📢Good morning,
According to Reuters, Fed Governor Chris Waller said he supports a September cut and the pace will be data-dependent, reinforcing market odds of an imminent move. Rate relief would lower debt service and extend buyer underwriting, accelerating the lending thaw already visible in Q2.
📊 Quick Dive
Futures imply ~92% odds of a 25 bp cut on Sept 17.
Current policy range: 4.25%–4.50%; Waller favors a gradual path.
Q2 CRE originations: +66% YoY, +48% QoQ (MBA).
July U.S. Construction Spending Slips; Private Nonres Down
Total construction spending fell 0.1% m/m in July to a $2.139T SAAR (-2.8% YoY). Private nonresidential declined 0.5% m/m; manufacturing fell 0.7% m/m and 6.6% YoY, while office was flat m/m. Developers should expect tighter pro formas where manufacturing-led pipelines were driving bids.
CMBS Delinquency Rises Again in August
Trepp reports the overall CMBS delinquency rate increased 6 bps to 7.29% in August, with the delinquent balance at $44.1B on $604.6B outstanding. Distress remains concentrated in office, with multifamily and retail showing mixed moves. Watch special-servicing as maturities stack into Q4.
Manhattan August Leasing Pops; Pricing Still Below 2020
Leasing volume rose more than 20% from July, led by Midtown South demand. Average asking rent ticked up 1% m/m to $74.73/SF but remains ~6% below March 2020 levels, underscoring a bifurcated market where trophy rent prints mask broader softness.
AI Tenants Revive San Francisco; Supertall Proposed
AI firms leased nearly 1M SF in 1H25 as momentum builds; Hines proposed a 1,225-foot office tower on the former PG&E site, signaling selective confidence despite elevated vacancy. Expect concessions to remain necessary outside top assets.
Labor Day Travel Was Heavy, A Tailwind for Urban Hotels
TSA screened ~2.84M passengers on Sept 1, near summer peaks. Strong mobility supports group and corporate mix even as weekly RevPAR comps have softened in several top-25 markets.
Rates are the primary lever. If the Fed cuts this month, lock cheaper fixed-rate debt where business plans are stabilized and preserve extension optionality where cash flows are still normalizing. Re-underwrite exit caps and DSCR on 2026–27 maturities now; falling base rates won’t fully offset wider credit spreads for transitional assets.
On development, July’s spend data confirm a moderation in private nonres—especially manufacturing. Expect better bid discipline from GCs and subs in Q4, but do not assume broad cost deflation. Target shovel-ready, phased projects with clear tenant pipelines and conservative contingency.
FOMC decision Sept 17: watch statement language on the pace of additional cuts.
August construction spending Oct 1: gauge manufacturing and commercial categories for further pullback or base-building.
NYC/SF office: track August–September leasing and sublease withdrawals to confirm momentum beyond trophy assets.
CMBS distress: monitor September delinquency and special-servicing updates as refi walls approach year-end.
Chart of the Day: CMBS Delinquency Rate by Property Type (2019–2025) — Office spiking to 11.66%, Multifamily to 6.86%, while Retail and Lodging improve and Industrial stays near 1%.
