GROSS DOMESTIC PRODUCT
Topline growth in GDP resumed. Real gross domestic product rose at an annual rate of 3.0 percent in the second quarter, following a 0.5 percent drop in the prior period. Yet the change in GDP was influenced in both quarters by the front-loading of imports ahead of new tariffs. Setting that distortion aside and focusing on consumer spending, final sales to private domestic purchasers increased 1.2 percent — the lowest annual rate since late 2022. Business expenditures also inched up a slight 0.4 percent, mirroring the change in government consumption. Together, these metrics point to an economy that is growing, albeit at a lessening pace.
New tariffs having a clear impact on trade. After a 37.9 jump in the first quarter, U.S. imports contracted by an annual rate of 30.3 percent in the second. U.S. exports also fell 1.8 percent in the most recent quarter. Although the volume of trade year to date as of May was above that of the same span in 2024, uncertainty from changing U.S. trade policies is still clearly impacting industrial property performance. Tenants, for example, may be holding off on expansion plans. More industrial space was relinquished than absorbed in the second quarter — the first such occurrence since early 2010. Move-ins are also scheduled to slow through the rest of the year. While this is pushing up vacancy, the coinciding slowdown in development is lessening the net impact. The U.S. rate is set to rise by its smallest margin in three years.
Multifamily recovery picks up steam. Residential fixed investment decreased at an annual rate of 4.6 percent last quarter, aligning with other indicators of a slowing housing market. The number of new homes sold was down 6.6 percent year over year as of June; at the same time, existing home sales were about flat. Elevated mortgage rates are continuing to impede single-family ownership, which is in turn bolstering the renter pool. Apartment net absorption hit a four-year high in the second quarter, dropping the national vacancy rate 150 basis points year over year to 4.3 percent. Even if vacancy is often lower in the summer, this still marks a robust recovery from recent, supply-induced headwinds.
* Date of July jobs report Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; CME Group; Federal Reserve; Moody’s Analytics; Real Capital Analytics; RealPage, Inc.