By: Head of Data Strategy at LightBox, Manus Clancy
In today’s commercial real estate landscape, where unpredictability has become the only constant, it’s hard not to feel like we’re living in a satire of our own.
In 1964, director Stanley Kubrick released Dr. Strangelove, a dark comedy/political satire starring Peter Sellers. The cult classic was parody of living under the stress of the Cold War between the U.S. and USSR. The subtitle was “How I Stopped Worrying and Learned to Love the Bomb.”
We’ve thought about that subtitle periodically over the last few weeks. After a two-week panic in early April, investors have clearly stopped worrying and started accepting (if not loving) certain events that they have little control over.
In the last two months of CRE news, there has been a great deal of pearl clutching over—you fill in the blank— tariffs, the likelihood of a U.S. recession, a global recession, renewed inflation, $36 trillion in outstanding debt, the unwillingness/inability to reduce spending, and, of course, air traffic controller shortages. (Don’t get us started on the Colorado Rockies—at 9-50 record, they’re off to the worst start in MLB history).
Over the last month, investors appear to have developed a resistance— if not an immunity—to the headlines. The whiplash-inducing market moves of April tapered off in May as the stocks and bond saw increasingly muted responses to new tariffs, tariff delays, breakdowns in budget negotiations, corporate earning warnings, and finally an actual budget bill.
This commentary dives into the recent data, investor behavior, and key commercial real estate trends—from big-ticket multifamily transactions to the impact of consumer spending patterns on retail CRE. As always, LightBox provides a grounded view of what the latest economic signals mean for commercial real estate stakeholders.
Complacency or Resignation?
There is no doubt that investor stress levels fell sharply in May. U.S. stocks erased all or most of their post April 2 losses over the last month. Bond deals that were paused due to peak volatility in April were back on track in May. Risk premiums—which spiked after 4/2—retreated in May. Treasury yields, after shooting upward over fears that foreigners were dumping U.S. bonds, leveled off before Memorial Day (albeit at an uncomfortably high level on the 10 and 30-year bonds).
In April, we suggested on the LightBox CRE Weekly Digest podcast, that the height of market panic might actually prove to be a smart time to take on risk in both equities and fixed income assets.
Now we worry that the pendulum may have swung too far. Even though the White House has ratcheted down or delayed tariffs, the forthcoming baseline will likely be higher than before the 2024 election. Whether or not this reverses the two-year gains to inflation remains to be seen. But the risk is not zero, yet at times it seems investors are now treating it as such.
Similarly, the risk of a lousy budget deal or another legislative impasse is not zero.
Just as April was a terrific moment to put risk on, we could look back and say May was a good time to take risk off.
As it pertains to retail CRE specifically, the waters could become particularly choppy for certain parts of the market. Specifically, discretionary retailers like Nike, Best Buy, and Gap—all of which rely heavily on imported goods—could find themselves caught in the chaos if tariffs escalate.
Certainly, late May’s retail earnings and commentary were as useful as sand in the Sahara. On the encouraging side, Home Depot and Lowe’s indicated tariffs and tariff-related impacts were limited. On the less encouraging side, several major retailers pulled guidance over where this is all headed. And when some did offer an outlook, assumptions included a baseline of tariffs that would create margin pressure and a consumer that would trade down but still spend selectively.
Regardless, for now, it seems that investors have learned to love mayhem.
What is the Data Saying?
While the pivot from panic to euphoria was surprising, so too was some of the May data.
Consumer confidence rebounded strongly in late May and the Fed’s favored measure of inflation—PCE—came in much cooler than expected last month.
Those data points—particularly the PCE print—were grist for the mill for the sky-isn’t-falling part of the market and head scratching for those expecting tariff impacts to start showing up in the data.
Earlier in the month, CPI and PPI readings also failed to rattle investors as the numbers were benign across the board.
All of this economic data likely contributed to analysts’ growing acceptance of the current risks.
The CRE markets paralleled the broader sentiment.
CMBS risk premiums (aka spreads) compressed over the last month up and down the credit stack. CMBS issuance rebounded after a slight pause in April. Sales transactions continued their pre-4/2 levels and even office leasing activities saw some positive headlines. The wheels never fell off after the tariff announcements—at least so far.
Time will tell if this is whistling past graveyards or ‘nothing-to-see here.’ But for now, investors of all stripes have learned to ‘Love the Chaos.’
Big Deals Continue Apace
The market saw a wide swath of big sales in May, further advancing the belief that it’s business as usual in the CRE markets.
The multifamily sector remained a reliable standout, pushing ahead with more than a dozen single-property sales of $100 million or more—alongside even larger portfolio trades. These high-dollar deals spanned the country, from Bellevue and Seattle, WA to Needham and Franklin, MA, Orlando and Clearwater, FL, Chandler, AZ, Campbell, CA (with two separate deals), Nashville, and Las Vegas. But big apartment sales have become predictable these days. Less predictable were big sales in other parts of the market.
While large apartment deals have become something of a constant in today’s market, what stood out in May was the return of big-ticket activity in less predictable sectors.
In the hospitality segment, the JW Marriott Phoenix Desert Ridge Resort & Spa sold for $865 million, marking a major win for Trinity Investments.
The office market, still navigating headwinds, saw two headline-grabbing trades in Manhattan: 590 Madison Avenue sold for over $1 billion to RXR, while Amazon acquired 522 Fifth Avenue for more than $450 million, a move that also resolved a distressed CRE loan.
Even the retail sector, where big deals have been more sporadic, made noise with the sale of Legacy West in Plano, TX for nearly $800 million—the largest retail transaction in months.
Together, these deals suggest a market where capital is still in play—selectively, but decisively—across multiple property types.
Keep an eye out for our upcoming major CRE deal analysis, dropping in the coming days. We’ll break down the biggest sales of May across all CRE sectors, including both $100M+ transactions and notable deals in the $50M–$100M range.
We’re not done worrying. But like any good Kubrick film, the next twist is probably already in motion. Whether it’s tariffs, inflation, or something entirely off-script, markets have a way of keeping us on edge—and commercial real estate will be right in the thick of it.
For more commentary from Manus Clancy, subscribe to LightBox Insights and tune in to the CRE Weekly Digest Podcast, where he, along with Martha Coacher and Dianne Crocker, shares real-time data, market commentary, and key signals to watch across the CRE landscape.
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