SVN | CRE Economic Research 05.28.26

Q1 GDP: Second Estimate

According to the Bureau of Economic Analysis's second estimate for Q1 2026 GDP, US GDP growth was revised down to a 1.6% annualized pace, below the initial 2.0% reading and down from 0.5% growth in Q4 2025. The downward revision was driven primarily by weaker consumer spending and lower-than-estimated inventory investment. Consumer spending growth was revised down to 1.4% from 1.6%. Final sales to private domestic purchasers were revised slightly lower to 2.4%, suggesting that core domestic activity remained relatively resilient despite softer headline growth. Business equipment investment remained a bright spot, surging 17.2% annualized, with AI-related capital spending continuing to support overall economic activity. Real gross domestic income increased just 0.9%, reinforcing signs of slowing underlying economic momentum entering Q2.

Commercial Property Prices

According to the latest MSCI RCA Commercial Property Price Index, US commercial property prices increased 1.1% year-over-year in April 2026, while rising 0.2% month-over-month. Elevated borrowing costs remain a major constraint on CRE pricing recovery. Office pricing led gains in April. CBD office prices rose 4.1% year-over-year and 0.8% month-over-month, marking the eighth consecutive month of annual appreciation, though values remain 49% below their March 2022 peak. Suburban office prices increased 3.1% annually and 0.1% monthly. Industrial prices rose 1.9% year-over-year, though annual appreciation has slowed for eight consecutive months. Apartment prices declined 1.1% annually and 0.4% monthly, leaving multifamily values nearly 20% below their July 2022 peak. Retail prices fell 2.3% year-over-year, the weakest performance across major property types.

CRE Investor Sentiment Falls

According to a recent SitusAMC survey, investor sentiment toward commercial real estate has softened, as slower price recovery and elevated financing costs have continued to weigh on investor conviction. Cash positions have become increasingly favored among institutional investors, reflecting a more defensive posture amid tighter capital market conditions and ongoing valuation uncertainty. Interest rates and constrained liquidity continue to pressure transaction activity, limiting the pace of capital deployment. Investors remain active but highly selective, with capital concentrating in sectors and submarkets viewed as fundamentally resilient or supply-constrained. The current environment is reinforcing a wait-and-see approach, as many institutions prioritize preservation of flexibility and liquidity over aggressive risk-taking. Market participants increasingly expect the recovery cycle to remain uneven, with stabilization occurring gradually rather than through a rapid rebound in pricing or deal flow.

FOMC Meeting Minutes

According to the latest FOMC minutes, four members dissented to the decision to hold the federal funds rate at 3.50-3.75% at its April 28-29 meeting, the most in a single FOMC meeting since 1992. A majority of participants said firming would likely become appropriate if inflation remains above 2.0%, the strongest collective hawkish signal of the current cycle. Rate cuts were deemed appropriate only if disinflation resumes or the US labor market weakens significantly. The Middle East conflict was again cited as a source of additional uncertainty. For commercial real estate operators, the hawkish dissent signals the next move is more likely a hike than a cut, pushing out the refinancing relief window further. Sustained restrictive short-term rates continue to put pressure on floating-rate CRE debt.

Consumer Sentiment

The University of Michigan Consumer Sentiment Index fell to a new historic low of 44.8 in the May final reading, down from the 48.2 preliminary reading earlier in the month. Year-ahead inflation expectations rose to 4.8% while the 5-year outlook held at 3.9%. Both inflation expectation measures are well above the Fed's 2.0% target. 57% of respondents cited high prices as directly eroding personal finances. The Expectations sub-index dropped to 44.1, indicating that consumers see conditions getting worse, not improving. The record-low consumer sentiment may be a leading indicator of discretionary retail spending, with in-store retail the most exposed to any pullback in non-essential categories.

Independent Landlord Rental Performance

According to the latest data from Chandan Economics-Rent Redi, on-time payments in independently operated rental units rose to 84.5% in May. The collection rate now sits 223 basis points above the September 2025 low. Year over year, on-time collections remained 48 basis points below the May 2025 level, extending the streak of annual declines to 34 consecutive months. The forecast full-payment rate for May rose to 97.1%, the highest level since May 2025. Late-payment pressure remains elevated, with forecasts suggesting only modest spring improvement. State-level performance remained uneven, with Western and Mountain states continuing to lead the country and several markets posting on-time payment rates above 90%.

Moving Expectations Fall to New Lows

According to the New York Fed's SCE Housing survey, just 21.7% of Americans expect to move within the next three years, marking a new series low for moving expectations. Moving expectations declined across both renters and homeowners, spanning nearly every major demographic category. Renters continue to report substantially higher expected mobility than homeowners, though renters' moving expectations have also fallen sharply. The decline reinforces the growing stay-put dynamic across the housing market. Higher mortgage rates and worsening affordability in the for-sale market continue to constrain homeowner mobility, while elevated asking rents and moving costs are increasingly limiting renter movement. Reduced moving expectations could contribute to lower apartment turnover and slower leasing velocity ahead.

The Geography of Young Family Renters

According to a recent Chandan Economics analysis, renter households with young children are increasingly concentrated in lower-cost metros and suburban markets where housing remains comparatively affordable. Midwest and Southern metros continue attracting larger shares of renter households with children. High-cost coastal metros, particularly in parts of California and the Northeast, have seen weaker concentrations of young renting families as affordability pressures increasingly price out early-stage households. Markets with higher shares of renters with young children generally feature younger overall populations, higher birth rates, and labor markets oriented toward lower-wage industries. Elevated mortgage rates and constrained affordability for homebuyers are also extending the time many young families remain renters. Overall, affordability is increasingly reshaping the geography of family formation, migration patterns, and long-term renter demand across US housing markets.

Existing Home Sales

According to the National Association of Realtors, existing-home sales edged up 0.2% month-over-month in April to a seasonally adjusted annual rate of 4.02 million. Existing home sales remain well below the pre-pandemic range of 5-6 million. The median sales price was $417,800 in April, up 0.9% year-over-year, the smallest annual gain in several months and a signal of price growth deceleration. Inventory rose 5.8% month over month to 1.47 million units, up 1.4% year over year, and currently stands at 4.4 months' supply. Supply is gradually loosening but remains well below the balanced-market benchmark of 5 to 6 months. The persistent affordability constraint in the for-sale market continues to redirect demand into rental housing, sustaining multifamily fundamentals even as new supply delivers.

Retail Sales

Total retail and food services sales reached $757.1 billion in April, up 0.5% from March and 4.9% year-over-year, according to the latest Census Bureau data. Gasoline station sales rose 2.8% month over month and 20.9% year over year, reflecting continued energy price inflation that is absorbing a growing share of household budgets. Non-store retailers led all subcategories, rising 1.1% month over month and 11.1% year over year. Food services and drinking places grew by 2.7% year over year. Headline retail growth looks solid, but the gasoline component is distorting the topline. Strip out energy, and real discretionary spending is under pressure — a persistent headwind for in-store retail formats.