The Brick Breakdown

Hello Brick Brief readers, 

Thank you for your continued support! We are excited to announce that we are adding a Brick by Brick section to our newsletter that dives deeper into a key real estate deal or headline each day.

Today we’re seeing progress in U.S.–China trade talks, growing pressure on small businesses from tariffs, a sluggish spring housing market, and NYC office foot traffic approaching pre-pandemic levels.

📉 Tariff Pressure Fuels Economic Unease
The U.S.–China trade talks launched in Geneva mark a diplomatic thaw, but rising tariffs, which are now up to 145%, are squeezing small businesses, delaying leases, and triggering layoffs with little federal relief. Fed Governor Michael Barr and Starwood’s Barry Sternlicht both flagged stagflation risks, suggesting weakening demand may soon force a rate cut if current conditions persist.

🏠 Housing Market Stalls Amid Affordability Strain
Spring home sales are lagging despite rising inventory, with mortgage rates hovering near 6.75% and buyers still hesitant amid economic uncertainty. While home equity remains historically high at 46.2%, affordability constraints and cautious consumer sentiment are capping momentum heading into summer.

🏢 Office Foot Traffic Signals Urban Recovery

Office visits improved in April, with NYC nearing pre-pandemic levels and San Francisco leading year-over-year gains as tech firms enforce return-to-office mandates. The rebound underscores a flight to quality in top-tier markets, where demand is strengthening for well-located, high-performing office assets.

This Week in Real Estate: Key Events & Data

Quick Markets

30Y Mortgage: 6.89% (+1 bps)
10Y Treasury Yield: 4.40% (+4 bps)
FTSE NAREIT Index: 768.04 (+0.75%)
30-day SOFR Average: 4.34%

Market Pulse

Rising tariffs and Fed warnings reflect growing economic strain, as small businesses struggle, confidence wanes, and market leaders signal that rate cuts may be needed to counter softening demand

U.S. and China conclude Geneva trade talks – Launch formal negotiation process as Trump seeks fairer trade and fentanyl crackdown (WSJ)

Small businesses buckle under 145% China tariffs – Owners lay off workers, tap savings, and delay leases as margins vanish and Washington offers little relief (WSJ)

Fed’s Barr warns tariffs risk stagflation – Says trade policy is raising inflation pressure, hurting small businesses, and could drive unemployment higher amid mounting economic uncertainty (BankingJournal)

Starwood’s Barry Sternlicht questions rebound – CEO says market recovery ‘doesn’t really feel right’ as travel demand softens and economic risks grow, adding that Fed rate cuts are likely if weakness persists (Bloomberg)

Brick by Brick: PCCP Buys 76 Bay Area Buildings for $541M

LA investor PCCP made the largest Bay Area multifamily acquisition of the year, buying 1,770 units across San Francisco and Oakland for $541M.

• $541M acquisition includes 76 buildings purchased from Veritas and Ivanhoe Cambridge
• Portfolio includes 1,770 units at $305,367 per unit, a 28% discount from prior valuations
• PCCP received a $430M loan from German American Capital to finance the deal
• Veritas will remain as property manager despite selling the portfolio
• Veritas defaulted last year on $1B in loans tied to 95 rent-controlled buildings
• The acquisition follows recent bullish moves from Fortress and Artemis in San Francisco multifamily
• Oakland assets in the deal are clustered near Lake Merritt, in Adams Point and Cleveland Heights

Takeaway: PCCP's discounted purchase suggests that major investors believe San Francisco multifamily has bottomed out. As rental growth picks up and competition remains limited, Bay Area apartments may offer long-term upside with institutional backing and distressed assets hitting the market.

Policy & Industry Shifts

Texas’s SB 17 highlights rising geopolitical tensions in real estate policy, as the foreign buyer ban draws backlash over discrimination concerns and expands executive authority over property sales

Texas House passes SB 17 to ban property sales to buyers from China, Iran, Russia, and North Korea – Critics warn of anti-Asian backlash as governor gains power to expand list (Bisnow)

Residential

High mortgage rates and economic uncertainty continue to suppress spring home sales, even as rising inventory and strong home equity fail to reignite buyer demand

Spring home sales disappoint despite rising inventory – High mortgage rates near 6.75% and economic uncertainty continue to deter buyers, slowing demand even as listings rise and builders offer incentives (WSJ)

Home equity dips to 46.2% in Q1 2025 – Equity-rich rate falls from 47.7% last quarter but remains near historic highs, with Northeast states seeing strongest YoY gains (RisMedia)

Office

Improving office foot traffic led by NYC and San Francisco suggests that return-to-office mandates and a flight to quality are gradually restoring demand in top urban markets

Office foot traffic improves in April – Placer.ai’s nationwide index shows visits down just 30.7% vs. April 2019, with NYC nearly recovered and San Francisco leading YoY gains amid tech RTO mandates (Placer.ai)

Industrial

Tariff-driven supply chain disruption is prompting firms like Gilead to invest heavily in U.S. production, signaling a broader shift toward domestic resilience in industrial and pharmaceutical sectors

Trump tariffs disrupt Mexico supply chains – U.S. importers face rising costs and uncertainty, with experts urging long-term supply chain resilience over short-term fixes (FreightWaves)

Gilead pledges $11B U.S. investment for pharma expansion – Funding will support six sites and 800 new jobs amid tariff pressures and push for domestic drug production (Bisnow) 

Market Mix

CMBS issuance rose 22% in Q1, reflecting renewed capital flow despite market volatility, while NYC life sciences leasing showed only a modest rebound as availability remains elevated and recovery uneven

Capital Markets

CMBS issuance rises 22% in Q1 2025 – $37.6B driven by SASB and conduit surge despite volatility from tariffs and widening spreads (GlobeSt)

Life Sciences

NYC life sciences leasing rebounds YoY – Q1 2025 leasing hit 30K SF after zero activity in Q1 2024, while lab availability dropped 740 bps YoY to 26.3% and asking rents rose 7% to $106.33/SF (CBRE)

Financings

Loans

Colliers Mortgage provides $55.9M loan for Denton, TX multifamily – Millennium Crest LP secures HUD-insured financing for 245-unit project in North Texas (REBusinessOnline)

Fixed Income & Securitized Products

San Francisco med campus lands $575M bond deal – California IBank will finance UCSF’s 300K SF Dogpatch medical building anchoring a 2,600-unit redevelopment of the former Potrero Power Station (TheRealDeal)

M&A

Building & Portfolio M&A

PCCP buys Bay Area apartments for $541M – LA-based investor acquires 76 buildings with 1,770 units from Veritas and Ivanhoe at 28% discount, 2025’s largest multifamily deal in the region (TheRealDeal)

Amazon pays $456M for Midtown NYC tower – Buyer acquired 522 Fifth Avenue from RFR at $800/SF amid continued office expansion (CommercialObserver)

KBS sells 496K-SF Charlotte, NC industrial park for $81.2M – Link Logistics acquires fully leased Crossroads Distribution Center near state line (ConnectCRE)

Distress Watch

Pappas Restaurants wins bid for On The Border – Houston-based buyer to modernize 60-location Tex-Mex chain after bankruptcy sale (CoStar)

$100M Miami office building heads to auction after bankruptcy – Judge approves June 30 sale of Gateway at Wynwood after R&B Realty defaulted on $113M loan (Bisnow)

Proptech & Innovation

Willow expands digital twin tech for sustainability – AI-driven platform helps infrastructure cut emissions, boost efficiency, and prepare for a retiring facilities workforce (GlobeSt)