Consumer prices fell 0.4% on a seasonally adjusted basis in June, its largest single-month decline since
April 2020, according to the latest CPI release by the Bureau of Labor Statistics. Prices rose 3.5% over
the past 12 months.
A retraction of energy prices drove the decline. The energy index fell 5.7% in June as the mid-June USIran ceasefire temporarily reopened the Strait of Hormuz, sending oil prices down roughly 21%. Gasoline
was down 9.7%.
Core CPI was unchanged month-over-month and rose 2.6% year-over-year, down from 2.9% in May, with
broad softness across motor vehicle insurance (-2.0%), communication (-1.5%), and apparel (-0.6%).
Shelter rose just 0.1% — its smallest monthly gain since January 2021.
The probability of a 25-basis-point hike at the July 28-29 FOMC meeting fell from roughly 42% to 17%
following the CPI release, according to implied probabilities from the Federal Funds futures market.
However, rate cuts are not back on the table for now. The ceasefire that initially relieved energy inflation
pressures has since broken down, with oil prices moving sharply higher in recent days. A July rate-hold
remains the likely scenario.
2. JUNE EMPLOYMENT REPORT
US employers added just 57,000 jobs in June, according to Thursday’s data from the Bureau of Labor
Statistics (BLS), well below the consensus estimate of roughly 115,000.
The unemployment rate edged down 10 basis points (bps) to 4.2%. However, this was mostly driven by
a contraction in the labor force participation rate—which fell to 61.5%—rather than by an expansion in
employment.
The headline number understates the breadth of the softness. BLS revisions to April and May data cut
a combined 74,000 jobs from previous estimates, placing the 12-month average monthly gain at just
36,000 per month.
Professional and business services added 36,000, social assistance added 25,000, and health care gained
22,000. Leisure and Hospitality shed a seasonally adjusted 61,000 jobs in June, which the BLS attributed to weaker-than-usual seasonal hiring.
Average hourly earnings rose 0.3% month-over-month to $37.64 and are up 3.5% year-over-year. Sustained
payroll growth at the current modest pace provides a stable but limited backdrop for expansion-driven
CRE leasing demand.
3. CONSTRUCTION SPENDING
According to the US Census Bureau, total construction spending edged up 0.1% month-over-month in
May to a seasonally adjusted annual rate of $2,210.2 billion.
Construction spending is down 1.5% year-over-year. Further, through the first five months of 2026,
cumulative spending of $858.4 billion is running 2.7% below the same period in 2025.
Private nonresidential construction fell 0.3% for the month and 6.6% year-over-year — its eighth
consecutive annual decline. Manufacturing construction is down 22.0% year-over-year as CHIPS Actsupported projects wind down. Warehouse construction has fallen for three consecutive months and is
down 8.5% year-over-year.
Data center construction rose 0.6% in May to a new record high, up 23% year-over-year. It is also the only
private nonresidential subcategory posting new highs.
4. JULY TRADE POLICY DEADLINES
In July, two overlapping trade policy deadlines are making news. First, on July 1, the US declined to renew
the US-Mexico-Canada Agreement (USMCA) in its current form, triggering an annual review cycle.
Then, on July 24, the 10% global tariff imposed under Section 122 of the Trade Act of 1974, which had
replaced the IEEPA tariffs struck down by the Supreme Court in February, is set to expire.
The Office of the US Trade Representative (USTR) is finalizing proposed Section 301 tariffs of 10% to
12.5% on approximately 60 countries as the intended replacement for the expiring Section 122 tariff, with
public hearings held July 7 through 9.
Round 3 of USMCA renegotiation talks is scheduled for the week of July 20 in Mexico City, where the US
is seeking to raise the regional content requirement for autos from 75% to 82% and add a new 50% US specific content threshold. Whether existing USMCA duty exemptions would carry forward under any
Section 301 successor remains an open question.
The Tax Foundation estimates that ending USMCA exemptions entirely would reduce long-run GDP by
an additional 0.1% and cost the equivalent of 95,000 full-time jobs, amounting to roughly $300 per US
household in 2027.
5. CREFC BOG SENTIMENT INDEX
According to the CRE Finance Council (CREFC), its Q2 2026 Board of Governors Sentiment Index steadied
near its baseline following Q1’s geopolitical shock. However, survey results suggest that sentiment
stabilized into caution rather than conviction. The survey was conducted from June 25 through July 6
with a 95% response rate from 38 senior executives across CRE lending, CMBS, private equity, and debt
markets.
Neutral was the most common answer on seven of nine core questions. Interest rates were the most
negative reading for a second consecutive quarter, with 53% of respondents expecting elevated rates to
weigh on CRE over the next 12 months.
Demand-side readings remained net positive. 42% of respondents expect stronger investor demand for
CRE and Multifamily assets versus 11% expecting less, down from 61% who expected increased demand
in Q1. Respondents also noted that borrowers appear to be accepting the current rate environment, with
refinancing described as more orderly than earlier in 2026.
For CRE capital markets, the index points to a market finding its footing rather than one recovering
momentum, a distinction that is likely to keep transaction volumes measured heading into the second
half of the year.
6. LOGISTICS MANAGERS INDEX
The Logistics Managers Index (LMI), a key leading indicator for Industrial Real Estate demand, rose to 71.1
in June, up 1.6 points from May’s 69.5 and the first reading above 70.0 since March 2022.
Researchers characterize June’s uptick as a “significant rate of expansion.” A reading above 50.0 indicates expanding logistics activity.
Inventory levels surged 5.7 points to 60.5, the primary driver of the gain, as retailers built stock ahead of
peak season and in anticipation of further tariff disruption.
Warehousing utilization rose 6.5 points. Transportation prices eased modestly to 92.4, but transportation
utilization rose to a near eight-year high of 74.7.
Aggregate logistics costs registered 242.1, a level that researchers describe as historically inflationary.
Ocean shipping companies implemented new surcharges at the start of July, introducing additional cost
friction heading into the second half of 2026.
Expanding logistics activity and rising inventory accumulation are near-term positive signals for Industrial
Real Estate demand, though whether the current cycle reflects durable end-demand or precautionary
front-loading remains to be seen in absorption data.
7. AI-DRIVEN OFFICE DEMAND
According to a recent analysis by VTS, national AI office demand rose 85% year-over-year as of July
2026, with demand across the industry’s largest AI hubs growing 179%.
Seattle posted the fastest growth of any market at 390% year-over-year. Other emerging hubs include
Northern Virginia, Austin, and Chicago, where AI demand is up 45% year-over-year.
In Q1 2026, US private investment in AI reached $206 billion, the largest quarterly total on record.
San Francisco leads with 81 active AI requirements totaling more than 5 million square feet. Meanwhile,
Silicon Valley and New York together account for nearly two-thirds of all active AI square footage tracked
nationally.
VTS noted that AI leasing activity is generating new demand ahead of when it typically appears in
traditional vacancy data, with Office market improvement in key tech submarkets likely outpacing what
headline statistics currently reflect.
8. APARTMENT CONCESSIONS
According to RealPage Market Analytics, 16.5% of stabilized US apartment units offered concessions in June, up 3.4 percentage points year-over-year and near the highest monthly level since mid-2014.
The average concession discount in June was 11.1% of annual lease value, the deepest monthly average in
more than 25 years.
Class C units were the most likely to offer a concession, with 20.7% of stabilized units carrying an incentive.
In comparison, Class A properties offered the deepest discounts at an average of 11.4% of annual lease
value.
Sun Belt markets, including Austin, Denver, and San Antonio, posted the highest concession rates
nationally, with average discounts of 14.5% to 15.5%.
RealPage attributed the elevated concession environment to ongoing competition from new deliveries
in high-supply markets. The current 11.1% average discount is more than double the cycle low of 5.5%
recorded in mid-2016.
Record concession depth reflects supply-demand imbalance in high-delivery markets. As new Multifamily
starts slow, the concession environment is expected to normalize gradually, though the timing will vary
considerably by market.
9. NATIONAL FORECLOSURE ACTIVITY
According to ATTOM’s 2026 Midyear US Foreclosure Market Report, 227,548 residential properties had
foreclosure filings recorded during the first half of 2026, up 21.3% from the same period in 2025 and
28.2% above the first half of 2024.
ATTOM CEO Rob Barber notes that the increase reflects a return to historical patterns rather than renewed,
heightened risk. Foreclosure timelines have also notably shortened through the first half of the year, and
overall activity remains well below pre-pandemic peaks.
Geographic stress remains uneven. Western and Southeastern states posted the largest year-over-year
spikes, led by Idaho (+59%), Colorado (+57%), Georgia (+52%), North Carolina (+47%), and Mississippi
(+45%). Florida carried the worst state-level rate at 0.27% of housing units, driven in part by surging
insurance costs and HOA fees.
10. RETAIL CRE CREDIT SPREADS
A recent GlobeSt analysis, citing data from Trepp, details how Retail CRE loan spreads are tightening
relative to Industrial loans as balance-sheet lenders demand meaningfully less additional yield for retail
risk than they did a year ago.
According to the analysis, the premium that lenders require for retail loans over Industrial ones has
compressed from approximately 2.42% to 1.39% over the past year.
Meanwhile, the spread premium of Office over Retail has moved in the opposite direction, widening
from 3.46% to 4.91%. The widening Office-Retail spread underscores how cautious lenders remain about
Office collateral compared with other major property types.
TMultifamily remains the tightest-spread sector. During the week ending June 6, with the 10-year Treasury
at 4.55%, balance-sheet lenders quoted 5.93% for stabilized, sub-60% LTV Multifamily loans and 5.97%
for comparably leveraged Industrial loans, just 4 basis points apart.
Trepp cautions that its survey captures quoted spreads, not closed loan pricing or volumes, and that
the compression in Retail could reflect improving fundamentals, competitive reallocation of lending
capacity, or both. A slowdown in consumer spending or tariff-driven cost pressure could reverse recent
tightening.
