Avoid the FOMO: The CRE News You Need to Know—June 30

The Latest Data, News, and Analysis Impacting the Commercial Real Estate Market

The May Personal Consumption Expenditures (PCE) report delivered a mixed bag. Inflation was slightly hotter than expected and consumer spending showed signs of fatigue. Core PCE, the Fed’s preferred inflation gauge that strips out volatile food and energy prices, rose 0.2% in May and 2.7% year-over-year, which was higher than April’s 2.6% and slightly ahead of forecasts. Headline inflation also ticked up to 2.3%, moving further from the Fed’s 2% target. Early price increases in categories like home furnishings and toys hint that pipeline pressures are building.

This uptick in inflation comes even as inflation-adjusted personal spending dropped 0.3%, a sign that Americans are reining in their spending. The drop was largely attributable to a 50% drop in motor vehicle sales after the March/April rush to buy in advance of tariffs. Outside of auto sales, the latest report showed a drop in discretionary spending at restaurants and hotels. The latest report could suggest the economy is entering a precarious period: the re-emergence of inflation coupled with slower household spending.

The LightBox Take: While May’s report wasn’t an inflation shock, it could represent the “calm before the storm.” Tariff-driven cost increases haven’t yet fully materialized in the data, but market watchers are anticipating inflation and spending data will reflect these pressures more clearly later in the year. Fed Chair Jerome Powell is threading a needle as he fights to preserve the Fed’s independence while facing growing public pressure from both the White House and internally at the Fed to cut rates. With inflation measures under the microscope as the July meeting approaches, markets see just a 14.5% chance of a cut at the next meeting, but a 62% likelihood by September, per the CME FedWatch Tool.

The U.S. housing market is showing signs of strain under the weight of buyer affordability challenges and elevated mortgage rates, as cited in the latest LightBox analysis. In May, housing starts dropped 9.8% to a five-year low, with single-family permits down 2.7% and new-home sales plunging 13.7%. Builder sentiment has declined sharply, prompting major homebuilders like KB Home, Lennar, Toll Brothers, and D.R. Horton to revise their strategies—focusing on incentives, operational efficiency, and pricing discipline to maintain volume amid weaker demand.

Multifamily construction has been hit especially hard, with starts down 30.4%, while overall building permits also declined, suggesting a pipeline recalibration rather than a temporary dip. Builders are compressing margins to preserve sales, with 62% of builders offering incentives in June.. These shifts are already rippling through the commercial real estate sector, with delayed land takedowns, repriced expectations, and more cautious underwriting. Developers in key Sunbelt markets are adjusting to new realities as land values soften and absorption timelines stretch.

The LightBox Take: The homebuilding market is a key barometer of overall economic health, and its current retreat may be an early signal of a broader slowdown ahead. Declining builder sentiment, falling starts, and shrinking gross margins point to mounting pressure. With mortgage rates expected to remain elevated and affordability strained, it’s not surprising that buyers and developers are growing more cautious. For CRE stakeholders, this shift demands revised expectations for land absorption and development timelines. As incentives increase and margins tighten, strategic site selection and up-to-date pro forma assumptions will be critical. Expect continued softness into 2026, particularly if economic headwinds and tighter capital persist.

The New York City mayoral primary has been upended by Zohran Mamdani, a 33-year-old Democratic socialist whose progressive platform includes bold rent control measures. Central to his housing policy is a proposed freeze on rent-stabilized apartments, a dramatic move that would halt annual increases on nearly one million units and expand tenant protections. Mamdani also aims to build 200,000 affordable housing units over the next decade and crack down on landlord negligence and deed theft. Mamdani’s win drew a swift market reaction, with shares in NYC-tied real estate firms like SL Green, Vornado Realty Trust, and lender Flagstar Financial sliding. Investors expressed concern over tighter rent controls, which could depress revenue, devalue assets, and deter new housing construction. If Mamdani wins the mayoral raise, his ability to execute on his campaign promise would hinge on his ability to appoint like-minded board members to the city’s Rent Guideline Board, who would need to approve the freeze.

The LightBox Take: The selloff in the wake of Mamdani’s win is a sign that rent control hits multifamily asset values and investor confidence. Decisions to build and invest in multifamily depend on predictable cash flows, and sweeping rent controls would undercut both income and incentive to build. In today’s housing crisis, local policies that discourage development can have long-term repercussions. The NYC mayoral race is now a referendum on rent control, and markets are clearly watching. Cities across the U.S. should pay close attention to how this plays out.

San Francisco, long viewed as the poster child of post-COVID office vacancy, is showing promising signs of revival thanks to a surge in leasing by artificial intelligence firms. In Q2 2025, the city saw 610,000 square feet of office space absorbed, the strongest quarterly gain since 2018 and the third consecutive quarter of positive net absorption. AI companies have driven more than 800,000 square feet in new leases this year, signaling a robust return of demand. High-profile deals include Notion and Databricks expanding their offices, Coinbase leasing 150,000 square feet at Mission Rock, LinkedIn renewing 165,000 square feet, and Morrison Foerster locking in over 100,000 square feet at 101 California Street.

Despite this momentum, San Francisco’s office vacancy rate remains elevated at 35.1%, reflecting a market still in early recovery. Yet, the resurgence led by AI firms reaffirms San Francisco’s appeal at a tech magnet even amid affordability headwinds. Premium Class A assets in core locations are most desirable, while older Class B/C buildings still struggle to attract tenants.

The LightBox Take: The latest round of data show that San Francisco is on track to experience its best leasing year since 2019, chipping away at the “death of the office” narrative. While overall vacancies there remain well above the U.S. average, the draw of AI leaders is evidence that demand for modern workspaces is strong. This is welcome news to landlords holding premium assets, especially those with trophy buildings in the Financial District and SoMa sections of the city.  For CRE investors and developers in San Francisco and other metros, it’s a reminder that location and asset quality remain critical, and that workplace demand isn’t dead but evolving. The ripple effects of San Francisco’s AI revival may soon be felt in markets like Seattle, Austin, and Boston as the next wave of leasing takes shape.

The AI and cloud computing surge is fueling an unprecedented wave of data center construction, but the boom is encountering increasing resistance in key markets. Industry leader, Meta, is building what will be the largest data center in the Western Hemisphere on a sprawling site in rural Northeastern Louisiana, a project expected to generate 5,000 construction jobs and 500 permanent roles. To power the massive facility, Entergy plans to build three natural gas plants, an effort drawing scrutiny from environmental advocates and regulators over cost and carbon impact. Louisiana Governor Jeff Landry calls the project transformational for a region long overlooked by major industry investment.

As developers chase land and power, geographic preferences are shifting. Northern Virginia, the nation’s largest data center hub, is seeing local backlash, with three major projects in Chesterfield, Fauquier, and Chesapeake counties rejected due to traffic, noise, and environmental concerns. Markets like Atlanta and Phoenix are now eclipsing older tech hubs like Dallas and Silicon Valley. This geographic shift marks a new phase of the digital economy where zoning laws, energy grids, and community relations are now as crucial to site selection as fiber optics and latency speeds.

The LightBox Take: The data center boom is now facing friction on multiple fronts. AI and cloud tech require energy-intensive infrastructure which puts buildings under pressure to find power-rich, regulation-friendly sites, even as opposition grows in traditional strongholds like Northern Virginia. That’s shifting demand toward emerging markets like Louisiana, where massive investments promise to transform local economies. For CRE players, this challenges the “build anywhere” mentality and reinforces the need for early engagement on zoning, power, and community impact. Long-term viability, along with future obsolescence, must now be part of the conversation.