease today, with just 5 million square feet before this deal. The $2.2 billion acquisition of Fundamental Income more than doubles that footprint and gives it a full operating platform with 467 properties and long-term leases. The move signals a push toward reliable cash flow and a larger role in a sector where scale matters.

Building & Portfolio M&A

Multifamily

Peterson buys 432-unit multifamily Batley in Washington, DC from JBG Smith for $155M – Deal marks 25% discount from JBG’s 2021 purchase as it trims portfolio beyond National Landing (CommercialObserver)

Office

Estein USA and Vanderbilt Office Properties acquire SPX Flow’s former Charlotte, NC HQ for $71.5M – Sale of Ballantyne Tower signals rebound in office investment demand (CoStar)

Institutional Fundraising

ACRE launches $1B multifamily credit fund – ACRE Credit Fund II targets $25M–$125M loans nationwide amid rising maturities and supply-demand imbalance (CommercialObserver)

Distress Watch

Private credit adds liquidity and risk to CRE lending – Moody’s warns nonbank lenders offer higher LTVs and face fewer regulations, raising default risks as they absorb loans banks now avoid (WSJ)

Insight: As large banks like Wells Fargo pull back from CRE lending and offload distressed loans, private credit is stepping in with higher leverage, shorter loan terms, and minimal regulatory oversight. Moody’s warns this could pose systemic risk because many private lenders lack crisis-tested track records, and their reliance on short-term funding and fund-level leverage could amplify losses if property values fall further or refinancing options dry up.

CIM Group and Osiris Ventures buy bankrupt NYC mixed-use property at 190 Berry St. for $56M – Deal includes 40 apartments and retail, sold at discount after LENY defaulted on $70M loan (TheRealDeal)

Proptech & Innovation

CertifID raises $48M to fight wire fraud in real estate – Backed by Centana Growth, the proptech firm expands its secure transaction platform after preventing $1.3B in wire fraud losses last year (TheRealDeal)

Last-mile maintenance tech boosts multifamily margins – Smarter repairs cut costs and improve tenant satisfaction as acquisitions slow (GlobeSt)