Hello Brick Brief readers, 

Today we’re seeing fresh momentum in office recovery, growing interest in anti–sale-leaseback strategies, and data center developers adopting new approaches to overcome power constraints.

Hope you enjoy today’s edition! If you find it helpful, please share it with someone who might too.

🏢 Office Recovery Momentum
U.S. office vacancy declined in Q3 for the first time since 2019, with leasing up 6.5% as tech and professional services drove fresh demand. JLL believes that limited new supply and stronger absorption in Class A buildings indicate that the office sector is starting a steady recovery cycle heading into 2026.

🛒 Rise of the Anti–Sale-Leaseback
Nuveen invested $250M this year to expand its portfolio of grocery-anchored and necessity retail centers that deliver stable foot traffic and resilient cash flow. On the other hand, Publix is acquiring the shopping centers its stores anchor to lock in control over key trade areas, build long-term value, and prevent bad-actor landlords from neglecting property upkeep.

⚡ Power Bottlenecks Fuel On-Site Generation
AI data center developers are now racing to secure electricity as grid interconnection queues stretch for years. Brookfield is committing $5B with Bloom Energy to install on-site fuel cell systems that generate reliable power directly at facilities and keep projects to avoid utility delays.

30Y Mortgage: 6.32% 

10Y Treasury Yield: 4.07% 

WSJ Prime Rate: 7.25%

FTSE NAREIT Index: 755.26 (+0.56%) 

30-day SOFR Average: 4.23%

Economists see U.S. growth holding near trend at 1.8% in 2025 – Strong AI-driven business investment offsets weak hiring and tariff drag, with inflation projected to stay around 2.5% through 2026 (Reuters)

Trump strikes softer tone on China after tariff threats – His remarks that the U.S. “wants to help China, not hurt it” eased fears of escalation and signaled room for renewed negotiation (FT)

AI has boosted U.S. growth through investment and market gains – Worker productivity hasn’t improved yet, showing the impact is financial rather than functional (WSJ)

Fed’s Paulson supports two more 2025 rate cuts – The Philadelphia Fed president said tariffs won’t cause lasting inflation and expects growth to stay above trend but narrowly based (Bloomberg)

Prolonged government shutdown heightens CRE risk – HUD funding and staffing shortfalls threaten affordable housing payments as economic losses mount by $7B per week (Bisnow)

HUD to lay off 400+ employees as shutdown drags on – Cuts hit Fair Housing and Public Housing offices nationwide, marking a 23% workforce drop since January amid prolonged budget paralysis (Bisnow)

Investors now make one-third of U.S. home purchases – They’re paying 1.8%–4.3% above market value, outbidding first-time buyers and tightening affordability across starter-home segments (Cotality)

Rocket Mortgage, United Wholesale, and others accused of price fixing – A class-action suit claims Optimal Blue’s pricing software enabled lenders to collude and inflate mortgage rates nationwide, echoing rent-pricing cases against RealPage (TheRealDeal)

After CBRE flagged a potential office rebound underway in Q2, JLL’s Q3 data suggests that inflection may be in its early innings as leasing strengthens and Class A vacancy tightens. Recently, TheRealDeal and CBRE also reported that office construction has fallen to GFC-era lows of 40.2M SF, setting the stage for gradual absorption as supply continues to shrink

U.S. office vacancy declines in Q3 2025 for first time since 2019 – Stabilizing demand and limited new supply signal the start of a potential growth cycle (JLL)

Leasing volume rises 6.5% QoQ in Q3 to 52.4M SF – Eighteen markets now exceed pre-pandemic activity and seven more have topped 90% recovery levels (JLL)

Class A vacancy drops 104 bps YoY in Q3 – Newer office stock tightens ahead of the broader market as construction pipelines fall 20% (JLL)

Salesforce commits $15B in San Francisco to accelerate AI adoption – The investment will fund an AI incubator and job growth (Reuters)

Insight: Building on Salesforce’s $15B commitment, we saw yesterday that AI is driving a luxury housing boom as mansion sales are up 14% YoY with wealthy tech buyers returning. Leasing activity from AI firms like OpenAI and Anthropic has also accelerated, and while SF office vacancy remains near 35%, the AI trend continues to build momentum. With Salesforce’s new initiative adding further investment and job growth, it’d be reasonable to expect continued recovery in San Francisco’s office market ahead. 

Additionally, when tech CEOs buy new homes, their employees often follow, driving fresh housing demand across the city. Although many tech companies aren’t driving strict RTO mandates the same way some other Fortune 500 firms are (such as in banking) it’d also be reasonable to expect more AI talent and employees to relocate as San Francisco reestablishes itself as the hub of the AI economy.

Neuralink leases 144K-SF office building at 499 Forbes Boulevard in South San Francisco, CA – Elon Musk’s brain implant startup expanded its Bay Area presence in a full-building lease near Genentech’s campus after the property sat vacant since 2023 (TheRealDeal)

Lewis Brisbois signs 70K-SF lease at 140 Broadway in New York, NY – Union Investment’s Class A FiDi tower secured the law firm as a tenant across three floors, marking the second-largest Q3 lease in Lower Manhattan (TheRealDeal)

Trucking faces strain from weak ports and rail in October – ITS Logistics said lower import volumes, higher accessorial fees, and new CDL regulations are squeezing drayage carriers and driving small-firm bankruptcies (FreightWaves)

Nuveen shifts toward necessity retail – The $140B manager plans nearly $1B in grocery-anchored and healthcare retail acquisitions as it prioritizes resilient, needs-based assets amid market volatility (Bisnow)

Lenders ramp up mall financing as trophy assets attract demand – Banks issued $1.8B in recent CMBS deals for top-tier malls in Dallas, Tampa, and San Antonio, signaling confidence in high-end retail despite broader sector weakness (CoStar)

Insight: Asset quality bifurcation remains most visible in the office sector, but it’s becoming increasingly clear in malls as well. The best malls create a positive feedback loop where modern design, strong upkeep, and high-performing or luxury tenants sustain steady traffic that reinforces value and attracts more top brands and even more traffic. Decrepit malls fall into the opposite cycle, losing tenants and visitors in a death spiral that accelerates decline. 

This widening gap is prompting some retailers to seek greater control over their mall or retail environments to protect their brand experience and long-term performance - I discuss this in more detail below

K-Beauty and personalization revive beauty traffic – Ulta’s K-Beauty World launch and Lip Lab’s custom offerings are drawing new shoppers as overall category growth stalls (Placer.ai)

FT Editorial warns of rising debt risks in AI boom – Leveraged, circular financing for $3T in data center spending could expose banks and non-bank lenders if generative AI underdelivers (FT)

OpenAI, Meta, and others pour billions into AI infrastructure – A wave of mega-deals, from OpenAI’s $300B Oracle contract to Meta’s $14B CoreWeave pact, underscores surging demand for compute power (Reuters)

OpenAI signs multiyear deal with Broadcom to build custom AI chips – The 10-GW rollout will boost capacity and lower costs by embedding model design into hardware (Bloomberg)

Brookfield invests up to $5B with Bloom Energy to power AI data centers – The deal deploys Bloom’s fuel cell technology for on-site generation as grid bottlenecks push developers toward “behind-the-meter” solutions (Bisnow)

Insight: Data center developers are getting increasingly inventive as power access becomes one of the biggest hurdles to new construction. Last week, we covered BlackRock's GIP and its potential $40B acquisition of US utility AES; major players are buying utilities outright to secure electricity for their data centers. Brookfield is taking a different approach through a $5B partnership with Bloom Energy to generate power on-site through fuel cells. With grid connection wait times approaching a decade in key markets, more developers are shifting toward on-site power to keep projects moving.

U.S. hotel RevPAR fell 0.4% for the week ending Oct. 4 – Las Vegas and Chicago boosted results, but national occupancy declined for a 15th straight week (STR)

September CRE deal activity hits 2025 high – LightBox index rose to 116.8 as listings and lender activity rebounded following the Fed’s 25-bp rate cut (ConnectCRE)

Publix acquires 207K-SF Hammocks Town Center in Kendall, FL for $72M – Regency Centers sold the 26-acre retail plaza anchored by a Publix supermarket, marking the grocer’s seventh South Florida center purchase since 2024 (TheRealDeal)

Insight: Publix’s recent acquisition spree has some interesting parallels to a story we recently discussed: Dillard’s $34M acquisition of Longview Mall in Texas. By owning the mall outright, Dillard can shape the tenant mix, elevate the customer experience, and guide future redevelopment to strengthen its own retail ecosystem. Its purchase allows the company to align amenities, branding, and property upkeep with its own standards to ensure that every aspect of the mall reinforces its presence as a high-performing anchor. 

Publix is pursuing a similar playbook through its wave of shopping center acquisitions. By purchasing the centers that its own stores anchor, Publix gains direct control over key trade areas, stabilizes costs through ownership rather than leasing, and builds steady income from national co-tenants like CVS and Wells Fargo. Ownership also protects its stores from bad-actor landlords who might cut corners on maintenance and damage the grocer’s image through deteriorating shopping centers. We might be looking at another theme: the rise of the anti-sale lease back, as well-performing retailers choose control and stability.

Turner Impact Capital acquires 749-unit Oaks and Laurels of Willow Hill apartments in Justice, IL for $82M – Waterton sold the 1987-built complex after 20 years of ownership in an off-market deal averaging $110K per unit (TheRealDeal)

Tokyu Land acquires 83-unit multifamily building in NYC’s Lower East Side, NY for $56M – AMAC sold the 2018-built 75K-SF property for $747 per SF with MUFG Bank providing a $31M loan (TheRealDeal)

Ares Management acquires 490K-SF LogistiCenter at Woodinville in Seattle, WA for $115M – Blackstone’s Link Logistics sold the 2-building complex leased to SpaceX, TW Metals, and United Healthcare (ConnectCRE)

2025 fundraising on pace to surpass 2024 – Capital raised through Q3 is up YoY, though totals would lag without three large mega-funds (PERE)

DOJ moves to take over bankrupt hotel chain LuxUrban – Prosecutors cite “gross negligence” over unpaid wages, tax debts, and shuttered properties that left guests stranded (Bisnow) 

CWCapital files $87M foreclosure suit against Group RMC for 1.1M-SF Westbrook Corporate Center in Westchester, IL – The CMBS special servicer rejected Group RMC’s $52.5M note purchase offer after loan defaults tied to tenant departures and missed payments (TheRealDeal)