Cap Rates Hit a Ceiling? CBRE Survey Says the Climb May Be Over

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Good morning. A midyear pulse check from CBRE suggests cap rates may have leveled off—but investors still face an uneasy mix of economic volatility and trade policy friction.

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Market Snapshot

MID-YEAR REPORT

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• Multifamily build-to-rent expands: The U.S. housing shortage has reached historic levels—and investors are looking to build-to-rent (BTR) communities as one of the fastest-growing solutions. (sponsored)

• Small deals, big wins: Commercial real estate deals between $5M and $25M rose 3.5% in early 2025, fueled by regional bank lending and strong demand in multifamily and industrial sectors.

• Does it appeal? Boston landlords filed a record 388 tax appeals amid nearly 19% office vacancies, but with just 11 approvals, frustrations grow as property values fall and tax burdens remain high.

• Bribery fallout: NYC real estate chief Jesse Hamilton resigned after being indicted in a $75K bribery scheme that also implicated former mayoral adviser Ingrid Lewis-Martin and several developers.

• Buyer boost: Cleveland led six U.S. metros in improved housing affordability, but nationally, higher mortgage rates continue to erode buying power despite wage growth.

• Fragmented rents: Single-family rents rose 2.9% year-over-year in June, but Cotality data shows sharp local divides—Chicago and New York are surging, Miami is slipping, and affordability gaps are widening between luxury and entry-level homes.

• Growing risk: The government’s unprecedented wave of lease terminations has upended once “bulletproof” CRE income streams, slashing D.C. office values, rattling CMBS markets, and signaling that political decisions now pose a real debt risk for landlords and lenders nationwide.

• Deal of the day: Morgan Properties is acquiring Dream Residential REIT for $354M, adding 3,300 units across Texas, Oklahoma, and Ohio, and boosting its presence in Sun Belt and Midwest markets.

• D.C. lease pressure: A surge of new apartments along D.C.’s waterfront has driven vacancies to 5.2%, prompting developers to offer steep concessions and test coliving and short-term rentals to stay competitive.

• Faithful investment: The Church of Jesus Christ of Latter-day Saints bought Del Ola, a 384-unit Boca Raton rental complex, for $152.5M—continuing its push into South Florida multifamily after recent nine-figure acquisitions in Wellington and Plantation.

• Surging enrollment: Cal Poly Pomona purchased The Current, a 636-bed student housing complex in Pomona, for $126M, expanding capacity as enrollment surges and advancing its $2.3B campus master plan.

• AI expansion: Wistron, a key Nvidia partner, picked Fort Worth over El Paso, Fremont, and Nashville for its first U.S. facilities—two AI supercomputing plants totaling 1.1M SF and $761M in investment.

• Hitting pause: The Inland Empire’s industrial pipeline slowed sharply in H1 2025, with just 5.8M SF under construction—less than half last year’s pace—but strong leasing and $669M in sales kept vacancies below the national average and pricing among the highest in the U.S.

• Refi: Bridge33 Capital secured a $460M CMBS loan from Wells Fargo to refinance a 4.1M-SF, 12-property retail portfolio spanning nine states, anchored by major national tenants.

• Store closure: Car Toys filed for Chapter 11 and plans to sell 35 of its 47 stores for about $14M, as evolving in-car tech and slowing consumer demand erode the aftermarket audio retailer’s core business.

• Big Apple discount: The retail portion of the former New York Times headquarters sold for just $28M—down from Kushner Cos.’ $296M purchase in 2015—marking a steep post-foreclosure bargain.

• Distress sale: An 18-story office tower near Hudson Yards sold for just over $100M—a 62% drop from its 2018 price—underscoring deepening distress in NYC’s office market.

• Office exit: Target sold its 189K SF Tempe office campus and 38 acres for $20.5M, shedding underused space as financial strain and remote work reshape its real estate strategy.

• Under conversion? Philadelphia’s largest office complex, the 2.2M-SF Centre Square at 1500 Market St., is headed to market after foreclosure—likely at an 80% discount—pitched as a prime candidate for residential, retail, or hospitality conversion.

📈 CHART OF THE DAY