Hello Brick Brief readers, 

Thank you for your continued support! Today we’re seeing a surge in August new-home sales, office tenants prioritizng transit access, and fresh capital for offices and multifamily. 

🏡 Builders Diverge as Affordability Stays Tight
August new-home sales surged 20% to a three-year high as mortgage rates slightly fell, giving buyers some relief, but affordability remains the key consideration. Recent earnings from KB Home and Lennar point to different tactics, with KB Home protecting margins via steadier pricing and limited buydowns while Lennar prioritizes volume with deeper incentives. The question now is whether the late-month rate relief lifted August existing-home sales enough to close the gap with new construction or if the gap widened again.

🏙️ Transit Access Beats Amenities in Office Demand
Office attendance hit a post-pandemic peak of 65.4% on peak days while weekly averages held near 55% as companies struggle to bring employees back to the office. Tenants now favor easy transit and food options over high-end amenities, prompting landlords to scale back gyms and lounges.

💼 Fresh Capital Targets Discounted Trophy Offices and Multifamily
RXR raised $3.5B for its Gemini Office Venture, acquiring three prime Manhattan buildings including 590 Madison Avenue at about a 50% discount. Milestone and Dwight Securities also closed over $2B combined for multifamily acquisitions and construction, signaling strong investor appetite for both cheap trophy office assets and multifamily projects.

30Y Mortgage: 6.37% 

10Y Treasury Yield: 4.14% (-3 bps)

WSJ Prime Rate: 7.50%

FTSE NAREIT Index: 768.71 (-0.95%) 

30-day SOFR Average: 4.35%

Mixed signals suggest that the Fed will cut rates cautiously, keeping borrowing costs only gradually lower as it balances cooling growth with persistent inflation risks.

Fed’s Daly signals more cuts – Expects further rate reductions after supporting September move as inflation stays near 2.5% and labor market cools (Reuters)

Fed’s Goolsbee warns against rapid easing – Backed September quarter-point cut but cites steady 4.3% unemployment and persistent inflation as reasons to avoid aggressive rate reductions (FT)

August new-home sales surged far beyond expectations, showing how builder incentives are powering demand even with mortgage rates still elevated. The jump highlights a sharp contrast between homebuilder KB Home’s margin-focused approach and Lennar’s push for volume.

🧱 Sales of newly built homes jumped 20.5% from July to a three-year high and were 15.4% above August 2024. Buyers locked in deals despite 30-year mortgage rates averaging 6.63% through the month, before September’s rate dip began. This momentum points to even more activity in September as mortgage rates continue to decline.

🧱 The median price rose 1.9% YoY to $413,500 as builders relied on incentives rather than broad price cuts. Inventory tightened to a 7.4-month supply from nine months in July, even as single-family starts slowed.

🧱 KB Home lowered its full-year sales outlook because it resisted heavy mortgage buydowns and kept pricing close to last year. Its average selling price slipped about 1% YoY to $475,700 in Q3, and net orders and deliveries declined, limiting growth in a high-rate environment.

🧱 Lennar took the opposite approach, cutting average selling prices to $383,000 from $422,000 and using aggressive mortgage buydowns to keep deliveries rising. That strategy preserved volume with 21,584 homes delivered in Q3 but pushed profit down to $591M from $1.16B and cut gross margins to 18%.

🧱 The two strategies reflect different risk calculations and pricing strategies. KB Home is prioritizing profitability over market share, while Lennar is sacrificing margin to capture demand and maintain scale. Regional strength in the Northeast and South shows incentives are most effective where affordability is tightest.

Takeaway: August’s sales surge highlights how builder incentives can temporarily overcome high borrowing costs, but the housing market remains dominated by affordability concerns. Lennar’s volume-first model wins near-term sales at the cost of profit, while KB Home’s discipline protects margins but limits growth as both builders work with customers stretched by record prices and elevated rates.

U.S. GSA offers 400 real estate staff fired under Trump’s efficiency drive a chance to return – While proceeding with 126 new Public Buildings Service layoffs amid broader workforce adjustments (Reuters)

New home sales surge 20% in August to a three-year high – Median price rises 1.9% YoY to $413,500 despite mortgage rates above 6% (CNBC)

California multifamily faces rising power costs and complex rules – VNEM lets owners monetize on-site solar/batteries, lower tenant bills by ~7.5–12.5%, and lift NOI with little upfront CapEx (GlobeSt)

U.S. office occupancy climbs to new post-pandemic records – Peak day hit 65.4% across 10 cities Tuesday with Austin topping 84.9%, though the weekly average edged down to 55.6% and Class A+ buildings held a strong 79.3% (KastleSystems)

NYC office amenity race cools – Landlords scale back costly perks as tenants prioritize transit access and food options over gyms and lounges despite rising leasing activity and rents (Bisnow)

Insight: Hybrid work is firmly the norm, and companies are struggling to bring employees back to the office. They now prioritize transit-friendly locations after learning that workers value commute convenience more than flashy amenities.

San Francisco office demand surges on AI boom – VTS reports 107% YoY growth and 356% rise since late 2022 as AI firms drive leasing to 2.71M SF in Q2, putting the city ahead of New York in leasing demand growth despite a 34.8% vacancy rate (CommercialObserver)

Insight Global leases 32K SF at 437 Madison Avenue in New York, NY – Staffing and professional services firm signs 10-year deal for entire 4th floor of Sage’s Midtown East tower, relocating from 250 Park Avenue (CommercialObserver)

Only three U.S. logistics markets, including St. Louis, still beat pre-pandemic conditions – Most regions face rising availability and falling rents as nationwide logistics space surges and demand cools (CoStar)

Eli Lilly to build $6.5B biomanufacturing complex in Houston, TX – Plans 236-acre Generation Park facility focused on weight-loss and small molecule drugs, creating 4,000 construction and 615 permanent jobs (TheRealDeal)

Black Rock Coffee ends NASDAQ debut at $1.32B – Q2 visits up 226% vs 2019, targeting 1,000 locations by 2035 with affluent customer base driving long-term growth (Placer.ai)

Brookfield and Macquarie eye massive infra growth – Global power demand and AI data centers drive multi-trillion-dollar investment opportunities as Alphabet explores nuclear and grid upgrades (Bloomberg)

Rick Perry–backed Fermi REIT targets $550M IPO – Plans 25M shares at $18–22 to fund a Texas data-energy campus aiming for 11 GW power by 2038 (Bloomberg)

U.S. hotel sector cools as summer travel slows – August RevPAR fell 1% YoY with occupancy down to 66.1% and midscale properties hit hardest by weaker leisure demand and investor pullback (Bisnow)

U.S. hotel sector cools as summer travel slows – August RevPAR fell 1% YoY with occupancy down to 66.1% and midscale properties hit hardest by weaker leisure demand and investor pullback (Bisnow)

KB Home beat Q3 earnings expectations but cut its FY outlook again amid a weak housing market. The average sales price fell to $475.7K from $480.9K a year earlier as lower mortgage rates failed to boost sales (WSJ)

Brookfield sells 727K-SF Shoppes at Carlsbad mall in Carlsbad, CA for $71.5M – Steerpoint Capital and Steelwave acquire the main portion of the 1.1M-SF property with a $42.9M Archway Capital loan for upgrades (CommercialObserver)

Atlas Hill Real Estate buys 1M-SF Galleria Mall in Fort Lauderdale, FL for $73M – Acquired from PA State Employees’ Retirement System with plans for major redevelopment (CoStar)

World Bank Group buys 488K-SF J Building land in Washington, D.C. for $165M – Acquired 701 18th St. NW from Benenson Capital Partners and Weiler-Arnow Management to consolidate its D.C. office campus (Bisnow)

Pivotal Manufacturing Partners buys 165K-SF office HQ of Commonwealth Fusion Systems in Devens, MA for $74M – Acquired from King Street Properties and The Baupost Group with $52.8M loan from Goldman Sachs (CommercialObserver)

K. Hovnanian buys 52.9-acre residential site in Phoenix, AZ for $71.1M – Wins Arizona State Land auction for land next to JW Marriott Desert Ridge Resort & Spa, plans new home development (TheRealDeal)

RXR forms $3.5B Gemini Office Venture – Baupost, King Street, Liberty Mutual and others invest as RXR acquires three prime Manhattan offices including 590 Madison Ave at about a 50% market discount (Bloomberg)

Milestone Group closes $1.1B fund – Targets middle-market multifamily acquisitions in Sun Belt and Mid-Atlantic regions (CoStar)

Dwight Securities Management raises $1B for multifamily construction – Targets $30M–$200M market-rate projects with floating-rate loans up to 80% loan-to-cost amid persistent housing shortages (Bisnow)

Pacific Elm and Ignite-Rebees launch 3-O Real Estate Partners – New venture targets $4B pipeline of retail and mixed-use projects across Texas, Los Angeles and Nashville with 2M SF under management (Bisnow)

AI-driven proptech investment surges – Analysts see continued growth and consolidation ahead as big platforms like Yardi, EliseAI and RealPage gain data advantages while smaller startups face rising barriers (Bisnow)