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:
- Fed Holds Rates Steady, Forecasts Two Cuts This Year
- LightBox Releases CRE Activity Index as 12-Month Moving Average
- Early Signs of Potential Cracks in Economy as Consumer Sentiment Weakens
- Builder Confidence in Housing Slips as Fears of Higher Costs Take Root
- RTO May Have Stalled as Office Metro Markets Diverge Sharply
1. Fed Holds Rates Steady, Forecasts Two Cuts This Year
At last week’s Federal Reserve meeting—the second of 2025—the Federal Reserve voted unanimously to hold interest rates at 4.5%, marking the second consecutive pause after three cuts since September. This decision, which was widely expected, reflects the Fed’s cautious stance amid growing economic uncertainty. The Fed’s updated projections point to slower economic growth and higher core inflation by year-end, partly due to new U.S. tariffs and expected foreign retaliation. In an encouraging twist, officials also shared a forecast of two interest rate cuts before year-end. Fed Chairman Powell struck a cautious tone, acknowledging the uncertainty surrounding the tariff wars and noting: “We think it’s a good time for us to wait for further clarity.” It wasn’t all good news as policymakers also downgraded their growth forecast for GDP in 2025 from December projections of 2.1% down to 1.7%.
The LightBox Take: It was no surprise that the market didn’t get any relief on high interest rates at last week’s meeting, but the markets were soothed to see two interest rate cuts forecast for the rest of this year and the acknowledgement that the central bank does not necessarily view tariffs as an obstacle to interest rate cuts. Stable rates should continue to offer short-term relief for borrowers and investors and help maintain this year’s return to healthy CRE transactions, lending, and refi activity after a slow 2024.
2. LightBox Releases CRE Activity Index as 12-Month Moving Average
LightBox released its February CRE Activity Index, expressed as a 12-month moving average (12MMA), a statistical tool that smooths out monthly volatility to focus on the market’s long-term trend. Following a peak in early 2022, the 12MMA Index declined through late 2023 before stabilizing and gradually recovering in mid-2024, and by February 2025, it reached 86.4, its highest level since mid-2023. The Index is a timely reflection of rising investor confidence, a greater volume of properties listed for sale, and the supportive activity in environmental due diligence and appraisals. Looking ahead, LightBox predicts that the Index will climb to 95–100 by year-end, assuming the Fed lowers interest rates, and economic conditions remain stable.
The LightBox Take: The 12MMA provides a clear lens through which to view trends in the LightBox CRE Activity Index by filtering out short-term volatility caused by seasonality or abrupt policy changes. This long-term perspective allows investors, developers, and policymakers to better assess true market momentum and make more informed decisions in today’s uncertain environment. As the market navigates shifting federal policies, inflation concerns, and labor market signals, the 12MMA will be an early sign of whether growing market uncertainty begins to impact the healthy investment and lending volume of January and February.
3. Early Signs of Potential Cracks in Economy as Consumer Sentiment Weakens
Despite the strength of the LightBox CRE Activity Index in January and February, several market barometers are showing potential areas of concern as policy uncertainty takes its toll. Among them, U.S. consumer sentiment index fell to 57.9, the lowest level since November 2022, from 64.7 a month earlier, according to University of Michigan data. Recessionary fears are also starting to take hold, stemming from fears that tariffs could trigger higher prices and an economic slowdown. PIMCO, a global investment management firm known for its expertise in active fixed income management, is now predicting a 35% chance of a U.S. recession in 2025, up from just 15% last December. JPMorgan puts the odds at a higher 40%, warning that Trump’s trade policies could damage America’s standing as a global investment destination. Last, the U.S. Policy Uncertainty Index, based on a 28-day rolling average of news articles mentioning the topics of the economy, uncertainty and legislation or policy, spiked to 400 just over the past two months compared to a 150 average. The only time the index surpassed today’s levels was in the early days of the Covid-19 pandemic.
The LightBox Take: Growing economic uncertainty is taking shape in the form of various softer market metrics like sentiment and recessionary forecasts. If sentiment continues to erode, or hard data on metrics like the labor market or GDP weaken, it could dampen investor confidence, slow transaction volume, and delay leasing or development decisions as decisionmakers retreat to the sidelines.
4. Builder Confidence in Housing Slips as Fears of Higher Costs Take Root
Despite an 11.2% rebound in housing starts in February coming off a harsh winter, builder confidence is slipping as economic uncertainty and policy challenges mount. Starts remain 2.9% lower year-over-year, with building permits and completions also down, signaling slowing momentum. The NAHB builder sentiment index fell to 39 in March, the lowest in seven months, with buyer traffic dropping sharply. Tariffs are expected to add $9,200 to new home costs, pricing out some buyers. And in the latest office-to-residential conversion, KB Home acquired a 276,000 SF office property in Bishop Ranch for $58M, planning to demolish it and build 190 townhomes and single-family homes.
The LightBox Take: Single-family home construction is expected to remain subdued in the near term, which means continued pressure on housing supply and upward pressure on already-high prices. The expectation of tariff-related cost increases and higher construction costs will likely weigh on future planning. If interest rates begin to ease later in 2025, and if the impacts of tariffs on supply costs is not extreme, construction could gradually pick up. With supply constrained and demand gradually returning, investors will be selective in identifying opportunities in markets with high rental income stability.
5. RTO May Have Stalled as Office Metro Markets Diverge Sharply
Office recovery across the U.S. remains uneven, with national office visits still 36.3% below pre-pandemic levels. Cities like New York and Miami are leading the rebound, with visits only down 17.1% and 20% respectively, while markets like Boston, LA, and Denver continue to struggle, showing activity down more than 40%. Notably, San Francisco has now outperformed Chicago in office recovery metrics for the first time post-pandemic, highlighting shifting dynamics across metros. Recent leasing and sales activity further underscores the fragmented nature of the office market. In Manhattan, Horizon Media renewed a 17-year lease at 75 Varick St., following recent long-term deals by Equinox and Notion, a strong sign of sustained demand for offices in prime locations. At the other end of the spectrum, Voice of America canceled a 350,000-square-foot lease on Pennsylvania Ave. in Washington, DC, citing federal policy changes and low office usage. The latest sign of distress in office came from the NYC metro in the form of Brookfield’s recent sale of an office building in the Garment District at a $105M loss, while RXR lost control of 340 Madison Ave. to its lender.
The LightBox Take: The latest RTO statistics highlight how very different one office market can be from another. Low office occupancy signals continued risk for investors, with underutilized space translating to weaker cash flows, declining asset values, and growing distress in certain markets. In today’s fragmented landscape, being highly selective is critical, as performance varies widely by metro—what succeeds in New York or Miami may be a riskier bet in markets like Chicago or Denver.
Important dates and industry events this week
- Monday, March 24
- U.S. services and manufacturing PMIs
- Tuesday, March 25
- S&P Case-Shiller home price index, consumer confidence, and new home sales
- Wednesday, March 26
- Durable goods orders
- Thursday, March 27
- Initial jobless claims, GDP revision
- Friday, March 28
- PCE Index, consumer sentiment
Did You Know of the Week
Did You Know that LightBox’s RCM platform tracks the pace of loan sales, offering real-time insight as banks quietly offload nonperforming debt? After a 2023 spike—especially in office and multifamily—loan sales have slowed to a steady drip, a trend expected to continue as more distressed assets change hands this year and beyond.
For more insights on commercial real estate data and trends, subscribe to Insights and the CRE Weekly Digest Podcast for commentary and real-time data.
Subscribe To Insights
Be the first to get the latest news, updates and insights from LightBox.
