The Brick Breakdown

Hello Brick Brief readers, 

In recent news, the U.S. economy contracted 0.3% in Q1, office markets showed sharp regional splits as San Francisco demand rebounded and Seattle hit a 40-year vacancy high, and prime retail assets continued to outperform amid broader volatility.

📉 Growth slows as tariffs hit trade and hiring

U.S. GDP contracted 0.3% in Q1 as businesses rushed to import goods ahead of Trump’s tariffs, creating a record drag from net exports. Job growth and private hiring both slowed in April, while compensation costs rose, reinforcing concerns that tariff-driven inflation could stall labor market gains.

🏢 Office market splits as San Francisco rebounds and Seattle struggles
San Francisco office demand rose 32% year-over-year, with tenant tours rebounding alongside return-to-office momentum, while Seattle’s vacancy rate hit a 40-year high above 16%. BXP posted strong Q1 leasing but cut its earnings forecast, and Piedmont Office suspended its dividend for the first time in 15 years amid tenant delays and rising build-out costs, underscoring uneven conditions across markets.

🛍️ Retail bifurcates as prime assets thrive and urban operators adjust
Prime retail centers and warehouse-anchored sites continue to outperform with rising rents and improved occupancy, even as broader retail investment slows. In D.C., rising costs and shifting local policies have driven a wave of restaurant closures, pushing landlords to offer larger concessions and flexible lease terms to retain tenants.

This Week in Real Estate: Key Events & Data

Quick Markets

30Y Mortgage: 6.81%
10Y Treasury Yield: 4.19% (+3 bps)
FTSE NAREIT Index: 762.75 (+0.80%)
30-day SOFR Average: 4.35%

Market Pulse

Tariff-driven frontloading distorted trade flows and dragged Q1 GDP into contraction, while solid income gains and slowing hiring reflect a mixed picture that may keep the Fed cautious on near-term rate cuts

U.S. GDP contracts 0.3% in Q1 as tariff fears fuel import surge – Economy shrank amid record drag from net exports as businesses front-loaded shipments ahead of Trump tariffs (WSJ)

March PCE inflation rises 2.3% YoY – Strong income and spending growth signals resilient demand, but unlikely to prompt Fed rate cuts (FT)

Private payroll growth slows to 62,000 in April – Hiring decelerates sharply, missing expectations amid tariff uncertainty (CNBC)

March 2025 Employment Cost Index rose 0.9% – Compensation growth driven by a 0.8% rise in wages and 1.2% in benefits, with annual increase of 3.6% in total compensation (BLS)

Residential

Pending sales and tenant screenings suggest rising rental and purchase activity this summer, but high rates and trade uncertainty continue to weigh on buyer confidence despite strong multifamily absorption and localized mortgage relief

Pending home sales rise 6.1% in March – Improvement from February, but still 0.6% below last year, with high mortgage rates and trade war uncertainty holding back buyers (Realtor.com)

Multifamily inventory nears 20M units – 577,000 new units added over the past year, net absorption more than double the prior year, with occupancy rising to 95% (GlobeSt)

Rental activity expected to spike this summer – Tenant screenings up 53.5% from December, with D.C. seeing a 68% increase, as affordability push more renters into long-term housing (CommercialObserver)

Monthly mortgage payments are declining in 12 U.S. metros – Jacksonville leads with a 4.2% drop, followed by San Francisco and Oakland, while Cleveland sees a 9.3% increase in payments (Redfin)

Office

Office markets remain deeply bifurcated as San Francisco sees a sharp rebound in tenant interest while Seattle vacancies hit a 40-year high, highlighting persistent regional disparities despite broader stabilization efforts

Seattle office vacancy hits 40-year high – Vacancy reaches over 16% in Q1 2025, though the pace of increase has slowed (CoStar)

San Francisco office demand spikes 32% year-over-year – Tenant tours surge amid return-to-office policies and cooling job market, though vacancy remains high (TheRealDeal)

Industrial

Self-storage market shows resilience in 2025 – Extra Space Storage (+7.0%), Public Storage (+2.1%), and CubeSmart (+3.4%) report YoY foot traffic growth, driven by rising housing costs and demand for space (Placer.ai)

Market Mix

Retail

Retail performance is splitting as prime assets post stronger rents and occupancy gains, while broader segments struggle with closures, rising costs, and softening demand

Prime retail assets show resilience in 2025 – Market rents for prime assets outperform lower-quality counterparts, with occupancy rates improving in top shopping centres and retail warehouses (CBRE)

D.C. restaurant closures rise – Landlords offer more flexible deals and higher tenant improvement allowances amid rising costs and local policy changes (Bisnow)

Hospitality

Private equity firms pull back from U.S. hotel investments – Tariff uncertainty and a drop in tourism lead to hesitation, with 35% of hotel loans due this year creating opportunities for niche buyers (CommercialObserver)

Earnings & Real Estate Impact

BXP’s strong Q1 leasing highlights tenant interest in high-quality office space, but its lowered earnings forecast signals ongoing caution as market uncertainty tempers long-term confidence

Office REIT BXP’s Q1 leasing activity exceeded expectations, with a 25% increase in leasing volume and an occupancy rate of 86.9%, slightly down from last year. However, the REIT's full-year earnings guidance of $1.60 to $1.72 per share fell short of the analyst consensus of $1.92, reflecting cautious market expectations.

Financings

Loans

Inter Miami CF secures $650M from J.P. Morgan for Miami Freedom Park – 25K-seat soccer stadium is part of a $1B mixed-use project with hotel, office, and retail space (CommercialObserver)

Bank OZK provides $156.3M construction loan for Long Island apartments– Heatherwood secures financing for Heritage Westminster project in West Hempstead, NY (CommercialObserver)

Charney Companies and Tavros secure $145M financing for 1,000-unit Brooklyn rental development – Silver Point Capital provides acquisition and pre-development debt (CommercialObserver)

Refinancings

Yellowstone Real Estate secures $113M refi for former Maxwell Hotel in NYC’s Midtown East – Plans to repurpose 344K  sq. ft. property, potentially into multifamily (CommercialObserver)

M&A

Building & Portfolio M&A

Fenway Capital buys Entrada in Culver City, CA for $130M – The 315K SF office is leased to Equinox and Deloitte (TheRealDeal)

Distress Watch

Piedmont Office Realty Trust suspends its dividend for the first time in 15 years to preserve $60M for tenant build-outs and securing new leases – 10% of tenants are not yet paying rent (Bisnow)

Brookfield defaults on $219M loan for Houston Center – Transfers 4.6M SF Houston office campus, last valued at $875M in 2017, to AustralianSuper and Stream Realty (Bisnow)