SVN | CRE Research Economic Update 04.24.26

Commercial Property Prices

According to MSCI-RCA, commercial property prices posted their strongest annual gain since late 2022 in March, rising 2.1% on the year, up from 0.6% in February. The Industrial sector rose 2.3% year-over-year and 0.2% month-over-month. Industrial also remains the only major sector to post a positive return since the onset of interest rate shocks in the summer of 2022. Apartment prices were flat on both a monthly and an annual basis, ending a stretch of annual declines that has lasted more than 3 years. Retail prices fell 1.2% year-over-year but rose 0.2% from February. March was the third consecutive month of annual declines for Retail, following 15 consecutive months of gains. Suburban office prices rose 5.1% year-over-year, while CBD office prices were up by 1.4% annually.

CPI Inflation

According to the latest data from the Bureau of Labor Statistics (BLS), the Consumer Price Index (CPI) rose 0.9% month-over-month in March, the largest single-month gain since June 2022. The annual inflation rate rose to 3.3%, the highest since May 2024, and up sharply from 2.4% in February. Energy prices drove nearly three-quarters of the monthly increase in headline inflation, with the gasoline index surging 21.2%, largely attributable to supply disruptions stemming from the Iran conflict. Core CPI, which excludes food and energy, held at 0.2% month over month and 2.6% year over year, suggesting the energy shock has not yet broadly filtered through underlying prices. The shelter index rose 0.3% for the month and 3.0% year over year, tied for its lowest annual rate since August 2021, indicating continued progress on one of the stickiest components of core inflation.

Fed Beige Book

According to the Federal Reserve's latest Beige Book, released on April 15th, overall economic activity grew at a slight to modest pace in eight of the twelve Federal Reserve Districts. Two districts reported little change, and two reported slight-to-modest declines. The dominant theme across all districts was the impact of the Iran conflict, evident in rising energy costs feeding through to freight, raw materials, and household budgets. Businesses broadly reported heightened uncertainty about the outlook. Employers were largely holding headcount steady but reluctant to commit to longer-term hiring. Prices rose at a moderate pace nationally, with input cost pressures intensifying, particularly for fuel and energy-linked inputs. In commercial real estate specifically, the Beige Book noted improving conditions in office markets, particularly in New York City, where demand from finance firms and AI-related tenants drove leasing gains. Industrial leasing was characterized as strong across several districts, including the New York/New Jersey corridor. Retail fundamentals remained solid. Consumer spending edged up slightly overall, though lower-income households were described as increasingly strained by rising energy, food, and insurance costs.

Prologis Logs Record Leasing Activity

According to Prologis Q1 2026 earnings, the company recorded a record 64 million square feet of lease signings with tenant retention of nearly 76% during the quarter. Same-store net operating income grew by 8.8% on a cash basis year over year. The company's lease mark-to-market stood at 17% on a net effective basis, representing an estimated $750 million of embedded future NOI at current spot rents. Prologis started $1.3 billion in data center build-to-suit projects in Q1, backed by a 5.6-gigawatt power pipeline under a letter of intent. Management stated that industrial vacancy appears to have peaked, and market rents posted their first positive quarter in two and a half years.

Homebuilder Sentiment

According to the NAHB/Wells Fargo Housing Market Index, builder confidence fell four points in April to 34, the lowest reading since September 2025 and the 24th consecutive month below the 50-point threshold. All three sub-indices declined. The current sales conditions sub-index fell by 4 points to 37, while the six-month sales outlook fell by 7 points to 42. Prospective buyer traffic slipped three points to 22. 62% of builders reported that suppliers had raised material costs due to higher fuel prices tied to the Iran conflict. 70% of builders reported difficulty pricing homes given uncertainty about input costs. Sales incentives held at 60% in April, the 13th consecutive month at or above that threshold, while 36% of builders cut prices, with an average reduction of 5%.

National Rent Collections

On-time rental payments in apartment units operated by independent landlords increased to 84.5% in April, according to national rent collections data from Chandan Economics/Rent Redi. It is 223 basis points above the September 2025 level and marks the sixth consecutive increase in on-time payments over the past seven months. On an annual basis, rent collections remain 119 basis points below April 2025 levels, extending the streak of annual declines to 33 consecutive months, though the pace of deterioration continues to ease. The forecasted full-payment rate strengthened to 97.2% in April, the highest level since May of last year. Late-payment pressure remains elevated but stabilizing. Western and Mountain states continue to lead the nation in performance, with multiple markets posting on-time payment rates above 90%.

Foreclosure Activity

According to ATTOM's latest foreclosure activity data, foreclosure filings rose 26% annually during the first quarter, and 18% during March alone. The latest activity reflects a broader normalization trend following pandemic-era lows. There were roughly 46,000 properties with default notices, scheduled auctions, or bank repossessions in March, or about one in every 3,131 housing units. Filings were up 28% from March 2025. South Carolina, Indiana, Florida, Illinois, and New Jersey had the highest foreclosure rates. South Dakota, Vermont, Montana, North Dakota, and Wisconsin saw the lowest rates during the month.

Consumer Sentiment

According to the University of Michigan's Consumer Sentiment Index, sentiment fell 10.7% in the preliminary April reading to 47.6, a record low in the survey's 74-year history. Declines were broad-based across all demographic groups, income brackets, and political affiliations, with every component of the index posting a setback. Year-ahead inflation expectations surged from 3.8% in March to 4.8% in April, their largest one-month increase since April 2025. Long-run inflation expectations rose to 3.4%, their highest since November 2025. One-year business condition expectations plunged by roughly 20%, falling to their lowest level since mid-2022. Researchers noted that 98% of interviews were completed before the April 7th ceasefire announcement, and that economic expectations are likely to improve if consumers gain confidence that supply disruptions have ended and gasoline prices have moderated.

Small Business Optimism

According to the NFIB, the Small Business Optimism Index fell 3.0 points in March to 95.8, dropping below its 52-year historical average for the first time since April 2025. None of the 10 index components increased in March, while eight declined. The frequency of positive profit trend reports fell 11 points to a net negative 25%. The Uncertainty Index jumped 4 points to 92, well above its historical average of 68. Expected business conditions fell for the third consecutive month, declining 7 points to a net 11%, its lowest reading since October 2024. The report's researchers noted that the dramatic spike in oil prices has spooked consumers and owners alike, creating cost-absorption challenges across the small-business sector.

Retail Sales

According to the U.S. Census Bureau's advance estimates, retail and food services sales grew 1.7% in March, its sixth consecutive month of growth and its largest jump in a year. Retail sales rose 4.0% year-over-year. Core retail sales, excluding autos, gas stations, and restaurants, rose 0.41% month over month and 7.05% year over year. Clothing and accessories stores posted a 0.57% monthly increase and a 10.89% year-over-year gain. Total retail sales for Q1 2026 were up 6.18% year over year. Above-average tax refunds helped offset elevated gasoline prices tied to the Iran conflict during the month, while the divergence between record-low consumer sentiment and continued spending growth reflects a well-documented gap between how consumers describe the economy and how they behave within it.