Housing slowing down, Retail and Office Trends

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Housing slowing down link

• Homebuilder traffic is down this spring, with weekly data showing a weaker selling season than in past years. High mortgage rates around 7% are one of the main reasons for the slowdown.

• Consumer confidence is at record lows, which is keeping many buyers on the sidelines. This hesitation is affecting demand even in typically active spring months.

• The number of homes for sale is rising, adding more pressure on the market. The increase in inventory is not matched by buyer interest, signaling a possible shift in market momentum.

Senior housing occupancy growth is outperforming other major CRE sectors

• Senior housing occupancy reached 88% in Q1 2025, nearing 2008 highs and outperforming other CRE sectors for the first time in nearly two decades. Secondary markets hit 89.1%, with primary markets at 87.4%, showing widespread demand across regions.

• East North Central, Mountain, Northeast, Southeast, Southwest, and West North Central markets are expected to exceed their 2008 peaks by the end of 2026. The Northeast already leads with 90% occupancy, showing the strongest recovery.

• Investor interest is rising due to high occupancy and limited new supply, but tight labor markets and high construction costs are barriers. Modular construction and off-site fabrication are being explored to cut build times and costs.

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Office leads as CRE mortgage volume rises 42% year-over-year link

• Office property loans shot up 205% year-over-year in Q1 2025, far outpacing other segments. Healthcare loans rose 159%, while multifamily loans climbed 39%, showing strong investor interest in these categories.

• Depository institutions led the lending surge with an 83% increase in originations. Life companies followed at 61%, with CMBS and GSE loans also rising by 37% and 20% respectively.

• Industrial and retail sectors saw slight declines, with industrial originations down 2% and retail down 3%. This highlights a shift in lender focus toward office, healthcare, and multifamily assets.

Valuations Surge for Data Center REITs link

• Data center REITs now have the second-highest average enterprise value, just behind tower REITs. Their total value surpasses all industrial REITs combined, including eight major players.

• Cap rates for data centers are the lowest across asset classes at 4.4%, showing how strong demand is. This low rate suggests investors expect stable, long-term returns.

• Growth is fueled by AI tech, big-ticket M&A deals, and massive development projects. Firms like Digital Realty, Equinix, and Iron Mountain are leading this surge.

Impact of economic conditions on commercial real estate link

• Industrial leasing is showing early signs of slowdown, with CBRE projecting a 5% to 10% decline this year due to trade policy shifts and inflation risks. Dallas and Kansas City are expected to benefit from stronger trade ties with Mexico and Canada.

• Office leasing rose 18% quarter-over-quarter in Q1 2025, with 32 of the 40 largest U.S. markets reporting improved absorption. Cities like New York are leading the recovery, though economic uncertainty is prompting many firms to opt for lease renewals over new expansions.

• Construction has dropped sharply, with office development down 82% since Q1 2020 and retail completions hitting their lowest in a decade. High financing and construction costs are suppressing new supply, which is keeping availability low in many markets.

Renters snapping up units at all-time highs in Augusta, GA link

• Augusta, GA saw record apartment demand in early 2025 with 1,351 units absorbed, more than double the 675 units added. This is over twice the city's five-year average of 600 units annually.

• Occupancy surged by 440 basis points over the past year, reaching 95.3% in April. This is well above Augusta’s long-term occupancy average.

• Other small markets also hitting all-time highs in absorption include Myrtle Beach, Lakeland, Pensacola, and Trenton. All of these cities have apartment stocks between 30,000 to 50,000 units.

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Charted: The U.S. Cities Gaining and Losing Corporate HQs link

• Dallas gained 100 new headquarters between 2018 and 2024, making it the fastest-growing corporate hub in the country. Austin followed with 81, while Nashville, Phoenix, and Houston each saw over 30 gains.

• The San Francisco Bay Area lost 156 headquarters in that same time, the most of any U.S. region. Greater Los Angeles lost 106, driven largely by high taxes and regulation.

• Texas cities like Dallas and Austin are thriving due to low taxes, a growing talent pool, and business-friendly policies. In contrast, California has lost 275 headquarters since 2018, costing the state billions in tax revenue.

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That Ceiling though!

Link to the listing

That's all folks.

Cheers,

Vidit

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