| | | | | | | | | | Office owners, shake off your case of the Mondays — we’ve got some good news for you this morning. Reason to smile No. 1: Top-tier office usage is so-so-close to back. Trophy buildings are getting 94% of their prepandemic activity on Tuesdays, the most active day, Kastle reports. Wednesdays are also consistently topping 90% for Class-A-plus. It is a very select bump — overall, in-office presence has stagnated nationally, and Kastle keycard swipes show the average weekly occupancy is just 50% overall and 75% for trophy towers — but Executive Chairman Mark Ein told CoStar he thinks the trend will eventually trickle down. | | | | | | | | Reason to smile No. 2: Leasing is picking up, with tenants happily signing leases when they get exactly what they want. Piedmont Office raised its 2025 leasing guidance to 1.8M-2M SF after it saw increased activity in April and May. It has inked 500K SF already in this quarter, 350K SF of which was to new tenants. "To date, we have not witnessed a slowdown in leasing demand or decision-making," CEO Brent Smith said. Highwoods Properties also reported a jump in lease volume, primarily focused on second-generation space, where it has signed 750K SF since April 1, 300K SF of which was to new tenants. That’s on top of 700K SF of second-generation leases signed in Q1. "The healthy volume of leases executed in the first five months of the year and pipeline of future prospects positions us to grow occupancy late in 2025 and thereafter," CEO Ted Klinck said. — Jay Rickey, Catie Dixon, Kayla Carmicheal and Mark F. Bonner Not getting The First Draft in your inbox? Click here to sign up. Got any feedback or a news tip? Email first...@bisnow.com. CRE News Quiz Primary Digital Infrastructure calls itself “the straw that stirs the drink” in the data center world. The quote is from what famous New York Yankees slugger? (Answer at the bottom.) On Our Radar “Don't ship it, don't ship it. We don't want it.” South Florida developers are hitting pause on projects as locomoting tariffs, volatile interest rates and construction cost spikes inject deep uncertainty into planning and financing. Case in point: The Related Group paid a 25% import duty on Asian tiles — one week before the rate dropped to 10% … “It was a huge, huge issue.” Traditional lenders remain cautious, private capital is stepping in and international condo buyers are backing off. Meanwhile, retailers sourcing goods from China are delaying leases, contributing to the slowest pace of shopping center leasing since 2020. RevPAR’s up … So why is everyone panicking? U.S. hotels were bouncing back from the pandemic with record tourism in 2024 — tourism forecasts for 2025 look quite gloomy — and rising room rates, but debt maturities and costly deferred upgrades are imperiling the recovery. Franchise-mandated renovations have doubled in price, and many owners are opting to sell rather than reinvest. High interest rates, inflation and staffing shortages are compounding the pain, with CMBS delinquencies for lodging hitting a three-year high. While luxury hotels remain resilient, mid-scale properties are feeling the squeeze — and with consumer confidence waning, the window to adapt may be closing fast. “The greatest opportunity I’ve ever seen.” That’s Fortress Investment Vice Chairman Tim Sloan, who told CNBC the current real estate cycle — driven by rate hikes, not overbuilding — is ripe for investment. “Values are down 10–30% ... but operating performance is strong,” he said. With banks retreating from CRE lending, Fortress is stepping in with senior loans backed by solid assets. Sloan sees $4T in upcoming maturities as a major credit opportunity. U.S. construction spending declined 0.4% in April. That’s also 0.5% lower than April 2024. Private construction drove the drop, falling 0.7% month-over-month to $1.64T. Residential spending declined 0.9%, while nonresidential edged down 0.5%. Public construction, by contrast, rose 0.4% to $513.5B, with highway projects up 0.5% and educational construction flat. Despite the monthly pullback, total construction spending through the first four months of 2025 reached $660.2B — 1.4% above the same period last year. Meanwhile, construction delays and cancellations are surging as finance gaps, rising costs and — you guessed it, tariff uncertainty — stall projects nationwide.
On The Charts: Renters Storm The Block | | | | Courtesy of Point2Homes | | | | | | | | Your neighbor out in the ‘burbs is increasingly likely to be a short-termer. More than 200 of the 1,500 largest suburbs outside the 20 largest metros are now renter-majority, according to a Point2Homes analysis of Census data. Five of the largest metros saw their renter households increase faster in the ‘burbs than the main city from 2018 to 2023, and 15 suburbs switched from owner-majority to renter-majority in that time frame. The explosion (sometimes doubling) of suburban renters is attributed to affordability, mobility, changing lifestyles and pure availability — the rise of BTR and SFR are giving renters suburban opportunities they didn’t have before. This Morning’s News CAPITAL MARKETS — Proposed 'Revenge' Tax Provision Is Causing Worry (Bisnow): Section 899 of the One, Big, Beautiful Bill enables the government to ramp up the federal tax rate on passive income earned in the U.S. by investors and companies in foreign countries. Taxes would start at 5% and increase to 20% over three years. Read more here.
CAPITAL MARKETS — High-Dollar Deals Rebound (CoStar): An uptick in sales of trophy assets is putting upward pressure on values, or perhaps finding a floor. Read more here.
PEOPLE — Hudson Pacific CEO's Compensation Tripled As Losses Grew (Bisnow): Victor Coleman’s total compensation rose from $8.4M in 2023 to $24.8M in 2024. At the same time, the REIT reported a net loss of $364M, up from a $192M loss in 2023. HPP said 2024’s performance was due in large part to losses from selling off assets. Read more here.
| | | | | | | | Unsplash/Jared Murray | | | | | | | | LEGAL — SCOTUS Slashes Environmental Review Rules (ABC News): In a unanimous 8-0 ruling with Justice Neil Gorsuch recusing, the court curtailed environmental impact studies. The proposed 88-mile railway at the center of the case has undergone years of environmental study with an impact statement now exceeding 3,600 pages of analysis. Read more here.
HOUSING — $1.7B Family Feud Over Property Empire (Bloomberg): Heirs to a sprawling portfolio of commercial and residential assets are locked in a legal battle that dates back to the death of Sol Goldman in 1987. Read more here.
HOUSING — Rent Growth Weakens (Apartment List): The national median rent is now 3.1% below its August 2022 peak, but the typical rent price is still 22% higher than its January 2021 level. The national vacancy index is 7%, a new record high since data tracking began in 2017. Read more here.
| | | | | | | | Courtesy of Meadow Partners | | | | | | | | REITs — Specialty Sectors Soar, Broader Market Slips (TRD, Seeking Alpha and S&P): REITs with unique real estate performed better than traditional REITs in May. Read more here, here and here.
HOSPITALITY — Global Tourists Ditch U.S. Travel Plans (WSJ): Foreign travelers arriving at main U.S. airports over the previous four weeks are down 6% YOY, and airline bookings suggest things won’t pick up anytime soon. Read more here.
CANNABIS — Texas Hemp Industry Braces For 8,000-Plus Shutdowns (Bisnow): Senate Bill 3 was passed by the Texas House, banning the sale of hemp products containing THC, an industry that makes $5.5B a year in the state. If Gov. Greg Abbott signs the bill, 8,500 businesses would face closure. Business owners are contacting their landlords, asking the governor to veto the bill. Read more here.
HOUSING — $700B Worth Of Homes Sit Unsold (Redfin and NYT): There’s $698B worth of homes for sale in the U.S., up 20.3% YOY and the highest dollar amount ever, but sellers are unwilling to lower prices and buyers appear reluctant to make a big purchase as mortgage, insurance and property taxes rise. Read more here and here.
FINANCE — White House Eyes Deregulation For Big Banks (Bloomberg): The Trump administration is reportedly planning to reduce the size of the capital cushion big lenders must maintain to endure economic stress. Read more here.
AI — Governor Vetoes Bill Targeting Rent-Setting Algorithms (Bisnow): Colorado Gov. Jared Polis killed a bill that would have banned the use of software like RealPage, saying that though he opposes the use of rent-setting software, he worries forbidding it could reduce access to rental data and drive housing providers out of the state. Read more here.
| | | | | | | | Wikimedia Commons/Steve Jurvetson | | | | | | | | CAPITAL MARKETS — Jamie Dimon Warns Of Turbulence (WSJ): In addition to a potential debt-market crisis, Dimon said an erosion of America’s economy and military could put the dollar’s preeminent status at risk. Read more here.
RETAIL — Chili’s, Applebee’s And Gen Z (NYT): Gen Z comprised 17% of the patrons at sit-down, midprice casual dining restaurants in 2024. Some chain restaurants are seeing a resurgence as young Americans embrace nostalgic, budget-friendly hangouts in an uncertain economy. Read more here.
RETAIL — ‘Family Guy’ Watering Hole Gets Real (USA Today): A real-life version of the Drunken Clam, the bar from Family Guy, is set to open in Boston this year. Signature cocktails include drinks named Shut Up Meg and Cool Whip. Read more here. *** BTW … Most-read story on the website Friday: Father And Son Plead Guilty To $284M Fraud For Massive Sports Complex Most-clicked story in Friday’s First Draft: Pinnacle Group Blames Interest Rate Hikes For Driving 5,200 Apartments Into Bankruptcy The Stanley Cup lineup: For the second year in a row, the Edmonton Oilers will play against the Florida Panthers. Will Florida take home the cup again? So You’ve Come For An Answer Reggie Jackson. Jackson meant that while he didn’t often lead the team in home runs or batting average, he played a critical role in its success. Primary sees itself as a catalyst that can help make the largest AI training cluster in the world. *** The First Draft is produced by Director of Newsletters Jay Rickey, Managing Editor Catie Dixon, Editor-in-Chief Mark F. Bonner and Deputy Newsletter Editor Kayla Carmicheal, with an assist from AI. We’d love your feedback! Email us at first...@bisnow.com. | | | | | | | | | | | | | | | | | | | | | |
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