The Brick Breakdown

Hello Brick Brief readers, 

Thank you for your continued support! Today’s update highlights cooling inflation with cautious sentiment, a weakening housing market with regional contrasts, and an office sector increasingly split by asset quality and location.

📉 Inflation cools, but sentiment stays cautious

April PCE inflation, the Fed’s preferred inflation gauge, slowed to 2.1 percent as consumers pulled back spending and raised savings, but core inflation remains firm and tariff impacts have yet to fully materialize. Consumer sentiment held steady in May, though the Fed is likely to keep rates elevated for now while it waits to assess how new trade pressures affect the broader economy.

🏠 Buyers gain ground as housing demand slips

Sellers now outnumber buyers by nearly 500,000 across the country, pushing 31 of the top 50 metros into buyer's market territory and weighing on prices. Sunbelt markets like Tampa and Austin are seeing steep inventory spikes and weak sales, though tighter markets in the Midwest and Northeast continue to hold firm.

🏢 Office market shows a growing divide by asset and city

Peak-day attendance at top-tier Manhattan towers has reached 94 percent of pre-COVID levels, but broader office usage remains stalled near 50 percent. San Francisco is seeing new demand from AI tenants, while falling values in Boston, Chicago, D.C., and Philadelphia are drawing interest from developers and end-users.

This Week in Real Estate: Key Events & Data

Quick Markets

30Y Mortgage: 6.95% (-2 bps)
10Y Treasury Yield: 4.42%
FTSE NAREIT Index: 770.33
30-day SOFR Average: 4.31%

Market Pulse

April’s economic data shows easing inflation, stable consumer sentiment, and a sharply lower trade deficit, but signs of slowing job growth and tariff uncertainty suggest underlying fragility. 

While the soft PCE reading offers some relief, the Fed is expected to hold rates steady as it monitors labor market cooling and the delayed impact of new tariffs on core inflation.

PCE inflation rose 2.1% in April, below expectations – Fed’s preferred inflation guage showed that onsumer spending slowed and savings jumped, but core inflation risks persist as tariffs loom (CNBC) 

Consumer sentiment held steady at 52.2 in May – Ending four straight months of declines as tariff relief lifted expectations, although stagnant household incomes offset gains (UMichSCA)

Goods trade deficit shrank 46% to $87.6B in April – Imports plunged post-tariff rush while exports rose, easing pressure after March’s record gap (Reuters)

Job growth likely slowed to 125K in May – Employers pulled back hiring amid tariff uncertainty, cost pressures, and weaker consumer demand (Bloomberg)

Dimon warns of bond market crack – Blames overspending and QE, says turmoil is inevitable as Treasury volatility rises and regulation hampers market making (Bloomberg)

Brick by Brick: Manhattan Office-to-Residential Conversions Scale Up with Potential $850M Loan for 111 Wall Street 

Developers are seeking $850 million in construction financing to convert 111 Wall Street into over 1,500 apartments, making it one of the largest and possibly most expensive office-to-residential conversions in New York history.

• InterVest Capital Partners is leading the project with Metro Loft Management, which also partnered with David Werner on the $720 million redevelopment of the former Pfizer headquarters into 1,600 units
• The $850 million loan would cover 65% of project costs, funding structural upgrades, five additional floors, and high-end amenities like a spa and rooftop pool
• About 25% of units will be reserved for households earning 80% or less of the area median income, qualifying the project for a key tax abatement
• Metro Loft, led by Nathan Berman, has emerged as a leading player in conversions, with a pipeline expected to top 8,000 units across NYC
• The firm’s phased conversion strategy lets them begin work while portions of a building remain in use, shortening timelines between acquisition and revenue
• InterVest originally acquired the tower in 2019 with plans to renovate it for high-end office use, but pivoted after the pandemic disrupted leasing demand
• Amid limited ground-up development, these conversions offer a path to add supply without navigating rezoning or new construction barriers

Takeaway: Office-to-residential conversions are drawing record-sized financing and proving critical to addressing NYC’s housing shortage. Metro Loft’s growing portfolio and execution model are steering institutional capital toward residential reuse and away from traditional office strategies.

Policy & Industry Shifts

Texas bill targeting National Association of Realtors' speech rules dies in committee – SB 2713 sought to limit trade groups’ enforcement of ethics codes, seen as response to NAR’s hate speech policy (RisMedia)

Residential

Housing markets are cooling as a record seller-buyer gap and rising inventory pressure prices lower, though regional strength and renewed multifamily investment suggest selective stability amid broader affordability and demand challenges

U.S. housing sees record seller-buyer gap – Sellers outnumber buyers by nearly 500K, tilting 31 of top 50 metros into buyer’s markets and pressuring prices lower (Redfin)

Parcl Labs rates most top housing markets Neutral or Bearish – Over half of U.S. metros face flat or falling prices as inventory climbs and demand softens (ParclLabs)

10 of 17 Bullish markets are in the Midwest and Northeast – Chicago, Boston, and Pittsburgh lead on tight inventory, high absorption, and rare price cuts (ParclLabs)

10 of 12 Bearish markets are in the Sunbelt – Tampa, Austin, and Cape Coral suffer steep inventory spikes, sluggish sales, and widespread price reductions (ParclLabs)

Nearly 7 in 10 condos sold below list in early 2025 – Investor demand dropped to decade lows as weak returns, rising fees, and Florida insurance costs dragged down the market (GlobeSt)

Mortgage payments near record high at $2,860 – Redfin expects price relief by year-end as listings rise and seller flexibility grows amid weak buyer demand (Redfin)

Fannie and Freddie IPO plan raises mortgage risk questions – Trump seeks share sale but unclear structure could raise mortgage rates and limit access for first-time buyers (WSJ)

Private equity now owns 1 in 10 U.S. apartment units – 2.2M units across 8,200 buildings, with 62% acquired since 2018 and heavy concentration in Sun Belt states like Texas and Florida (PEStakeholder)

Multifamily property sales rose in April – High-value investment-grade deals climbed 39% year-over-year, signaling a possible pricing floor for Class A and B assets (CoStar)

Office

The office market is continuing to show a large split, as high-end buildings and AI tenants are driving strong demand in cities like Manhattan and San Francisco, while lower-tier properties face weak usage and falling prices that are drawing interest from buyers looking for deals

Trophy office towers approach pre-COVID usage on peak days – Class A+ buildings in top markets like Manhattan hit 94% of pre-pandemic attendance on Tuesdays, while broader office use stagnates around 50% (CoStar)

Manhattan led Q1 office investment with $2.1B – Boston, DC, and Chicago saw volume drop as pricing stabilized and leasing stayed tenant-favorable (Colliers)

Regional

San Francisco AI leases jump from 2 in 2020 to 167 in Q1 2025 – Rapid expansion by AI firms is reshaping San Francisco’s office market, with their footprint reaching 4.8M sf in 2024, up from 2.6M sf in 2022 (LATimes) 

Philadelphia office sales rose 25% year-over-year in Q1 – Falling values have opened the door for developers and end-users to acquire buildings at more attractive prices (CoStar)

Industrial

Trump to double steel and aluminum tariffs to 50% on June 4 – Escalates trade tensions days after court ruling, drawing sharp backlash from Canada, the EU, and UK industry groups (FT)

Market Mix

Specialty REITs led May returns at 8.2% – Office followed, while telecom lagged despite strong YTD gains, as tariff volatility weighed on broader equity REITs (TheRealDeal)

Retail

Malls are redefining success around foot traffic, as experiential and niche anchors like theaters, gyms, and specialty retailers outperform traditional department stores and draw steady consumer engagement

Malls shift to foot-traffic-driven anchor strategy – Experiential retailers, dining chains, gyms, and pop-ups are outperforming traditional anchors as malls focus on visit volume over square footage (Placer.ai)

Movie theaters lead Memorial Day surge – Theater visits jumped 92% for the week, while retail traffic stayed flat YoY; apparel, grocery, and discount stores saw boosts (Placer.ai)

Scheels, Barnes & Noble, and Porto’s lead new wave of mall anchors – Smaller tenants with strong experiential appeal are driving outsized foot traffic, replacing traditional anchors like Macy’s and JCPenney (Placer.ai)

Hospitality

Retiring boomers to spur hospitality M&A – As 10K people turn 65 daily, aging owners are selling restaurant and hotel brands, opening the door for private equity and first-time buyers (CoStar)

Hotel conversions rise as new builds slow – Developers and brands favor faster, lower-cost strategies amid tighter financing and construction headwinds (CoStar)

Financings

Loans

$850M loan sought for Manhattan office-to-resi conversion – InterVest and Metro Loft plan 1,500-unit redevelopment at 111 Wall St., with 25% affordable units to qualify for tax breaks (Bloomberg)

Kushner lands $115M construction loan for Surfside luxury project in Miami, FL metro – Arbor Realty is financing the 68-unit development set to deliver in late 2026 (TheRealDeal)

Refinancings

New York Life provides $136M refi for Hawaii’s Fairmont Orchid – Mirae Asset secures five-year loan for 540-key resort amid $110M renovation on the Big Island (CommercialObserver)

M&A

Building & Portfolio M&A

Union Investment lists Dallas, TX trophy tower at 2000 McKinney – JLL will market 457K SF asset amid rising office trades, with 2022 comp McKinney & Olive fetching nearly $400M (CoStar)

$177M deal marks largest San Francisco office sale since 2022 – Greg Flynn and DRA Advisors acquire Market Center at steep discount, taking over $417M distressed debt on 44%-leased towers (Bloomberg)

Noble Investment Group buys 16 WoodSpring Suites hotels – Two portfolio deals expand its extended-stay platform as demand grows for flexible, branded accommodations (IREI)

Distress Watch

CRE loan distress has reached its highest level since 2014, signaling growing strain in the sector despite overall delinquencies still sitting below pre-pandemic norms

CRE loan distress hits highest level since 2014 – Past-Due and Nonaccrual rate for CRE loans climbs to 1.49% in Q1 2025, even as overall loan delinquencies remain below pre-pandemic levels (GlobeSt)

Foreclosure looms for Charles Cohen’s Houston asset – Ladder Capital alleges $50M loan default on Decorative Center Houston, with auction set for next week (TheRealDeal)