- The US economy posted strong growth in 2025 Q2 with 3.0% GDP growth. A sharp decline in imports drove much of the growth even as inventory declines curtailed growth.
- Employment growth slowed markedly to 190K in Q2 as May and June job growth estimates were revised down to a mere 33K total. Despite this, the unemployment rate stayed low, averaging ~4.2% for the quarter.
- Inflation re-accelerated in Q2. Headline and Core CPI ended the quarter at 2.7% and 2.9%, respectively.
- The Federal Reserve held the fed funds rate steady at 4.25-4.5% in its July meeting, despite political pressure for a cut. The 10-Year UST yield hovered near 4.4% in Q2, ranging from 4.0% in early-April to 4.6% in mid-May.
- Real estate fundamentals have weathered a spike in apartment and industrial supply:
- Industrial vacancy rate has spiked to a 10-year high due to elevated supply and recent slow leasing due to tariffs, particularly in port cities. Rent growth will slow to 1-2% in the near term before improving in 2027-28.
- Apartment rent growth should trend up to 2-3% through 2028 as excess supply is absorbed. Decreased immigration in major cities and construction cost inflation will further limit new supply.
- Neighborhood retail rent growth will average 2-3% over the next 4 years and vacancies will remain at their current lows as new supply is minimal.
- Office vacancies will approach a peak of ~17% by 2026 then plateau. The sector is approaching bottom, and green shoots are emerging, particularly for modern stock.