Fed Updates, Office Green Shoots
The Fed Holds Steady
Following its two-day meeting on Wednesday, March 19, the Federal Reserve announced its decision to maintain the target range for its main interest rate at 4.25% to 4.5%. This decision coincides with a downward revision of the Fed’s 2025 economic growth forecast to 1.7%, a decrease from the 2.1% projection made in December. Simultaneously, inflation expectations have been adjusted upward to 2.7% from the previously anticipated 2.5%.
Federal Reserve Chair Jay Powell attributed these adjustments in part to U.S. trade policy and tariff uncertainties, stating that "clearly some of it, a good part of it" stems from these factors. While concerns regarding potential stagflation—sluggish economic growth coupled with persistent inflation—have been raised by some economists, the Federal Open Market Committee’s (FOMC) decision to maintain the current rate seems to have calmed markets. The 10-year Treasury yield concluded the week at 4.25%, a slight decline from the previous week’s 4.3%.
Signs of (Office) Life
In the commercial real estate sector, the office market appears to be showing signs of improvement. According to Marcus and Millichap’s 2025 Office National Investment Forecast, key indicators such as positive net absorption in early 2024, declining nationwide vacancy rates, and increasing corporate return-to-office initiatives are fostering cautious optimism. Among the markets demonstrating particular strength are Tampa, Raleigh, Fort Lauderdale, Charleston, West Palm Beach, Miami, Las Vegas, Charlotte, Salt Lake City, and Orlando.
Residential Home Sales Surprise
According to the National Association of Realtors (NAR), existing home sales exceeded expectations in February, reaching a seasonally adjusted annualized rate of 4.2 million. However, challenges persist, as total home sales remain below year-ago levels, and the average time on the market has increased to 42 days in February, compared to 38 days in the same period last year.
Further Reading:
https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20250319.pdf
https://www.nar.realtor/research-and-statistics
https://www.marcusmillichap.com/research/market-report/multiple-markets/2025/2025-us-office-investment-forecast