CRE This Week - What's impacting the United States market?
February 17, 2025 - US commercial real estate news, macroeconomic indicators and market analysis.
Week of February 17, 2025
Welcome to the latest edition of CRE This Week, curated by Altus Group’s US research team.
Our team has handpicked pertinent and noteworthy market indicators, articles, original research, and significant industry dates that are critical to the US commercial real estate sector. We understand that your time is valuable, so we're excited to deliver research that helps you stay informed and saves you some time each Monday morning.
For more key economic indicators that matter to commercial real estate, see Top Indicators by Major Asset Type.
Economic print
Macro economic factors impacting CRE
NFIB Small Business Optimism Index
The National Federation of Independent Business (NFIB) released Small Business Economic Trends report for January on February 11. The Small Business Optimism Index fell 2.3 points month-over-month to 102.8, though it remains above the 50-year average of 98.
While optimism remains high, the Uncertainty Index (which measures responses of “Don’t Know” and “Uncertain” across six questions) rose 14 points to 100, reversing two months of declines and signaling rising uncertainty amidst the potential implementation of tariffs. Small businesses, key demand drivers for retail, office, and industrial space, are growing more cautious, with the net percentage expecting higher sales down 2 points month-over-month and capital outlay plans dropping 7%, suggesting tempered expansion and investment ahead.
The U.S. Bureau of Labor Statistics Released the Consumer Price Index (CPI) for January on February 12, showing that prices rose 0.5% month-over-month and 3.0% year-over-year, on a seasonally adjusted basis. Core CPI, excluding volatile food and energy prices, rose 0.4% month-over-month and 3.3% year-over-year.
Both headline and core measures of inflation came in hotter than expected for the first month of the year. As both the month-over-month and year-over-year rates of change across both measures accelerated through January, the disinflationary trend from the June 2022 peak-inflation period appears to be petering out, raising uncertainty around future Federal Reserve monetary policy decisions.
On February 13, the U.S. Bureau of Labor Statistics Released the Producer Price Index (PPI) for January. The January’s PPI for final demand increased 3.5% on a year-over-year basis and 0.4% on a month-over-month basis. After moving up 0.4% in the prior month, the PPI for final demand less foods, energy, and trade services rose 0.3% in January, but was up 3.4% on a year-over-year basis.
While PPI does not get as much attention as the other inflation indicators (notably CPI and PCE), it is a helpful metric to understand pricing pressures further up the supply chain. The rising input and producer price pressures revealed in the January release (both headline and core), coupled with the CPI print from the week, showed that inflation is being felt throughout value chains.
The U.S. Census Bureau released its advance monthly report on retail and food sales for January 2025 on February 14. Sales fell 0.9% month-over-month to $723 billion but were up 4.2% from the same month a year prior. Excluding motor vehicles and parts dealers, sales fell 0.4% month-over-month but were up 3.7% year-over-year, the highest annual growth rate since March 2024. Retail sales fell more than expected in January, in part due to revisions to December 2024 figures.
Trends in brick-and-mortar spending carry important implications for commercial real estate. Grocery store sales are accelerating, up 3.9% year-over-year, the fastest annual growth rate since March 2023. Meanwhile, spending at sporting goods stores and bookstores has declined annually in all but one month since July 2023. General merchandise stores have remained resilient, posting annual growth nearly every month since the pandemic began. However, after adjusting for inflation, sales in some categories may be flat or declining. Given these dynamics, it will be increasingly important for property owners to assess tenant credit quality and curate a tenant mix that aligns with evolving consumer spending patterns in an uncertain economic environment.
News
News to know
Twenty percent of outstanding commercial mortgages, totaling $957 billion, will mature in 2025, reflecting a three percent increase from the previous year, according to the Mortgage Bankers Association. Despite the Federal Reserve’s 100-basis-point rate cut in 2024, longer-term interest rates rose by the same margin, leading many loans that were set to mature in 2024 to be extended into 2025. Loan maturities vary by sector, with 35 percent of hotel loans, 24 percent of office loans, and 22 percent of industrial loans coming due this year. Among capital sources, 29 percent of CMBS loans and 35 percent of credit company loans will mature, while only three percent of agency-backed multifamily and healthcare mortgages will reach maturity. The path forward remains challenging, with longer-term rates expected to stay rangebound, but opportunities will differ across property types, capital sources, and markets.
Hyatt to buy Caribbean resort owner Playa for $2.6 Billion | Bloomberg | February 10, 2025
Hyatt Hotels Corp. has agreed to acquire Playa Hotels & Resorts NV for $2.6 billion, expanding its all-inclusive resort footprint in the Dominican Republic, Jamaica, and other markets. Hyatt will pay $13.50 per share and already owns 9.4% of Playa’s outstanding shares. The acquisition aligns with Hyatt’s previous moves in the all-inclusive sector, including its 2021 purchase of Apple Leisure Group and a joint venture with Grupo Piñero. Unlike other major hotel companies focusing on asset-light strategies, Hyatt is adding owned real estate to its portfolio but plans to sell most of Playa’s properties to third-party buyers. Analysts have raised concerns about the acquisition’s alignment with Hyatt’s stated strategy, especially given Playa’s mix of non-Hyatt branded properties. Hyatt expects to finance the purchase with new debt and aims to generate at least $2 billion from asset sales by 2027. The transaction is expected to close later this year.
Mergers and acquisitions in commercial real estate are expected to accelerate in 2025 as macroeconomic conditions improve and public market valuations recover. After a sluggish 2024 with only $12.9 billion in REIT M&A activity, industry experts anticipate a resurgence in large transactions and portfolio consolidations. Factors such as net asset value disparities, reduced bid-ask spreads, and pro-business policies are driving increased public-to-private and inter-REIT deals. Notably, Bill Ackman’s $1.5 billion bid to take Howard Hughes Holdings private has set the tone for the year. Private capital, led by firms like Blackstone, continues to play a dominant role in acquiring public REITs, leveraging significant dry powder for acquisitions. As scale and specialization become increasingly critical, consolidation within sector-specific REITs is expected to shape the market in the coming years.
The office sector is showing signs of stabilization and growth as the nation’s largest tenants signed bigger leases in 2024, reversing a years-long contraction. The average lease size among the top 100 office users rose 8% to 288,834 square feet, with total leasing volume reaching 28.9 million square feet, up from 26.8 million in 2023, according to CBRE. Tech firms led the rebound, signing 29 of the largest leases totaling 9.3 million square feet, followed by finance and professional services. Renewals made up 68% of the largest leases, reflecting cost considerations and limited availability of high-quality office space. Manhattan remained the top market, with Washington, D.C., Dallas-Fort Worth, Silicon Valley, Chicago, and Boston also seeing significant activity. A growing preference for prime, amenity-rich office districts is shaping leasing decisions, with 60% of the top 100 leases located in mixed-use environments despite such areas representing just 31% of total U.S. office inventory.
The senior housing sector is shifting from oversupply to a looming shortage as the oldest baby boomers turn 80 next year, driving a projected increase of over four million people aged 80 and older by 2030. However, new development remains sluggish, with only 191,000 units expected by 2030, far short of the 560,000 needed. High construction costs and interest rates have led major players like Welltower and Ventas to focus on acquisitions rather than new builds, as existing properties remain 20 to 30 percent below 2019 prices. While affordability remains a concern, with private senior housing averaging $4,100 per month, boomer wealth presents an opportunity since many have paid-off homes and sufficient income. At the same time, a significant portion still prefers to age in place, aided by technological and design improvements. Future development will likely focus on luxury communities catering to affluent seniors, while investors and operators adjust to a rapidly tightening market.
JPMorgan launches build-to-rent business focused on Southeast US | Bisnow | February 14, 2025
J.P. Morgan Asset Management has partnered with Georgia Capital and Paran Homes to launch Laseter Development Group, a build-to-rent (BTR) firm focused on new construction in the Southeast. Georgia Capital and Paran Homes hold a 50% stake, with institutional investors advised by J.P. Morgan owning the rest. The move aligns with J.P. Morgan’s broader push into the BTR sector, driven by rising demand for single-family rentals amid affordability challenges. Laseter plans to develop its own projects and offer third-party contracting, with nearly 300 homes in Atlanta and Nashville set to break ground this year. J.P. Morgan already manages a $2B portfolio of rental communities, reflecting broader investor interest, nearly 10% of new homes in 2024 were built as rentals, and the sector saw $6.3B in investment last year.
Research Spotlight
Catch the latest insights from the Altus team
Podcast | EP 50 - REIT results recap – Major sectors Q4 2024
Every quarter, Omar Eltorai and Cole Perry listen in to the latest round of REIT earnings calls. The calls provide a glance into REIT portfolio performance, and some insight into what the management teams at these companies are focused on for the coming quarters. Today’s episode is devoted to covering a selection of calls they’ve listened into over the last couple of weeks touching on the company overviews, key results, and valuable nuggets they picked up during each call’s Q and A portion.
Insight | TreppWire’s Stephen Buschbom shares his CRE outlook and key metrics he’s watching for 2025
Stephen Buschbom sits down with Altus Group's research team to discuss key signals he’s been watching in the CRE market over the past year and what he sees ahead for 2025.
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Important dates
Upcoming data releases and events
Data releases (Times in EST)
Tuesday, February 18
10:00AM: Home Builder Confidence Index, Data Release
Wednesday, February 19
8:30AM: Building Permits, Data Release
8:30AM: Housing Starts, Data Release
8:30 AM: Gladstone Commercial Corporation [NASDAQGS:GOOD], Earnings Call
10:00 AM: Community Healthcare Trust Incorporated [NYSE:CHCT], Earnings Call
10:00 AM: Centerspace [NYSE:CSR], Earnings Call
11:00 AM: Healthcare Realty Trust Incorporated [NYSE:HR], Earnings Call
1:00 PM: Industrial Logistics Properties Trust [NASDAQGS:ILPT], Earnings Call
1:00 PM: Sabra Health Care REIT, Inc. [NASDAQGS:SBRA], Earnings Call
Thursday, February 20
8:00 AM: Americold Realty Trust, Inc. [NYSE:COLD], Earnings Call
8:30 AM: Tanger Inc. [NYSE:SKT], Earnings Call
8:30 AM: Gladstone Land Corporation [NASDAQGM:LAND], Earnings Call
8:30 AM: Armada Hoffler Properties, Inc. [NYSE:AHH], Earnings Call
9:00 AM: Lamar Advertising Company [NASDAQGS:LAMR], Earnings Call
10:00 AM: Host Hotels & Resorts, Inc. [NASDAQGS:HST], Earnings Call
11:00 AM: Park Hotels & Resorts Inc. [NYSE:PK], Earnings Call
12:00 PM: Empire State Realty Trust, Inc. [NYSE:ESRT], Earnings Call
12:00 PM: Innovative Industrial Properties, Inc. [NYSE:IIPR], Earnings Call
1:00 PM: Broadstone Net Lease, Inc. [NYSE:BNL], Earnings Call
5:00 PM: Hudson Pacific Properties, Inc. [NYSE:HPP], Earnings Call
5:00 PM: Peakstone Realty Trust [NYSE:PKST], Earnings Call
Friday, February 21
8:30 AM: Uniti Group Inc. [NASDAQGS:UNIT], Earnings Call
9:00 AM: CTO Realty Growth, Inc. [NYSE:CTO], Earnings Call
9:45AM: S&P Flash U.S. Services PMI, Data Release
9:45AM: S&P Flash U.S. Manufacturing PMI, Data Release
10:00AM: Existing Home Sales, Data Release
10:00AM: University of Michigan Consumer Sentiment, Data Release
10:00 AM: VICI Properties Inc. [NYSE:VICI], Earnings Call
11:00 AM: Ryman Hospitality Properties, Inc. [NYSE:RHP], Earnings Call
11:00 AM: Gaming and Leisure Properties, Inc. [NASDAQGS:GLPI], Earnings Call
12:00 PM: American Homes 4 Rent [NYSE:AMH], Earnings Call
1:00 PM: Sunstone Hotel Investors, Inc. [NYSE:SHO], Earnings Call
Upcoming industry events
February 23 – February 26: SFAVegas
February 25: RealCapital
February 26: ULI Housing Opportunity Conference
February 26 – March 1: CORFAC Spring Conference
About our research team
Omar Eltorai
Research Director
Altus Group
Omar Eltorai is a Research Director at Altus Group. With more than a decade of experience in the industry in investment management and financing roles,
Omar's focus is on macro, capital and market trends affecting the US CRE market. Beyond regularly authoring articles and reports, his commentary and analysis has been featured in various media publications, including: Wall Street Journal, Globe Street, and Yahoo! Finance.
Cole Perry
Associate Director of Research
Altus Group
Cole Perry is a Associate Director of Research with Altus Group's Research team. In this role, Cole delivers key insights into macroeconomics, capital markets, and the broader commercial real estate sector.
Cole boasts a rich background in Commercial Real Estate analytics with previous roles at CompStak and Brixmor Property Group. He holds dual M.S. degrees from Columbia University in Urban Planning and Real Estate Development.
Disclaimer: The opinions expressed in this newsletter are solely those of the authors and are not endorsed by Altus Group Limited, its affiliates and its related entities (collectively “Altus Group”). This publication has been prepared for general guidance on matters of interest only and does not constitute professional advice or services of Altus Group. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy, completeness or reliability of the information contained in this publication, or the suitability of the information for a particular purpose. To the extent permitted by law, Altus Group does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. The distribution of this publication to you does not create, extend or revive a client relationship between Altus Group and you or any other person or entity. This publication, or any part thereof, may not be reproduced or distributed in any form for any purpose without the express written consent of Altus Group.
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