US Consumer Confidence dipped sharply in March, according to the Conference Board’s latest numbers.
The index fell 7.2 points to 92.9, its fourth consecutive monthly decline and lowest reading since January 2021. The reading fell short of expectations.
Consumers’ increasing concerns about their financial futures are weighing down on the index as the measure of Americans’ short-term expectations for income, and the job market is now at its lowest level in 12 years.
The present-situation part of the index remains higher but is also on a downtrend as consumers signal increasing anxiety over tariffs and inflation.
The Conference Board notes that the metric of short-term expectations is well below the recession-indicating threshold of 80. Meanwhile, the share of US consumers anticipating a recession sits at a nine-month high.
2. BUSINESS UNCERTAINTY
The Atlanta Federal Reserve’s latest monthly survey of business uncertainty shows that sales revenue growth expectations have risen recently, but firms remain more uncertain about future sales growth than they were prior to the pandemic.
The panel of senior finance and managerial professionals has reported considerably slower nominal sales growth over the past two years. The past several months have seen a modest revival of sales growth expectations. However, elevated uncertainty leaves current forecasts on a shakier footing than estimates made under less volatile economic conditions.
Expectations around year-ahead employment growth have similarly improved, while uncertainty about unemployment growth has returned to pre-pandemic levels. As of March, most firms don’t foresee drastic changes to working arrangements over the coming year, with fully in-person employees accounting for 68.1% of full-time workers.
3. FED INTEREST RATE DECISION
Fed policymakers kept interest rates unchanged at their March meeting, holding the federal funds rate at 4.25-4.50%, which was in line with market expectations.
In its post-meeting statement, the FOMC acknowledged that the uncertainty around the economic outlook had increased and that they were attentive to risks on both sides of its dual mandate.
Despite the nod to rising uncertainty, officials affirmed their expectations of reducing rates by an additional 50 basis points (bps) by the end of the year, which, for context, is in line with their December 2024 projection.
The Fed statement highlights that recent indicators show continued economic expansion with a stable unemployment rate and solid labor market conditions. They also noted that inflation remains somewhat elevated and that they will continue to monitor incoming data and its potential implications on the economic outlook.
4. FOMC ECONOMIC PROJECTIONS
The FOMC’s latest Summary of Economic Projections, released during every other policy meeting, cut the median GDP growth forecast for 2025, 2026, and 2027 compared to December while raising forecasts for PCE inflation in 2025 and 2026.
The median real GDP growth forecast for 2025 was cut from 2.1% in the December projections to 1.7% as of the March projections. The real GDP forecast for 2026 was revised down from 2.0% to 1.8%, and 2027 revised from 1.9% to 1.8%.
The median PCE inflation forecast for 2025 was raised from 2.5% to 2.7%. For 2026, the inflation forecast is up slightly from 2.1% to 2.2%. The Committee kept the inflation forecast for 2027 unchanged at 2%.
The unemployment rate is expected to be slightly higher this year at 4.4% compared to 4.3%, but no changes were made for the 2026 and 2027 forecasts, each at 4.3%.
5. NAIOP INDUSTRIAL SPACE DEMAND FORECAST
According to NAIOP’s Q1 2025 Industrial Space Demand Report, in 2024, the Industrial sector experienced its lowest annual rate of net absorption in 13 years.
NAIOP reports that Industrial net absorption in the second half of 2024 totaled 96.9 million square feet, bringing the annual volume to just 170.8, its lowest since 2011.
The report notes that elevated long-term interest rates have been a key reason for slowing space demand.
Analysts forecast that net absorption will slow further during the first half of 2025 to a projected 52.2 million square feet before accelerating in the second half to end the year with a total of 156.4 million square feet absorbed.
In 2026, Industrial net absorption is expected to climb back to 224.9 million square feet as elevated interest rates are expected to gradually normalize, though not return to the low-rate equilibrium of the past decade.
6. FASTEST GROWING CITIES
According to a Business Insider analysis of the recently released 2024 metro-level population estimates by the US Census Bureau, most US metros saw populations increase last year, while Florida metros were among the fastest.
Ocala, Florida (FL) and Panama City, FL, grew by 4.0% and 3.8%, respectively, last year. Meanwhile, Myrtle Beach, South Carolina, aligned with Panama City’s 3.8% growth.
Another notable Florida metro includes Lakeland-Winter Haven, which grew by 3.5%. Provo, Utah, and Daphne, Alabama, were honorable mentions at 3.0% each.
Immigration was key to the growth, with each metro area experiencing positive net international migration during the year.
Notably, cities like Midland and Odessa in Texas, which experienced pandemic-era population declines, were some of the fastest-growing metros in 2024.
7. CO-WORKING SPACES CLIMB 25% IN A YEAR
According to Commercial Edge’s latest National Office Report, co-working locations surged 25% year-over-year through February, coinciding with a 15.2% increase in overall square footage.
Co-working spaces have grown in popularity since the pandemic and are helping to fill a gap in the demand for space by working professionals.
As a percent of total office stock, co-working spaces increased 30 basis points from February 2024 to 2.0% as of the latest tally.
While still a significantly small portion of national office space, co-working’s momentum in individual regions and sectors makes it increasingly important in several local office markets.
The Southeast region of the United States leads in total co-working spaces with 1,960 spaces, up 24.2% year-over-year. The West follows closely with 1,709 spaces and has grown 16.7% in the past year.
In the Northeast, there are a total of 1,422 spaces, which is a 17.5% increase over last February. The Midwest has 1,121 spaces, up 27.7% year-over-year. The Southwest has 999 spaces, up 18.8% year-over-year.
The average size of co-working locations has decreased in the past year, which is expected to continue but mostly reflects the sub-sector’s shift into the suburbs as central business districts gradually normalize.
8. HOMEBUILDER CONFIDENCE
Builder confidence dropped to its lowest level in seven months in March, according to the latest reading from the NAHB/Wells Fargo Housing Market Index.
Both sales conditions and prospective buyer traffic for newly built single-family homes worsened during the month. Sales expectations for the next six months held steady.
According to an NAHB statement following the data release, builders continue to face labor and lot shortages, while tariff issues exacerbate material cost challenges.
Meanwhile, builders are beginning to see regulatory relief, such as in the Administration’s recent pause in the 2021 IECC building code requirement.
9. INDEPENDENT LANDLORD RENTAL PERFORMANCE
According to the latest Chandan Economics-Rent Redi Independent Landlord Rental Performance Report, in March 2025, the on-time payment rate in independently operated rental units jumped by 53 basis points (bps), rising to 85.7%.
This month’s 53 bps jump was the most substantial single period of improvement in on-time rental payments in two years.
Compared to a year earlier, on-time payments are down slightly by a quarter of a percentage point (-25 bps). On-time collection rates have now fallen annually for the past twenty (20) consecutive months. However, the pace of annual increase has meaningfully lessened in recent months
The forecast full-payment rate improved for the second straight month, rising to 94.7%.
Western states continue to hold the highest on-time payment rates in the country, led by Idaho, New Mexico, Alaska, California, and Utah.
2-4-family rental properties and single-family rentals held the highest on-time payment rates in February, coming in at 85.7%.
10. RETAIL SALES
US Retail sales rose 0.2% month-over-month in February, rebounding from a downwardly revised 1.2% decline in January but still below forecasts.
Seven of the report’s 13 categories registered a decline during the month. This included food services & drinking places (-1.5%), gasoline stations (-1%), clothing stores (-0.6%), motor vehicle & parts dealers (-0.4%), sporting goods, hobby, musical instrument, & bookstores (-0.4%), miscellaneous store retailers (-0.3%) and electronics & appliance stores (-0.3%).
Meanwhile, increases were seen in sales at non-store retailers (+2.4%), health & personal care stores (+1.7%), food & beverage stores (+0.4%), general merchandise stores (+0.2%) and building materials retailers (+0.2%).
Annually, US retail sales grew 3.1%, following a downwardly revised 3.9% increase in January.
Discussions are heating up around proposals to extend 100% bonus depreciation deductions on certain business assets as tax-extension negotiations gradually take shape.
The 2017 Tax Cuts and Jobs Act (TCJA) offered 100% bonus depreciation on items such as machinery and equipment from 2018 through 2022 before declining by 20 percentage points annually in each year since.
Some advocate for its extension as a lever to grow the economy and create jobs, while reviews of the policy show mixed results.
Scholarly research on the TCJA-based changes shows that the reforms grew capital investment, particularly in the manufacturing sector.
The Joint Committee on Taxation (JCT) finds that extending the 100% level through 2025 and making it retroactive back to 2023 would reduce federal revenues by $3 billion over ten years.
However, an analysis by the Tax Foundation suggests that while restoring 100% bonus depreciation wouldn’t have significant effects on GDP growth in the immediate term, by 2029, it would add an estimated 0.2% to Real GDP.
2. CONSUMER CONFIDENCE FALLS
US consumer confidence slid in February by its fastest pace since August 2021, based on the latest data from the Conference Board.
The Conference Board numbers align with recent developments in the University of Michigan’s consumer sentiment measure, which fell to a seven-month low last month. Consumers show increasing concern about buying conditions for goods and threats to their purchasing power.
Both the present situation index, which measures current assessments of business and labor market conditions, and the expectations index, which looks at the short-term outlook for business and income, declined.
Notably, the expectations index fell within a ‘potential recession’ threshold of below 80 for the first time since June of last year. Inflation expectations also surged during the month.
Through the end of January, some inflation expectations indicators appeared steady, such as the NY Fed’s Survey of Consumer Expectations, which showed stable expectations compared to one year before.
However, the Conference Board data suggests that expectations have unanchored in recent weeks as price pressures resurge and economic uncertainty mounts.
Some of the culprits may be temporary, such as the rise in egg prices or volatility in energy markets. Therefore, policymakers at the FOMC will be keen to zero in on trends in core inflation expectations to assess potential policy implications.
3. STALLING BUSINESS ACTIVITY
US business activity in the manufacturing and service sectors fell to a 17-month low in February as uncertainty over tariffs and the federal budget boggs down what had been a post-election boost in business confidence.
Observing trends in S&P Global’s flash US Composite PMI Output Index, manufacturing and service output fell to an index level of 50.4 in February, its lowest reading since September 2023. A reading above 50 indicates growth, indicating that the sectors barely expanded this month.
Potentially related to both the drop in the PMI and January’s inflation uptick is consumer activity shifting away from services and back towards goods. The services sector drove much of the decline after contracting for the first time in two years. Meanwhile, manufacturing activity rose to an eight-month high.
During the initial pandemic recovery in 2020, goods spending drove both consumer spending and inflation pressures, but the pandemic reopening shifted much of this momentum to services, contributing to our sustained period of inflation.
It’s unclear whether the apparent shift toward goods reflects the temporary effects of consumers trying to get ahead of potential trade restrictions or if we are seeing the impact of falling borrowing costs on producers amid wage and spending stability. There is likely some mix of the two.
4. SURVEY OF HOUSEHOLD EMERGENCY EXPENSES AND DECISION-MAKING
A quarterly survey by Morning Consult that estimates US households’ confidence in their capacity to absorb emergency expenses found that households grew slightly more confident during Q1 2025 relative to the previous quarter but are less optimistic than one year ago.
44% of US adults believe they could cover potential emergency expenses with cash, up from 43% last quarter but down from 47% in Q1 2024.
The survey replicates the hypothetical approach of the Fed’s annual Survey of Household Economics and Decision-making (SHED) while secondarily measuring real outcomes reported by consumers who have recently experienced emergency expenses.
Interestingly, the latest findings show that those who encountered an emergency expense between $200-$600 were able to cover those expenses at a higher rate relative to how they responded hypothetically.
As US consumer confidence statistics drop, surveys that compare confidence levels to real outcomes add an important layer of analysis.
So far, consumers appear to be faring better than expected, but the Morning Consult survey period spanned from January 22-27, leaving questions about the effects of recent key developments, such as an inflation uptick and stalling business activity.
5. FOMC JANUARY MEETING MINUTES
The recently released minutes from the January FOMC meeting indicate that policymakers are cautious about the current high level of uncertainty in the economy as they chart their course for monetary policy adjustments.
The meetings showed that many participants suggested that the committee maintain restrictive policy rates if inflation stays hot amid a largely robust economy.
Conversely, several officials also indicated an inclination to ease rates if labor market conditions weakened, economic growth slowed, or core inflation returned to 2% more quickly.
Meeting participants noted upside risks to inflation, such as potential shifts in trade and immigration policies, geopolitical disruptions to supply changes, and stronger-than-expected household spending.
6. DECLINING BUILDER SENTIMENT
According to data from the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index, home-builder confidence fell sharply in February, reaching its lowest level in five months.
According to NAHB Chairman Carl Harris, builders remain hopeful of the prospect of pro-development policies such as regulatory reform, but rising uncertainty is currently dampening expectations for 2025.
Trade factors again play a role. NAHB points out that 32% of appliances and 30% of softwood lumber comes from imports. The association notably penned a letter to the Trump Administration earlier this month requesting a pause or carve-outs to the proposed tariffs.
In more positive news, the survey also shows that 26% of builders slashed home prices in February, down from 30% in January and the lowest share since May 2024. However, the average rate of price reduction remains consistently around 5%.
7. HOUSING STARTS DROP
Housing starts dropped 9.8% month-over-month to an annualized 1.36 million units in January, down from a 10-month high of 1.51 million in December. January’s performance missed market forecasts of 1.4 million annualized units.
Severe snowstorms and freezing temperatures disrupted construction activity in much of the country, while rising costs of imports and mortgages impeded any potential rebound.
Single-family home starts declined by 8.4% monthly, while multifamily starts fell by a steeper 11.0%.
Most regions saw starts fall, occurring most significantly in the northeast, down 27.6% from December. The South fell 23.3%, while the Midwest fell 10.4%.
8. CRE CAP RATES RISE
According to a recent CRED iQ analysis, cap rates in the CMBS shifted towards the end of 2024, with several property types rising on a quarter-over-quarter basis in Q4.
Office cap rates averaged 7.40% in Q4, up from 7.16% in Q3. Multifamily rates sat at 5.90% on average, slightly increasing from the 5.77% average in the prior quarter.
Meanwhile, retail sector cap rates averaged 6.70%, up from 6.45% in Q3, while Industrial cap rates averaged 6.40%, up from 6.24%. Smaller property types were mixed, with self-storage cap rates climbing from an average of 5.86% in Q3 to 6.20% in Q4, while hotels fell from an average of 7.80% to 7.30%.
With valuations trending in an overall positive direction, the uptick in cap rates reflects some upward movement in operating incomes across key sectors.
9. IMPACT OF FEDERAL WORKFORCE CUTS
Recent cuts to the federal workforce could significantly impact local commerce and commercial real estate in the Washington D.C. area, as explored in a recent analysis by Globe Street.
Increased layoffs in and around D.C. have largely not shown up yet in unemployment claims data. Roughly 9,500 full-time federal workers and 200,000 probationary workers were laid off on the day before the most recent reporting period began, but initial claims rose just 5,000 above the previous week’s level.
However, initial claims figures are seasonally adjusted and may understate the impact of the federal layoffs. Globe Street found that non-adjusted data actually showed a 4.8% week-over-week decrease in initial claims, but the decline was more tepid than the 6.6% projected by seasonal factors, suggesting layoffs are higher than typical for this time of year.
Some economists suggest the layoffs could have far-reaching effects, potentially dampening local consumer activity and housing demand while decreasing revenues from national firms that provide or rely on federal services.
10. INDEPENDENT LANDLORD RENTAL PERFORMANCE
According to the Chandan Economics-Rent Redi Independent Landlord Rental Performance Report, on-time payments to independently operated rental units declined in February, falling by 16 basis points from January to 85.2%.
Conversely, the forecasted full-time payment rate for February, which estimates the effect of late payments that will be received throughout the month, rose for the first time since October.
Western states continue to experience the highest on-time payment rates nationwide, led by Ohio, Utah, Colorado, New Mexico, and Alaska.
2-4 family rental properties and single-family rentals hold the highest on-time payment rates, each at 85.7%
The Federal Reserve held rates unchanged at 4.25-4.50% at its January meeting, on par with market expectations.
Solid labor market performance and somewhat elevated inflation kept officials neutral as they continued to assess the impact of the three consecutive rate cuts made at the end of 2024.
A slight adjustment in the Fed’s meeting statement this month deemphasized inflation’s “easing”, language that accompanied the December decision. Markets initially interpreted the Fed’s change in language as a hawkish signal, dampening equities and sending treasury yields higher. However, markets reverted following Chair Powell’s post-meeting briefing, in which he affirmed that the FOMC feels confident in the economy and its policy options’ flexibility.
Powell confirmed that Fed researchers are keeping an eye on proposed changes to trade, immigration, and regulatory policy due to their potential impact on inflation and employment. However, when pressed about the anticipated effects of these changes, Powell stated that officials would withhold that assessment until specific changes become clearer.
2. TREASURY MARKETS
The current yield on a 10-year US treasury bond is hovering near 5%. While rising long-term yields sometimes reflect an anticipation of higher growth and the higher rates needed to keep the economy from overheating, it may reflect concerns about America’s fiscal trajectory.
Yields climbed in reaction to the FOMC’s January interest rate decision, where the committee held rates unchanged and referenced both confidence and uncertainty about economic developments.
Recently, some fixed-income analysts have warned that rising bond yields signal a higher term premium demanded to fund US debt, reflecting concern about the inflation and fiscal risks from trade uncertainty.
Analysts say bond markets could play out in several ways. On the one hand, a deregulatory push could boost economic potential and dampen the term premium. Meanwhile, a cascading trade dispute or a tax cut extension without significant spending cuts could renew upward pressure on yields.
3. THE AI RACE AND DATA CENTER DEMAND
A shocking AI advancement by Chinese company DeepSeek upended the US tech market this week as investors reassess the dominance of US tech firms in the AI race. It also sparked debate about domestic data center demand.
Data centers have garnered increased attention in recent years as the AI race takes off due to the nascent technology’s high electricity demand. According to the investment bank Jefferies, projected AI needs represent 75% of the overall US electricity demand through 2035 in most forecasts.
However, DeepSeek raised the stakes for US AI firms after building a generative AI model with significantly less hardware and energy, challenging the energy-demand thesis driving data center development. US utility firms dependent on data center demand also saw their stock prices take a hit following the DeepSeek news.
Nonetheless, a more competitive AI space would likely create down-the-road opportunities for data centers. As AI infrastructure becomes cheaper to build and AI applications become easier to produce, it could funnel new capital into startups and widen the customer base for data center providers.
4. BUSINESS UNCERTAINTY
According to the Atlanta Federal Reserve’s January 2025 Survey of Business Uncertainty, sales revenue growth expectations have risen in recent months but remain more uncertain compared to pre-pandemic averages.
The survey, which polls about 1500 senior managers at US firms monthly, shows that year-ahead sales growth expectations are the highest since the end of 2022. Additionally, expected employment growth has improved recently, while uncertainty surrounding employment growth has returned to pre-pandemic levels.
Sales uncertainty has fallen but remains high by historical standards. As of January 2025, year-ahead sales growth uncertainty is at its lowest since 2020 but continues to hover close to around 4% compared to a pre-pandemic coalescing around 3%.
5. CONSUMER CONFIDENCE
US consumer confidence fell at the start of the year, according to the latest reading from the Conference Board.
While some deterioration was expected following a holiday season bump, the index, which measures American’s assessment of both current conditions and their six-month outlook, fell steeper than most economists expected.
The current conditions index tumbled 9.7 points in January, while the more narrowly scoped labor market conditions index fell for the first time since September.
American’s short-term expectations for income, business, and the job market also fell. However, anticipation of a recession over the next 12 months remained relatively low.
6. RETAIL SALES
US retail sales were up 0.4% month-over-month in December, according to the latest data from the Census Bureau.
The reading reflects some added momentum to consumer activity to close 2024 and prompted some economists to revise up their growth forecasts for 2025.
While the holiday season contributed to the uptick, sales rose 4.2% from December 2023. According to the retail trade report, strong demand for motor vehicles and non-store retailers helped drive the increase, with sales up 8.4% year-over-year and 6.0% year-over-year, respectively.
Strong retail data also likely contributes to the Fed’s caution around rate cuts as they monitor demand indicators to prevent an inflation resurgence.
7. LOGISTICS PROPERTY RENTS DROP
According to new data from Prologis, rent growth for US logistics properties turned negative in 2024, the first drop in 15 years.
Rents in the US and Canada fell by 7% on average, steeper than the 5% decline experienced globally. The decline was partly led by slower growth in markets with recently high competition rates, such as Phoenix.
US logistics rents are still up 59% compared to 2019, leaving most inventors well positioned, while lower rents could entice new tenants looking to scoop up cheap space in the high-demand sector..
8. INDEPENDENT LANDLORD RENTAL PERFORMANCE
According to the Chandan Economics-RentRedi Independent Landlord Rental Performance report, the on-time payment rate in independently operated rental units slipped by 70 basis points (bps) in January and is down 112 bps year-over-year, falling to 85.0%.
On-time collections had stabilized for the latter half of 2024, holding between 85.4% and 85.8% from July through December. January’s estimate signals some deterioration in tenant payments—as it currently stands, this month’s on-time collection rate is the lowest on record since April 2021.
Western states continue to hold the highest on-time payment rates in the country, led by Idaho, Utah, Nevada, North Dakota, and Colorado.
Meanwhile, 2-4-family and single-family rental properties held the highest on-time payment rates in January, reaching 85.2%.
9. BEIGE BOOK
According to the Federal Reserve’s latest Beige Book, economic activity increased “slightly” to “moderately” in most regions between late November and early December, driven by higher-than-expected consumer holiday spending.
Construction activity generally declined as producers reported high materials and financing costs that dampened business expansion. Residential real estate activity was on balance unchanged as elevated mortgage rates kept demand at bay. Commercial real estate sales ticked up.
Manufacturing declined slightly, with many manufacturers reportedly stockpiling inventories in anticipation of higher tariffs. Meanwhile, truck freight volumes fell.
10. NEW HOME SALES
Sales of newly built single-family homes jumped by 3.6% in December to a seasonally adjusted annualized rate of 698k, the highest increase since September and well above market expectations.
Sales growth was sustained despite a surge in mortgage rates during the month. The West region of the US led by volume, selling at an annualized rate of 154k units per year. The West was followed by the Northeast, with an annualized rate that would amount to a 41.7% increase. Sales rates in the South and Midwest fell.
The median price of a newly built single-family home was $427k, up from $402k in December.
According to Deloitte’s 2025 look-ahead, the current outlook for Commercial Real Estate is dominated by expectations surrounding global interest rates, renewed revenue sentiment, and the potential for industry-wide shifts in areas such as AI, climate resilience, and regulation.
Rates are projected to fall across most major economies in 2025 — however, so is growth. Deloitte’s forecast projects that Real US GDP will fall from a projected 2.4% annual growth rate in 2024 to 1.1% in 2025. The Fed’s interest rate pivot has boosted CRE market sentiment. Still, uncertainty around the timing and volume of rate cuts will keep some capital deployment at bay until things become clearer.
Revenue growth is expected to recover, with 88% of global executives surveyed by Deloitte anticipating higher revenue next year compared to 2024. For context, 60% of executives forecasted declines coming into 2024. In the year ahead, roughly two in three respondents expect revenue to increase by more than 5%.
Data and technology, including AI development, are seen as key drivers of growth in the coming years. 81% of executives plan to increase their technology investments.
Climate resilience also continues to be an increasing focus of CRE leaders. 76% of survey respondents plan to invest in significant energy retrofits over the next 12-18 months.
2. CPI INFLATION
According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 0.2% month over month in October and 2.6% year-over-year, each roughly in line with expectations.
Core-CPI, which removes the more volatile food and energy components, accelerated 0.3% month-over-month, boosted by shelter costs, which accounted for half of the gain in overall CPI. Meanwhile, the energy component held flat while the food index climbed by 0.2% in the month.
Other notable increases included used vehicles, which rose 2.7% month-over-month, and airfares, which jumped 3.2% during the month.
Inflation-adjusted wages increased modestly, rising 0.1% month-over-month and 1.4% from one year ago.
With CPI arriving roughly in line with expectations, the reaction from the interest rate futures market was negligible. At their upcoming December policy meeting, the FOMC is projected to make one additional quarter-percentage-point cut before the end of the year.
3. COMMERCIAL PROPERTY PRICES
According to the MSCI-RCA Commercial Property Price Index, national commercial real estate prices fell just 0.1% month over month and -1.5% year-over-year through October. This performance represents a gradual recovery of commercial prices as the market reaches a cyclical inflection point.
Apartment prices fell by 0.3% from September and 6.1% year-over-year through the end of October. Retail property prices fell 0.1% from September and 1.9% year-over-year.
Industrial again emerged as the only major asset group to post a monthly or annual increase, rising 0.6% month-over-month and an impressive 7.6% over the past 12 months.
The Office sector as a whole fell by 0.1% month-over-month, but suburban office prices climbed by 0.1%. All office segments continue to post year-over-year declines — but suburban office prices have gradually improved this year, resulting in a positive three-month moving average for the broader office sector.
4. INTEREST RATES
According to the Chicago Mercantile Exchange’s Fed Watch Tool, there is a 55.5% chance that the FOMC will follow through with a 25-basis point cut at their December policy meeting, reflecting a relatively split futures market. The forecast has declined from just a week earlier when futures markets priced in an 82.5% probability of cut.
The split sentiment reflects monetary doves who, on the one hand, reference a recent labor market slowdown and shift in the Fed’s dual mandate focus to predict further accommodation. On the other hand, monetary hawks note strong economic growth and Fed officials’ relative caution over cutting too fast as evidence that rates may remain where they are as we turn to the new year.
At the FOMC’s November meeting, the committee voted to cut the Federal funds rate by 25 basis points, following up on their 50-basis point cut in September that began their pivot to accommodative monetary policy.
5. NON-BANK CRE BORROWING
A recent Altus group survey investigated the experiences that commercial real estate borrowers have had with non-bank lenders and polled their expectations, recommendations, and challenges.
Borrowers polled expressed a desire for greater efficiency and consistency from their lenders. Bank borrowers expressed higher overall satisfaction with their CRE lenders, while non-bank borrowers referenced flexibility and service as the top factors for their choice.
Non-bank borrowers reported fewer steps to secure financing than bank borrowers. However, their deals tended to move more slowly. Moreover, some expressed higher levels of concern about managing market risks and challenges they expect to face in the coming years.
6. NAHB HOUSING MARKET INDEX
The latest data from the National Association of Home Builders’ Housing Market Index shows that it reached its highest level in seven months during November, exceeding expectations.
The index received a post-election bump, as builders expressed confidence that the Republican sweep of Congress and the White House will increase the likelihood of significant regulatory relief and boost construction activity.
The current sales conditions indicator rose on the month, as did the gauge that measures sales expectations for the next six months. Prospective buyer traffic also posted a modest gain from October.
There was also a modest decline in the share of builders cutting prices and their amounts. 31% of homebuilders slashed prices in November, compared to 32% in October, while the average price reduction was 5%, slightly below the 6% rate posted in October.
7. INDEPENDENT LANDLORD RENTAL PERFORMANCE
According to the latest report from Chandan Economics, the on-time payment rate in independently operated rental units remained flat at 85.5% in November compared to the previous month.
On-time collections are down by 70 bps from a year earlier. Moreover, compared to the post-pandemic peak of 88.2% set in April 2023, on-time payments are down by 279 bps, reflecting some sustained performance deterioration.
Still, there are signs that on-time collections are stabilizing. For the past five months of data, on-time payment rates have held between a low of 85.3% and a high of 85.7%.
Trends within key rental subsectors reveal a slight performance gradient. Of the three tracked property sub-types, properties with 2-4 rental units and single-family rentals (SFR) led the way in November 2024, with the two subsectors holding an on-time payment rate of 85.7%, respectively. Multifamily properties sat slightly lower at 85.1%.
Measured by State, western-located properties continue to outperform the rest of the country. In November 2024, on-time payment rates stood highest in Alaska (93.7%), followed by Nevada (91.9%), Utah (91.4%), Colorado (91.4%), and New Mexico (91.1%).
8. ENGINEERING & CONSTRUCTION INDUSTRY OUTLOOK
According to Deloitte’s 2025 Engineering and Construction Industry Outlook, the improving interest rate outlook, technological integration, and navigating the policy landscape will guide the industry over the next year.
Falling rates are expected to boost construction demand across various segments and create growth opportunities in 2025. However, labor market challenges persist. The engineering and construction sector faces a significant talent shortage, posting an average of 382k job openings between August 2023 and July 2024.
Cost overruns from inflation and interest rates will incentivize firms to focus on value creation and sustaining growth through strategic divestitures and rebalancing capital allocation. Large construction firms may optimize portfolios by divesting noncore assets and doubling down on core investments.
Like other sectors, adopting AI and other digital tools to enhance productivity and address labor gaps will be crucial to the engineering and construction field. Technologies such as digital twins, robotics, and generative AI will continue to transform operations in the industry.
The policy outlook is also key. Recent federal investments through the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), and the CHIPS and Science Act will continue to trickle into markets in the coming year. The activity is expected to drive growth in the manufacturing and energy sectors and generate downstream demand for engineering and construction firms.
9. HOUSING INVENTORY REBOUND
According to a recent analysis by ResiClub, 54 of the nation’s 200 largest housing markets have inventory levels above their pre-pandemic levels, a significant jump from just 17 at the end of 2023.
From October 2019 to October 2021, the number of US actively listed homes fell from 1.2 million to just 566k, a 53% drop in just two years.
However, inventory is gradually recovering, reaching 954k through October 2024, still a large but more modest 21% below the 2019 benchmark.
Smaller markets have tended to be the ones to see the most recovery. Huntsville, AL, Killeen-Temple, TX, and Lubbock, TX, have experienced the strongest post-pandemic recoveries but rank 108, 119, and 162, respectively, in national metro size.
The Bridgefield-Stamford-Norwalk, CT metro remains the furthest below pre-pandemic levels, followed by Connecticut’s largest metro area, Hartford-East Hartford-Middletown. Peoria, IL, ranks the third furthest below 2019 levels.
10. NMHC QUARTERLY SURVEY OF APARTMENT CONDITIONS
According to the Q3 NMHC Survey of Apartment Conditions, Multifamily financing and sales volume reached their highest level since 2022 during the third quarter.
43% of respondents reported higher sales in Q3 2024 compared to 32% during the previous quarter. With the Fed’s first interest rate cut only coming in September, the early pace of thawing deal activity is an encouraging indicator for the sector.
The equity financing gauge rose from an index level of 49 in the previous quarter to 67 in the Q3 reading. In October 2023, the reading stood at just 18.Optimism increased around debt financing, with 62% of respondents seeing now as a better time to take out a Multifamily mortgage, compared to just 37% who expressed this sentiment in Q2.
Looking market to market, 38% of respondents listed “primary markets” like New York, San Francisco, Los Angeles, and Miami as benefiting from sales activity better than the secondary or tertiary markets that dominated initial post-pandemic activity. Still, roughly 45% saw no change.
According to the October 23rd release of the Federal Reserve’s Beige Book Summary of National Economic Activity, activity has changed little in nearly all districts since early September, though two districts have reported modest growth.
The latest Beige Book provides an additional glimpse at how the US economy has performed in the weeks leading up to and following the Fed’s interest rate pivot.
In early September, macroeconomic and labor data persuaded some observers, including many Fed officials, that it was time to move into a more accommodating stance with slowing inflation and economic activity.
In the weeks following the cut, robust jobs data and a slight acceleration in consumer prices have dampened the worries surrounding growth and caused markets to rethink their interest rate projections. Treasury yields have grown, showing that markets expect a higher new normal for interest rates.
Nonetheless, the relatively unchanged nature of economic activity, according to the anecdotal Beige Book, offers little clarity on the question. Economic sentiment was surveyed between August 27th and October 18th, with the interest rate cut coming in the middle of the survey period and unlikely to have significantly impacted week-to-week activity shifts.
2. MORTGAGE DEMAND & INTEREST RATES
Mortgage applications fell by 6.7% during the week ending on October 18th, according to the latest data from the Mortgage Bankers Association. It was the fourth consecutive weekly decline.
New mortgage applications fell roughly 5.0% during the week, while refinance applications fell 8.5% week-over-week.
The latest data comes one week after a sharp 17% drop in overall mortgage activity and is in line with the increases in benchmark interest rates that have occurred since the start of October.
The ongoing acceleration in benchmark rates is in reaction to strong recent solid economic data such as the September jobs report, and better-than-expected retail sales, and unemployment claims data, with Treasury markets reflecting doubt that the Fed will cut rates as quickly as markets were previously pricing in.
3. DEBT MARKET OPPORTUNITIES IN THE OFFICE MARKET
Work-from-home headwinds and elevated interest rates have stifled the US Office sector — but a recent report by Hines delves into why an upcoming wave of loan maturities may create an opportunity for new funding mechanisms.
The analysis discusses signs of higher-quality office assets performing well in the new work-from-home normal. Class A buildings represent roughly 27% of the US Office stock.
With valuations down and the work-from-home shift largely priced in, the risk is falling for newly originated loans, and lower LTVs could mitigate the risk of any principal loss. Higher yields on debt may also provide further cushioning.
As property owners look to fill the gap between equity and what is likely to be smaller senior mortgages, funding opportunities in the mezzanine are likely to multiply, the analysis finds.
4. RETAIL SALES
Retail sales jumped by 0.4% between August and September, a significant increase above the 0.1% monthly rate recorded in August and beating consensus forecasts of a 0.3% rise.
Misc. store retailers recorded the most significant jump in sales, rising by 4% during the month. Clothing sales were up 1.5%, health and personal care sales were up 1.1%, and food and beverage retailers saw a 1.0% increase.
Other retail groups experiencing month-over-month increases in sales growth include food services and drinking places (+1.0%), general merchandise stores (+0.5%), non-store retailers (+0.5%), sporting goods, hobby, musical instrument, and bookstores (+0.3%), and building material and garden equipment supply dealers (+0.2%).
Conversely, electronics and appliance store sales fell by 3.3% month-over-month, while gas stations and furniture stores experienced declines of 1.6% and 1.4%, respectively.
5. CMBS DELINQUENCIES JUMP
CMBS Delinquencies continue to climb across all property types, with the indicator tracked by Trepp up 26 basis points to 5.70% in September. The delinquency rate is up 131 basis points over the past 12 months.
The Retail sector was a key contributor to the increase, accounting for roughly 50% of the monthly rise in the headline rate. The Retail delinquency rate rose 86 basis points in September to 7.07%, its first time crossing the seven percent threshold since April 2022.
Office accounted for 37% of the $2 billion increase in overall delinquent loans in the CMBS market, up 39 basis points to 8.36%.
Lodging and Multifamily delinquencies also climbed, up 32 and 3 basis points respectively.
Industrial was the sole sector to see a decline in delinquencies, falling eight (8) basis points to 0.32%.
6. COMMERCIAL FORECLOSURES
According to the most recent monthly US Commercial Foreclosures report by ATTOM, while commercial foreclosures appeared to have peaked in May 2024, they remain elevated over pre-pandemic figures.
Foreclosures began steeply rising in June of 2023 before peaking at 752 in May 2024. In September, ATTOM registered 695 commercial foreclosures, a modest rise from summer numbers, suggesting that foreclosures may settle into higher equilibrium while CRE dynamics continue to transition.
According to historical data, foreclosure activity has seen large fluctuations over the past decade shaped by economic conditions and structural shifts, such as during the COVID-19 pandemic. The decade high remains an October 2014 total of 889 before foreclosures began to decline during the latter half of the 2010s.
7. CONSUMER SENTIMENT
According to preliminary estimates, the University of Michigan Consumer sentiment index declined in October to 68.9 after reaching a five-month high of 70.1 in September and arrived slightly below a forecasted level of 70.8
October ends consecutive monthly increases for the index, which experienced a relatively steady decline across the first six months of the year. The index started the year at 79 points in January and reached a year-to-date low of 66.4 in July.
Both the current conditions and the expectations sub-indices weakened in October.
Year-ahead inflation expectations rose slightly to 2.9% from 2.7% the month before, aligning with the slight uptick in price pressures experienced between September and October.
The five-year-ahead outlook for inflation eased from 3.1% to 3.0%.
8. INDEPENDENT LANDLORD RENTAL PERFORMANCE
On-time rental payments in units operated by independent landlords jumped higher in October 2024, reversing a trend of four consecutive declines.
An estimated 85.5% of tenants in independently operating rental units completed their monthly payments on time. The on-time payment rate improved by 30 basis points (bps) from the prior month, though it remains down by 79 bps from the same time last year and 275 bps from the post-pandemic peak.
Following exceptional apartment sector rent growth in 2021 and 2022, on-time payments began falling in the Spring of 2023 — from a high of 88.3% to a low of 85.2% in September 2024. However, while on-time collection performance has deteriorated in the past year, the October data offer a hopeful sign that the worst has passed.
Of the three tracked property sub-types, properties with 2-4 rental units had the highest on-time payment rate in October 2024, coming in at 85.7%. Single-family rental (SFR) followed next with an on-time payment rate of 85.6%. Meanwhile, average on-time payment rates in multifamily properties sat slightly lower at 85.1%.
Measured by State, western-located properties continue to outperform the rest of the country. On-time payment rates stand highest in October 2024 in Nevada (94.5%) — followed by Utah (94.1%), Idaho (92.5%), Colorado (92.2%) and California (91.7%).
9. FOREIGN-BORN HOUSEHOLDS MAKE UP ONE-FIFTH OF US RENTAL DEMAND
According to a recent Chandan Economics analysis of Census Bureau data, out of the 36.3 million rental households in the US, 9.4 million have a head of household born outside the country — accounting for 21.0% of total rental demand.
Foreign-born US households are roughly 30% more likely to be renters than their US-born neighbors. With US population growth projected to sink lower in the coming decades — due in part to a falling birth rate — the dependence on foreign-born rental demand could continue to accelerate in the years to come.
Over the past two decades, the foreign-born share of US rentals has gradually grown, from 17.8% of rental households at the turn of the century to a peak of 21.1% in 2016. Between 2017 and 2020, the share declined to 20.0% before climbing again in 2021 and 2022, reaching its previous high.
Between 2000 and 2022, the number of foreign-born rental households in the US has grown by 47.6% — more than double the growth for US-born rental households (+20.5%) over the same period.
10. HIGHER INFLATION FOR LOW-INCOME HOUSEHOLDS
A recent analysis by the Federal Reserve of Minnesota dives into mounting research showing diverging inflation patterns for lower vs higher-income households experienced both before and after the pandemic.
Their modeling finds that since 2005, prices have risen 64% on average, for the lowest-income households, while the highest-income households have seen prices in their basket increase 57%.
Zeroing in on the post-pandemic inflationary period, the poorest households have seen prices rise about two percentage points more than the richest ones—or about 8.3% faster than the average consumer price index (CPI) over this period.
While these margins appear small in absolute terms, the differences are amplified when considering several underlying factors that affect poorer households, including the varying ability of households to substitute their purchases and how modest changes in purchasing power compound changes in income over time.
