June 2025 Market Update
Economic Climate:
According to the US Commerce Department, a key inflation gauge moved higher in May in the latest sign that prices remain stubbornly elevated while Americans also cut back on their spending in May.
Prices rose 2.3% in May compared with a year ago, up from just 2.1% in April, the Commerce Department said Friday. Excluding the volatile food and energy categories, core prices rose 2.7% from a year earlier, an increase from 2.6% the previous month. Both figures are modestly above the Federal Reserve’s 2% target. The Fed tracks core inflation because it typically provides a better guide to where inflation is headed.
As reported by Reuters, the weekly jobless claims report from the Labor Department on Thursday, the most timely data on the economy’s health, showed state unemployment benefit rolls in mid-June increasing to the highest level in 3-1/2 years. Though layoffs remain historically low, hiring has been tepid, with economists saying broad import tariffs are making it difficult for businesses to plan ahead.
Goldman Sachs vice chairman Robert Kaplan thinks the US economy would be in a deflationary situation right now if not for the wave of tariffs. Kaplan, the former president of the Federal Reserve Bank of Dallas, told CNBC in a new interview that recent inflation numbers suggest the possibility of rate cuts later this year.
Commercial Real Estate Market Overview:
- The national office vacancy rate was 19.4% in May, up 160 basis points year-over-year, with occupancy unlikely to rise in near future.
- According to new insights from real estate services firm Avison Young, sectors such as industrial, data centers, multifamily, and experiential retail are leading the way, while hybrid work continues to redefine the office space market.
- As per CBRE, although commercial real estate values declined substantially as interest rates climbed, fundamentals remained robust, and levels of new supply began to taper off. Most properties saw price reductions of 20% or more in recent years (closer to 40% for office assets). This resetting of asset values has made for some compelling investment opportunities.
Defeasance Market:
- The defeasance market continues to see moderate activity with a balance of sales and refinancing, as owners look to lock in profits, trade up and / or lock in rates.
- The asset classes seeing the most activity includes; Self Storage, Multifamily, Retail, Hospitality, NNN, Industrial as well as some smaller balance notes (i.e. less than 5 million).
