SVN Research
Economic Update
March 14, 2025
1
CPI Inflation
The Consumer Price Index (CPI) rose 0.2% in February and 2.8% year-over-year, cooling more than expected and potentially providing some relief to markets and policymakers on guard about price pressures. Core-CPI, which removes the more volatile food and energy components, mirrored the headline 0.2% month-over-month figure but arrived slightly higher on an annual basis at 3.1%. Nonetheless, Core CPI also fell short of Wall Street’s consensus forecast, with economists expecting a 0.3% month-over-month increase in both the headline and core numbers
2
Business Optimism Decline
Business optimism took a significant dive in February, according to the National Federation of Independent Businesses (NFIB). The Business Optimism Index fell 2.1 points from January, which puts it at its lowest level since October, just prior to the 2024 presidential election. Also notable, a supplemental indicator of the index that measures uncertainty has surged to its second highest level on record, beaten only by the initial uncertainty surrounding COVID-19.
3
Tariffs, Uncertainty, and Real Estate
The US Logistics Managers’ Index (LMI) came in at 58.4 in November, a slight downtick from October’s level but marking the 12th consecutive month of growth for the logistics industry. Logistics activity is a leading indicator of Industrial Real Estate demand. Inventory levels were down, in line with seasonal patterns, which saw warehouse utilization fall and capacity rise. The drop off in inventory also caused transportation capacity to expand and prices to fall.
4
March Jobs Report
According to the Bureau of Labor Statistics, the US economy added 151k jobs in February, a rebound from a downwardly revised 125k additions in January but short of the 170k job additions that were expected. Job growth in health care, finance, as well as transportation and warehousing led job growth for the month, while federal government and retail trade drops saw some of the most notable declines. • Average hourly earnings rose 0.3% month-over-month and rose annually by 4%.
5
Commercial Property Prices
Commercial real estate prices edged into year-over-year growth in January and posted their third consecutive monthly increase, according to the latest Commercial Property Price Index (CPPI) data from MSCI-RCA. Overall, commercial prices are up 0.5% from December and 0.3% over the past twelve months. Moreover, monthly price growth is accelerating, implying a faster annualized growth pace if the trend continues.
6
Falling CRE Distress
According to reporting from CRED iQ, distress for both conduit and single-borrower large loan deal types dropped for the first time in five months during February. This comes after MSCI reported in its January US distress tracker, which combines delinquencies and special servicing rates, that levels had reached their highest in a decade
7
Logistics Activity
Logistics activity rose for a second consecutive month in February and, like in January, charted its strongest growth since June 2022, according to the Logistics Mangers’ Index (LMI). A notable uptick in inventory levels drove logistics activity growth, with both upstream and downstream firms expanding. LMI researchers note that expanding inventories across the supply chain is similar to a dynamic observed last year, but overall, expansion levels are elevated.
8
Construction Planing Activity Flattens
According to the Dodge Construction Network’s momentum index (DMI), construction activity grew 0.7% in February while planning activity moderated. Commercial planning rose 3.3% during the month, while institutional planning fell 4.6%, leading to a mostly flat period for overall activity
9
Household Utility Costs
According to a recent analysis by Chandan Economics, the average US renter household pays $220 per month in utilities, and the costs vary widely by property type. On an absolute basis, tenants living in single-family rentals (SFR) pay considerably more in average utilities—about $327 per month, 56% higher than the next closest property type.
10
Geographic Difference in Credit Access
A recent study by the New York Federal Reserve finds that residents in urban areas, specifically West Coast metros, have better access to credit on average than residents of other regions of the country. The study reports that between 2018 and 2023, rural areas had consistently worse credit health than urban areas. Further, 85% of the top 25 cities for credit access were on the West Coast or in the region near Minneapolis.