Location Strategy Chartbook 05.10.25

The Fed left rates unchanged for a third straight meeting on Wednesday, and Chair Jerome Powell avoided offering any timing on when rate reductions might resume.

The costs of being late to cut rates is small relative to the potential for a “big mistake” if the Fed eased decisively and inflation expectations shot up, while the labor market held steady, said former New York Fed President Bill Dudley. “It is about risk management — try not to do the wrong thing,” the Bloomberg Opinion contributor said.

Both Democratic and Republican presidents have tried to revitalize US manufacturing, using the carrot of tax incentives and subsidies and the stick of tariffs to bring production back home.

Neither have really worked because the challenges to re-industrialize a country that has been de-industrializing for decades are so monumental.

Warehouse owners including Prologis, First Industrial Realty Trust and Rexford Industrial, and global real estate brokerage Colliers, said tenants began delaying decisions on new leases after what had been a strong start in the first few weeks of the year.

“We are all operating in unfamiliar territory, and whether we like it or not, we're being included in the geopolitical and economic sausage-making," Peter Baccile, CEO of Chicago-based warehouse developer First Industrial Realty Trust, said during an earnings call. "We have ringside seats to what looks to be an ongoing and volatile negotiation with our international trading partners."

U.S. industrial leasing picked up prior to the tariff disruptions, according to CoStar’s national industrial report. Warehouse deal volume increased more than 50% in the first quarter above prior two-year averages in such cities as St. Louis, Richmond, Virginia, Nashville, Tennessee, and Charlotte, North Carolina, according to the report.

Southern California-based Rexford Industrial Realty reported that at the time of its earnings call in February, tenants had shown interest in about 90% of its vacant space, a significant pickup from last year.

But the Trump administration announcement April 2 of a universal 10% tariff on all imports and "reciprocal" tariffs on dozens of countries deemed by the White House to be "trade offenders," including a 145% tariff on China, led to changes for Rexford, the industrial REIT said.

The company has “seen some tenants defer decision making amid increased economic uncertainty,” Chief Operating Officer Laura Clark said during its earnings call in the past month. "It is difficult to predict the near-term impacts surrounding the tariffs,” Clark added.

Up to two-thirds of the container traffic through the ports of Long Beach and Los Angeles — among the world's busiest port complexes — comes from China, according to port data. Cargo container volume was down 35% at the Port of Los Angeles in the past week when compared with the same week last year, officials said.

"The recession will start on the docks of Los Angeles," Joseph Brusuelas, chief economist for international accounting firm RSM, said in a blog post on Tuesday. "The price of those policies will be first paid at the ports and then spread to the rest of the economy."

Port of Seattle Commissioner Ryan Calkins told reporters that “you've got warehouses and logistics operations that are functioning based on the volumes at the ports, so [the slowdown] will ripple through the whole economy in our port communities.”

He added that cargo is expected to drop 35% at Washington ports in May.

In Southern California, Prologis — the world's biggest warehouse owner and developer — owns over 500 buildings with a total of more than 120 million square feet, according to its website. The firm said leasing activity fell roughly 20% in the first two weeks of April, preventing the firm from issuing a more optimistic growth forecast.

Industrial developers said higher tariffs could drive up the price of building materials such as steel, aluminum and lumber, increasing construction and other project costs.

Prologis cut its guidance for speculative construction spending this year in its $41.5 billion development pipeline amid tariff uncertainty.

The San Francisco-based industrial giant in January expected to spend between $2.25 billion and $2.75 billion on development starts for 2025. Last month, though, Prologis cut that range to between $1.5 billion and $2 billion, reflecting "a reduction in our expectations for spec development until visibility improves,” CEO Tim Arndt said.

In our increasingly financialized world, you can now pay for a burrito 🌯 in installments, so why not a Manhattan skyscraper? A buttoned-up pension fund is considering an unusual strategy to unload its 1M sf 41-story office tower at 590 Madison - allowing a buyer to opt for a deferred payment structure to meet the hefty $1B-plus price tag, per CO. The usual suspects have popped up as prospective buyers: Blackstone, which is in its “office buildings are good again” era; RXR, which bought in on the cheap at Murdoch HQ in January; Tishman Speyer, which is in contract for its first Manhattan office deal in a couple years; and SL Green. There’s so much noise around this particular (Eastdil-brokered) process, not only because it’d be the biggest NYC deal in 3Y, but also because the seller, STRS Ohio, has been embroiled in unusually public infighting – it’s been telenovela fodder for the pension trade publications.

In February, the State Teachers Retirement System of Ohio marketed 590 Madison Avenue in Midtown Manhattan for sale, Bloomberg reported. The building is one of the market’s biggest trophy office assets to go up for sale since the onset of the pandemic five years ago.

The pension fund is pricing the 1-million-square-foot property at $1.1 billion, which would represent the city’s first billion-dollar investment sale in two years, should the owner achieve its pricing. Situated between East 56th and East 57th streets, the property became known as the IBM Building, though the namesake tenant has since relocated to 1 Madison Avenue.

While IBM has departed, 590 Madison still holds appeal. In the fall, luxury brand conglomerate Louis Vuitton Moet Hennessy leased 150,000 square feet across four office floors; the asking rent was $190 per square foot. LVMH may also take retail space at the building as Bonhams Auction House prepares to relocate to 40,000 square feet at 111 West 57th Street.

Greenstreet: DRA Advisors is taking bids for $550 million of debt it would use to finance its planned purchase of a large portfolio of West Coast shopping centers.

The New York-based firm has agreed to buy 15 mostly grocery-anchored properties for about $750 million. The seller is Merlone Geier Partners of San Francisco. DRA is circulating its financing request via Newmark, taking quotes for fixed- or floating-rate debt that would run five years total.

The collateral encompasses 2.4 million sf across nine properties in Southern California and three each in Northern California and suburban Seattle. The package is about 93% leased with a weighted average remaining term of 7.2 years.

Thirteen of the centers are anchored by grocery-store tenants, including Aldi, Safeway, Sprouts, Target, Trader Joe’s and Vons. That group accounts for 26% of the pool’s sf and has an average remaining term of nearly 11 years. Other large tenants include Burlington, Chick-fil-A, Chipotle, Five Below, HomeGoods, Planet Fitness, Ross, Starbucks and T.J.Maxx.

Roughly two-thirds of the space is in Southern California, while 20% is in the Seattle area and 14% is in Northern California. On average, 143,000 residents with a household income of $147,000 live within 3 miles of the properties.

Merlone Geier began shopping nearly all its assets earlier this year, encompassing 38 properties worth $2 billion. While the retail specialist considered bids for the entirety of its holdings, it apparently liked the offers it saw on subportfolios and pivoted toward selling 100% interests in several pieces.

DRA’s pending deal is the biggest Merlone Geier has struck, and it would represent the largest shopping-center transaction in the country since 2022, according to Green Street’s Sales Comps Database.

Another investor — Gerrity Group of Solana Beach, Calif. — is in talks to buy six other grocery-anchored centers for around $250 million, while 17 other properties remain up for grabs. Eastdil Secured is advising Merlone Geier on the sales.

Realtor.com’s April Market Trends Report

• The inventory of homes for sale rose 30.6% year over year, marking the 18th consecutive month of inventory growth. Inventory surpassed April 2020 levels, hitting a new post-pandemic high.

• The total number of unsold homes, including those under contract, was up 19.8% compared with last year.

• Pending home sales—homes under contract—fell 3.2% compared with last year, as a renewed climb in mortgage rates weighed on buyers.

• Newly listed homes increased 9.2% from a year ago.

• Homes spent a median of 50 days on the market, four more than a year ago.

• The national median list price for homes was $431,250, largely unchanged from last year, while the price per square foot rose 1.1%, signaling modest home value growth.

• The required income to afford the median-priced home rose by almost $47,000 compared with 2019.

• 18% of listings saw price reductions, the highest share for any April since at least 2016.

• Homebuyers found more options in April, as the number of actively listed homes rose 30.6% compared with the same time last year. This marks the 17th consecutive month of year-over-year inventory gains and builds on March’s 28.5% increase.

• For the first time, the number of homes for sale in April surpassed April 2020 levels—a key pandemic benchmark. Despite this progress, active inventory remains 16.3% below typical 2017–19 levels, signaling that the market still has ground to cover.

• April’s gains suggest the market is closing that gap more quickly than before.

While inventory was up, buyer activity was more subdued. Pending home sales—listings under contract—fell 3.2% year over year, marking a smaller decline than March’s 5.2% drop. However, a late-April uptick in mortgage rates—reversing the downward trend seen in March—could put renewed pressure on demand. This increase, driven by market uncertainty around government trade and economic policy, brought rates almost back to where they were a year ago, potentially discouraging some buyers who had been waiting for further declines. If higher borrowing costs persist, they might weigh on both pending sales and new listings as we move into the summer season.

In April, the typical home spent 50 days on the market, which is 4 days longer than the same time last year. This marks the 13th straight month of homes taking longer to sell on a year-over-year basis. Still, homes are moving more quickly than they did before the pandemic, spending 5 fewer days on the market than the April 2017–19 average.

In April, the typical home spent 50 days on the market, which is 4 days longer than the same time last year. This marks the 13th straight month of homes taking longer to sell on a year-over-year basis. Still, homes are moving more quickly than they did before the pandemic, spending 5 fewer days on the market than the April 2017–19 average.

Even though overall asking prices haven’t declined, more sellers are making price cuts. In April, 18% of home listings had price reductions—up 2.5 percentage points from last year. This is the highest April share in Realtor.com data going back to at least 2016.

This trend suggests that sellers are adjusting their expectations in the face of affordability challenges and weaker buyer demand in some markets.

• In 2005, the median U.S. homeowner lived in their home for 6.5 years.

• In 2024, the median U.S. homeowner lived in their home for 11.8 years.

• “Moving forward, we expect homeowner tenure to stay flat or increase slightly for the foreseeable future. Existing-home sales hit a 15-year low last year, with many homeowners locked in by low mortgage rates, and while sales should pick up a bit this year, it’ll be more of a trickle than a flood,” wrote Redfin researchers.

• “Older Americans are hanging onto their homes because they’re financially incentivized to do so. Most (54%) baby boomers who own homes own them free and clear, with no outstanding mortgage. For that group, the median monthly cost of owning a home–which includes insurance and property taxes, among other things–is just over $600 (similar to the monthly cost for other generations with no outstanding mortgage, but other generations are far less likely to own homes free and clear)”