The Latest Data, News, and Analysis Impacting the Commercial Real Estate Market
Every week, LightBox carefully selects the week’s most impactful economic news, market metrics, in-house data and analysis, and transactions shaping the CRE industry.
In This Week’s Edition:
- Walmart Wobbles: Weak Guidance Highlights Retail’s Tariff Concerns
- DOGE’s Widespread Lease Cuts Shake Up Commercial Real Estate
- Latest Fed Minutes Reinforce Firm Stance on Further Rate Cuts
- California Bills Address Housing Crisis and Wildfire Recovery
- Growing Signs of a Rebound in Office as Employers Push RTO Mandates
1. Walmart Wobbles: Weak Guidance Highlights Retail’s Tariff Concerns
Walmart’s stock plummeted more than 7% last week after the retail giant issued an unexpectedly cautious outlook for fiscal 2026, despite beating Q4 earnings expectations. The company projected earnings per share of $2.50 to $2.60—falling short of Wall Street’s estimates—citing potential disruptions from delayed tariffs on Mexico and Canada. Revenue for the quarter ending January 31st rose 4.1% to $180.6 billion, slightly surpassing forecasts, but the company’s full-year sales growth estimate of 3% to 4% lagged analysts’ 4% expectation. The market’s sharp reaction suggests investors found Walmart’s guidance overly conservative. In the overall retail market, following a strong holiday season, U.S. retails sales dropped 0.9% in January—the steepest decline in nearly two years, attributable to economic uncertainty, severe winter weather, and the LA wildfires. While restaurants and bars saw gains, spending on discretionary goods like autos, furniture, and apparel was weaker.
The LightBox Take: Walmart’s conservative stance reflects the broader retail sector’s caution given uncertainty over the timing and extent of tariffs that could impact consumer spending this year. As some retailers struggle, others have ambitious expansion plans. Major chains like Party City and Joann’s are making headlines as they close 700 and 500 stores, respectively. However, discount and value-focused retailers are moving to expand into new storefront locations, led by Dollar General and Dollar Tree that collectively plan to open 1,300 new stores this year and ALDI making its biggest U.S. push yet, with 225 new locations in 2025, positioning itself as the nation’s third-largest grocery chain by 2028.
2. DOGE’s Widespread Lease Cuts Shake Up Commercial Real Estate
Elon Musk-led DOGE has axed 97 federal office leases, slashing 2.3 million square feet of space nationwide in a major real estate cost-cutting move. Based on a list posted by DOGE, nearly half of the lease cancellations are on properties in the D.C. area, with the Department of Labor losing 845,389 square feet—the largest single reduction. In total, the federal government leases nearly 150 million square feet of office space, with annual rent payments totaling $5.23 billion. DOGE’s terminations are a strategic move projected to save $144.6 million as part of the broader downsizing trend of the new Trump administration.
The LightBox Take: The termination of nearly 100 government leases could have widespread effects, particularly in metros where office landlords may already be struggling with rising operating costs and high vacancies. Only 30% of the federal government’s leases are in D.C. so the impacts of the terminations will extend well beyond the Beltway. Outside the Washington, D.C. and surrounding metro area, cities with the highest square footage affected by federal lease terminations are Atlanta, GA (152,854 sq. ft.), National Archives Centers in both Fairfield, OH (124,569 sq. ft.) and Hoffman Estates, IL (73,573 sq. ft.); as well as Columbus, OH (61,371 sq. ft.). For owners, losing a longstanding, reliable federal tenant could be a major hit to a property’s NOI, and local economies could struggle with impacts related to factors like reduced business activity and job losses.
3. Latest Fed Minutes Reinforce Firm Stance on Further Rate Cuts
In the minutes released last week from the Federal Reserve’s January meeting, officials said they want clearer disinflation signals before considering any more interest rate cuts. The central bank’s position on keeping interest rates steady is not surprising, given persistent inflation concerns and uncertainty around Trump’s trade and immigration policies. Chicago Fed President Austan Goolsbee warned that Trump’s proposed tariffs could create a shock akin to COVID-era disruptions, potentially complicating the Fed’s outlook. Investors, hoping for quicker relief, now expect rate cuts later in the year rather than in the near term.
The LightBox Take: With rate cuts off the Fed’s table at least for the time being, CRE investors and lenders have recalibrated expectations and are moving forward with decisions based on the assumption of little expected near-term movement in interest rates. All eyes will remain on inflation data and the labor market for any shifts that could shape the Fed’s next move.
4. California Bills Address Housing Crisis and Wildfire Recovery
California is taking legislative action to combat its ongoing housing crisis and the devastation left behind by the LA wildfires. With an estimated need for 2.5 million new homes by 2030, affordability issues and restrictive land-use policies are exacerbating the state’s housing crisis. Based on a recent analysis by LightBox, the January 2025 Palisades and Eaton fires further strained supply, destroying or damaging more than 18,295 structures—a vast majority of which were homes—and leaving environmental hazards in its wake that could complicate rebuilding efforts. Two key bills—Senate Bill 9 (SB 9) and Senate Bill 140 (SB 140)—aim to address these challenges. SB 140 streamlines rebuilding in wildfire-affected areas, expediting permits and promoting fire-resistant construction to accelerate recovery. SB 9 would permit duplexes and lot splits in single-family zones to increase housing supply, though its impact has been limited by local resistance.
The LightBox Take: These two bills reflect efforts by local governments to rethink zoning regulations in the context of the housing crisis as well as the urgency of rebuilding efforts in the LA area. Local jurisdictions must balance an increase in population density as residents displaced by the fires relocate with considerations for fire safety, infrastructure, and environmental sustainability. More dwellings in wildfire-risk zones could heighten exposure to fire hazards, creating new challenges for emergency response and evacuation planning. Local governments may also use the flexibility afforded by SB 140 to implement new zoning laws that prioritize fire resilience in the design of rebuilt homes.
5. Growing Signs of a Rebound in Office as Employers Push RTO Mandates
The U.S. office market is showing renewed momentum, with leasing revenue up by a significant 28% year-over-year and sales activity growing by 20% in early 2025, according to CBRE CFO Emma Giamartino. Major gateway markets like New York, San Francisco, Los Angeles, and Chicago saw leasing growth nearing 30%, while cities like Dallas, Seattle, and Atlanta experienced even stronger gains. Recently inked leasing deals that reinforce this trend include trading firm Jane Street Capital nearly doubling its space at Brookfield Asset Management in lower Manhattan to almost one million square feet, software firm Databricks negotiating a new lease that would dramatically expand its office footprint in San Francisco, and insurance brokerage Lockton signing a 100,000 square foot lease at an office tower in Uptown Dallas. As interest in leasing rebounds, global real estate firm, Savills, reported that office availability fell to 24.8% in Q4 2024, marking the first major decline since the pandemic. One factor driving strong recent leasing activity is the corporate push for return-to-office, most notably JPMorgan Chase whose CEO Jamie Dimon is holding fast on mandatory five-day office attendance despite employee pushback.
The LightBox Take: The recent spikes in office leasing in major markets across the U.S. are a strong sign that office occupiers are increasingly comfortable making long-term decisions, given improved return to office momentum and a healthy economic outlook. Even San Francisco, once the poster child for spiking office vacancies post-COVID, is showing strong signs of increased demand for office space as evidenced by the office vacancy rate declining in a small but meaningful way in Q4 for the first time in 19 quarters, from 36.9% to 36.7%.
Important dates and industry events this week
- Tuesday, February 25:
- Consumer confidence
- Wednesday, February 26:
- New home sales
- Thursday, February 27:
- Initial jobless claims, durable goods orders, and GDP
- Friday, January 28:
- PCE index
Did You Know of the Week
Did You Know that the largest retail listings int the LightBox RCM platform in January were for shopping centers on separate coasts? The Campus Marketplace near CalState’s San Marcos campus and Hammocks Town Center in a Miami planned community both hit the market last month, offering a mix of retail across grocery, pharmacy, gym, personal services, and fast food.
Worth Noting:
LightBox announced its launch of True Owner, a tool designed to help brokers, investors, and analysts easily uncover reliable commercial property ownership data.
Save the Date: February 25th at 2pm EST
Join us as we share a broad-based look at the trends that shaped year-end 2024 and what it means for the 2025 forecast with Manus Clancy, Dianne Crocker, and Tina Lichens.
For commentary on this week’s CRE developments and more, tune in to the LightBox CRE Weekly Digest podcast.
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