Hello Brick Brief readers, 

Happy Monday. Today we’re seeing Fed officials divided between inflation risks and a softening labor market, Office REIT OPI filing for bankruptcy after rising rates and shrinking government leases drained liquidity, and spending fatigue weighing on dining and hotel demand.

💬 Fed Officials Split as Labor Market Softens
Fed rhetoric is fracturing as the job market weakens and hiring momentum fades. Companies that once hoarded workers are now resuming layoffs, giving doves like Waller justification for December easing while hawks like Logan and Hammack warn that inflation remains too high for further cuts.

🏚️ OPI Bankruptcy Exposes Office REIT Weakness
OPI’s Chapter 11 filing marks a reckoning for office REITs weighed down by higher borrowing costs and obsolete assets. Rising rates, aging Class-B exposure, and shrinking government leases drained liquidity, prompting a restructuring that converts $1B of debt into equity and adds $125M in financing to stabilize its 17M SF portfolio.

🍔 Spending Fatigue Hits Value Dining and Hotels
Spending fatigue among middle-income consumers is eroding demand in value-focused dining and travel. Wingstop’s same-store traffic fell 8.8% and broader hotel RevPAR dropped 5.3% YoY, while Shake Shack’s higher-income base kept visits nearly flat with just a 1.0% same-store decline.

30Y Mortgage: 6.28% (-5 bps)

10Y Treasury Yield: 4.08% (-2 bps) 

WSJ Prime Rate: 7.25%

FTSE NAREIT Index: 758.70 (+0.18%) 

30-day SOFR Average: 4.21%

Companies end labor hoarding – Firms that once clung to workers post-pandemic are now resuming layoffs as hiring conditions normalize and retention fears fade (WSJ)

Fed’s Waller calls for December rate cut – The governor urged more easing to support a weakening labor market as other officials warned inflation risks remain too high for further cuts (Reuters)

Fed’s Logan says this week’s rate cut was not needed, opposes one in December – The Dallas Fed president cited a balanced labor market and stubborn inflation as reasons against further easing (Reuters)

Fed’s Beth Hammack opposed this week’s rate cut – Warning that easing too soon risks reigniting inflation as policy nears a neutral stance (Bloomberg)

Office Properties Income Trust (OPI), an externally managed REIT under The RMR Group, filed for Chapter 11 bankruptcy protection in the Southern District of Texas after missing a $30M debt payment in September. Its 17M SF Class-B portfolio spans secondary markets such as Washington, D.C., Atlanta, Denver, Houston, and suburban Boston. Under the restructuring plan, $1B in senior debt will be converted to equity, and lenders will provide $125M in debtor-in-possession financing to keep operations running.

🧱 How the Restructuring Works
The plan allows OPI to cut leverage and maintain operations while RMR continues as manager under a new five-year agreement paying $14M annually. Moelis & Co. and AlixPartners are advising the process, which aims to simplify the REIT’s capital structure and stabilize cash flow after funds from operations collapsed from $259M in Q2 2024 to just $5.6M a year later.

🧱 1. Rising Rates and Refinancing Pressure
OPI entered 2025 with more than $2.4B in debt and limited liquidity. Higher borrowing costs turned its balance sheet unsustainable as maturities approached. As the value of its assets fell and its credit was downgraded to CCC, refinancing debt became impossible, forcing OPI’s eventual Chapter 11 filing.

🧱 2. Class-B Exposure and Structural Obsolescence
The REIT’s properties are mostly older, suburban offices in markets where tenants are consolidating into newer, higher-quality buildings. While top-tier office assets are seeing early signs of recovery, OPI’s Class-B portfolio faced declining rents, rising vacancy, and limited reinvestment capacity.

🧱 3. Government Lease Contraction
About 17% of OPI’s rent came from U.S. government tenants like the GSA and VA. The Trump administration’s lease-reduction campaign further weakened occupancy, which eliminated one of OPI’s few stable revenue sources across its government-heavy markets.

Takeaway: OPI’s bankruptcy was the result of multiple headwinds: high interest rates, a demand shift and structural decline in its assets, and government downsizing. While equity holders are being wiped out, this externally managed REIT will restructure and continue operating. There remains a clear misalignment of incentives, as the management firm that led OPI into bankruptcy will largely walk away unharmed, even if some of its problems were driven by broader market forces and out of their control.

Bessent says high rates pushed housing into recession – The Treasury secretary warned that tight Fed policy has hit low-end consumers hardest and urged faster rate cuts to revive real estate activity (Reuters)

Only 28 out of every 1,000 U.S. homes changed hands in 2025 – The lowest turnover rate since the 1990s reflects affordability challenges and rate-lock keeping buyers and sellers on hold (Redfin)

Mortgage spreads hit lowest level in years, keeping rates near 6% – Average spreads have improved 0.42% in 2025 from 2024 levels, helping stabilize purchase demand and inventory (HousingWire)

Apartment REITs turn bearish on rents – Major landlords cut guidance as new-lease growth stalls and economic uncertainty, elevated supply, and slower job gains pressure multifamily performance (Bisnow)

Office demand fractures along remote work lines – The VTS Office Demand Index fell 4% in Q3 but remains up 16% YoY, as remote-heavy markets like San Francisco and Boston surge while traditional office hubs like New York and Chicago weaken (GlobeSt)

Coworking expands to 8,400 U.S. locations – Flexible workspaces now span 150M SF nationwide as hybrid demand drives growth in midsized cities and mixed-use corridors beyond traditional downtowns (GlobeSt)

Small-bay industrial outperforms as big-box demand softens – BKM Capital Partners’ Q3 2025 Light Industrial Market Update shows sub-100K SF warehouses remain in short supply and high demand while large-format assets face rising vacancies (IREI)

Grocers face $8B sales hit as SNAP funding lapses – The government shutdown threatens to suspend food aid for 42M Americans, pressuring retailers like Walmart and suppliers across the food supply chain (Reuters)

Shake Shack visits up 15.1% YoY – Growth came from rapid expansion as same-store visits dipped 1.0%, showing stable demand among higher-income customers despite softer consumer sentiment (Placer.ai)

Wingstop visits down 2.8% YoY – Same-store visits fell 8.8% amid tough 2024 comps, though rising digital orders and promotions like National Chicken Wing Day helped sustain overall momentum (Placer.ai)

Insight: Both Shake Shack and Wingstop are growing their store count quickly, but their performance shows a clear divide in spending power. Shake Shack’s higher-income customers are keeping visits steady even with modest price increases, while Wingstop’s value-driven diners are pulling back. 

Wingstop is leaning on promotions and digital discounts to offset weaker traffic, but its rising prices and flat value perception are weighing on customer visits. Burger King’s Q3 3.1% same-store sales growth, meanwhile, shows that consistent quality and focus on core menu items are winning over cost-conscious consumers. The company explicitly said it’s avoiding the discount value wars that many fast-food chains are participating in.

Boot Barn to double store count to 1,200 – The Western apparel retailer lifted its target amid an 18.7% sales jump and surging demand for “cowboy core” fashion across U.S. markets (CoStar)

AI buildout accelerates across industries – Global investment in data centers and infrastructure now exceeds $350B annually as companies from Microsoft to Caterpillar expand to meet surging AI demand (Reuters)

U.S. hotel RevPAR down 5.3% YoY for week of 19–25 October 2025 – STR attributes the decline to weaker group demand and tough 2024 comps, with nearly half of hotels reporting revenue drops of 5% or more (STR)

Total U.S. CRE debt hits $4.8T in Q2 2025 – Banks hold $1.83T while life insurers and securitized lenders post the strongest growth, with $767B in loans maturing through 2026 highlighting refinancing pressure (Trepp)

West Shore secures $600M loan package for multifamily portfolio across Southeast and Midwest – Citi originated $550M in senior debt and $50M in mezzanine financing for refinancing and acquisitions spanning eight properties and 1,496 units (ConnectCRE)

Outpost acquires 17-acre industrial outdoor storage site near Miami International Airport in Miami, FL for $52.1M from Centerpoint – The 3200 NW 67th Avenue property sold at a 77% premium and will remain a truck terminal (CommercialObserver)

Homebuilder D.R. Horton acquires Axis Raintree office building in Scottsdale, AZ for $70.7M from Trammell Crow Company – The 179K-SF Class A property at 8605 E. Raintree Drive, developed with PGIM in 2022, ranks among the year’s largest Phoenix-area office trades (ConnectCRE)

Insight: As D.R. Horton has a major homebuilding presence in Phoenix and nearby metros, this purchase appears to be for its own corporate use rather than office investment. Major homebuilders including D.R. Horton have actually recently scaled back or divested multifamily ventures to refocus on their core homebuilding operations, which are now facing challenges from overbuilding and affordability pressures.

Izek Shomof acquires 24-story Landmark Square office tower in Long Beach, CA for $50M from Manulife – The 460K-SF property at 111 W. Ocean Boulevard sold at a 63% discount from its 2013 price as downtown Long Beach office vacancies climb to 28.5% (TheRealDeal)

REIT Office Properties Income Trust files for Chapter 11 – The 17M SF landlord will convert $1B of debt into equity and secure $125M in new financing after steep occupancy and cash flow declines (Bisnow) 

Zombie foreclosures account for just 3.25% of homes in foreclosure in Q4 – Rising homeowner equity and tighter lending have kept abandonment near historic lows despite higher foreclosure activity (MortgageOrb)

tZero, a blockchain platform that tokenizes assets including real estate, plans 2026 IPO – The company aims to expand its compliant digital securities marketplace amid growing adoption of tokenized assets (Bloomberg)