Pacific West CRE Briefing Market Intelligence & Strategic Insight from Gary McKae

I’m a Commercial Real Estate Advisor and Broker Associate with decades of experience guiding investors, property owners, and institutions through complex real estate decisions. My background spans investment banking, portfolio strategy, and high-value real estate transactions—including REO, TICs, foreclosures, and structured deals across California and beyond. I specialize in helping clients navigate market shifts with clarity and strategy.

COWBOY LOGIC, GROWTH AND EMPLOYMENT

Cowboy Logic Meets the Modern Market: Are the Jobs Numbers Missing the Mark?

By Gary McKae | McKae Properties, Inc. | DRE# 01452438

Cowboy logic, in its simplest form, refers to a pragmatic and straightforward approach to problem-solving — making decisions based on common sense, life experience, and self-reliance. No frills, no overthinking — just calling things like they are.

And lately, cowboy logic has been telling me something doesn’t quite add up.

AI Disruption Without Labor Fallout?

Artificial Intelligence has had a dramatic effect on labor across Silicon Valley. Many entry-level programmers have been replaced by AI. Law firms have trimmed support staff thanks to document automation. Countless other businesses are using AI to reduce overhead by automating administrative roles.

So, by cowboy logic, that should show up in the labor data — fewer support jobs, maybe a dip in the jobs report. But it didn’t… not until the August 1, 2025, revision.

Immigration, Consumer Behavior, and Job Resilience

Another factor is immigration. ICE enforcement and shifting policies should have, in theory, tightened the labor supply — particularly among service and construction sectors. Yet again, there was no substantial change reflected in the employment data through the first half of 2025.

Consumer spending has been slowly declining since 2024. If people are buying less, common sense suggests fewer retail and service jobs would be needed. Still, the jobs reports remained strong.

And then there’s the “return to work” trend — employees leaving remote setups to return to pre-COVID workspaces. That has certainly revived activity in urban business districts and bolstered support staff needs in some service sectors. But this shift mainly involves geographic relocation, not true job creation.

The real sign of this movement is seen in rising rents and reduced vacancy in urban cores — not necessarily in labor market expansion.

Bad Data? History Says It Happens

Statistics are only as good as the data behind them. And data can be wrong — or misinterpreted. Take the 1948 election: Thomas Dewey was forecasted to win by a landslide. The polls were wrong because they relied on telephone surveys, a luxury at the time. Affluent voters were overrepresented — the result? Harry Truman won. Bad data, bad predictions.

Today, we gather economic data from a wide variety of sources — but that doesn’t make it foolproof. We need to continually evaluate the assumptions behind the numbers.

If the Department of Labor failed to account for AI job displacement, immigration shifts, and consumer contraction until August, cowboy logic says we have a data interpretation problem. And that matters for real estate.

How This Impacts Real Estate Markets

Let’s look at what the market is telling us — not just the headlines.

Multifamily Housing: San Francisco & San Mateo/Burlingame

San Francisco's multifamily market has rebounded. Q1 2025 absorption hit the highest level since 2021. Population growth has resumed, crime is declining, and the city is stabilizing. That stability is fueling demand for apartments — and landlords are responding.

In San Mateo/Burlingame, a major apartment submarket with 22,000 units, rents have risen sharply. Much of the inventory is older Class B/C properties, which creates opportunities for value-add investments. Caltrain and bridge access add to the area’s desirability. New construction is being absorbed quickly — evidence of strong renter demand — even as vacancy rates hover at 5.1%, the lowest in a decade.

Key Trend: Multifamily is surging due to migration back into core markets, a tight construction pipeline, and stabilized urban appeal.

Office Market: Still Sluggish, But Stabilizing

San Mateo has 10 million SF of office space. It’s home to major players like Sony Interactive and Roblox. Leasing activity is up — especially from AI firms — with new deals hitting levels not seen since 2022. But vacancy remains high, and rents are still 30% below pre-pandemic levels.

Key Trend: Office is in recovery mode, but cowboy logic says the AI hiring boom and return-to-work narrative aren’t enough to call this a full rebound.

Hotel & Hospitality: Momentum, But Long Road Ahead

Hotel investment has picked up, with $159M in transaction volume in H1 2025 — a major increase over just $17.5M in the same period last year. But much of this activity stems from distressed sales and recovery plays. Labor contracts with higher wages and protections are squeezing profitability, and many insiders say pre-pandemic performance levels may not return until after 2030.

Key Trend: Hospitality is moving, but it’s fragile. It’s not driving labor strength — it’s still finding its footing.

Conclusion: Trust the Market, Not Just the Models

Cowboy logic doesn’t deny the value of data — it just demands the data make sense.

If AI is cutting jobs…
If consumer spending is down…
If immigration is being restricted…
If office and hotel markets are still weak…
...then how do we explain booming jobs reports?

We don’t. Or at least not yet.

The market, not the headlines, tells the story. And for now, the story is mixed. Multifamily is strong, but office and hospitality still face headwinds. That’s not consistent with robust job creation across the board. As always, we must look beneath the surface, evaluate where the data comes from, and follow the real signals — not just the spreadsheets.

That’s cowboy logic.

Gary McKae
Commercial Real Estate Advisor | Investor Advocate | Author
📍 McKae Properties, Inc.
📧 gary@mckaeproperties.com
🌐 www.mckaeproperties.com
📞 (650) 743-7249
📍 655 Oak Grove Ave #1346, Menlo Park, CA 94026
DRE# 01452438

📌 Want to know how this affects your portfolio or property plans?
📅 Schedule a consultation or visit www.mckaeproperties.com for market updates and strategic advisory.

Consumers temper their pessimism as a tariff deadline nears

Intro:

While media narratives continue to warn of economic softening, a clearer picture is emerging from recent consumer sentiment and retail data. July brought a third straight month of improvement in how Americans view the economy—yet inflation pressures and trade policy uncertainty still loom large. Here's what CoStar’s economists have to say:

A buoyant stock market and a temporary pause in tariff tension helped temper American consumers' pessimism last month, according to a handful of data releases.

Whether the improving sentiment persists could depend on what happens August 1, when a pause in U.S. tariffs is scheduled to expire, and whether inflation continues to seep in to the price of consumer goods.

According to the University of Michigan’s monthly consumer sentiment survey, Americans’ economic mood improved into early July. The sentiment index increased to 61.8 in its preliminary reading, up 1.8% compared to June.

This marked the third consecutive month of improvement and the highest sentiment reading since February. Still, overall sentiment is down more than 16% since its peak in December 2024 and, aside from the recent decline in early 2025, the index remains lower than at any time since November 2023.

Contributing to the sentiment could be consumers’ inflation expectations, which, while easing, remain around a two-year high.

Adding to the prevailing level of uncertainty, the Conference Board’s leading economic indicators index continued to deteriorate in June. As the index measuring manufacturers’ new orders fell and unemployment claims rose, the index fell by 2.8% in the first half of 2025, a faster pace of deterioration than the 1.4% the year prior.

In the Michigan consumers’ survey, current conditions performed better than short-term expectations. Evidence of the improved sentiment could be found in retail sales data, which grew 0.6% on a nominal basis in June. It was only the second month of positive retail sales growth in 2025, coming after consumers had front-loaded purchases in advance of the imposition of tariffs with a March buying spree and then cut back on discretionary spending in later months.

The retail sales recovery was broad-based across categories, including some signs that consumers were ready to spend on discretionary items again. Restaurant spending increased by 0.6%, outpacing the comparable food away from home category of the consumer price index, which rose 0.4%.

At the same time, though, tariff-impacted categories such as electronics and furniture showed continued weakness, both falling 0.1% in the month, even as their comparable price indices increased 0.4% for furniture and 1.9% for appliances in the month. And as price increases became more apparent in other tariff-impacted goods, nominal growth in some categories could have been influenced by inflationary pressures as well as organic demand. Sporting goods stores, for example, reported a 0.2% increase in sales while the comparable consumer price index rose 1.4%.

Car prices, a much larger category of sales, continued to decline, with the used car and truck price index down 0.7% in June and new vehicle prices down 0.3%. At the same time, nominal sales to auto and other motor vehicle dealers were up 1.4%. Despite the increase in total auto spending, though, unit sales data shows a slight decline in the number of cars sold in June, perhaps reflecting the continued resilience of higher-end consumers who are more likely to purchase higher-value brands.

The appearance of price increases in the June inflation data comes simultaneously as consumer expectations of inflation are softening. One driver of the improved mood in the University of Michigan survey was a downtick in inflation expectations for the next year.

Survey respondents’ inflation expectations fell to 4.4%, their second consecutive monthly decline after a peak of 6.6% in May. Though those short-term inflation expectations remain the highest since late 2023, the limited impact of tariffs on headline inflation so far is helping to anchor expectations.

With trade policy still to be resolved, and amid other geopolitical tensions, including the Ukrainian conflict and turmoil still to be managed in the Middle East, uncertainty remains elevated, which would be expected to weigh on business and consumer sentiment. Yet the economy appears on an even keel, and equity markets have recovered and moved higher from their April lows.

How this discordance is resolved remains to be seen. Still, the tight balance has the Federal Reserve in a holding pattern until incoming data either shows continued positive momentum for the economy, which may motivate a rate increase, or a deterioration of labor market conditions, which would call for a rate cut. Neither seems immediately likely.

CoStar Economy is produced this week by Christine Cooper, CoStar's managing director and chief U.S. economist, and Chuck McShane, senior director of market analytics.

Conclusion:

What does this mean for investors and property owners?

While inflation expectations are moderating, discretionary spending is coming back in targeted sectors—particularly among higher-income consumers. With tariff deadlines approaching August 1 and the Fed signaling no immediate change in rates, we’re in a crucial window where commercial real estate investors can take advantage of interest rate spreads and buyer hesitancy.

Expect more volatility in the months ahead, but as always, smart positioning and local market knowledge will determine who wins.

📌 Want to know how this affects your portfolio or property plans?
📅 Schedule a consultation or visit www.mckaeproperties.com for market updates and strategic advisory.

ANNOUNCEMENT: PACWEST CRE MOVES AGENCY RELATIONSHIP

ANNOUNCEMENT: Pacific West Commercial Real Estate Advisors has transferred their association to Engel & Völkers from Berkshire Hathaway HomeServices Drysdale Properties.

Engel & Völkers is a well-known international real estate and service company that specializes in brokering both high-end residential and commercial properties.

Their commercial division, Engel & Völkers Commercial , offers a wide range of services for various types of commercial real estate. This includes:

Residential Investment: this covers multi-family dwellings, residential portfolios, building plots, and development/renovation properties. They serve private investors, property owners, project developers, institutional investors, and family offices.
Office rental services: they advise companies on expansion, location optimization, and new retail concepts, leveraging detailed market data and expertise.
Other commercial properties: this can include industrial units, land acquisitions, hotels, and various types of investment properties.

Engel & Völkers Commercial prides itself on:

Global presence and local expertise: They have a wide international network with over 100 commercial divisions in major cities worldwide, combined with in-depth local market knowledge from their advisors.
Experience: founded in 1977, they have over 40 years of experience in the real estate sector.
High standard of service: They emphasize providing professional guidance, transparency, tailored approach to meet client needs.
Exclusive network: Their network of contacts and opportunities is a key asset for their clients.

In addition to direct brokerage, they also offer consulting services such as hotel consulting and investment consulting across various asset classes.

Gary McKae fits well into this organization. Gary McKae holds a certification from Wharton School of Business in Investment Management Analysis.

He started his career in Investment Banking and Trading. As a licensed real estate agent in the securities industry he specialized in liquidating foreclosed and restructured properties through Limited Liability Corporations, Tenants in Common and Limited Partnerships. Gary Specialized in advising investors in the acquisition of Triple Net Leases, Multi-Family Housing, Shopping Centers and Storage Centers and Offices Buildings.

He advanced into management with numerous offices in the Bay Area. He established a High Net-worth Services team which became the Top 100 brokers of Merrill Lynch.

Gary’s Community Service in the San Mateo County involved as a member of the Woodside School Foundation, Woodside Town Council, Woodside Mayor, Woodside Trails Committee, Woodside Livestock Committee, San Mateo City and County Association of Government, San Mateo Council of Cities. Gary was a Special Deputy in the Mounted Division San Franciscan Sheriff's Department, The San Mateo Mounted Patrol, former trustee College of Notre Dame in Belmont, Conservator and Guardian for State of California and Friend of San Mateo Probate Court.

In 2004 Gary renewed an interest in real estate and was licensed in the State of California as an agent and now a broker.

The Commercial office is located at 2044 Union Street, San Francisco 94123 with local peninsula meeting facilities at the Burlingame office at 1408 Chapin Avenue, Suite 1 94010.

Residential Stall, Commercial Surge: A Market in Transition

Residential Stall, Commercial Surge: A Market in Transition

The residential real estate market is finally seeing a return of inventory—but demand is not following suit.

High mortgage rates, rising insurance premiums, and general affordability concerns have locked many buyers in place. For now, the cost of renting continues to outweigh the cost of ownership—yet paradoxically, that financial logic hasn't translated into buyer urgency. The result? A market full of hesitancy.

The “Sell-to-Return” Dilemma

Adding pressure to the market are homeowners who must sell in order to return to the workplace. The remote-work migration during COVID-19 led many to relocate to more affordable regions such as the Central Valley, Sacramento area, and the East Bay. Now, corporate mandates are calling employees back, creating a wave of reluctant sellers.

Some can’t afford to repurchase near their former employment centers. Others are realizing that their current home won’t sell at a price sufficient to meet their financial goals—or even cover the cost of moving back. And therein lies the heart of the matter: satisfying their needs in a market that no longer supports their expectations.

The pressure will likely build. These migration markets face four years' worth of returning inventory. My advice: Sell now, before you’re forced to sell for less.

Luxury Markets: Still in Orbit

Not all sectors are feeling the pinch. Ultra-luxury communities—like Los Altos on the San Francisco Peninsula—continue to see competitive bidding, with six-figure premiums over list price. Liquidity from tech-sector stock sales is being recycled into high-end real estate, reinforcing the notion that cash is still king—at least at the top of the market.

The Commercial Advantage

While residential mortgage rates have remained stubbornly high, commercial real estate financing is far more attractive. Current loan rates include:

Multifamily (5-year): 5.20% – 6.29%
Multifamily (7-year): 5.26% – 6.29%
Multifamily (10-year): 5.39% – 6.63%
General Commercial Loans: 5.85% – 6.58%

These rates align favorably with current cap rates—often exceeding borrowing costs—providing a rare positive carry opportunity for commercial buyers. Lenders are clearly confident: if recession were on the horizon, underwriting would tighten, not expand.

What About the Fed?

Despite continuous headlines, residential mortgage rates haven’t budged. Commercial lending, by contrast, shows meaningful declines. Although the Fed has hinted at potential rate cuts, Chairman Powell recently attributed delays to ongoing tariff uncertainty—a statement that could be interpreted as a rebuttal to President Trump’s criticism of the Fed’s policy stance.

Markets had anticipated a possible cut in July, but that now appears unlikely. Still, most analysts expect cuts by year-end. In the meantime, expect continued softness in residential pricing, especially among investment properties that failed to yield expected returns and are now returning to market.

A Two-Speed Market

The bifurcation is clear: buyers with strong income and credit will have leverage. They’ll be able to negotiate price, select from increasing inventory, and lock in rates as they begin to trend downward—eventually helping to stabilize inflation and restore affordability.

Commercial owners who locked in financing near 6% are now well-positioned. With rent growth and occupancy stabilizing, refinancing within the next few years could reduce costs, increase NOI, and free up capital for new investments.

Final Takeaway:

Residential real estate is resetting. Commercial real estate is recovering. Strategic investors—especially in multifamily and value-add sectors—will find this a compelling window. The difference, as always, is timing.

If you’d like help evaluating your next move—whether selling, exchanging, or investing—Pacific West Advisory Group is here to provide the insights and execution you need.

👉 Book a 15-Minute Commercial Real Estate Consultation
📅 Schedule Your Call

Post Pandemic Migration

Reverse Migration Is Real—And It’s Reshaping California's Real Estate Landscape
A recent article claiming that the nation’s largest office landlords are seeing post-pandemic highs in leasing activity struck a nerve. A bell went off. That headline may hold the key to understanding the shifting tides in California’s real estate markets—especially the Central Valley and Sacramento corridor.

The Why Behind the Inventory Surge

The flood of new listings in these areas—both residential and commercial—is no accident. Platforms like Crexi and CoStar are saturated with gross and triple-net lease properties. Residential markets are softening, with listing prices dropping and sale-to-list ratios declining. Meanwhile, on the San Francisco Peninsula—aka Silicon Valley—home prices and rental rates are climbing again.
Why? Because the pandemic is effectively over. Covid prevention measures are common, serious cases are rare, and treatments are available. With that, Silicon Valley employers are calling their teams back to the office. It’s either return—or find another job.

The Great Reversal

The “pandemic migration” out of the Bay Area into lower-cost regions like Sacramento, Modesto, and beyond promised a lifestyle of affordable homes, recreational access, and remote work flexibility. But the tradeoff? Summers with 100+ degree heat from May through October, cultural and political shock for many, and an unexpected impact on their children’s education and values.
Now, many of those workers are making the reverse migration—coming back to the Peninsula, paying up for homes, and competing in a reinvigorated market. Those who bought in the outlying areas are either stuck waiting for a price that may never return or commuting up to 6–7 hours a day.

The belief that remote work would be permanent is fading fast.

Data Points That Back It Up

Just look at the headlines:

“5 Types of Homes Expected to Plummet by the End of 2025”

“Redfin: 500,000 More Homes for Sale Than Buyers”

“Sellers Need To Wake Up—This Is Not 2021”

“Inventory Piling Up in California”

“Downturn Forecasted in 60% of Counties” (Newsweek)

These aren’t just headlines—they’re signs of a market correction already in motion.

Commercial Real Estate Is Shifting, Too

This isn’t limited to residential. I recently reviewed a listing for a collision repair facility in Modesto—one of the largest collision chains in North America had invested in a full remodel and signed a long-term lease. But nine months later, it’s still for sale at a 7.25% cap. Why? Fewer cars = fewer accidents. Reverse migration means fewer customers.

I was also paid for a Broker Price Opinion on a small strip mall with four units. What I found was eye-opening. While many strip malls in Central California remain vacant or are for sale, not a single one in the Peninsula—east of Highway 101 in this case—was unoccupied or available for purchase. Recent comps show strong cap rates (6%), low days on market, and quick sales—particularly in affluent areas.

Peninsula Retail: Low Vacancy, Steady Demand

The Menlo Park retail submarket provides a snapshot of the strength in Peninsula commercial real estate. As of Q2 2025:

Vacancy rate: 4.2%, compared to a 5-year average of 2.9% and a 10-year average of 2.4%.
Net absorption: -36,000 SF over the past 12 months, with no new space delivered.
Available inventory: 83,000 SF, an availability rate of 4.5%.
Total inventory: Approximately 1.8 million SF.
New construction: 0 SF currently under construction, well below the 10-year average of 10,000 SF.
Market rent: $49.00/SF, with annual rent growth of 0.6%—slightly below the 5-year average (1.0%) and 10-year average (2.3%).

Across retail asset types:

Neighborhood centers: +4.0%
Power centers: +3.7%
Strip centers: -0.2%
General retail: -0.9%

This data underscores the resilience and scarcity-driven strength of Peninsula retail. In contrast to the high vacancies and soft pricing in the Central Valley and Sacramento, core markets like Menlo Park are commanding premium rents and maintaining occupancy stability.

Multi-Family and Office Space: Strengthening in Core Markets

Cap rates on multi-family assets in the Peninsula have compressed from the mid-5% range to the mid-4% range. Inventory is down from 2023 and mid-2024 levels. Even in San Francisco, activity is rebounding, especially in premier neighborhoods like Pacific Heights and Presidio Heights, where mid-4% cap rates are being accepted.

Office space—once written off—is being quietly scooped up by REITs and institutional investors, anticipating a return to pre-pandemic leasing strength. They’re betting that this rebound is real. I believe they’re right.

My Advice: Move Now

If you own residential or investment real estate in the Central Valley or Sacramento corridor, sell now. Don’t wait for the market to improve—because it likely won’t. Even if you sell at a higher cap rate and reinvest in a lower one, you can make up the difference with appreciation and rental growth in stronger markets like the Peninsula and San Francisco.

Investor Takeaway

The market has changed—and it’s not going back to 2020.
Real estate fundamentals—not emotional expectations—should drive decisions today.

If you’re holding residential or commercial property in high-inventory areas like the Central Valley or Sacramento, this is your signal: consider selling while demand still exists. Stronger, more resilient markets like the San Francisco Peninsula are seeing renewed growth, tighter supply, and long-term opportunity.

Smart investors adapt early. The reverse migration is real—those who act now stand to benefit the most..

👉 Book a 15-Minute Commercial Real Estate Consultation
📅 Schedule Your Call

U.S. Treasury Posts a Historic Surplus

With $258 Billion in the Black, U.S. Treasury Posts Historic Surplus

Experts Say It May Signal Brighter Days Ahead

As I read the often dismal analysis in the media, I was reminded of a quote from the Friday, May 23, 2025 edition of The Wall Street Journal, Opinion Section (page A13):

“Making predictions is hard to do, especially about the future.”
—Supposedly from Yogi Berra

Despite the media’s gloom, a striking report caught my eye—shared by The Economic Times (India) via Yahoo News—stating that the U.S. government posted the second-highest monthly budget surplus in history, recording a $258.4 billion surplus in April 2025. This trails only April 2022’s surplus of $308.2 billion.

Key Drivers of the Surplus

This marked the first monthly surplus of fiscal year 2025 (which began in October 2024), largely attributed to an influx of individual tax payments, as April is the deadline for filing final taxes and the first quarterly estimated payments for many individuals and businesses.

Additionally, customs duties—boosted by President Trump’s tariffs—contributed $15.6 billion, more than double April 2024’s $6.3 billion. While still a modest slice of the total, it’s a noteworthy increase.

While it’s too early to predict consistent surpluses or long-term fiscal balance, this positive development is a welcome change from the negativity dominating U.S. news outlets.

Treasury Yields Rebound, Yield Curve Steepens

As of late May:

30-Year & 20-Year Treasury Yields are back above 5%

10-Year Yields exceed 4.5%

Mortgage Rates have climbed back over 7%

The six-month Treasury yield—often a reliable predictor of near-term rate changes—has ticked up by 20 basis points since early April and now aligns closely with the Effective Federal Funds Rate (EFFR). This uptick reflects the Fed’s continued "wait-and-see" approach, echoed by Federal Reserve officials in recent commentary.

A Closer Look at the Yield Curve

On May 23, 2025, the yield curve revealed a steepening at the long end, while the previous sag in the middle (between the 6-month and 7-year yields) has flattened:

Long-term yields (7 to 30 years) are now above short-term yields, effectively reversing the previous inversion.

This normalization—or “re-un-inversion,” as some traders call it—suggests increasing confidence in longer-term economic growth.

A Recession? Not So Fast.

To me, this is not a signal of an impending recession. In fact, bond traders and the bond market are often better indicators of economic direction than the sensationalist headlines of mainstream media. Bad news simply sells better.

We're still far from any reliable long-term forecasts, but Treasury Secretary Besset’s cautious and deliberate approach appears to be yielding results. His philosophy of “slow and steady” economic management aims to stabilize the U.S. economy while gradually improving budget surpluses and reducing deficits—something that appeals to both Wall Street and Main Street.

The Case for Lower Interest Rates

As the U.S. pushes for increased domestic manufacturing, lower interest rates are essential:

Lower federal borrowing costs—reducing the inflationary pressure of growing interest payments on national debt.

Lower financing costs for manufacturers—helping control the cost of goods sold, as manufacturing costs are embedded in all consumer products.

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The Art of a Deal, No Recession Forecasted

THE ART OF A DEAL... NO RECESSION FORECASTED?

When Donald Trump first jumped into the political scene, I bought his book The Art of the Deal on my Kindle. I found it interesting reading—even if I had jaded opinions about who Donald Trump was and his real estate background. I go back to it from time to time for a better idea of how the man operates. As I read his exploits, I find him a rather fair fellow compared to some real estate investors and builders I’ve known.

Watching his public actions over the years, it’s clear that his comments are part of a lifelong pattern of deal-making. Unfortunately, his critics and the media seem more focused on attacking him than understanding how he operates. But that’s politics—something I know all too well.

As in most investments, I’ve often said: wait—don’t make knee-jerk decisions based on current events. Long-term results rarely reward short-term reactions.

During the Trump presidency, I advised long-term investors to build cash and reallocate capital into real estate—not back into the stock market. That advice was later validated by a Wall Street Journal article analyzing investor performance from “Liberation Day” (the announcement of tariffs) through the various resolution periods. Investors who panicked and sold lost out.

We’re in an Adjustment Phase

This realignment of capital has historical precedent. We are entering a phase where the U.S. government will exert less influence over economic direction. Agencies like the DOGE (Department of Government Efficiency) have made strides in reviewing—and eliminating—wasteful spending. A recent 60 Minutes segment revealed how rogue foreign entities have infiltrated government programs, resulting in trillions of U.S. taxpayer dollars lost overseas.

As analysts and media jumped to conclusions based on fragmented data, the markets reacted wildly. But let’s look at some facts:

As of May 13, 2025, U.S. inflation dropped to 2.3%, the lowest since February 2021.
That figure was below estimates and contradicted fears that tariffs would spark stagflation.

What is Stagflation?

Stagflation combines inflation with economic stagnation. But current forecasts of a recession are declining. In fact, Wall Street banks are now projecting positive growth—not two quarters of contraction, which define a recession.

Investors Crave Stability

Investors prefer steady, predictable growth. This economic backdrop encourages conservative investors to trim risky positions and focus on long-term, income-generating assets.

The Federal Reserve, faced with mixed signals, appears to be holding interest rates steady—“sitting on their hands,” as has often been the case since the 1970s. The Fed rarely leads; it follows. Until there is executive action to reshape its economic philosophy, we’re unlikely to see bold changes.

Meanwhile, real estate investors are positioned to profit.

Why Real Estate Shines Now

The reduced likelihood of a recession is the most promising sign for real estate allocation—especially for Triple Net (NNN) Leases.

In a downturn, businesses may close, leases terminate, and owners are left with expenses and no income. But in a stable economy, NNN tenants pay rent plus property taxes, insurance, and maintenance. That leaves the owner with a true net return.

But Choose Carefully

Not all NNN assets are created equal. Some sectors, such as bank branches and pharmacy locations, are under liquidation pressure due to corporate restructuring. This opens opportunities for investors—but also requires diligence. You don’t need inside corporate intel to recognize a bargain, but you do need solid underwriting.

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