Hello Brick Brief readers, 

Thanks for reading. Today we’re tracking rising office vacancy, private buyers moving on discounted subscale REITs, and utility consolidation to help fund grid upgrades for the AI-driven data center buildout.

Based on recent REIT M&A in the last month - City Office REIT, Elme Communities, and Plymouth Industrial - I am adding another theme that we’re now tracking. 

Stay tuned for more quality real estate insights you can find nowhere else! And share with a friend if you’re enjoying The Brick Brief - it helps a lot😀

🏢 Offices: Vacancy Pressure Builds
Office vacancy reached 20.6% in Q2 as San Francisco climbed to 31.2% and Miami held at 11%, underscoring the uneven pace of recovery. Suburban vacancy rose to 20.9% and surpassed the CBD rate of 20.3% for the first time; 21% of U.S. buildings are now considered highly vacant.

📦 Subscale REITs: Private Capital Moves In
Subscale REITs are trading at discounts as public investors retreat from platforms that lack scale, liquidity, and access to capital. Sixth Street’s $1.07B bid for Plymouth Industrial REIT, is a a 65% premium to Monday’s closing price, which reflects how private buyers are targeting undervalued portfolios with strong fundamentals that public markets are undervaluing.

⚡ Data Centers & Energy: Utilities Consolidate for Capex
Utilities are merging to finance the grid investment needed as AI drives long-term growth in power demand. NorthWestern Energy’s $15.4B merger with Black Hills nearly doubles its rate base and secures $7B+ in capex through 2029, while Vantage’s $25B Texas campus and Northern Virginia’s 74% preleasing rate show that developers are racing to meet AI capacity before it’s even built.

30Y Mortgage: 6.60% (+1 bps) 

10Y Treasury Yield: 4.31% (-2 bps)

WSJ Prime Rate: 7.50%

FTSE NAREIT Index: 764.78 (+1.89%) 

30-day SOFR Average: 4.35%

Dollar climbs ahead of Jackson Hole – Traders price 84% odds of a September Fed cut, while tariff-driven price pressures and weak payrolls keep the policy outlook uncertain (Reuters)

Traders bet on half-point Fed cut at Jackson Hole – SOFR options surge with $325K contracts targeting September easing, though tariff-driven inflation and Powell’s remarks could derail expectations (Bloomberg)

 Sixth Street offered to acquire Boston-based Plymouth Industrial REIT in a deal that values the company at about $1.07 billion.

• Plymouth owns 226 industrial buildings totaling 32.1M SF across primary and secondary markets. The portfolio includes small-bay warehouses and distribution centers that are expensive to replace.
• Sixth Street already invested $250M last year and formed a JV around Plymouth’s Chicago assets. The partnership gave them asset-level knowledge and confidence to take the platform private.
• The offer values Plymouth at a nearly 65% premium (too good for shareholders to refuse) to its $14.64 closing price on Monday. The board said it will review the bid with financial and legal advisers.
• The public market discounted Plymouth due to thin liquidity, subscale size, and a complex preferred-and-warrants structure. Shares fell 40% after the 2024 financing while vacancies and tariff uncertainty added pressure.
• Sixth Street believes private ownership and new capital can stabilize the balance sheet and unlock growth. They lined up $1.5B in debt financing and plan to simplify the company’s structure.
• Plymouth’s inland focus is a tailwind. Cushman & Wakefield recently reported that many occupiers shifted inventory inland to Chicago and Dallas as they stockpiled goods ahead of tariffs earlier this year. That redirected demand has lifted secondary markets while Los Angeles and the Inland Empire saw rents fall and vacancy climb.
• Publicly-traded subscale REITs are trading at discounts as they struggle with limited access to growth capital and weak institutional support. Two weeks ago, D.C. multifamily REIT Elme Communities’ decision to liquidate highlights how boards are opting to sell rather than fight uphill in public markets.
• Industrial M&A has been muted in 2025 as higher rates slowed transactions, but private capital continues to target discounted REITs where replacement cost and long-term demand support higher values.

Takeaway: Sixth Street sees long-term value in Plymouth’s inland warehouse footprint, which has benefited from tariff-driven inventory shifts away from port markets. The bid, priced at a steep premium to the REIT’s market value, highlights how private capital is stepping in where subscale REITs like Elme cannot compete for growth.

High rates and rising inventory are cooling home prices while rental demand keeps builders focused on multifamily construction

Home prices slip 0.1% in July – 39 of top 50 metros saw monthly declines as supply outpaces demand, with YoY growth slowing to record-low 2.9% (Redfin)

Active listings surged 26% YoY in July – U.S. housing inventory topped 1.4M homes, the highest since 2017, with Raleigh posting the largest metro increase (Homes.com).

Rental demand fuels housing starts surge in July – Multifamily construction jumped 27.4% YoY while single-family projects fell as buyers delay purchases amid high rates and tariffs (WSJ)

Rising operating costs squeeze multifamily performance – Expenses growing up to 7% annually in top metros, with insurance climbing nearly 12% a year, now rival rent growth and pressuring NOI (GlobeSt)

Office vacancy continues to climb as more buildings sit underused, with suburban markets weakening and San Francisco leading the rise in highly vacant properties

U.S. office vacancy climbs to 20.6% in Q2 – Rates up 20 bps YoY and QoQ across 15 leading markets, with recovery uneven (Colliers)

San Francisco vacancy tops at 31.2% while Miami lowest at 11% – Suburban rate of 20.9% now higher than CBD’s 20.3%, reversing recent trends (Colliers)

Rising share of office buildings face high vacancy — 21% of U.S. office buildings are now highly vacant, with San Francisco seeing the steepest increase (CoStar)

Hyundai signs 134K-SF office lease in Irvine, CA – Automaker takes entire 2300 Main St. building in Orange County’s largest lease of 2025 (TheRealDeal)

Sheridan Capital Partners leases 25.4K SF at Jewelers Building in Chicago, IL – Firm relocates HQ from Wrigley Building as owners Prime Group and CRG market 556K-SF landmark (TheRealDeal)

California warehouse projects face moratoriums and new regulations – Developers push ahead in Inland Empire despite community opposition and AB 98 requirements (GlobeSt)

Retail spending rose in July on promotional events and early seasonal demand, but slowing volume growth and weak traffic in big-ticket categories signal cautious consumer behavior

Retail sales rise 4.3% YoY in July – Prime Day, holiday spending, and early back-to-school drove $6.2B pull-forward, though volume growth slowed to 1.4% (Colliers)

Furniture and apparel sales up 5.8% and 7.4% – Promotions lifted categories, but foot traffic gains were smaller at 2.75% and 3.93%, showing selective consumer participation (Colliers)

Electronics and home improvement sales decline in July – Visits dropped 1.23% and 0.35% as consumers held back on discretionary big-ticket spending (Colliers)

Wholesale clubs see Q2 traffic gains – Costco, BJ’s, and Sam’s post visit growth as all three pursue expansion beyond regional strongholds, setting up heightened competition (Placer.ai)

AI demand is driving record-low data center vacancy and rapid expansion, with most new capacity already preleased before delivery

Vantage Data Centers plans $25B Texas AI campus – 1.4-GW, 10-facility project backed by Silver Lake and DigitalBridge to meet soaring AI demand (Reuters)

North America data center vacancy hits record-low 1.6% in H1 2025 – Hyperscale and AI occupiers drive demand, pushing lease rates higher and fueling rapid expansion (CBRE).

Northern Virginia leads with 538.6 MW absorption and 80% surge in construction – 74.3% of capacity under development already preleased to cloud and AI providers (CBRE)

Home Depot slightly missed Q2 earnings expectations but maintained its FY outlook, signaling confidence in steady demand as big-ticket sales and pro spending gained momentum. The home improvement outlook remains cautious as economic uncertainty delays larger projects; the company is planning selective price hikes despite earlier assurances that it would absorb tariff costs (CNBC)

Insight: In their Q2 earnings call, Home Depot mentioned that 55% of sales now come from pros and contractors. This expansion into pro-focused distribution aligns with MCR's acquisition of Soho House, as both companies are reducing exposure to cyclical consumer spending. Home Depot is using its $18.25B SRS acquisition and $4.3B GMS deal to tap into contractor demand, which tends to remain steadier even in down cycles, unlike DIY projects that often get deferred when rates are high and homeowners grow cautious.

Home services firm Leaf Home seeks $2B refinancing – Goldman Sachs and BofA lead efforts while private credit weighs preferred equity options (Bloomberg)

Bank of America provides $115M acquisition loan for CA and NV self-storage portfolio – Etude Capital and San Felipe acquired nine stabilized facilities totaling 850K SF and 6,750 units (CommercialObserver)

Xin Capital secures $51M loan for 144.5K-SF Times Square property in New York, NY – White Oak Real Estate Capital finances fully leased retail and office complex with new master tenant (TheRealDeal)

Wells Fargo and Barclays provide $165M refi for Hollywood CA film studio – Hackman Capital and Affinius secure 3-year 7% loan on Raleigh Studios, 94% leased to Netflix (CommercialObserver)

NorthWestern Energy merges with Black Hills in $15.4B all-stock deal – Utilities combine to meet rising energy demand and boost resilience, serving 2.1M customers with $7B+ investment plans through 2029 (WSJ)

Sixth Street Partners proposes $1.07B buyout of Boston-based Plymouth Industrial REIT – Offer of $24.10 per share in cash, a 65% premium, funded with investment vehicles and $1.5B debt (WSJ)

REIT AvalonBay sells $447M D.C. multifamily portfolio – Foulger Pratt acquires 1,248 units across four properties in NoMa, Gallery Place, and H Street at a 5.94% cap rate with value-add plans (Bisnow)

TLC Management buys $100M multifamily in Vernon Hills, IL – Stuart Handler’s firm acquires 294-unit Mil’Ton Apartments from Mesirow in year’s largest suburban Chicago sale (TheRealDeal)

Tavros Capital buys $150.5M development site in New York, NY – 250 Water St. is acquired from Bill Ackman-backed Seaport Entertainment at a $30M loss from its 2018 purchase (Bisnow)

Hines Global Income Trust buys $137.6M mixed-use in Houston, TX – Firm acquires 189K SF Montrose Collective from Radom Capital for record $727 per SF, fully leased with office, retail, and library tenants (Bisnow)

Greystone closes $103M LIHTC fund – First fund will deliver nearly 1,000 affordable housing units across six states (GlobeSt)

AllianceBernstein takes control of $550M Campus at Horton in San Diego, CA – Stockdale Capital Partners lost the mixed-use redevelopment after loan delinquency and failed auction sale (CoStar)

US Bank seeks receiver for One California Plaza in Los Angeles, CA – Moves to take control of 1M-SF Rising Realty tower after $300M CMBS default and foreclosure filing (TheRealDeal)

Denver proptech LightTable raises $6M seed – AI peer review platform cuts construction design checks from weeks to under an hour, with pilots signed by Mill Creek Residential (CommercialObserver)