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:
- February PCE Inflation Index Hotter than Expected, Growth Outlook Cools
- LightBox Analysis of How Creative Destruction Trends Can Spell Opportunity
- Dollar Tree Offloads Family Dollar in $1B Private Equity Deal
- CREFC’s Lisa Pendergast Sees “Renewed Confidence” from CRE Lenders
- Spending Freeze Puts Hundreds of Affordable Housing Retrofits at Risk
1. February PCE Inflation Index Hotter than Expected, Growth Outlook Cools
The February PCE inflation data came in slightly hotter than expected, raising fresh concerns that disinflation may be slowing as price pressures persist. Core PCE, the Federal Reserve’s preferred inflation gauge, rose 0.4% month-over-month—the largest monthly gain since January 2024—pushing the annual rate to 2.8%. Both figures exceeded expectations and signal persistent inflation pressures even before potential impacts from new tariffs take hold. Consumer spending increased 0.4% for the month, just shy of forecasts, pointing to some softening in demand. Meanwhile, S&P Global Ratings released a more cautious economic outlook. Real GDP growth is projected to decelerate to 1.9% in 2025 and 2026, compared to 2.9% in 2023. Inflation is expected to remain closer to 3.0% next year due to rising tariffs, which could weigh on household and business spending. S&P sees just one rate cut in 2025, bringing the federal funds rate to a range of 4.00%-4.25% by year-end. The divergence between actual activity data and weakening business and consumer sentiment is widening. Business investment plans are softening, and concerns over federal workforce cuts are dampening confidence.
The LightBox Take: The latest PCE data showed inflation running slightly above expectations, making it more likely the Fed will remain cautious and delay any policy easing until late 2025. The new S&P Global Ratings forecast speaks to the growing concerns about economic headwinds and prolonged uncertainty. Slower GDP growth, tighter financial conditions, and cautious business sentiment could weigh on leasing demand, investment activity, and asset values.
2. LightBox Analysis of How Creative Destruction Trends Can Spell Opportunity
Across the U.S., commercial real estate is undergoing a dramatic transformation—fueled not just by disruption, but by reinvention. Once-prized office towers, malls, and factories are being reimagined into uses like multifamily residences, live-work-play communities, fulfillment hubs, and healthcare centers. This is creative destruction in action. In a recent blog, LightBox explores how CRE trends like high vacancy rates, remote work, e-commerce, the housing shortage, and shifting policy are colliding to drive demand for adaptive reuse. What happens when traditional asset classes no longer perform? From San Francisco’s office-to-housing push to Detroit’s industrial rebirth, new redevelopment projects are redefining a property’s profile. “For some older assets, the highest and best use might end up being to just knock it down and turn it into something else,” observed Ryan Severino, managing director and chief economist at BGO. Visionary investors are spotting potential reuse in the outdated and obsolete and are redesigning tomorrow’s real estate landscape in a way that is creating new opportunities.
The LightBox Take: Adaptive reuse is one of the most important shifts in the built environment today. Outside of high interest rates, the wave of loan maturities, and concerns about where federal policies will land, there are important evolutions in how properties are used that will reshape CRE for years to come. Old malls or obsolete vacant office buildings are increasingly being converted into uses that more aligned with these shifts in demand for CRE.
3. Dollar Tree Offloads Family Dollar in $1B Private Equity Deal
In a move that marks the end of a long and challenging chapter, Dollar Tree announced it will sell the Family Dollar brand to Brigade Capital Management and Macellum Capital Management for just over $1 billion. The sale comes nearly a decade after Dollar Tree acquired Family Dollar in 2015 for $9 billion, in the hopes of expanding its footprint across a broader income demographic. Despite the initial promise, Family Dollar struggled under Dollar Tree’s ownership, with store closures, inflationary pressures, and operational inefficiencies weighing heavily on performance. Nearly 1,000 of Family Dollar’s roughly 8,000 stores have already shuttered over the past year, with more likely under private ownership. The divestiture allows Dollar Tree to refocus on its core brand, which serves a slightly more affluent, suburban customer base.
The LightBox Take: Dollar Tree, which struggled to manage Family Dollar after acquiring it in 2015, faced ongoing challenges including weak store locations, supply chain issues, and limited pricing flexibility amid inflation. The deal signals potential shifts in urban retail occupancy, particularly in markets where Family Dollar was a tenant. Investors should also note Dollar Tree’s warning of future headwinds in the retail sector, including tariffs and trade barriers, while broader retail sector contractions—from Walgreens to Party City—suggest continued volatility in some brick-and-mortar retail.
4. CREFC’s Lisa Pendergast Sees “Renewed Confidence” from CRE Lenders
In last week’s LightBox CRE Weekly Digest podcast, Lisa Pendergast, president and CEO of Commercial Real Estate Finance Council (CREFC), shared a cautiously optimistic outlook for CRE lending. According to CREFC’s Sentiment Index, lender confidence has rebounded sharply since the pandemic. “That confidence was certainly lacking during COVID,” Pendergast observed, “and our index shows that sentiment has rebounded pretty sharply in late 2024 and really into the first quarter. There’s a renewed confidence in lenders from a market condition perspective.” While lending remains tight with conservative underwriting standards, Pendergast expects a steady increase in capital flowing into CRE this year. Pendergast is forecasting that CMBS issuance will reach $150 to $160 billion this year—potentially the strongest year since before COVID—with $37 billion already recorded year-to-date with underwriting discipline continuing to temper issuance volume.
The LightBox Take: Despite the growing volume of CRE loans and an active CMBS market, the biggest challenge this year is the growing wave of loan maturities facing refinancing hurdles. With the Fed unlikely to cut rates soon, refinancing pressure will remain elevated. Sector performance varies with elevated delinquencies in office averaging 9.8% compared to industrial, which remains the strongest, at just 0.34%. “What gives me the most optimism is that the market has not only seemed to have listened and learned but has stuck to it. Underwriting remains sound and judicious and that is to the good of the market,” Pendergast noted.
5. Spending Freeze Puts Hundreds of Affordable Housing Retrofits at Risk
The Trump administration’s freeze on the $1.4 billion Green and Resilient Retrofit Program (GRRP) leaves hundreds of affordable housing projects across the U.S. into limbo. Originally funded through the Inflation Reduction Act of 2022, the GRRP aimed to support energy-efficient retrofits for aging, HUD-assisted properties—particularly serving low-income seniors and rural communities. The program’s sudden suspension, which HUD says is under review rather than canceled, has left developers uncertain and scrambling to fill financial gaps. Projects already awarded funds—but not yet closed—are especially vulnerable. Only 22 of 270 awards had finalized their deals as of March 2025, leaving more than 2,900 units awaiting over $150 million in funds. The freeze affects developments like the 202-unit Ashtabula Towers in Ohio and Council Tower in St. Louis, both of which relied heavily on GRRP grants and loans to address asbestos abatement, weather resiliency, and energy efficiency upgrades.
The LightBox Take: For developers in this space, the GRRP was a major component of a complex capital stack that leveraged private, local, and state investments. Without it, it is likely that many projects will stall or collapse entirely. HUD’s statement suggests the administration is prioritizing traditional affordability efforts over green initiatives, but industry experts warn this short-term shift could lead to higher long-term costs and further strain the already undersupplied affordable housing stock. Until further clarification, developers remain in a holding pattern.
Important dates and industry events this week
- Tuesday, April 1
- Construction spending and ISM manufacturing
- Wednesday, April 2
- Tariff decision, ADP employment and factory orders
- Thursday, April 3
- Initial jobless claims and ISM services
- Friday, April 4
- U.S. employment data
Did You Know of the Week
Did You Know that the volume of Phase I environmental site assessments, often conducted before major CRE deals, was up 9% in February over January according to the output of LightBox’s ScoreKeeper model? Next week, LightBox’s CRE Activity Index for March comes out and will be an interesting early indicator of whether the early year momentum in CRE is being affected by growing market uncertainty.
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.
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