BGO Chief Economist Ryan Severino presents the Q2 2025 update on the U.S. economy and commercial real estate (CRE), introducing a novel augmented base case model. This combines macroeconomic scenarios with a machine-learning behavioral model to navigate unpredictable trade policy shifts. The forecast anticipates continued use of tariffs, moderate economic growth around 1.5%, gradual disinflation, and expected Fed rate cuts in 2025, with the 10‑year Treasury yield hovering slightly above 4%.
In the CRE market, Severino notes a cautious yet stabilizing environment: leasing decisions are delayed, vacancy rates and rent growth are sluggish, and capital markets show signs of strain with repricing and extended due diligence. Despite these headwinds, gains in equity returns are expected, while debt markets show stable income but face maturity pressures. Sector-wise, industrial remains opportunistic, multifamily benefits from tight supply and high demand, retail stays resilient, and office markets see signs of bottoming with AI-driven demand and repositioning strategies.