Avoid the CRE FOMO: The CRE News You Need to Know – October 27

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

The September Consumer Price Index (CPI) was released late last week after a multi-week delay as the federal shutdown became the second longest in modern history. The index rose 0.3% month-over-month and 3.0% year-over-year, modestly below expectations, while core CPI (excluding food and energy) held steady at 3.0%, down slightly from August’s 3.1%. The report leaves the Fed on course to cut interest rates at this week’s meeting and to maintain a soft bias toward another cut later this year. Fed leaders pivoted toward easing over the summer as labor-market softness began to outweigh modest inflation setbacks, and the September data hardly alters that calculus. Importantly, inflation, while still elevated, is proving to be less concerning than Fed officials feared when the Trump administration announced major tariff increases last spring. Several forces have muted the impact: slower housing-cost growth has offset price pressures from imports, and many companies appear to be spreading tariff-related price increases over time rather than passing them directly to consumers.

 The LightBox Take: The market is currently pricing in roughly a 90-95% probability of a 25-basis-point rate cut this week. Inflation appears to be cooling at the margins, supporting the view that the economy is adjusting to tariffs and tighter financial conditions without reigniting broad price acceleration, which gives the Fed cover to maintain an easing bias, at least for now. In commercial real estate, this dynamic points to another modest reduction in borrowing costs on the heels of the mid-September cut, a tailwind for stronger year-end momentum for investing and lending.

Two marquee Manhattan leases underscore the demand rotation toward transit-rich, top-tier assets and the emergence of AI as a real occupier catalyst. First, a tentative 275–300K SF commitment by C.V. Starr at 343 Madison Avenue, a new BXP tower adjacent to Grand Central, signals renewed appetite for large blocks in modern, amenity-heavy buildings. Leases larger than 200K SF have been rare post-2020 and securing one at a ground-up project materially de-risks lease-up and supports construction financing. Second, a lease of about 100K SF at One Madison Avenue for Harvey AI extends a nascent trend of AI companies taking meaningful footprints (echoing recent San Francisco deals). Together, the transactions illustrate that the flight-to-quality is intact, with corporate demand concentrating in energy-efficient, well-located Class A product, and that tech tenants are becoming incremental drivers of absorption.

The LightBox Take: These wins arrive as NYC office leasing sets a 2025 high, surpassing pre-pandemic 2018–2019 levels through September. Manhattan’s Class A pipeline is active as lenders and investors reward well-located, best-in-class assets that pair transit access with efficiency and amenities. To be sure, the office recovery remains bifurcated (Class B/C assets still face structural headwinds), but these deals support rising effective rents and longer terms at the top end, with positive spillovers for valuations and debt availability on other best-in-class assets.

The CREFC Board of Governors Sentiment Index surged to 122.8 in Q3 2025, up 9% from the prior quarter and marking its highest level since late 2024. The quarterly survey of 50 senior executives representing firms that collectively control roughly two-thirds of commercial real estate lending captures a sharp improvement in confidence across the $6.2 trillion CRE finance sector. Nearly all respondents (95%) expect higher borrower demand over the next 12 months, while 86% foresee stronger investor appetite for assets. Two-thirds also anticipate better liquidity conditions, nearly doubling last quarter’s share. Although concerns linger around multifamily stress and selective office exposure, the broader message is one of resilient fundamentals, improving liquidity, and renewed conviction that the next leg of the cycle will be driven by credit expansion rather than contraction.

The LightBox Take: The latest CREFC index confirms what deal data is already hinting at: the lending spigots remain open. With sentiment improving across nearly every measure behind the Index, from borrower demand to liquidity, CRE finance appears to be entering a more active phase. At this early stage of the rate cut cycle, the CREFC survey results point to a breadth of optimism in the world of CRE finance with respondents pointing to concerns about a broader economic slowdown due to tariff-related impacts as the greatest threat to CRE’s near-term forecast.

Last week’s torrent of corporate results painted a broadly positive picture of U.S. business performance. Roughly 86% of S&P 500 companies beat Q3 earnings expectations, extending a streak of resilient profitability despite persistent economic crosswinds. Revenue growth remained steady, margins improved modestly, and forward guidance was generally constructive, signaling that corporate America continues to adapt effectively to elevated rates and moderating inflation. From an economist’s lens, these results suggest that productivity and pricing discipline are offsetting slowing nominal growth.

However, beneath the upbeat earnings headlines lies a more cautious labor narrative. A growing number of large firms are opting to grow without hiring, betting that investments in artificial intelligence and automation will generate efficiency gains without adding headcount. JPMorgan Chase, RTX, and Goldman Sachs all indicated plans to limit staff expansion, while Walmart, a bellwether as the nation’s largest private employer, intends to keep its workforce flat for the next three years. This restraint, while supportive of margins, could signal an inflection point for the labor market: a transition from job-led expansion to productivity-led growth. If sustained, it may cool wage pressures and ease inflation risk, but at the cost of slowing job creation and mobility, particularly for white-collar workers in corporate and tech sectors.

The LightBox Take: The strong Q3 earnings season confirms that U.S. companies are managing inflation and rate pressure effectively but also marks a potential pivot point for labor demand. Many corporate leaders are tapping the brakes on hiring, leveraging AI-driven productivity to maintain growth with leaner teams. For commercial real estate, that shift has mixed implications: steady profits and rate cuts sustain space demand among top performers, but a slower hiring cycle could soften near-term absorption, particularly in large urban office markets.

A new Bloomberg research effort uncovered mounting evidence that markets are now pricing physical climate risk directly into corporate finance. The analysis, conducted with Riskthinking.AI, shows that for every 10-percentage-point increase in potential asset damage from climate hazards, companies face an estimated 22-basis-point increase in their weighted average cost of capital, even after controlling for sector, region, and size. “If you’re more exposed to storms, floods, or heatwaves, financing gets more expensive—and valuations take a hit,” explains Niall Smith, Senior Sustainable Investments Quantitative Researcher. The pricing effect is strongest in emerging markets, particularly Latin America (94 bps) and Asia (25 bps), and among asset-heavy industries such as materials (56 bps) and utilities (45 bps).

The LightBox Take: These findings suggest that capital markets are beginning to treat climate vulnerability as a measurable financial risk, akin to insurance premiums that rise with exposure. The report concludes that corporates demonstrating resilience through disclosure and adaptation strategies could lower financing costs, while investors are encouraged to integrate physical climate risk into valuation and asset-allocation models. As Bloomberg notes, “markets are waking up to the realities of climate change,” and firms that operate in high-risk geographies or asset-intensive sectors will increasingly pay more to raise debt or equity, while those that disclose and mitigate risk stand to gain a financing advantage.