Hello Brick Brief readers, 

Thank you for your continued support! Today we’re seeing August inflation expectations remain largely anchored, lumber flashing a warning sign for housing, and data center demand proving insatiable.

📊 Inflation Expectations Stay Anchored
Median one-year inflation expectations rose just 0.1 pp to 3.2%, while three- and five-year outlooks held steady at 3.0% and 2.9%. Powell stressed at Jackson Hole that anchored expectations are key to preventing sustained inflation, and the relatively unchanged outlook supports rate cuts as labor market confidence weakens.

🪵 Lumber Flashes a Warning Sign
Lumber prices have plunged 24% since early August to $526.50, reversing tariff-driven spring gains and signaling waning demand. The velocity of decline is flashing a cautionary signal that builders are pulling back and new supply is stalling, though it’s possible that much of the move may reflect price normalization rather than a full cycle downturn.

⚡ Data Centers Stretch Capacity
North American data center supply jumped 43% YoY in H1 to 8,155 MW, yet vacancy still sits at just 1.6% as AI and hyperscale demand outpaces deliveries. Appetite for space remains immense, with surging lease rates in top hubs and Fermi’s planned IPO showing both investor momentum and growing strain on U.S. power infrastructure.

30Y Mortgage: 6.28% (-1 bps) 

10Y Treasury Yield: 4.05% (-2 bps)

WSJ Prime Rate: 7.50%

FTSE NAREIT Index: 774.32 (-0.61%) 

30-day SOFR Average: 4.37%

Median inflation expectations stayed mostly anchored in August, a sign Powell flagged as key to avoiding sustained inflation and one that supports Fed rate cuts amid a weakening job market

Median inflation expectations rose 0.1 pp to 3.2% for the one-year horizon – Three-year (3.0%) and five-year (2.9%) outlooks were steady, with inflation uncertainty higher in the near term but easing at the five-year horizon (NYFed)

Worker confidence in job prospects sinks to record low – NY Fed survey shows just 44.9% see chance of finding work in 3 months as labor market weakens and employers tighten hiring (WSJ)

StanChart expects Fed to cut rates 50 bps next week – Weak August jobs report pushed unemployment to 4.3%, fueling calls for a sharper move than the 25 bps cut markets currently price at 90% odds (Reuters)

The Wall Street Journal reported yesterday that lumber prices are sliding sharply, and history suggests investors should pay attention. Lumber has a track record as a leading signal for housing cycles. It surged ahead of the Covid inflation spike and collapsed in 2022 just before housing slowed. The latest downturn raises fresh concerns.

🧱 Prices have fallen 24% since early August to $526.50 per thousand board feet. While still above September 2024 levels, the sharp decline has traders worried that demand is drying up faster than supply adjustments can keep pace

🧱 Market volatility has been extreme. Prices climbed in the spring on tariff threats and higher Canadian duties, then dropped once buyers recognized inventories were already high and construction demand was faltering

🧱 Producers are cutting output to stabilize supply. Interfor, Domtar, and other major mills are reducing hours and idling facilities, underscoring how oversupply and weaker demand are straining the sector

🧱 Housing construction data confirms the pressure. Residential permits fell to 1.4 million units in July, the lowest since mid-2020, while total U.S. construction spending has slipped more than 3% from last year’s peak

🧱 The speed of the decline matters more than the absolute level. Lumber prices remain higher than a year ago, but the rapid unwinding of gains points to a sharp sentiment shift by builders, echoing patterns that have preceded past downturns

🧱 Affordability pressures remain front and center. Mortgage rates are easing and prices are showing early signs of softening, but lumber’s decline signals a slowdown in construction that could limit new future supply, offsetting recent affordability gains.

Takeaway: Lumber’s velocity of decline is flashing a cautionary signal. It points to builders pulling back quickly, construction slowing, and new supply stalling, even as mortgage rates fall. The key question is whether this is just a correction back to normal levels or an early warning that the housing cycle faces another downturn. I am inclined to believe this is largely price normalization, although it remains something worth watching closely.

NYC’s Airbnb crackdown cut tens of thousands of short-term rentals – Rents remain at record highs as vacancy stays near all-time lows, showing little impact on housing supply (WSJ)

Lumber futures down 24% to $526.50 – Tariffs, weak housing demand, and oversupply force mills to cut output, signaling pressure on construction and the economy (WSJ)

Zillow forecasts CPI’s Owners’ Equivalent Rent to rise 3.3% YoY and Rent of Primary Residence to rise 2.9% in 2025 – CPI shelter inflation expected to slow sharply into 2026 as market rents decelerate (Zillow)

US housing market value hit $55.1T in June – Growth slowed to $862B YoY as New York led gains while Florida, California, and Texas posted steep declines (Zillow)

Fannie Mae’s Home Purchase Sentiment Index dipped to 71.4 in August – Buying optimism improved, but selling confidence and price expectations fell amid high rates and uncertainty (Realtor.com)

US property insurance costs hit record highs – Average annual payment rose 4.9% to $2,370 as climate disasters drive sharp premium increases and insurer retreat from high-risk markets (Bloomberg)

Manhattan office leasing reached 2.95M SF in July, 63% above average, with YTD activity up 38% to 20.49M SF – Availability fell to 17% and net absorption turned positive, while rents held flat at $77.73 PSF (CBRE)

Retail REITs post strong Q2 results – Shopping center and net lease landlords outperformed while mall REITs faced mixed results, with sector outlook steady despite tariffs and cautious consumers (CoStar)

Mall traffic slowed in August – Visits fell across formats with indoor malls up 1% YoY and outlet malls closing a 6% gap to flat (Placer.ai)

Labor Day traffic dipped across all mall formats – Shorter visits and weaker discretionary spending suggest shoppers are prioritizing everyday value over promotions (Placer.ai)

Average visit length declined in August – Reversal of post-pandemic gains signals heightened caution as consumers cut back on leisure and discretionary browsing (Placer.ai)

North American data center supply jumped 43% YoY in H1 but vacancy still hit a record-low 1.6%, showing insatiable AI-driven demand that is pushing rents higher and fueling new IPO activity

North America data center supply rose 43% YoY to 8,155 MW in H1 2025 as vacancy fell to a record-low 1.6% – Hyperscale and AI demand continued to outpace deliveries (CBRE)

Lease rates surged in H1 2025 – 10 MW+ deals climbed 19% in Silicon Valley, 15.4% in Chicago, and 13.8% in Northern Virginia amid power shortages and AI-driven demand (CBRE)

Data center builder Fermi files for U.S. IPO – Texas firm co-founded by former U.S. Energy Secretary Rick Perry plans Nasdaq listing under after raising $100M from Macquarie (Reuters)

Life insurers’ CRE loan returns hit 1.9% in Q2 2025 – Trepp’s LifeComps index shows gains from income and appreciation, with 62 new originations at a 5.98% median coupon (ConnectCRE)

Multifamily lending volume rose 17% YoY to $288.7B in 2024 – Activity was broad across 2,463 lenders, though over half made five or fewer loans, with JPMorgan, Walker & Dunlop, Berkadia, Wells Fargo, and CBRE leading by volume (ConnectCRE)

Mill Creek Residential and Group P6 secure $101M loan for Boca Raton, FL multifamily – PNC Bank financing backs 12-story, 304-unit project after $20M office condo buyout (CommercialObserver)

Al Adelson and Sympatico Real Estate secure $63M loan for West Palm Beach, FL condos – JVP Management backs 25-story, 193-unit Berkeley tower, about 15% presold (TheRealDeal)

Douglas Emmett secures $941M refi on eight Los Angeles multifamily properties – New 5-year, fixed-rate loans at 4.8% replace $930M in prior debt and add The Landmark Residences to unencumbered assets (ConnectCRE)

Pacific Elm lands $132.5M refi for Santander Tower in Dallas, TX – CIM Group loan funds Phase 2 of Peridot conversion, expanding to 396 apartments (ConnectCRE)

Starwood Capital secures $930M CMBS loan to refinance a 54-property, 8.2M SF industrial portfolio across NV, AZ, CO, MD, and TN – Portfolio is 88.3% leased to 230+ tenants including Amazon, UPS, and FedEx (CommercialObserver)

Blackstone’s QTS Realty Trust lines up $600M ABS financing for Phoenix, AZ data center – Deutsche Bank to arrange refi of 210 MW PHX2DC2 facility, fully leased to a hyperscale tenant (ConnectCRE)

Insight: QTS’s $600M Phoenix refinancing highlights how ABS has become a preferred choice for data center financing, as it matches the long-term stability of hyperscaler leases with investor demand for predictable cash flows. Borrowers favor ABS because it offers cheaper funding than corporate debt while lenders value the collateral and contracted triple-net structures that anchor repayment, making it one of the fastest-growing corners of CRE capital markets.

Extell Development secures $1.2B equity infusion from hedge fund for nine projects in New York and Utah – Portfolio includes 1.8M SF Disney campus redevelopment, 875K SF Times Square Torch tower, alongside large-scale condo, rental, and hotel projects (TheRealDeal)

Corinthia Hotels acquires Beverly Hills, CA office from PE firm The Gores Group for $100M – 42K SF property traded at $2,387 psf as part of a $135M redevelopment strategy with nearby hotel purchases (CoStar)

Standard Communities and Vistria Group acquire San Jose, CA multifamily complex from Greystar for $410M – 948-unit Park Kiely will undergo a major market-to-affordable conversion with half the units restricted at 80% AMI (CommercialObserver)

Ethos Real Estate and Prospect Ridge acquire San Jose, CA multifamily from Stockbridge for $97.6M – 230-unit LINQ complex near Berryessa BART sold at a loss from Stockbridge’s $104M 2019 purchase (TheRealDeal)

Hilco spins off HRP Group as a standalone real estate operator with $2.6B in assets – HRP is launching its first $250M value-add fund targeting underperforming properties across US markets (Bloomberg)

CMBS delinquencies hit 7.2% in July 2025 – $122B in CRE distress is nearly half office, while industrial stays low at 0.5% and distressed sales remain minimal (CommercialObserver)