Limon Net Lease Group

Archives for June 2025

Flat FED, Inflation Risks & Durability of Retail Sales

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Consumers Are Still Spending,​
But Are Tariffs Starting to Shift Their Habits?​​

Retail Sales Remain Strong, But Slowed Down From Prior Month​

  • May Inflation-adjusted headline retail sales are up 0.9% from a year ago, but they did drop 1.1% compared to last month​
  • Front-running of tariffs boosted January-April figures, so May’s dip likely reflects payback rather than true weakness​

Tariff Impacts Are Beginning To Show Up In The Data​

  • Building-supply, electronics and restaurant receipts have begun to soften ahead of higher input costs​
  • Container rates from Asia to the West Coast rose 167% from early April through mid-June​
  • As of mid-June, crude oil is up about 20% since June 1 to $75 per barrel; signals of inflation still to come​

Households Remain Resilient, Though Sentiment Lags Sales ​

  • Unemployment holds at 4.2% and income growth is outpacing debt: total household debt to income ratio at 60.9%​
  • Consumer savings including money market funds are up 3.6% year-over-year, giving consumers spending power, but historically low sentiment could temper outlays in H2 2025​

​Sources: Marcus & Millichap Research Services, U.S. Census Bureau​

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Have Tariffs Increased Inflation? Not Yet…

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Tariff Impacts Still Unclear, ​
But CRE Investors Eye Long-Term Opportunities​​

Inflation and Employment Metrics Show Lagged Impact​

  • Tariffs expected to raise inflation and slow hiring, but data hasn’t reflected this yet​
  • May inflation and job growth remain stable, but effects may take months to show​
  • help track broad trends but may not reflect individual deal realities​

Market in Wait-and-See Mode as Risks Build​

  • Fed is holding rates steady amid stable but backward-looking data​
  • Potential for delayed inflation as companies burn through pre-tariff inventory​
  • Tariff policy remains volatile, creating short-term uncertainty​

CRE Investment May Benefit from Acting Early​

  • Interest rates are a key risk factor that could make deals harder later​
  • Acting now may position investors ahead of potential rate hikes​
  • Long-term fundamentals remain sound despite near-term volatility​

*Through May​
Sources: Marcus & Millichap Research Services, BLS​

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Emerging Cap Rate Spreads and Trends

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Beyond the Average: ​
What Cap Rates Really Reveal About CRE Opportunities​

Average Cap Rates Offer a Benchmark, Not the Full Picture​

  • National apartment cap rate averages 6%, but varies from 4.7% to 7.2% by market and asset class​
  • Primary markets and Class A assets tend to command lower cap rates​
  • Averages help track broad trends but may not reflect individual deal realities​

Market and Asset Type Influence Cap Rate Ranges​

  • Cap rate spreads narrow across market tiers; gap between primary and tertiary markets has halved since 2018​
  • Class and metro trends shape cap rate variance—e.g., hotels (6–11%), industrial (5–8.1%)​

Granular Data Reveals Strategic Investment Opportunities​

  • Cap rate ranges signal where investors can find yield vs. stability​
  • Outliers and micro trends offer entry points others may overlook​
  • Success often comes from drilling past averages to uncover local dynamics​

As of 1Q 2025​
MT Retail = Multi-Tenant Retail​
Includes sales $1 million and greater​
Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics​

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New Tax Bill May Bolster CRE Investment Climate

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New Tax Bill Advances with CRE-Friendly Provisions​​​

Tax Bill Progresses Through Congress​

  • House passed version includes key CRE provisions; Senate approval still pending​
  • Changes still possible, but framework offers early insight for investors​

Key Provisions Likely to Benefit Commercial Real Estate​

  • 1031 exchanges and carried interest rules left untouched​
  • QBI deduction raised to 23% and made permanent​
  • Bonus depreciation extended through 2029 with 100% first-year expensing​

Investors Remain Optimistic Despite Rising Distress​

  • Bill may increase deficit by $2.6T to $4.3T over 10 years​
  • Added Treasury issuance could pressure interest rates upward​
  • Commercial real estate benefits may help offset rate impact, especially for value-add deals​

*As of May 28​
Sources: Marcus & Millichap Research Services, Internal Revenue Code §164(b)(6); House-passed American Growth & Opportunity Act, Sec. 11004 (BPC summary 5/22/25)​

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