Avoid the CRE FOMO: The 5 Leading News Stories of the Week of February 3rd-7th

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:

1. Tariffs Whiplash: Trump’s Trade War Threats Roil Markets, Stoke Inflation Fears
2. LightBox CRE Activity Index Jumps to 81.2 in January
3. Treasury Over Rates: Bessent Signals Focus on 10-Year Yield, Not Rate Cuts
4. Key Jobs Market Report Out: U.S. Economy Adds 143, 000 Jobs Just Shy of Expectations 
5. Signs of an Office Rebound? Sublease Space Shrinks as Employers Reassess Needs

1. Tariff Whiplash: Trump’s Trade War Threats Roil Markets, Stoke Inflation Fears

After rocking financial markets around the world at the start of last week, worries about a potentially punishing global trade war have eased a bit after Trump gave 30-day reprieves for tariffs on both Mexico and Canada after positive negotiations with both countries. The 10-year Treasury yield responded with volatility, initially rising due to inflationary fears spurred by the tariffs, but later declining 4.421%, its lowest since Dec. 17. The tariff announcement was the first in a week of federal policy developments that kept the markets on edge.

 The LightBox Take: The tariff turmoil of last week supported the position that the president will use tariffs as a tool for negotiation, rather than as a long-term policy. Economists are warning that retaliatory tariffs could reverse inflation progress, with Federal Reserve officials highlighting the risk of prolonged price pressures. If inflation rises, the Fed may become more cautious about reducing interest rates. The latest inflation reports showed that the personal consumption expenditures price index increased 2.6% on a year-over-year basis in December, while core PCE was at 2.8%, both in line with expectations but well above the Fed’s 2% target.

2. LightBox CRE Activity Index Jumps to 81.2 in January

The LightBox CRE Activity Index rebounded in January 2025, underscoring renewed market momentum after the subdued close to 2024. The Index surged to 81.2, a substantial increase from 56.8 in December 2024, and 80.5 in November. Year over year, the first month of 2025 outpaced the 76.2 of one year before, reflective of the improvements in market conditions over the past year, including strengthening capital deployment, slightly lower interest rates, more buying opportunities, available debt capital, and pricing clarity. The strongest force behind the five-point increase in January’s index over last January was the 12% increase in commercial property listings in LightBox’s RCM platform and a 6% increase in commercial appraisal activity by lenders.

The LightBox Take:  The results point to a strong start to transactions in 2025, headlined by the 43 sales of $100 million or more that closed in January. Despite the Fed holding off on another rate cut at its January meeting, the aggregate Index reflects a strong start to CRE activity as investors actively look for opportunities to place capital, particularly in Sun Belt markets.

3. Bessent Signals Focus on 10-Year Yield, Not Rate Cuts

In interviews last week, Treasury Secretary Scott Bessent said the Trump administration is keeping its eye on the 10-year Treasury yield rather than pressuring the Fed for a fourth interest rate cut. Instead, he expects long-term rates to ease “naturally” under Trump’s policies related to deregulation and non-inflationary growth while the administration focuses on lowering the 10-year Treasury yield. Last year ended with high volatility in the Treasury yield. When the Fed cut rates by an unusually large half-point in September, the 10-year yield fell briefly but then edged up higher and remained at elevated levels even after the Fed cut rates twice more last year.

The LightBox Take: This development may come as some relief to Fed Chair Powell who had been pressured earlier in January to lower interest rates. The policy shift to focus on the 10-year yield re-establishes monetary policy independence. In related news, Scott Turner, newly confirmed as the Secretary of Housing and Urban Development, has outlined his priorities for the agency, with the privatization of Fannie Mae and Freddie Mac at the forefront. 

4. Key Jobs Market Report Just Shy of Expectations

In a Labor Department report out on Friday, the U.S. economy added 143,000 jobs in January, falling short of expectations. Upward revisions to prior months data, however, softened the miss. The Los Angeles wildfires last month likely weighed on the January employment numbers, as well as frigid weather across much of the nation. The unemployment rate edged down to 4%, slightly below the expected 4.1%, marking an eight-month low. The latest jobs report came on the heels of ADP’s report earlier in the week announcing that 183,000 private-sector jobs were added in January, surpassing economists’ forecasts of 150,000. Consumer-facing industries drove hiring, while business services and production lagged.   

The LightBox Take: Any implementation of tariffs and continued policy uncertainty could impact corporate leaders’ confidence and drive companies to pull back on hiring plans. Federal job cuts are expected to adversely impact future labor market data, which will be closely watched leading up to the Fed’s next meeting in March.

5. Signs of an Office Rebound? Sublease Space Shrinks as Employers Reassess Needs

A new Cushman & Wakefield report points to a potential turnaround in the struggling office sector, with sublease space shrinking by 5.6 million square feet over the past three quarters. More than half of U.S. office markets have seen declines in sublease availability, signaling increased demand as companies pull back on space they previously offloaded. Meanwhile, the GSA is moving to terminate 7,500 federal office leases, despite the Trump administration’s return-to-office push, adding uncertainty to the government’s workspace strategy. Walmart also made headlines as it restructured its office footprint, shutting its Charlotte location while investing in hubs in California, New York, and Washington. In Manhattan, the office leasing market continued its march toward recovery last month as tenants inked deals for 3.6 million square feet of office space, almost a million more than last January, according to a new Colliers report.  

The LightBox Take:  This mix of barometers points to broader office market stabilization in metros like Manhattan and San Francisco while other metro markets will continue to struggle. Blackstone’s recent acquisition of a Manhattan office tower is being viewed as a strong sign of confidence in the office investment market, and one that could lead other investors to actively shop around for opportunities to place capital.  

Important dates and industry events this week:

• Tuesday, February 11
  • Fed Chairman Jerome Powell testifies to Congress
• Wednesday, February 12
  • Consumer price index
• Thursday, February 13
  • Producer price index and initial jobless claims                         
• Friday, February 14
  •         U.S. retail sales and industrial production

The LightBox team will be at MBA CREF February 9-12, and Tina Lichens, general manager of Capital Markets, will be speaking on a panel about generative AI for deal decision making in CRE loan originating and services.  

×

Subscribe To Insights

Be the first to get the latest news, updates and insights from LightBox.

Subscribe Now

Share this: