U.S. Economic Update

Economic Growth

• Real GDP increased at a 1.5% annualized rate in Q2 2026, following 2.1% growth in Q1, indicating continued expansion but a slower pace of growth.

• July personal consumption expenditures increased 0.2% month-over-month, while personal income rose 0.4%, pointing to continued consumer support for the economy.

Federal Reserve & Interest Rates

• The Federal Reserve held the federal funds target range at 3.50%-3.75% at its July 28-29 meeting, with the decision passing 9-3.

• Three FOMC members dissented in favor of a 25-basis-point hike, underscoring continued concern about inflation and leaving the September meeting highly data-dependent.

Inflation & Labor Market

• July CPI increased 0.1% month-over-month and 3.4% year-over-year, remaining above the Federal Reserve’s 2% inflation objective.

• The unemployment rate held at 4.1% in July, while nonfarm payroll employment declined by 23,000; May and June payroll gains were also revised lower by a combined 103,000.

Financial Markets

• Long-term rates remain a key CRE constraint, with the 30-year Treasury yield moving above 5.3% in August and keeping refinancing economics challenging for highly leveraged assets.

• Credit markets remain functional, but borrowers are increasingly being evaluated on property-level cash flow, leverage and debt yield rather than simply market liquidity.

Commercial Real Estate Update

Capital Markets

• Domestic private-label CMBS issuance reached $76.2 billion through July 2026, according to Trepp, with $58.0 billion in SASB issuance and $16.1 billion in conduit issuance.

• Office represented 22.7% of issuance, or $17.3 billion, making it the largest property type by issuance through July; industrial and multifamily each represented roughly 17.3%.

Property Fundamentals

• Office fundamentals continued to improve in Q2: CBRE reported vacancy of 18.3%, down 30 basis points quarter-over-quarter, with 12.6 million square feet of quarterly net absorption and 38.9 million square feet over the past four quarters.

• Industrial vacancy fell to 6.5% in Q2, the first quarterly decline since Q2 2022, while multifamily vacancy declined to 4.3%. Retail availability remained tight at 4.9%, supported by limited new construction.

Debt Markets

• Trepp’s overall CMBS delinquency rate increased 51 basis points to 7.86% in July, with the delinquent balance rising $3.52 billion to $47.5 billion.

• Office remains the most stressed major property type, with an 11.91% delinquency rate in July. Trepp’s August hard-maturity cohort totaled $5.49 billion, including $3.04 billion with debt yields below 8.0%, highlighting continued refinancing pressure.

Outlook

• Capital markets are improving, but the recovery remains highly selective. Stronger liquidity and CMBS issuance should support transaction activity, while debt-yield constraints continue to limit refinancing for weaker assets.

• Office and other transitional assets remain the primary source of credit stress, while high-quality industrial, retail and multifamily properties continue to attract lender and investor demand.