Avoid the CRE FOMO: The 5 Leading News Stories of the Week of May 5th-9th

Each week, LightBox carefully selects the most impactful economic news, market metrics, in-house data and analysis, and transactions shaping the CRE industry.

In This Week’s Edition:

1. Inside the Beltway: Trade Talks Bring Hope, Fed Stands Pat on Interest Rates
2. LightBox Q1 2025 Capital Markets Snapshot: Property Listings Surge as Sentiment Shifts
3. Retail Sales Rose in April, But Tariff Pressures Loom
4. Private Equity Mobilizes as Office Deals Surface, Some at Deep Discounts
5. From Cubicles to Homes: Office Reuse to Residential Gaining Ground

Last week the market breathed a sigh of relief as President Trump announced a new U.S.–U.K. trade deal, signaling what could be the first in a wave of bilateral agreements aimed at easing tariff pressures ahead of the July 8 “Liberation Day” deadline. Investors welcomed the move as a potential off-ramp from escalating trade tensions, with more talks scheduled this weekend between U.S. and Chinese officials in Geneva. Meanwhile, at the third FOMC meeting of the year, the Federal Reserve held interest rates steady, as expected. Anyone hoping that the Fed would tip its hand on future rate cut decisions was disappointed. Instead, Chair Jerome Powell struck a familiar tone, using the phrase “wait and see” 12 times—on everything from the Fed’s dual mandate to the direction and timing of future rate moves. Powell noted that “the risks of higher unemployment and higher inflation have risen,” largely due to uncertainty surrounding tariffs. In recent months, the unemployment rate has been “moving sideways,” but at 4.2% it is still within the range of maximum unemployment.

The LightBox Take: After last week’s Fed meeting, futures traders were pricing in about 17% odds of a quarter-percentage-point cut in the fed-funds rate at the next policy meeting in mid-June. This is down from 30.5% on Tuesday and 63% the prior week. Much, of course, depends on the scope and duration of tariffs, and whether they result in a one-time bump in prices or more persistent inflation, none of which is clear right now. For CRE, this mix of cautious optimism and policy unpredictability is driving a “wait-and-watch” mindset, especially around financing and pricing strategies. As talks progress and trade policy takes shape, expect CRE sentiment to remain measured but engaged.

The forthcoming Q1 2025 LightBox Capital Markets Snapshot reveals a commercial real estate market that opened the year with energy—but ended the quarter with growing caution. Optimism in January fueled a wave of activity, with the LightBox Property Listings Index hitting 173.3, a three-year high and a 57% jump from Q4. Listings climbed month-over-month through March, led by multifamily assets, which surged 132% and made up one-third of all listings. Retail and industrial followed, at 20% and 12%, respectively. Momentum cooled in March as market sentiment adjusted to macroeconomic volatility, new tariff policies, and Fed inaction on rates. The 10-year Treasury yield fluctuated sharply, and equity markets reacted to rapid policy shifts. While banks reported rising loan and refinance demand, underwriting tightened. On the equity side, private equity fundraising surged in Q1 with a 78% jump over Q1 2024 as investors mobilized capital to take advantage of new opportunities.

The LightBox Take: Amid policy-driven volatility, interest rate uncertainty, and shifting fundamentals, investors are becoming more selective, targeting assets that offer clear ROI potential and resilience in a changing market. The Q1 data reflects a market in recalibration rather than retreat: deal activity is continuing, but with greater discipline. As far as what happens next, the Q1 property listings data set a high bar—whether that growth continues will depend heavily on the duration and scope of tariffs, their impact on inflation and borrowing costs, and the market’s overall ability to adapt to policy-driven headwinds.

U.S. retail sales climbed in April as consumers rushed to make purchases ahead of anticipated tariff-driven price increases. Total retail sales (excluding autos and gas) rose 0.72% month-over-month and 6.76% year-over-year, according to the CNBC/NRF Retail Monitor, accelerating from March’s 0.6% and 4.75% gains. The surge is attributed in part to consumers pulling forward purchases in anticipation of higher costs due to newly imposed tariffs on Chinese imports. Ports are now receiving the first shipments subject to the 145% tariffs, with cargo volumes from China cut in half. The Port of Los Angeles reports that imports are down 35% compared to this time last year, and volumes from China are expected to fall 75–80% in the second half of 2025, per JP Morgan. The NRF expects total U.S. imports to drop by at least 20% in the second half of the year. The full inflationary impact on consumers is expected to hit in the coming weeks, raising concerns about potential spending slowdowns.

The LightBox Take: The April sales bump is likely temporary. As tariffs push prices higher, consumer spending could slow, impacting certain retail tenants’ performance and challenging rent collections. CRE investors should watch consumer behavior and trade flows closely in the months ahead. Over time, sustained weakness in consumer demand could ripple through the broader economy, affecting job growth, credit markets, and ultimately CRE asset values across sectors tied to consumer-driven activity.

The spigot of private equity capital is wide open, and funds are aggressively stepping back into CRE with distressed assets in their crosshairs. Leading the charge, Brookfield Asset Management raised nearly $6 billion in Q1, part of a $16 billion global opportunistic fund, one of the largest in recent memory. Already 25% invested, the fund is focusing on multifamily, logistics, and distressed office assets, where valuations have dropped 20–40% from peak levels. Brookfield is part of a broader trend: Private equity funds collectively raised $57.1 billion in Q1 2025, a sharp rebound from $32.5 billion a year earlier.

In a recent example of distressed asset opportunities, a struggling office tower in Chicago at 125 South Wacker Drive, listed by Ivanhoé Cambridge, is expected to sell for under $60 million, less than half its 2017 purchase price of $145 million, as occupancy drops and tenants vacate. And in Los Angeles, Carolwood is in escrow to buy EY Plaza for $130 million, down from a prior valuation of $150 million. Brookfield defaulted on $305 million in debt tied to the 41-story tower in 2023.

The LightBox Take: Over the past few years, fundraising has been challenging for private equity funds, but the sharp year-over-year rise reflects the growing conviction that well-capitalized investors are eager to jump on distressed properties as falling prices and mounting pressure on owners drive more assets to market. Expect increased deal flow—especially in urban office markets like Chicago’s Loop area and where office demand has been weakened by remote work, tenant downsizing, still-high rates, and limited investor appetite.

The office-to-residential conversion trend is gaining steam as cities across the U.S. confront rising office vacancies and persistent housing shortages. Developers are increasingly targeting underused office buildings—especially in dense urban cores—for adaptive reuse as apartments or mixed-use housing. In one recent example, Scottsdale-based Meritage Homes acquired a five-story, 111,500-square-foot vacant office building in Santa Ana for $19.2 million, with plans to convert it into 86 townhomes. In NYC, developers Metro Loft and Silverstein Properties converted the former Goldman Sachs HQ at 55 Broad Street into 571 luxury apartments. And in Charlotte’s first office-to-mixed use conversion, the old Duke Energy HQ is being transformed into 460 units of housing with retail space to counter the 25% office vacancy in Uptown.

The LightBox Take: While not every office property is suitable for conversion due to layout, zoning, or cost constraints, local governments are offering incentives and streamlined approvals to encourage these projects. This trend reflects a strategic shift in asset repositioning, aiming to restore property value, revitalize downtown districts, and meet growing demand for housing in supply-constrained urban markets. Metros leading the trend in adaptive reuse of obsolete office space are D.C., NYC, Dallas, Chicago, and L.A.

Important dates and industry events this week

• Tuesday, May 13
  • CPI
• Thursday, May 15
  • Initial jobless claims, U.S. retail sales, PPI, homebuilder confidence index             
• Friday, May 16
  •         Housing starts, building permits, consumer sentiment

Feeling CRE market whiplash? Join LightBox and industry experts for a data-packed webinar on Q1 trends, capital shifts, and what’s next for investment and lending.

We’ll unpack exclusive insights from our Market Snapshot series, covering due diligence, appraisals, and where capital is flowing. Get the clarity you need to navigate today’s volatility with confidence. Register for the webinar.

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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