The Brick Breakdown

Hello Brick Brief readers, 

Thank you for your continued support! Ahead of the today’s May CPI release (!), we’re seeing positive US-China trade developments, increasingly positive office sentiment and occupancy data, and short-term rentals outperforming hotels. 

📦 Trade thaw boosts optimism, but rate cuts still unlikely
The U.S.–China tariff pause, stronger small business sentiment, and rising confidence around jobs point to a more resilient outlook for 2025. Still, Reuters reports the Fed is expected to hold rates through summer, with cuts unlikely before September due to inflation risks and fiscal uncertainty.

🏢 Offices show signs of life as buyers circle the market
Kastle data shows office occupancy hit a new post-COVID high, while CBRE says now is a prime time for institutional investors to buy, with values down 40% from peak and cap rates expanding. Net absorption stayed positive in Q1 and debt markets are rebounding as stabilized rates spur competition.

🛎️ Hospitality sees mixed results as STRs outperform hotels
Short-term rentals grew demand 6% in April, far outpacing hotels and lifting STR RevPAR 12.7% as they gained share. Traditional hotels posted modest gains led by luxury properties, but broader occupancy softness continues to limit performance.

This Week in Real Estate: Key Events & Data

Quick Markets

30Y Mortgage: 6.93% (-2 bps)

10Y Treasury Yield: 4.47% (-2 bps)

WSJ Prime Rate: 7.50%

FTSE NAREIT Index: 778.31 (+0.73%) 

30-day SOFR Average: 4.30%

Market Pulse

The revival of the U.S.–China tariff truce and rising small business optimism point to improving economic sentiment heading into summer. However, the Fed is still expected to hold rates through at least September, as tariff-driven inflation risks and unresolved fiscal policy cloud the path forward

U.S. and China revive tariff truce – Geneva pact framework aims to ease tensions with mutual tariff cuts and faster Chinese mineral export approvals pending presidential sign-off (WSJ)

Fed expected to hold rates through summer – Reuters poll shows cuts unlikely before September as tariff-driven inflation risks and fiscal uncertainty cloud outlook (Reuters)

Treasury Secretary Bessent emerges as top contender for Fed chair – Trump expected to name successor soon with Powell’s term ending in May 2026, renewing focus on Fed independence (Bloomberg)

Small business optimism rises in May – NFIB index climbs to 98.8 on easing tariffs, but uncertainty grows over Trump’s stalled tax bill and regulatory agenda (Reuters)

🏢 Brick Breakdown: Office Recovery Gains Traction Amid Hybrid Headwinds

The May 2025 office data signals a slow but steady recovery. While hybrid work continues to suppress traffic, high-quality buildings in strong markets are outperforming, and national supply is finally contracting.

• Foot traffic dipped 1.0% YoY in May, according to Placer.ai, with visits down 37.2% from 2019. The drop reversed April’s gains and highlights the persistence of hybrid work.

• NYC & Miami led performance, with visits down just 18.4% & 19.6% from 2019. Atlanta, Dallas & Houston also posted gains, driven by in-migration & corporate relocation.

 • Kastle Systems reported a 64.2% peak-day occupancy, the highest since 2020. Weekly averages rose to 54.3%, while Class A+ buildings reached nearly 95% peak occupancy.

 • CBRE expects the national office footprint to contract in 2025, with 23.3M SF removed through conversions & demolitions, compared to 12.7M SF in new deliveries.

 • Office financing volume rose 205% YoY as the bid-ask gap narrows & capital returns to better-located & differentiated assets.

Takeaway: The office market is stabilizing in pockets, and top-tier buildings in key metros are seeing stronger demand, while weak assets continue to face pressure. With supply shrinking & occupancy firming, investors are selectively reentering.

Policy & Industry Shifts

A federal appeals court ruling revives landlord claims for pandemic rent losses, setting up a potential Supreme Court case over whether eviction bans violated property rights under the takings clause

Appeals court backs landlord lawsuits over pandemic rent losses – Ruling allows property owners to seek compensation under takings clause, with case likely headed to Supreme Court (Bisnow)

NYC broker-fee law takes effect today – Judge rejects industry challenge to FARE Act, requiring landlords to cover listing broker costs and shifting financial burden away from tenants (Bloomberg)

Residential

Evergreen will now manage 21,000 VineBrook homes – SFR operator expands Midwest footprint and workforce housing reach as acquisitions slow (Bloomberg)

Multifamily

Multifamily demand holds firm in May – U.S. rents rise to $1,761 as high-supply markets like Denver and Austin post gains despite economic uncertainty, Yardi reports (ConnectCRE)

Multifamily vacancy falls for first time in 3+ years – CoStar reports improving demand in mid-2025, with rent growth and occupancy gains in rebound markets like San Francisco (CoStar)

Office

Office occupancy hits new post-COVID high – Kastle reports 64.2% peak-day occupancy with record highs in D.C. and L.A.; weekly average rises to 54.3% across 10 tracked cities (KastleSystems)

Office traffic dips in May – Placer.ai data shows nationwide office visits fell 1% YoY and remain down 37.2% from 2019, as hybrid and remote work slow full recovery (Placer.ai)

New York and Miami lead office rebound – Both metros saw the smallest drop in visits vs. 2019, while Houston and Dallas posted YoY gains, buoyed by corporate relocations and population growth (Placer.ai)

CBRE calls now a prime time to buy U.S. offices – Office values are down 40% from peak, cap rates have expanded, and early-cycle timing offers strong upside for institutional buyers (CBRE)

Office leasing and debt markets rebound – Net absorption stayed positive in Q1 2025, and loan volume jumped 205% YoY as stabilized rates spur lender competition (CBRE)

Industrial

GM’s $4B investment and a tariff-driven import surge reflect a strategic shift toward domestic production and short-term restocking, as firms brace for trade volatility ahead of a potential fall slowdown

GM to invest $4B in U.S. plants – Automaker shifts production from Mexico to Michigan, Tennessee, and Kansas to reduce tariff exposure and expand domestic output (WSJ)

Retailers expect import surge in summer 2025 – Temporary China tariff pause drives restocking, but volumes set to fall again by autumn as 145% rates return (FreightWaves)

Market Mix

Hospitality

Short-term rentals continued to outpace traditional hotels in April, driving stronger demand and revenue growth, while luxury hotels propped up modest RevPAR gains amid broader occupancy softness

Short-term rentals outpace hotels in April – STR demand rose 6.0% vs. 0.1% for hotels, pushing STR RevPAR up 12.7% as market share climbs to 13.7% (CBRE)

Luxury hotels lead modest RevPAR gains – March/April combined RevPAR rose 0.4% overall, driven by 2.9% growth in upper-tier properties despite declining occupancy (CBRE)

Data Centers

Digital Realty seeks to cut $104M Dallas expansion – Company asks to reduce investment to $13M while retaining $2M in Texas incentives after scrapping major data center upgrade (Bisnow)

Financings

Loans

Steve Ross lands $600M for West Palm Beach, FL condo project – Bank OZK provides $475M senior loan for South Flagler House, with $125M mezzanine from GoldenTree and TZ Capital (TheRealDeal)

 Madison Realty Capital leads $525M financing for NY LIC condo tower – Tavros and Charney secure $425M loan and $100M equity from Kushner for 55-story, 600-unit project at 24-19 Jackson Avenue (CommercialObserver) 

Tidal Real Estate Partners lands $181.8M construction loan for Nashville, TN hotel – Lionheart backs 16-story, 300-room Gulch project with retail space as Tidal expands footprint near future Marriott Edition site (ConnectCRE)

Structured Finance

Vornado and Stellar secure $675M CMBS refi for Manhattan’s Independence Plaza – Five-year loan refinances 1,328-unit Tribeca complex as owners pursue 900-unit expansion (CommercialObserver)

M&A

Building & Portfolio M&A

EQT Exeter buys Glendale warehouse for $128.2M – 1.1M SF Sarival Logistics Center traded by WPT Capital; fully leased to Logistics Plus near Loop 303 growth corridor (ConnectCRE)

Spear Street buys back former 23andMe HQ in Sunnyvale, CA for $88M – Property sells for $95M less than 2019 price after 23andMe bankruptcy and lease exit (TheRealDeal)

Institutional Fundraising

Starwood’s REIT faces $850M in withdrawal requests – SREIT sold $1.6B in assets since December to meet redemptions after gating withdrawals, with NAV down 40% from 2022 peak (WSJ)

Distress Watch

Foreclosures rise 9% YoY in May – ATTOM cites a mixed picture, with Delaware, Florida, Illinois, and Indiana posting the highest rates (Inman)

Walgreens, Authentic Brands, and Kourtney Kardashian weigh Rite Aid assets – Bankrupt pharmacy chain draws interest in IP and Thrifty ice cream brand ahead of June 18 bid deadline (Reuters)

Proptech & Innovation

Shovels raises $5M seed round – AI startup backed by Base10 Partners uses permit data to generate construction insights for vendors, contractors, and local governments (CommercialObserver)