CRE This Week - What's impacting the United States market?
June 9, 2025 - US commercial real estate news, macroeconomic indicators and market analysis.
Week of June 9, 2025
Welcome to the latest edition of CRE This Week, curated by Altus Group’s US research team.
Our team has handpicked pertinent and noteworthy market indicators, articles, original research, and significant industry dates that are critical to the US commercial real estate sector. We understand that your time is valuable, so we're excited to deliver research that helps you stay informed and saves you some time each Monday morning.
For more key economic indicators that matter to commercial real estate, see Top Indicators by Major Asset Type.
Economic print
Macro economic factors impacting CRE
The Institute for Supply Management released the Manufacturing Purchasing Managers Index (PMI) for May on June 2. May’s PMI slipped to 48.5, the third straight month of contraction, and only the Supplier Deliveries component remained above 50, confirming that demand for manufactured goods is cooling and lead times for inputs stay long.
Because factory executives are often the first to respond to changes in demand, production schedules, and supply chain conditions, this index is widely viewed as a leading economic indicator, often preceding broader government data releases. A reading above 50 indicates manufacturing expansion, while anything above 42.3 still points to overall U.S. economic growth. At 48.5, the Index signals an economy that is cooling rather than contracting.
For commercial real estate, particularly industrial, this cooling may temper demand from manufacturers and logistics firms in the near term. However, the broader economy remains in expansion territory, suggesting any pullback could be sector-specific rather than systemic. Importantly, the Prices Index (which does not factor directly into the PMI calculation) remains elevated at 69.4. That level signals sticky input inflation, which continues to weigh on construction activity, where tariff-related increases in material costs remain a key concern for developers and contractors.
The U.S. Census Bureau released the April edition of the Value of Construction Put in Place survey on June 2. Total construction spending was estimated at $2.1 trillion on a seasonally adjusted annual basis, representing a decline of 0.4% month-over-month and 0.5% year-over-year. The decline was largely driven by a pullback in private residential construction, which totaled $892 billion, down 0.7% from March and 0.9% from April 2024.
Private non-residential construction in April was estimated at $746 billion, down 0.5% from the previous month and up just 1.0% compared to the prior year. Because the survey tracks nominal spending (dollars spent at the time of construction) an annual growth rate of only 1.0% suggests that real construction activity is likely declining when adjusted for inflation. That said, year-over-year trends vary across non-residential sectors, with lodging down 2.5%, commercial down 5.4%, manufacturing flat, office up 3.9%, and other categories such as telecom, amusement, transportation, and power up a combined 5.2%.
ADP Employment and the May Employment Situation
On June 4, 2025, ADP and the Stanford Digital Economy Lab released the ADP National Employment Report, indicating that private sector employment increased by 37,000 jobs in May, the smallest gain since March 2023's contraction of 53,000 jobs. This slowdown was accompanied by steady annual pay growth of 4.5% for job-stayers and 7.0% for job-changers, suggesting persistent wage pressures despite the hiring deceleration.
Two days later, on June 6, the Bureau of Labor Statistics reported that the U.S. economy added 139,000 nonfarm jobs in May, slightly below the 12-month average of 149,000. The unemployment rate remained unchanged at 4.2%. Notable job gains occurred in healthcare (+62,000), leisure and hospitality (+48,000), and social assistance (+16,000), while federal government employment declined by 22,000. However, the labor force participation rate dipped to 62.4%, and the employment-population ratio fell to 59.7%, indicating underlying softness in the labor market.
These labor market dynamics suggest a cautiously softening economy with meaningful implications for commercial real estate. While May job gains beat expectations, nearly all growth came from healthcare and hospitality, sectors with limited impact on major property sectors like office or industrial. Professional and business services, manufacturing, and retail saw cuts. Federal employment has declined by nearly 50,000 since December, and March and April saw downward revisions totaling almost 100,000 jobs. This doesn’t yet signal recession, but it does point to growing fragility as fallout from the global trade war sets in. For CRE, that means steady demand in noncyclical areas like healthcare, but mounting headwinds for others.
News
News to know
In the wake of natural disasters, modular and prefabricated homes are gaining traction as viable alternatives for rebuilding. Companies like Hapi Homes and ICON offer faster and more affordable construction solutions, appealing to homeowners facing insurance shortfalls. Advancements in technology and increased public sector support are helping to overcome past stigmas associated with factory-built housing. “Disasters are actually going to be the turning point” for the wider adoption of factory-built housing, said Vikas Enti, CEO of Reframe Systems. “That’s what we’re betting on.”
Supreme court limits major environmental law | GlobeSt, June 2, 2025
The U.S. Supreme Court unanimously ruled to narrow the scope of the National Environmental Policy Act (NEPA), limiting federal agencies' obligations to consider indirect environmental impacts in project reviews. The decision, stemming from the approval of Utah's Uinta Basin Railway, emphasizes that agencies need only assess direct effects of projects. This ruling is expected to expedite infrastructure developments but has raised concerns among environmental groups about reduced oversight.
As Musk exits, DOGE’s shock and awe campaign against office space grinds on | Bisnow, June 4, 2025
Despite bold promises to slash the federal office footprint, Elon Musk’s Department of Government Efficiency (DOGE) has exited only 6.7 million square feet of leased space, just under 4 percent of the total, according to General Services Administration data cited by Bisnow. While the government had initially targeted far more aggressive cuts, many properties remain in use and hundreds of leases were later removed from termination lists. Layoffs and delays at GSA have slowed progress, though consolidation continues, with most vacated space classified as lower quality. Analysts now expect the ongoing federal budget process, rather than DOGE’s initiatives, to drive meaningful changes in government real estate strategy.
New steel, aluminum tariffs will push construction costs higher | Construction Dive, June 5, 2025
New tariffs doubling duties on foreign steel and aluminum to 50 percent are expected to raise construction costs and pricing volatility across commercial real estate projects. According to panelists from a June 2025 Skanska webinar, the cost impact could be substantial, adding up to $22 million on a $375 million healthcare project. Key materials like coil-based steel and Midwest aluminum have already surged more than 50 percent year-to-date. Developers are responding by bundling contracts, shifting sourcing strategies, and renegotiating pricing structures. While some early gains in material prices are being reversed, industry leaders warn of ongoing risks tied to capacity constraints and supply chain complexity.
Boston tax hit from office market slump swells to $1.7 billion | Bloomberg, June 2, 2025
Boston’s office sector could lose nearly half its value by 2029, wiping out as much as $1.7 billion in cumulative tax revenue and costing the city $550 million annually by that year, according to a report by Tufts University’s Center for State Policy Analysis and the Boston Policy Institute. Office sales at steep discounts suggest a worsening decline driven by hybrid work and high interest rates. With commercial properties funding roughly a third of Boston’s budget, the city is particularly exposed. Mayor Michelle Wu’s efforts to raise commercial tax rates have stalled, while budget pressures and potential federal funding cuts add to the fiscal strain.
Apartment rents decline in more than half of US markets | GlobeSt, June 6, 2025
More than half of U.S. apartment markets saw year-over-year rent declines in May, as elevated supply continues to outpace demand, according to Redfin. National median asking rents fell 1 percent to $1,633, with Austin, Minneapolis, and Columbus leading the drop. Markets with the steepest rent cuts were also among the most active in permitting new multifamily units, while metros with rent growth, including Cincinnati, Tampa, and Memphis, had comparatively lower construction activity. Overall rent volatility has cooled, but two-bedroom units experienced the sharpest declines, dropping 1.8 percent from a year earlier.
Office demand continues to show signs of stabilization, with net absorption remaining positive for the fourth straight quarter, per NAIOP’s latest Office Space Demand Forecast. In Q1 2025, 5.6 million square feet were absorbed, building on 7.3 million in Q4 2024. This momentum is partly due to the plateauing of remote work and greater consistency in workplace strategies. However, NAIOP projects slower absorption in 2026, down to 15.1 million square feet, amid legacy lease overhangs and weaker office-using job growth. Despite macroeconomic headwinds, including trade policy shifts and rising long-term interest rates, the report suggests a cautious optimism that the office market is slowly regaining balance.
Research Spotlight
Catch the latest insights from the Altus team
US commercial real estate transaction analysis – Q1 2025
Single property sales slowed in Q1 2025, with daily transaction counts approaching pandemic-era lows. Activity dropped 11.6 percent from Q4 2024 and 8.0 percent year-over-year.
However, pricing remained resilient in most sectors, and some subsectors saw sharp quarter-over-quarter gains.
Podcast | What the Fed, banks, and consumers are telling us about CRE’s future
We dig into the Fed’s recent meeting minutes, Q1 GDP revisions, consumer confidence trends, and the latest FDIC banking data. From inflation signals and trade tensions to CRE lending slowdowns and cooling construction activity, this episode connects the dots between the broader economy and the decisions facing market participants in 2025.
Whether you're watching the labor market, pricing strategies, or borrower behavior, you’ll want to press play on this pulse check
Important dates
Upcoming data releases and events
Data releases (Times in EST)
Monday, June 9
10:00AM: Wholesale Inventories, Data Release
Tuesday, June 10
6:00AM: NFIB Small Business Optimism Index, Data Release
Wednesday, June 11
8:30AM: Consumer Price Index, Data Release
Thursday, June 12
8:30AM: Producer Price Index, Data Release
Friday, June 13
10:00AM: University of Michigan Consumer Sentiment (Preliminary), Data Release
Upcoming Industry Events
June 9 – June 11: CREFC Annual Conference
June 16 – June 19: NAREE Annual Conference
June 28: BOMA International Expo
About our research team
Omar Eltorai
Research Director
Altus Group
Omar Eltorai is a Research Director at Altus Group. With more than a decade of experience in the industry in investment management and financing roles,
Omar's focus is on macro, capital and market trends affecting the US CRE market. Beyond regularly authoring articles and reports, his commentary and analysis has been featured in various media publications, including: Wall Street Journal, Globe Street, and Yahoo! Finance.
Cole Perry
Associate Director of Research
Altus Group
Cole Perry is a Associate Director of Research with Altus Group's Research team. In this role, Cole delivers key insights into macroeconomics, capital markets, and the broader commercial real estate sector.
Cole boasts a rich background in Commercial Real Estate analytics with previous roles at CompStak and Brixmor Property Group. He holds dual M.S. degrees from Columbia University in Urban Planning and Real Estate Development.
Disclaimer: The opinions expressed in this newsletter are solely those of the authors and are not endorsed by Altus Group Limited, its affiliates and its related entities (collectively “Altus Group”). This publication has been prepared for general guidance on matters of interest only and does not constitute professional advice or services of Altus Group. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy, completeness or reliability of the information contained in this publication, or the suitability of the information for a particular purpose. To the extent permitted by law, Altus Group does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. The distribution of this publication to you does not create, extend or revive a client relationship between Altus Group and you or any other person or entity. This publication, or any part thereof, may not be reproduced or distributed in any form for any purpose without the express written consent of Altus Group.
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