Market Talk: While Trump and Elon Spar, the CRE Market Softens as a Beige Outlook Meets a Blinking Labor Market Insights| LightBox

While the headlines have been glued to the Trump–Elon slugfest—an oddly entertaining combination of bravado, battles on social, and billion-dollar egos—something consequential unfolded this week with the Fed Beige Book, jobs, and LightBox CRE Activity Index.

The story is in the data released this week. The outlook in the Beige Book was pessimistic. The ADP report landed with a thud. And JOLTS is narrowing. The unemployment rate is stable, but the labor force is shrinking. And just below the surface, the LightBox CRE Activity Index—after a promising Q1—has taken a modest but meaningful turn.

If you are operating in the commercial real estate capital markets, skip the splashy headlines and focus on the fundamentals. The story they’re telling? One of caution and recalibration.

Beige Book: Commercial Real Estate in a Holding Pattern with Mixed Reports

The Federal Reserve’s June Beige Book didn’t offer any bombshells, but the message was consistent: commercial real estate conditions are steady, momentum is cooling. Office leasing activity remains weak across most major markets, with modest improvement in Class A assets in cities like Boston and Richmond. However, vacancy rates are stubbornly flat, and concessions are increasingly common. While return-to-office policies are creating isolated pockets of leasing momentum, many tenants continue to delay long-term space decisions. The sector remains the most structurally challenged in CRE.

Industrial remains the most resilient asset class, but the pace of leasing has slowed—particularly near port markets and large distribution corridors where recent tariff uncertainty has disrupted logistics planning. Vacancy rates are beginning to tick up in areas with aggressive spec development, and some projects are being delayed or downsized. Supply chain instability, higher construction costs, and unpredictable demand are all contributing to a more cautious tone, even as long-term fundamentals stay strong.
Retail activity across the Federal Reserve districts was mixed, with signs of both softening consumer demand and regional strength tied to specific events or tourism. In New York City, retail linked to tourism remains solid, supported by rising hotel occupancy, strong Broadway ticket sales, and increased restaurant traffic. Elsewhere, retailers are seeing more selective consumer behavior. High-ticket and discretionary categories are softening, while discount and necessity-based segments are holding up. New leasing is limited, and landlords report a stronger focus on renewals and tenant retention. Development remains muted, with most projects centered on proven, high-traffic corridors.
The multifamily sector continues to benefit from solid underlying demand, especially in high-cost urban areas where for-sale housing remains out of reach. Rents are rising in tight inventory markets such as NYC and Southern California. However, in overbuilt metros like parts of the Mountain West, concessions are reemerging, and absorption is slowing. New development is also cooling, with high operating and construction costs suppressing starts.
Construction activity is slowing across nearly every asset class and region. Developers are contending with elevated material costs, tighter lending conditions, and tariff-related input price uncertainty. Many are delaying or shelving projects that don’t offer short-term returns or guaranteed tenancy. Only essential-use builds—such as infrastructure, public utilities, and mission-critical facilities like data centers—are moving forward at any scale.

ADP Jobs Report: The Engine’s Still Running, But It’s Misfiring

The ADP report was the softest in more than two years: just 37,000 private-sector jobs added in May, a major miss against forecasts of 110,000. Sectors like manufacturing and natural resources shed jobs, while small businesses posted net losses.

Key points:

Small businesses lost 13,000 jobs.
Manufacturing and mining took a hit.
Professional services cut jobs—never a great signal.

Despite that, all news was not gloomy.

Annual wage growth held steady at 4.5% for job-stayers and 7% for job changers – so wage pressures have not eased.
Leisure and hospitality added 38,000 jobs, leading all sectors in job creation. That’s a bullish sign for real estate segments tied to consumer experience—think retail, restaurants, hotels, and urban entertainment venues.

The takeaway? The hiring engine isn’t dead—but it’s definitely shifting gears. Sectors tied to in-person interaction and discretionary spending are still hiring, and that’s a tailwind for select CRE asset classes.

JOLTS: The Job Openings Tide Is Ebbing

April’s JOLTS data showed 7.4 million job openings, slightly up from March – and beating forecasts—but other signals were also telling:

The quits rate edged down—fewer workers are confident enough to jump ship.
Layoffs are up—the highest since October 2024.
The unemployed persons to openings ratio is now 1:1. That’s a shift in market balance that has continued since 2022 when for every unemployed person, there were 2 jobs.

What this tells us: The economy is slowing but the job openings suggest employers aren’t freezing entirely—just moving selectively. And with labor being a big input in commercial real estate demand—whether it’s office leasing, retail footprint, or industrial throughput—this matters.

May Jobs Report: Good News and Not-So Good News

The U.S. economy added 139,000 jobs in May beating expectations, but job growth is slowing.

Unemployment rate held steady at 4.2% for the third month.
Labor force participation rate (those employed or looking for work) was 62.4%, down 0.2 points
Wages average hourly earnings rose 3.9% year-over-year.

Leisure and hospitality contributed jobs—a good sign for the restaurant and bar retail sectors, but federal cuts have impacted government jobs—with 22,000 payrolls trimmed in May. Additionally, the report had some areas that were not great news: April and March were revised lower by 95,000. And the decline in the participation rate helped temper the overall unemployment rate. Behind the headlines: on balance the job market appears to be on firm footing, which means that the Fed is likely to keep interest rates steady later this month—despite renewed calls from President Trump to cut rates.

After four months of advancement, the LightBox CRE Activity Index declined in May for the first time in 2025.

The dip isn’t catastrophic—but it is notable. Here’s what’s driving it:

Appraisal activity fell 19% from April—lenders are tapping the brakes.
Listings rose just 1%—still strong YOY, but the pace is flattening.
Phase I environmental site assessments were flat for the second straight month, after rising earlier in Q1.

Tariff anxiety is a big variable. April’s trade announcements introduced fresh uncertainty, and CRE participants are responding with selectivity, patience, and tighter risk tolerances. And while new equity is entering the market—particularly private capital—deals are taking longer to close. Lenders are asking harder questions. Buyers are modeling tougher assumptions. Momentum hasn’t disappeared, but it’s decelerating under pressure

Final Thought: Look Past the Market Noise

When the front page is full of clickbait from political pugilists and billionaire beefs, it’s easy to get distracted. But if you’re in this business—lending, investing, underwriting, advising—your focus should be laser-sharp on the real signals.

The labor market is worth monitoring closely. Real estate activity is slowing. Tariffs, rates, and refinancing are weighing on decision-making. And if you’re holding office properties underwritten in the days of low cap rates and high optimism, now may be the ideal time to model some hard truths.

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Brokers & Investors Lending Commercial Real Estate