- Due to the extended federal shutdown, initial estimates of Q3 GDP are yet to be released. The Federal Reserve Bank of Atlanta’s GDP Now model estimates that the US economy grew by 4.0% (annualized) in 2025 Q3, slightly above last quarter’s pace. Overall, we expect little lasting impact from the shutdown.
- September employment data were also delayed, but employment growth totaled 101K in July and August, signaling that the labor market is softening. Despite this, the unemployment rate remained low at 4.3% in August.
- Inflation accelerated in Q3, particularly for goods. Annual headline and Core CPI both ended the quarter at 3.0%, up from mid-2% in April.
- The Federal Reserve cut the fed funds rate twice in Q3 – by 25 bps at both the September and October meetings. The current fed funds range stands at 3.75%-4.00%. The 10-Year UST yield fell 10 bps QoQ to below 4.3% in Q3. Yields are near ~4.1% as of mid-November.
- Real estate fundamentals have continued to soften as the large apartment and industrial pipelines deliver:
- Industrial vacancy rose to 7.5% in Q3 due to elevated supply and slower leasing, particularly in port cities, possibly due to tariffs. Rent growth will slow to 1-2% in the near term before improving in 2027-28.
- Apartment fundamentals softened, with vacancy rising to 9.8% and rent growth moderating to 0.7%. Fundamentals should improve in the medium term as excess supply is absorbed.
- Neighborhood retail rent growth remained healthy at 3.1% over the past year and vacancy was a low 6.4%. Rent growth will average 2-3% over the next four years and vacancies will remain at their current lows as new supply is minimal.
- Office fundamentals have remained weak, although net absorption turned positive over the past year. Vacancies were 16% in Q3 and annual rent growth fell to 1.1%. The sector is approaching bottom, and green shoots are emerging, particularly for modern stock.
- Trailing 4Q transaction volumes rose 4% QoQ to $460B, even as tariff uncertainty weighed on investors. Transaction volumes were up for all four major property types as debt markets continued to improve.