Bond Yields Defy Rate Cuts, But Real Estate Investors Stay Optimistic

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Good morning. Bond yields are up, but real estate investors aren’t backing down. With stable property values, easing inflation, and better lending conditions ahead, 2025 is shaping up to be a strong year for CRE investment.

Today’s issue is brought to you by AirGarage—maximize parking revenue at your property.

🎙️ New Episode No Cap Podcast: Jack and Alex are sitting down with Marc Deluca, CEO of KBS, one of the nation’s largest premier commercial real estate investors, with over $45 billion in transactional volume since 1991.

Market Snapshot

STATE OF THE MARKET

TOGETHER WITH AIRGARGE

What a Good Parking Management Deal Structure Looks Like

Real estate owners often ask our team at AirGarage what a "good" parking management agreement looks like.

The first thing we say is to prioritize a revenue share agreement, since it gives the parking operator skin in the game and incentive to boost revenue.

The second thing we recommend is asking for the operator to pay for expenses out of its portion of the revenue share. This encourages efficiency, since otherwise, many operators will pass through marked up expenses for equipment like pay stations, and then when they break, they mark up the repairs and labor costs too!

All parking management agreements at AirGarage are structured to align incentives with the two above principles in mind. This encourages us to be efficient, invest in the latest technology, and increase revenue at your property.

*This is a paid advertisement. Please see the full disclosure at the bottom of the newsletter.

• CRE Policy Pivots: Upcoming tax changes could reshape CRE strategies, urging investors to rethink depreciation and deductions. (sponsored)

• Cap rates: CRE asking prices stayed steady in early 2025, with retail averaging $261.19/SF and office space at $230.49/SF.

• Studio struggles: Hollywood faces a worsening studio vacancy crisis, with half of L.A.’s production stages sitting empty due to competition, overbuilding, and limited incentives.

• Middle class: The income needed to qualify as middle class in the U.S. has risen, with Arlington, VA, leading at a range of $93,470 to $280,438.

• Program protection: The Treasury Department moved to safeguard the Community Development Financial Institutions Fund, which supports low-income communities, after Trump ordered its functions reduced.

• Inflation Nation: U.S. consumer spending edged up 0.1% in February, while core inflation rose 0.4%, heightening concerns over upcoming tariffs.

• A win for Frisco: Wilks Development's $2.5B to $4B Firefly Park in Frisco, TX, won city approval to begin construction, starting with a 187-unit multifamily building, a wedding chapel, and a Dream Hotel.

• Rent rebound: Fresno led U.S. cities in rent growth with a 6.1% annual increase, as the national median rent rose 0.6% in March to $1,384.

• Dallas density: The Dallas City Council approved Henry S. Miller’s plan to redevelop the 15.5-acre Pepper Square shopping center into 868 apartments and 67,000 square feet of retail, despite community opposition.

• Attainable housing: J.P. Morgan REIT added two properties to its portfolio, acquiring The Preserve at Pine Valley for $32.1M and Bass Lofts for $34.8M.

• Tariff turmoil: Industrial leasing slowed as tariff uncertainty looms, with in-place rents rising 7.1% year-over-year to $8.43 per square foot in February, according to CommercialEdge.

• IOS loan: Cerberus and Outour Storage nab financing from Clarion Partners for an 8-property, 2.3 MSF industrial outdoor storage portfolio across seven metros.

• Florida lease: Ideal Nutrition signed a 43,200/SF industrial lease at Prologis Airport Center in Palm Beach County, part of a 70-acre business park.

• Growing pipeline: Stack Infrastructure plans a 36-megawatt, 263,000-square-foot data center in Elk Grove Village, IL, after acquiring 27 acres near O’Hare Airport for $42.1 million.

• Open for now: Saks Global will keep the Dallas flagship store open through the holidays while exploring redevelopment plans with the city.

• Stepping down: Seritage CEO Andrea Olshan will step down in April as the company wraps up its portfolio sell-off, with only 15 properties left.

• Power center: Schonsheck sold the fully leased, 161,626/SF Willow Creek Shopping Center near Detroit for $23.8 million.

• Leading the way: A Newmark report highlights top-performing U.S. office submarkets, where resilient locations and trophy assets are thriving despite hybrid work challenges and rising capital costs.

• Sales slump: Office properties in Silicon Valley are trading at steep discounts, with some sales closing up to 75% below their assessed values, despite signs of a leasing recovery.

• Discount D.C. deal: Brookfield sold the 350,000-square-foot Victor Building in Washington, D.C., to Rockwood Capital for $153 million, with Deutsche Pfandbriefbank AG providing a $113 million acquisition loan.

• Hotel halt: A lender is pushing to remove control from a Blueprint Hospitality affiliate over its stalled $55M Marriott hotel conversion in San Antonio, citing mounting debt, unpaid taxes, and mold damage.

• More problems: Aby Rosen’s RFR Holding faces eviction and an $18M lawsuit from landlord Commerz Real over unpaid rent at Soho’s 11 Howard hotel, while RFR counters with claims of lease violations.

A MESSAGE FROM JBREC & CRE DAILY

Q125 Burns + CRE Daily Fear and Greed Index

The latest Q1 2025 JBREC + CRE Daily Fear and Greed Index offers a fresh look at investor sentiment across commercial real estate. Based on 1,000+ sector responses from 500 investors, the survey tracks shifting confidence in the market.

Access the 28-page survey chartbook for in-depth insights into investor sentiment, capital trends, and challenges—along with a sector-by-sector breakdown featuring exclusive commentary. 

*Please see the advertising disclosure at the bottom of this newsletter.

📈 CHART OF THE DAY