Inflation Fails to Shake Equity Markets, Focus on Rate Cuts while CRE Holds Firm

For the week ending August 15, The CRE Weekly Digest team digs into a tale of two markets. Hot wholesale inflation data dampened hopes for a jumbo September rate cut, but investors are still more focused on the prospect of cheaper money than the persistence of higher prices. Manus Clancy warns that U.S. equities are looking dangerously complacent – with historically high P/E ratios, low volatility, and frothy valuations – but sees a steadier hand in commercial real estate. LightBox transaction data shows $160B in 2025 deals to date, with July posting a 10% jump in deals over $50M, and a broad, sober buyer pool keeping valuations grounded. Dianne Crocker spotlights that 54% of office deals are trading at a discount, while multifamily remains the most in-demand listing type. The team also covers steep Pasadena office price cuts, San Francisco hotel distress, and the flow of plentiful (often private equity) capital into even riskier CRE projects. Plus: Disney-branded housing, relocation cash incentives from unexpected cities, and why insurance costs could be CRE’s biggest near-term headwind.

00:18 Market Complacency and Inflation Concerns 

01:57 Frothy Equities vs. Steady CRE Markets 

03:47 CRE Market Activity and Measured Optimism 

09:08 LightBox Data Dive: July Transactions 

17:46 Noteworthy Transactions and Market Trends 

29:19 Upcoming Webinar and Disney “Storyliving” 

Have questions for the pod team? Send them to Podcast@LightBoxRE.com. 

www.lightboxre.com

Transcript

The CRE Weekly Digest by LightBox

Episode 59: Inflation Fails to Shake Equity Markets, Focus on Rate Cuts while CRE Holds Firm

August 15, 2025

Martha Coacher: This is the CRE Weekly Digest by LightBox, a firm transforming the commercial real estate landscape by connecting every step of the CRE process with comprehensive tools and data. I'm Martha Coacher with our experts Manus Clancy and Dianne Crocker. For the week ending August 15th. Despite some mixed signals in the inflation data this week, investors are still writing hopes that the Federal Reserve will start cutting rates in September.

Manus, a hot wholesale inflation number reduced the chances of a jumbo cut, reviving questions about how much relief consumers can expect in the months ahead. But for now, it seems that the market is way more focused on the possibility of cheaper money than the persistence of higher prices. 

Manus Clancy: It's a very funny market right now, I have to say.

I've been hinting at this for a while, and now I think I'm gonna go in full bore. I think that the market is exceedingly complacent right now, and I think that it's reflected not only in the low volatility numbers, which we'll talk about later, but when you see something like today. Where the PPI number came in multiples higher than what people were expecting, and the s and p 500 is only down, I don't know, four tenths of 1% today, and treasuries are not really jumping around like you would expect after this.

It tells me that the market is way, way too complacent right now. We are seeing stocks at all time highs. We're setting new highs every single day. The markets are functioning fully, yet we've now seen two really nasty surprises. We saw a terrible jobs report a couple weeks ago, and now we've seen an alarming PPI number and I don't know.

Let's separate for a moment, the equity markets and, and CRE on the equity markets. I don't know how people can continue to chase returns when we're seeing historically high PE ratios, extremely low volatility, record high prices, and. NA word about the threats we're looking at, and those threats are real.

The possibility of a US recession, the possibility that AI spending just dwarfs earnings for some of these real tech bellwethers, the possibility that inflation does reignite. I thought people would be much more frightened today than they were. And lastly, that corporate earnings are. Hammered because they have to pass through higher costs. We've seen that already from Ford and gm. So to me, I'm perplexed. 

Dianne Crocker: I wonder too, you know, that complacency that you talked about, Manus, like, are people just so desperate for interest rates to come down? You know, I feel like we're right where we were last August in a way. Meaning the markets are, are treating a 25 basis point cut as kind of a done deal in September.

I think any hope of a bold half point move is, is off the table after the inflation data you just talked about. Beyond September, I think is anyone's guess, but I, I read this week that Goldman Sachs is expecting. The cut in September, but then cuts after that. I think they cited like three consecutive quarter point moves, and JP Morgan pulled their forecast forward too, projecting the September cut and then additional reductions because of the labor market, softness and, and political uncertainty.

And I, I feel like a lot of the perception is, is a market that's just so desperate for rates to come down. It's almost like they're hoping that they do and it becomes a foregone conclusion. 

Manus Clancy: I did promise that I would talk about CRE and US equities separately. I am entirely risk off at this point on US equities.

The silver lining is, I don't feel quite as concerned about the CRE markets, although there are concerns out there. The reason I'm not as concerned about the CRE markets, yes. The markets have been very active. We've seen the uptick since the beginning of the year. In the LightBox Activity Index, we've seen surveys come out in terms of buyers, sellers, lenders, developers being more optimistic than they had been in the past.

We see capital as plentiful. That's a great sign for the market. But the thing that really keeps me from being as concerned about CRE. As I am about the broader market is that we haven't seen this euphoria in CRE in terms of higher prices. People are conducting business faster, loans are taking place, properties are being bought and sold, but we're not seeing that euphoria, for example, that we saw in 2007 or that we saw in 2021.

With multifamily properties, there's a soberness among buyers that is giving me great comfort that even if the equity markets get volatile and sell off, the reaction in CRE will be more like it was in April and May than it was, for example, in 2008 or 2015 during the oil bust. 

Martha Coacher: Manus underscoring what you were talking about, the complacency we saw, I think in a number of publications as well as CNBC, the Fear Gauge is at its lowest that it's been for some time, and it isn't simply a measure of the fact that it's the middle of summer.

Manus Clancy: There was a reporter at the Wall Street Journal years ago, I wish I could remember his name. He followed the commercial real estate market, and he said at one point, and I love this quote, it's like the old detective movie where the hero comes out and says, you know what? It's quiet. It's too quiet. There could also be a naked gun reference in there too.

That's probably something they'd say in those spoof movies, but that's what it feels like to me that the Fear Gauge says nobody is terrified in the least. Bullishness is really high in the equity markets. I think that's the time where you hold onto your wallet. What do you think, Dianne? 

Dianne Crocker: Hmm. Yeah, it's interesting. Manus, I wanted to mention, there was a tidbit that I saw this week and it, it relates to what you're talking about. The tidbit was that for the first time, since 2020, the five biggest real estate services firms, so that's C-B-R-E-J-L-L, Cushman, Colliers, and Newmark, they all raised their 2025 outlooks in the same quarter, and that that hasn't happened since basically COVID and why?

Buoyed by Stronger Leasing, which is leading the recovery. They're, um, encouraged by commercial real estate deals that are catching up, and they're hopeful that momentum could carry us into 2026. But what struck me when I read it was that the sense was that they're not blind to the headwind. But there was kind of a sense among these big firms that the worst of the volatility is behind us.

And that definitely syns with the midyear sentiment survey that we closed in July where the majority of folks that we surveyed are expecting a busier second half. You know, I spoke to a client this morning who said that? Q3 and especially September after summer vacations. That's traditionally the time that there's a ramp up in transactions leading up to the fourth quarter, and his clients actually told him to take a vacation now because they're expecting a busy September, especially if freights drop.

Manus Clancy: What was really unique about 2025 so far is that we saw for the first time I would say. At least for the first time in a long time, a detachment during that panic in April when the equity markets were down 20%, there was really no sign of panic in the CRE side. Yes, we saw lending spreads go up in some cases considerably for CMBS, triple B minus according to Morgan Stanley data, by the way.

But we didn't see. Activity dry up like we did during past crises, but that's really the exception to the rule. The big question will come if I'm correct and the equity markets are frothy and we do see a shock to the system in the last five months where we retest those lows of April, where the equity markets sell off by 20%.

Will the CRE maintain. That stiff upper lip that it did in April. It was unique. We don't see that very often. I'm confident that it can, for many reasons, I wouldn't articulate them all. I think that there's a good chance that it will shrug off broader market volatility, but it's by no means a slam dunk.

Martha Coacher: Let's turn to the LightBox data dive. Dianne, we're gonna turn to the July transaction data. 

Dianne Crocker: We are, yeah, we've been going deep into July's transaction data for a blog that's going live in a day or so. And so far this year through the end of July, we've tracked a total of $160 billion in transactions for all of 2025.

And the kind of reminds me of that tracker that they used to have on on the McDonald's buildings when I was little. You know, that number of billions of burgers sold. And so we've been looking at 160 billion in deals so far this year. Isolating just the ones in July, the number of total deals above 50 million.

They were up 10% in July and we had already seen a surge in June. So that was very encouraging to see, especially given that we're in the the throes of the summer season, which sometimes can be a little bit slower. So that jump really kind of mirrors the broader trend that we saw in the July CR Activity Index, which was strong payment just below June's high watermark.

Manus Clancy: I think this underscores perhaps why I'm confident that the C markets could shrug off volatility over the next couple months is that this activity, not only has it been picking up, and that's great news for everybody, but as your blog and your research has shown, Dianne, the buyer pool is deep. This isn't a case where there's just a handful of big institutional buyers.

Gobbling up everything, every transaction, and every month. We see a broad array of buyers out there. And the term I've used before is confidence. This is a confident market. People are confident in their ability to get capital for new projects or transitions from office to hotel or multifamily, and they're confident deploying capital, and it feels good right now. CRE in ways that it doesn't. In the broader US markets. 

Dianne Crocker: Yeah, you bring up a good point. You know, the more that I dig into the transactions data from your team, the more it's obvious to me that we're seeing very few repeat buyers, as you said, you know, and, and that's important because it means that every month.

We're seeing the net of investors coming into the market with intention is expanding, you know, so they're feeling like, okay, we're gonna jump in the pool as well. And as long as that continues, it's, it's very encouraging and it's happening, as you said, against a backdrop of a lot of uncertainty and. The potential for the type of volatility that we saw in the market in uh, April and May.

Manus Clancy: And the thing I love about this, and I'd love to hear from some of our listeners, if people want to ping us via email or uh, LinkedIn or Twitter or things like that, feel free. It doesn't feel like people are paying up for assets. They are not reaching. For these assets, and I'll look at the office market as the example.

Even though leasing has picked up in certain markets like New York and San Francisco, those markets are still bouncing along near the floor that they set in 2024. There's no real irrational exuberance to use the term that the Fed share. Back in the nineties used. It does feel like it's a sober deployment of capital at the moment. What do you think about that, Dianne? 

Dianne Crocker: I think I agree and I, you know, not to sound like a broken record, but looking back at the sentiment data, because that's, that's fresh data from mid-July from a. Broad brush of professionals across commercial real estate, and when we asked them what their expectations were for the second half of this year, I didn't see a lot at the extremes, meaning nobody's expecting a substantial increase in activity or a substantial decrease.

They're huddled around the middle. Very few are expecting a decline, but the ones who are expecting an increase, it's a subtle increase. So it's not going like gangbusters. And I think that speaks to the fact that folks are hopeful that capital will still find a home in real estate, but nobody's, you know, expecting irrational exuberance. And I think that's a good thing. 

Manus Clancy: We do have a recent set of data that shows us what. Irrational exuberance looks like if you look at the same type of data in 2021 and 2022, there was extraordinary evidence in two property types of people overpaying. One was justified, one was not justified. The justified was the industrial.

Mostly the warehouses and logistic centers. There you would see properties that sold in 2015 sell for two x in 2021, but that's because demand was so high. People were clamoring for industrial space and the rent increases justified that euphoria totally get it. Where it was unjustified was in multifamily and there what you were seeing is properties trading in 2021 at 40% premiums.

To where they traded in 2018 and that wasn't a one-off. That was over and over and over again. And whenever you see something like that happen, to use the same term I used 10 minutes ago, it's time to hold onto your wallet. And we saw how that worked out for a lot of these buyers in 2021. They're seeing their values down, they're seeing disappointing rent growth, disappointing valuations, and to the good. We're not seeing that right now as far as I can tell. Any of the five major food groups in CRE. 

Dianne Crocker: Well that's a perfect place, Manus, for me to thank you for all the data that you're collecting on transactions. That $160 billion in deals in calendar year 2025 gives us a way to drill down into asset class and see, okay, what's the average in the office sector in terms of.

The current selling price versus the prior selling price? Is it selling at a discount? Is it selling at a higher price? If it is selling at a discount, what's the average discount? And it'll be interesting to see. We're just really in the early stages of doing that. But at first cut, it looks like for the office.

Deals where we had a prior purchase price as the basis for comparison. 54% of office deals are selling at a discount versus the prior price compared to only 25% in multifamily. 

Manus Clancy: And I think if you looked at industrial, I bet you would be low single digits. 

Dianne Crocker: I think so too. That's next on the list. 

Manus Clancy: That's next on the list, but I gotta pay it forward here. Thank you for the compliment, Dianne. But I really, I am only the vehicle here. I have a great team. Behind me collecting this data, cleaning the data, looking at it week after week. They do great work and thank you for that Great work. 

Martha Coacher: Our did you know for the week is going to take us to our Capital Markets Snapshot report, which was recently released. Dianne, what does it tell us about listings? 

Dianne Crocker: We go deep into our property listings, data for these quarterly snapshots, and I love doing that because it really offers us a clear window into the types of assets that are driving the most attention, and it's still multifamily. Multifamily listings increased their share of total listings in Q2 from 33% in Q1.

So 36% of all listings coming on the market are for multifamily. The transactions data shows that multifamily deals are moving very briskly. We might see some impact on rising insurance costs that might challenge new development in this sector, but I, I think multifamily still very much sits at the top of the pile.

So the report has more details by asset class. We have some encouraging data on the office sector, and we go deep into breaking down deals by size to see whether institutional capital is getting more active than private. And of course, we share our thoughts on how we think the rest of the year is gonna shake out for investors and brokers, 

Manus Clancy: if there's one reason to be less bullish than I am on CRE in the near future.

It's what you just said, Dianne. It's that insurance cost. Line item. That is a real concern. We're seeing things go up extraordinarily fast in many markets, and if there's something that could take the wind out of the sails, let's say over the next six to 12 months, that would be my biggest concern. 

Martha Coacher: Let's turn to some of the noteworthy transactions we've seen. I'm gonna start maybe glass half empty. A couple of stories that are some steep discounts. 

Manus Clancy: We have one in the Pasadena office. Towers sold at a 50% discount. This is a two building complex in Pasadena. It had sold in the past for about 256 million. Uh, that's per commercial observer. That was $537 a square foot.

Uh, the last sale taking place in 2016. This particular price down more than 50% to 120 million. The buyers there, Harbor Associates and the Roxboro Group, the seller, CBRE, investment management. And what you're seeing here is the echo of what I said earlier, which is office valuations plummeted in some markets, 80%, in some markets, 70%.

They really haven't bounced off that. Trough that they hit a couple years ago, and I don't think there's any expectation that they will, especially in the Class C, class B and Class A minus segments, the trophy office market doing quite well. Valuations have really rebounded nicely, but everything else you are bouncing around on that trough.

The bad news is. Probably no acceleration valuations anytime soon. I just don't see that happening in most major markets. Maybe you'll get a bump in New York because leasing has picked up so considerably, but elsewhere, I, I don't expect it. The good news is that we see are seeing a lot of transactions, which means there's a lot of transparencies.

The market should clear. Letting new owners come in, as was the case here, setting the stage for someday these valuations starting to come back. The first thing that has to happen is a clearing of the distress, and that's happening right now, and that's the one silver lining you could point to in this story.

Dianne Crocker: Office is definitely on its way to the bottom, but, but not there yet. What was interesting about that story, Manus, is that that's an office tower deal where they sold at a 50% discount. And I just said that when I looked at our office transactions data, the average discount for office was 54%. So it's almost right on the money in terms of the average and as the market kind of recalibrates.

You know, it'll be interesting to kind of watch if those, uh, average discount rates change or not. To your point, office investment sales have surged in early 2025 in metros, like la, greater LA's office deals reached 1.4 billion in the first half of the year, and that was compared to just 287 million over the same period of 2024.

So to your point, the universe of buyers is ramping up, but they're buying at much lower valuations. 

Manus Clancy: We had a podcast guest on, and I don't wanna name this person because I'm not sure if the remark was on the record or off the record, so I'll keep it anonymous for now. But the person said if I had an office today and somebody said, I'll give you 50% off the last purchase price for office, the gavel would come down so hard and you'd hear that seller saying, sold.

There are so many comps right now in Portland, right? You're seeing 85% discounts in Chicago. You're seeing 85% discounts that if you happen to get a 50% bid. I think in most markets, in many markets, you would do your happy dance. You'd be the happiest person in the world for getting that kind of bid. So just some perspective on on what we're looking at at office, even after two years of real, real price resetting. 

Martha Coacher: And the next transaction takes us to San Francisco, where we've seen big hotels change hands. 

Manus Clancy: Yes, this has been a long time in the making a several hundred million dollars CMBS loan backed by two hotels. This was really undone by the quality of life issues that took place in San Francisco.

It was really a nationwide phenomenon. In terms of the acknowledgement of this problem, certain cities don't get the kind of attention that San Francisco gets. Smaller cities, you might not know that there are quality of life issues, but in San Francisco it's unavoidable. It's part of the national dialogue.

And here that dialogue resulted in fewer people holding conferences, going to that city for vacations. And it was reflected in. Valuations of hotels and also the bottom line numbers of people that were coming to that city to stay. So, but San Francisco's not alone. At one point, high quality, or even every man hotels in New York, were selling for six, 700, $800,000 per key.

During COVID, we saw that trough at $250,000 a key. Now New York has battled its way back. Maybe it's a a $450,000 per key market. For a high quality hotel now, but that market in places where people are concerned about crime, homelessness, it's a hard road back. Once a city gets stigmatized with quality of life issues, it takes an awful lot of time. It change that narrative. 

Dianne Crocker: Yeah, Manus. It's a shame because I've attended a number of conferences in San Francisco. It's a beautiful city. I'm hoping it, it does make a comeback, but you have to think that a lot of eyes are on this deal because they're bellwethers for San Francisco's hospitality market.

And if the sale closes, it could be the early sign of a start of a reset where maybe realistic pricing brings some of the bigger players back to the table. 

Manus Clancy: Yes, this has been kind of dead loan walking. For a while, but if there's a silver lining, and I keep using that term a lot today for San Francisco, is we have seen that uptick in leasing from AI companies, and that should be the first start of what could be a revival.

If you get workers coming back to the city, even if it's three days a week, that should at least change momentum in terms of the city becoming a little bit more vibrant. 

Martha Coacher: Okay. Let's talk a little bit about financing. We saw a number of financing deals that are pretty interesting. 

Manus Clancy: Yes, I'd like to talk about how the four pillars of C lending are functioning and they are.

This week's headlines really underscored that. We saw one story from Commercial Observer that Bridge City has lent 45 million for the development of Long Island City Condos. This is one of maybe a half dozen stories that I highlighted for an internal meeting. Within LightBox where we talked about the financing market, and two takeaways from this particular story.

Number one is, and this might be redundant, but capital is plentiful even for the riskiest types of assets. Construction and conversion capital is available for people that wanna put shovels in the ground, another sign of a confident market. But the other side of it, when I went through this week's litany of just by account basis, it seemed like.

Two out of three or three out of four, the cash was coming from private equity. It wasn't coming from that traditional bank. It was coming from somebody who probably only started doing CRE lending in the last five to 10 years, and I thought that was very interesting. Now, there may be some bias in my numbers.

I tend to look for stories where we are talking about. Shovels in the ground construction or conversions. I'm sure that the banks are very, very active in refinancing stabilized properties, but I was amazed at the number of times when it was a non-bank providing this financing. The other story that jumped out at me was that clear line.

They nabbed an $89 million construction loan for a 310 unit project in Wynwood. Here you have two lenders. This is not unusual. Maybe this is a little bit of an educational segment. In this particular case, we have the senior loan being made by Bank OZK. They are one of the more active loans in CRE, especially on new development.

They provided the senior debt for this project, and they were backed up by PGM real estate who provided the mezzanine loan in this particular deal. So. Sometimes you see banks acting alone. Often that's for stabilized properties. Sometimes you see private equity working alone, especially for things that are outside the sweet spot for banks.

Things with more risk or higher LTV or more value add necessary than banks wanna take. And sometimes it's a partnership, a bank providing the senior debt and somebody else providing that additional bridge capital to get the deal done. 

Martha Coacher: And the last financing story is an interesting one. Disney's Tino community has tapped $160 million construction loan, which tells me that living the magic isn't cheap Manus. 

Manus Clancy: Well, Disney certainly isn't cheap these days from what I hear. I haven't been there in a long time since I had young kids. I always love going there. I know that there's Disney lovers and Disney haters, but it certainly isn't cheap. But I think in our prep for the pot today, you were talking about, you know, are the, the princesses and.

Prince Charming is gonna do double duty. Are they gonna have to greet people at the entryway, you know, do the the special dining things, but also survey the property for these new projects? I know labor is tight. 

Dianne Crocker: Just bringing up images of looking out the window and seeing Donald Duck or goofy mowing the lawn.

Manus Clancy: A Prince charming hopping off a white horse and pulling out his tape measure and his surveying tool. I think that would be one that would break TikTok. 

Martha Coacher: Well, we joke, but I think it's this brand meets real estate hybrid. People wanna live the Disney magic in their, you know, $1 million home. 

Manus Clancy: That could be, I gotta tell a story.

I'll take a detour. Maybe this will end on the cutting room floor, but it just shows how little street savvy I have. I took my young kids to Disney once, and a lot of time was being wasted on the autograph line. You know, my kids wanted to get the autograph from Goofy and you'd wait 15 minutes to meet Goofy, and my wife and I would get irritated.

Come on, there's rides to be gone on. We don't need Goofy's autograph. And my wife told my kids that night, give me your autograph books. Disney has this plan where if you leave it outside your hotel room, the characters come around, sign it all, and when you wake up, all the autographs will be in your book.

And me being the idiot that I am, said to my wife, wow. They think of everything. She says, no, you idiot. We're gonna sign them. 

Dianne Crocker: That is brilliant. I love that. 

Manus Clancy: My wife is so much smarter than me and But you would've thought something like that even I would've been able to figure out. 

Martha Coacher: And a programming note Next Monday, August 18th at 1:00 PM Our very own Manus Clancy and Dianne Crocker are gonna be joined by Tina Lichens to talk about is the CRE market off course or on track, caution, conviction and course corrections.

How's that for alliteration? So join us if you can. It'll be insightful in terms of what's happened through the first half and what we can expect for the second half of 2025. And in closing. You've seen the stories. I know we've talked about incentives to get people back into the office. Well, now cities are getting in on the action and they're offering cash incentives for you to come move to their locations.

And no, I'm not talking about Miami or New York. I'm talking like Tulsa and Terre Haute. You could get anywhere from five to maybe $12,000 for some of these cities to relocate your family and work from their city. 

Manus Clancy: How long do you have to stay? Can you do more than one city at a time? I need to know some details here and I would like the list itemized if you have it, Martha, I would enjoy seeing that list to see if there's a side hustle to be had from living your life.

Like Bob Seger used to like going on a tour of all these cities having a T-shirt made up right? Tulsa, Oklahoma, April 12th, Omaha, Nebraska. April 14th, Kansas City. April 17th. If I can get $5,000 at every stop, maybe I'll get a tour bus. 

Dianne Crocker: You could be like the 2025 Johnny Cash that I've been everywhere. Song.

Manus Clancy: Love it. 

Martha Coacher: You guys are trying to game the system. With that, we will close. Thanks to our producer Josh Bruyning. Please join us every week as our LightBox team shares CRE news and data in context. If you like what you hear, subscribe and rate the podcast and send your comments or questions to podcast@LightBoxre.com. Thank you for listening and have a great week. 

Manus Clancy: Well, let's go.