The Brick Breakdown

Hello Brick Brief readers, 

Thank you for your continued support! Today we’re seeing weak manufacturing data driving the dollar toward a 3-year low, office removals outpacing deliveries, and the housing market continuing to soften. 

📉 Weak ISM data and tariff pressure weigh on Fed outlook
The U.S. manufacturing PMI fell to 48.5 in May as tariffs drove input costs higher and imports to a post-2020 low, dragging the dollar toward a 3-year low. Chicago's Goolsbee expects rates to fall within 15 months if trade shocks ease, while Fed officials overall remain cautious amid heightened inflation expectations.

🏗️ Office removals to outpace deliveries for first time since 2000
More U.S. office space will be demolished or converted in 2025 than added through new construction, marking a first since at least 2000. CBRE projects 23.3 million square feet will be removed versus just 12.7 million delivered, driven by obsolete buildings and weak demand in urban cores.

🏠 Housing market softens as construction dips and inventory swells
Residential construction spending fell 0.4% in April, dragged by a 1.1% decline in single-family activity as builders face rate pressure and rising costs. Inventory has ballooned to a record $698 billion, with 44% of listings sitting for over 60 days, underscoring buyer-seller disconnect.

This Week in Real Estate: Key Events & Data

Quick Markets

30Y Mortgage: 6.96% (+1 bps)
10Y Treasury Yield: 4.42%
FTSE NAREIT Index: 770.93
30-day SOFR Average: 4.31%

Market Pulse

The U.S. manufacturing PMI fell to 48.5 in May as tariff-driven cost pressures dragged imports to a post-2020 low, while the White House pushes for trade offers ahead of the July 8 deadline
The dollar neared a 3-year low on weak data and rising trade fears, as Fed officials struck a cautious tone with Goolsbee eyeing rate cuts within 15 months if shocks ease

U.S. pushes for trade offers by Wednesday as tariff deadline nears – Trump administration detailed proposals from trade partners as July 8 deadline looms (Reuters)

U.S. manufacturing PMI slips to 48.5 in May – Orders, output, and employment remain weak as tariff disruptions push input costs higher and drag imports to lowest level since 2020 (ISM)

Dollar nears 3-year low as ISM manufacturing index drops to 48.5 – Weak data and renewed tariff fears weigh on U.S. growth outlook, while bond yields rise amid debt sustainability concerns (FT)

Fed officials cautious amid tariff uncertainty – Chicago's Goolsbee expects rates to fall within 15 months if trade shocks ease, while Dallas' Logan says policy is well-positioned to wait, warning tariff-driven inflation expectations could become entrenched (Reuters & Reuters)

Brick by Brick: Office-to-Residential Shift Project to Reach Tipping Point in 2025

More U.S. office space is set to be demolished or converted this year than added through new construction, marking a first since at least 2000, according to CBRE.

• CBRE projects 23.3 million square feet of U.S. office space will be removed in 2025 through conversions or teardowns, while just 12.7 million square feet will be delivered
• The shift is driven by high vacancies, elevated construction costs, and weak demand for obsolete properties, particularly in central business districts
• Manhattan leads all markets with 10.3 million square feet of conversions underway, followed by D.C., Houston, Chicago, and Dallas
• About 76% of these conversions are being transformed into apartments, adding 43,500 units to the pipeline alongside 33,000 already delivered since 2016
• Developers are also turning old office towers into hotels, logistics hubs, and life sciences spaces, though these remain a smaller share of the market
• In Dallas, a 49-story Energy Transfer tower was converted into The Sinclair, with 293 luxury apartments and over 400,000 square feet of reimagined office and retail space
• Local zoning reforms like NYC’s City of Yes and D.C.’s Office to Anything have helped accelerate activity in large metros

Takeaway: This year marks a clear inflection point for the office sector as more space exits the market than is added. Although conversions alone won’t solve the housing shortage, they offer a targeted solution for reusing obsolete inventory in dense, supply-constrained cities and are set to play a growing role in shaping urban investment strategies.

Residential

Rising costs and bloated inventory are stalling new construction, but resilient millennial demand signals underlying pressure that could reawaken housing activity once affordability improves

Construction spending slips 0.4% in April – Single-family housing down 1.1% as higher rates, tariff-driven costs, and rising inventory stall builder activity (Reuters)

U.S. home listings hit record $698B in April – Nearly $331B of that is stale inventory as 44% of listings linger for 60+ days, reflecting weak demand and growing seller-buyer imbalance (Redfin)

Millennial homebuying interest climbs despite high rates – Share planning to buy in next 6 months jumped to 23%, with many tapping savings or family support to overcome affordability hurdles (GlobeSt)

Multifamily

Oversupply is weakening rent growth and absorption, prompting multifamily owners to shift from expansion to cost control and tenant retention as vacancies rise

New apartment absorption stays below 50% – Just 49% of Q4 2024 completions leased within 3 months as record supply boosts renter leverage and vacancies hit 8.2% (Redfin)

Apartment rents rose just 0.4% in May – Annual growth turned negative as oversupply softens markets like Austin, Denver, and Phoenix (GlobeSt)

Multifamily owners prioritize efficiency amid volatility – Rising costs and tenant demands push shift from growth to tech-driven cost control and retention strategies (Bisnow)

Office

More U.S. office space to be removed than added in 2025 – Conversions and demolitions will outpace new construction for the first time since at least 2000, with 23.3M SF set for removal versus 12.7M SF delivered (CoStar)

Regional

Manhattan office leasing dipped 7% in May – Still up 5% YoY with 3.1M SF signed, led by NYU’s 1.1M SF lease at 770 Broadway (CommercialObserver)

Industrial

S&P’s manufacturing PMI rose to 52.0 as firms ramped up input purchases ahead of tariffs, which contrasts with ISM’s drop to 48.5 that reflects weaker domestic output and demand

Industrial vacancy is stabilizing as new supply slows, but softening rent growth and tepid e-commerce activity point to weakening tenant demand in key logistics hubs

S&P Global PMI rises to 52.0 in May as firms front-run tariffs – Surge in input inventories and price hikes reflect supply chain fears, though production lags and delivery delays hit 30-month high (S&PGlobal)

National Industrial vacancy hits 8.8% in April – Supply is expected to taper, but flat e-commerce growth and a shrinking lease premium signal near-term softness in demand (GlobeSt)

Construction cooldown reshapes the market – New supply in the top 25 industrial markets fell 50% YoY, while projects under construction dropped 30%, helping vacancy stabilize at 6.9% (Colliers) 

Rent growth slows across top metros – Average warehouse/distribution rents rose just 0.7% to $9.56/SF in top markets, with declines in high-growth metros like Los Angeles and San Francisco (Colliers)

Regional

Phoenix faces oversupply risk – With 32M SF delivered in the past year and just 47% absorption, Phoenix now has the highest vacancy rate among major markets at 13.2% (Colliers)

Market Mix

Data Centers

CoreWeave’s $7B lease and Amazon’s global buildout highlight sustained and accelerating demand for AI infrastructure as developers race to meet rising compute needs through both hyperscale and edge deployments

CoreWeave signs $7B lease for North Dakota AI data centers – Applied Digital to build 250 MW of capacity in Ellendale under 15-year agreements, with option for 150 MW more (Bisnow)

AI adoption drives demand for edge data centers – As inference workloads grow, developers pivot from megacampuses to 20–50 MW sites near population centers to cut latency and meet real-time AI needs (Bisnow)

Amazon ramps up global data center expansion – AWS opens new sites in Mexico and builds in Chile, NZ, Saudi Arabia, and Taiwan, aiming to meet strong demand for AI services powered by Nvidia chips (Bloomberg)

Hospitality

US hotel deals slow as buyers hesitate – Market enters price discovery phase despite selective activity by Noble Investment Group and Peachtree Group (CoStar)

Hotel labor market shows early signs of stabilization – Hiring timelines have shortened and applicant quality is improving, though gaps in experience and people skills persist (CoStar)

Retail

CVS gains as Rite Aid foot traffic plunges – Rite Aid visits fell 37.2% year-over-year in Q1 2025 amid store closures and bankruptcy, while CVS visits rose 5.1% as it absorbed customers and assets from hundreds of shuttered Rite Aid locations (Placer.ai)

Financings

Loans

Advance Realty and Greek Development secure $300M loan for NJ’s Linden Logistics Center – Northwestern Mutual funds 1.6M SF second phase of the 4.1M SF Class A industrial project near the Port of NY/NJ (CommercialObserver)

Urban Standard Capital lends $77M for NoMad condo tower – Financing supports Pro-H Development’s 27-story, 101-unit project at 842 Sixth Avenue, slated for completion in 2026 (CommercialObserver)

Inmobiliaria Brom secures $77M loan for Onyx Tower in Hallandale Beach, FL – The 285K SF office building traded between affiliates for $52M as part of a recapitalization, with Barings providing the debt (TheRealDeal)

Refinancings

Barings provides $77M refinance for Onyx Tower in South Florida – The 28-story, 796K SF office building in Hallandale Beach is anchored by Crystal Cruises and Industrious (CommercialObserver)

M&A

Building & Portfolio M&A

Harbor Group buys 3,590 Sun Belt apartment units for $625M – Portfolio spans SC, LA, GA, and TN with 95% occupancy, sold by JV of David Werner, Onyx Partners, and Carlton Associates (Bisnow)

Equity Residential buys 2,064 Atlanta units from Blackstone for $535M – The REIT continues its Sun Belt expansion with eight suburban properties averaging 16 years in age, purchased at a sub-5% cap rate (Bisnow)

Tishman Speyer returns to NYC office market with $105.5M buy – Firm acquires fully leased 148 Lafayette St. in SoHo, its first U.S. office deal since 2021, backed by $68.3M loan from Blackstone (ConnectCRE)

TruAmerica pays $72M for garden-style multifamily in NoVA – The LA-based firm acquired the 236-unit Chase Heritage Apartments in Sterling from McDowell Properties (CommercialObserver)

Institutional Fundraising

Clear Investment Group targets $300M for multifamily fund – Chicago-based firm seeks distressed portfolios of 300–1,200 units, with deals in Dallas, Houston, and potential plays in Chicago (ConnectCRE)

Distress Watch

$500M in distressed Texas CRE loans set for foreclosure – Multifamily and hotel assets across Houston, Dallas, Austin, and San Antonio are headed to auction this week (TheRealDeal)

Atlanta office campus faces $330M loan default – CP Group and Bawag Group to take over Georgia’s 2.2M SF Piedmont Center after The Ardent Companies defaults (Bisnow)

AllianceBernstein takes Santa Clara office via foreclosure – PCCP defaulted on a $72M loan tied to the 152K SF building at 2390 Mission College Blvd, now seized by the lender (TheRealDeal)

Proptech & Innovation

​​Growing disaster risks are accelerating adoption of prefab homes as a faster, more affordable solution for rebuilding in high-cost, climate-vulnerable regions

Disasters push prefab homes toward the mainstream – Firms like ICON, Hapi Homes, and Reframe Systems are gaining traction in fire-hit areas like Los Angeles and Maui by offering faster, lower-cost rebuilds (WSJ)