The Brick Breakdown

Hello Brick Brief readers, 

In recent news, tariffs are impacting sectors from retail and logistics to housing, even as new home sales in March unexpectedly rose. At the same time, foreign investors are showing renewed interest in U.S. real estate, with almost half planning to increase their exposure this year.

💸 Tariffs ripple across sectors, Trump signals potential relief
Tariff-driven uncertainty continues to strain housing, manufacturing, retail, transportation, and hospitality sectors, as builders warn of price hikes, Chipotle missed Q1 revenue on weaker visits, hotel demand softens in cities like Chicago, and Knight-Swift cut its outlook on freight delays. Retailers face tighter liquidity and rising distress, while Q1 investment activity slowed sharply as spreads widened and capital remained on the sidelines. Trump is now considering cutting China tariffs to 50–65%, a move that could ease market tensions if trade talks succeed.

🏠 New-home sales jump in March, but clouds remain
New-home sales rose 7.4% in March, led by Southern markets as builders used incentives and lower rates to attract buyers. However, affordability concerns, material cost inflation, and elevated mortgage rates continue to cloud the 2025 outlook, with builders forecasting cautious demand ahead.

🌍 Foreign investors eye U.S. real estate but remain cautious

In a recent survey, 44% of non-U.S. investors plan to increase exposure to U.S. real estate in 2025, targeting Dallas, New York, and Miami. Still, 63% hold a negative outlook overall, highlighting lingering global concern around rates, policy, and long-term fundamentals.

Quick Markets

30Y Mortgage: 6.94% (-4 bps)
10Y Treasury Yield: 4.35% (+1 bps)
FTSE NAREIT Index: 747.42
30-day SOFR Average: 4.35%

Market Pulse

Tariff-driven uncertainty is weighing on business sentiment and inflation outlooks, with output growth slowing to a 16-month low as firms warn of rising costs, hiring freezes, and softer demand while the White House considers easing China tariffs to stabilize markets

US output growth hits 16-month low in April – Business confidence slumps and price pressures rise sharply, with tariffs driving manufacturing costs higher and service demand weakening (S&PGlobal)

White House mulls slashing China tariffs to 50–65% – Trump may cut steep duties to ease trade tensions, with a tiered system likely, though no final decision has been made (WSJ)

Fed Beige Book highlights trade uncertainty – Economic activity held steady, but tariff mentions doubled and outlook worsened as firms brace for cost hikes, hiring freezes, and consumer pullbacks (Bloomberg)

Policy & Industry Shifts

Elon Musk is stepping back from federal property reform efforts as Tesla’s earnings fall, while DOGE’s early momentum fades with GSA activity rebounding. Meanwhile, a long-running legal fight ends with Sears retaining its $10-a-year lease at Mall of America, highlighting the complications of legacy retail agreements

Musk shifts focus from DOGE to Tesla – After laying groundwork for DOGE, Musk will reduce his federal role as Tesla posts a 71% Q1 profit drop; DOGE’s early lease cuts slow as GSA resumes major signings (Bisnow)

Supreme Court declines to void $10-a-year Sears lease at Mall of America – Landlord Triple Five loses bid to overturn 100-year lease, which remains with Sears’ liquidating trust despite years of litigation (CoStar)

Residential

March’s jump in new-home sales signals resilience in the South, but falling apartment completions, rising mortgage rates, and looming tariff-driven price hikes suggest mounting pressure on affordability and future demand

New-home sales jump 7.4% in March on Southern surge – Builders capitalize on lower rates and incentives, but tariff-driven cost pressures and elevated mortgage rates cloud outlook (Bloomberg)

U.S. apartment completions drop to 116K in Q1 – Supply falls for second straight quarter, marking clear decline from 2024 peak across all regions (RealPage)

Brokerage CEO backs listing bans – Samson Properties' Donny Samson supports Zillow and Redfin’s MLS-only policies as a win for transparency and fairness (RisMedia)

Builders warn of price hikes ahead – Tariffs and affordability pressures prompt major homebuilders to forecast higher prices and cautious consumer demand later in 2025 (MortgageOrb)

Institutional investors return to San Francisco multifamily – Fortress, Artemis, and Hines ramp up acquisitions amid falling vacancies and renewed rent growth, with Q1 2025 rents up 2.7% and vacancy at a 5-year low (GlobeSt)

Mortgage demand drops as rates rebound – Applications fell 12.7% last week, with refis down 20% as 30-year rates hit 6.9%, reversing recent gains amid rate volatility and economic uncertainty (RisMedia)

Office

Office demand shows signs of stabilization with a third straight quarter of net absorption gains, but high vacancy, falling transactions, and weak weekly occupancy highlight the market’s continued bifurcation and sensitivity to broader economic conditions

Office sales diverge from historical trend post-COVID – Low rates in 2021–22 boosted small asset deals despite high vacancy, but rising interest rates have since driven a sharp drop in transactions (CBRE)

U.S. office market posts third straight quarter of positive absorption – Q1 2025 saw 1.7M SF of net gains despite a vacancy rise to 18.1%, with tenants downsizing and top-tier lease rates holding steady (Colliers)

Office occupancy dips amid seasonal events – Weekly average fell to 53.4%, led by drops in D.C. (−3.7 pts) and NYC (−3.1 pts), despite Class A+ buildings hitting 89.6% peak occupancy on Tuesday (Kastle)

Industrial

Tariffs are driving short-term demand for warehouse storage while prompting firms like Toyota to onshore production with new U.S. investments

Prologis sees tariffs boosting demand – Trade uncertainty is driving short-term warehouse needs and higher utilization of third-party logistics space as firms reroute goods and seek flexible storage (GlobeSt)

Toyota boosts hybrid output with $88M West Virginia investment – Move expands U.S. transaxle production by 27% as part of onshoring strategy amid looming auto tariffs (Bloomberg)

Market Mix

Tariffs and travel crackdowns are dampening international tourism and stalling investment decisions as uncertainty clouds the hospitality sector and broader capital markets

Hospitality

Tariffs and travel crackdowns hurt Chicago hospitality – International tourism drops as visa delays and global backlash to Trump’s policies threaten hotel recovery just months after record 2024 revenue (Bisnow)

Capital Markets

Investment stalls amid Q1 volatility – Treasury swings, widened spreads, and tariff fears froze decision-making across asset classes as investors await clarity on rates, trade, and policy (Colliers)

Regional

Harvard exits 2 Boston leases as $2.2B in federal research funds remain frozen – Public health school cuts space and plans layoffs amid ongoing clash with Trump administration (Bisnow)

Earnings & Real Estate Impact

Q1 earnings show early signs of consumer pullback and tariff-driven business caution, with Chipotle seeing fewer visits and Knight-Swift cutting its Q2 outlook as trade uncertainty disrupts demand and logistics

Chipotle missed Q1 revenue expectations and reported a 0.4% YoY decline in same-store sales as customers began reducing the frequency of restaurant visits in February due to economic uncertainty (CNBC) 

Knight-Swift beat Q1 earnings and revenue expectations, supported in part by gains on equipment sales. However, it lowered its Q2 outlook as trade uncertainty from tariffs delays customer bids and tightens inventory management, pressuring truckload demand and future earnings (FreightWaves)

Financings

Bonds & Securitizations

Stanley Hotel to issue $300M mortgage-revenue municipal bonds – Funding will support a horror-themed expansion curated by Blumhouse ahead of Sundance’s Boulder, Colorado debut (Bisnow)

Loans

Ulysses secures $67M to build 152-unit affordable housing near Denver, Colorado – The transit-oriented Harvest Hills project targets households earning 30–70% of area median income (TheRealDeal)

M&A

Building & Portfolio M&A

San Diego apartment complex sells for $140M – Nuveen’s sale to Bridge marks one of San Diego’s biggest recent multifamily deals amid rising investor demand (CoStar)

Blackstone and Link sell $121M South Florida industrial portfolio – Ares Management acquires three warehouses in Miramar and Dania Beach (TheRealDeal)

Handler pays $60M for 192-unit Maple Street Lofts in Chicago’s Mount Prospect – TLC Management acquires the Wingspan-built asset amid tax advantages and rent growth (TheRealDeal)

Millrose pays $50M for San Francisco’s San Ramon office campus – 11-acre Bishop Ranch site will be redeveloped by Trumark Homes into 195 single-family homes and townhomes (TheRealDeal)

Institutional Fundraising

Despite lingering pessimism, with 63% of global investors still cautious on U.S. real estate, 44% plan to increase exposure in 2025, signaling selective optimism focused on key markets like Dallas, New York, and Miami

Morgan Stanley IM raises $800M for nontraded REIT – Net REIT targets net-leased U.S. industrial and retail assets, amassing a 19-property portfolio since launching last year (PERE)

KHP Capital Partners raises $300M for sixth hotel fund – Fund VI targets value-add hotel investments via branding, renovation, and adaptive reuse (ConnectCRE)

Catalyst Opportunity Funds closes $140M Fund II – The double bottom-line real estate investor targets socially impactful projects in underserved U.S. markets (IREI)

44% of non-U.S. investors plan to boost U.S. real estate exposure in 2025 — Dallas, New York, and Miami rank top targets; 63% of all investors still hold a negative outlook for U.S. cross-border investment (AFIRE)

Distress Watch

Retailers are under mounting pressure as tariffs tighten liquidity, forcing distressed firms like Rite Aid to cut costs and restructure aggressively to avoid a second wave of bankruptcies

Rite Aid heads for second bankruptcy – Low on cash, the retailer plans to sell itself in pieces and seeks debtor-in-possession financing less than a year after exiting Chapter 11 (Bloomberg)

Tariffs squeeze liquidity for distressed retailers – AlixPartners says firms are slashing costs, tightening inventory, and pursuing liability management over bankruptcy to stay afloat amid demand uncertainty (Bloomberg)