The Brick Breakdown

Hello Brick Brief readers, 

In recent news, April consumer confidence continued to decline and CEOs reduced spending amid growing uncertainty, but data center demand is projected to stay robust in 2025.

📉 Consumer sentiment slumps as inflation fears rise ahead of expected supply shock

Consumer sentiment fell 8% in April, with expectations down 32% since January and one-year inflation forecasts surging to 6.5%. A supply shock from Trump’s tariffs is expected to hit by mid-May, likely worsening inflation and further straining the economy into the summer.

🏢 CEOs and CRE investors brace for tougher times

Faced with tariff-driven uncertainty, CEOs are slashing spending plans, pausing hiring, and focusing on cost control as growth expectations fade. Commercial real estate sentiment mirrored this pullback, with optimism dropping 30.5% in Q1 and 80% expecting worsening economic conditions.

⚡ Data center growth powers through volatility

Digital Realty raised its 2025 earnings guidance after strong AI-fueled leasing demand lifted Q1 results, showing resilience even as broader real estate markets slow. The sector continues to benefit from institutional investment and surging infrastructure needs despite rising costs and macro uncertainty.

This Week in Real Estate: Key Events & Data

Quick Markets

30Y Mortgage: 6.84% (-8 bps)
10Y Treasury Yield: 4.24% (-7 bps)
FTSE NAREIT Index: 748.02( -0.11%)
30-day SOFR Average: 4.35%

Market Pulse

Trade-driven uncertainty is weighing on consumer sentiment, corporate spending, and real estate valuations, with new tariffs expected to trigger supply shocks and job losses by mid-May

Consumer sentiment falls 8% in April – Expectations drop 32% since January amid trade uncertainty, while year-ahead inflation expectations surged to 6.5% (UMichSCA)

Federal Reserve flags risks in real estate valuations – Despite recent declines, property prices remain high relative to earnings forecasts, with concerns over leverage and funding risks (Bloomberg)

U.S. companies slash spending amid tariff uncertainty – CEOs delay projects, pause hiring, and cut costs to "control the controllables" as trade policies disrupt business (WSJ)

Supply shock from Trump tariffs to hit U.S. economy – By mid-May, inventory shortages, higher prices, and layoffs in trucking, logistics, and retail expected (Bloomberg)

Policy & Industry Shifts

New Jersey AG sues RealPage over rent-setting practices – Alleged cartel behavior with major property management firms under scrutiny (Inman)

Residential

Residential sector faces mounting pressure as legal battles disrupt listing practices, multifamily values decline, and mortgage delinquencies remain elevated year-over-year

Compass sues Seattle-area NWMLS over private listings – Alleges anticompetitive practices and blocking of "private exclusives" for pre-marketing homes (Bloomberg)

Multifamily prices fell 2.1% quarter-over-quarter – Annual decline accelerated to 4.7% for the 12 months ending in March (CoStar)

U.S. mortgage delinquency rate decreases to 3.21% in March – Delinquency down 9% from February, but up 0.41% from last year (MortgageOrb)

Office

Small-market office prices rose 1.9% in Q1 – Equal-weighted index showed annual price gains despite declines in large-dollar office deals (CoStar)

Office properties still face distress despite strong occupancy – Loans in special servicing rise due to high leverage, higher interest rates, and volatile 10-year Treasury yields (GlobeSt)

Industrial

Industrial markets are bracing for disruption as Trump tariffs drive steep declines in China-U.S. container traffic, weaken LA port volumes, and trigger a forecasted global drop in freight activity

Container bookings from China to the U.S. drop 45% YoY – Trump tariffs and trade uncertainty lead to sharp declines in freight volumes (FT)

LA port volumes drop 20% – Container bookings from China plunge, signaling trouble for truckers reliant on Southern California freight amid rising tariffs (FreightWaves)

Global container volumes to drop 1% in 2025 – Trump tariffs and shifting trade patterns forecast a decline of 1.8M TEUs, with potential port congestion and operational disruptions ahead (FreightWaves)

Market Mix

CRE sentiment deteriorated sharply amid tariff-driven uncertainty, hotel investment weakened further, and Kansas City advanced a $10B bond review to support Google’s new data center

CRE market sentiment drops 30.5% in Q1 – Optimism plummets due to tariff policies, with 80% expecting worsening economic conditions and rising construction costs (Reuters)

Hospitality

U.S. hotel investment volumes declined 9.9% in 2024 – Cross-border investment share remained below pre-COVID levels, with full-service hotels making up 87% of inbound capital (CBRE)

Data Centers

Port Authority to consider $10B in bonds for Google data center – Incentive package for second Kansas City campus under review (BizJournals)

Earnings & Real Estate Impact

Digital Realty’s raised earnings outlook highlights how surging AI-driven demand is sustaining data center growth, reinforcing broader momentum in infrastructure investment despite broader of economic uncertainty

Digital Realty slightly missed Q1 revenue expectations but reported better-than-expected Q1 earnings and raised its annual core FFO forecast thanks to strong data center demand driven by AI investments and robust leasing activity (Reuters)

Financings

Loans

Vornado secures $450M loan for NYC Times Square property – Loan against 1535 Broadway boosts cash by $425M as the REIT's stock facing pressure from economic uncertainty (TheRealDeal)

M&A

Company M&A

Axonic Capital explores strategic options, including the sale of a controlling stake – Firm focuses on mortgage-backed securities and distressed real estate assets (Bloomberg)

Building & Portfolio M&A

TIAA sells Boston office at major discount for $227M – Synergy acquires 99 High St. tower in city's largest office deal of 2025 (CoStar)

Luxury Housing

Naples, FL estate sells for $225M – Florida’s second-highest home sale, setting a state record despite a recent surge in high-end real estate deals (WSJ)

Institutional Fundraising

SWIB invests $200M in U.S. real estate – $150M in Digital Realty's data center fund, $50M in FPA's apartment fund, marking new relationships and reinforcing apartment strategy (IPERealAssets)