CARNM

The U.S. economy is defying easy classification. It’s expanding, but without the job growth that usually defines a recovery — an “almost” economy, as BGO Chief Economist Ryan Severino described it in a recent LinkedIn post.

Severino noted that the current conditions don’t necessarily point to a recession, but they also lack the hallmarks of a traditional boom. Employment growth has slowed to a crawl, even as the overall economy continues to move forward. “The result is an expansion that almost resembles past recoveries, but without the employment dynamism that usually defines them,” he wrote.

Consumer spending remains “resilient,” though that can be misleading. Moody’s Analytics found that households earning $250,000 or more accounted for nearly 49.7% of all consumer spending in early 2025, up from 36% three decades earlier. This concentration of spending power raises questions about how broadly the economy’s resilience is shared.

Productivity, he said, is “almost too strong,” its rapid growth potentially signaling structural change. If businesses can now produce more with fewer workers, that shift could mean fewer people contributing to the 69% of GDP generated by consumer spending. “The economy, therefore, looks strong on the surface, but the underlying drivers may be shifting in ways that are not yet fully understood,” he wrote.

Another unusual feature of the moment is the lack of a typical economic cycle. There’s little of the “strong job growth, rising investment, and accelerating credit creation” that generally mark an expansion. The current cycle, Severino argued, feels “cyclically muted,” as if the economy is stuck in a “permanently late cycle.”

Even popular narratives about deglobalization don’t fully align with the data. While reshoring and nearshoring dominate headlines, global trade volumes remain near historical highs — suggesting that many global production and supply patterns endure.

Meanwhile, higher interest rates haven’t triggered the credit stress or bond market instability that might have been expected. The financial system has stayed stable, and large fiscal deficits have yet to spark a fiscal crisis. Housing shortages, too, have emerged without a broad construction boom, perhaps because recent years’ building booms already created pockets of high vacancy and slowing rent growth.

Despite widespread pessimism in consumer sentiment surveys, spending continues to climb — though again, the question remains: whose spending is driving that growth?

For commercial real estate, these patterns complicate forecasts. With market growth less tied to job creation, traditional signals have become unreliable. “The result is a CRE cycle that also feels a little unusual: fundamentals and capital markets conditions that are stabilizing, but not booming, in an economy that is expanding, but not hiring,” Severino wrote. The picture, in short, is one of an “almost” CRE market — stable but uncertain, and difficult to navigate in the months ahead.

Multifamily continues to anchor CRE investment, even as capital flows broaden across other sectors. Data from Agora shows that multifamily captured nearly half of all capital raised in 2025, reinforcing its position as the industry’s most consistent investment category.

Housing-related assets dominated fundraising overall, the report said. When combined with other residential investments, including single-family rental portfolios, residential accounted for more than 60% of total capital raised. The strong showing reflects investors’ continued focus on housing demand as affordability challenges keep many households in the rental market.

Industrial real estate also gained momentum, particularly in the second half of the year, as returns accelerated amid ongoing demand for logistics and distribution facilities tied to e-commerce growth and evolving supply chains.

Quarterly fundraising trends show how investor priorities shifted throughout the year. Multifamily dominated early in 2025, accounting for more than half of capital raised in the first quarter before moderating toward year-end. Meanwhile, residential investments outside traditional multifamily steadily gained share, reaching their highest levels in the fourth quarter.

Retail and mixed-use activity strengthened mid-year, while industrial investment surged in the third and fourth quarters. Office investment remained selective, with demand largely focused on smaller Class B and Class C properties rather than large institutional towers. Hospitality maintained a steady presence, while infrastructure saw limited fundraising activity, although interest in the sector is growing, said Agora.

Regional dynamics also shaped investor outcomes. The Southeast led in both capital deployment and returns, supported by strong population growth, expanding multifamily demand and development in adjacent sectors such as retail and self-storage.

Texas, New York and Florida ranked among the most active states, with Florida notable for the number of investor contributions. Emerging Southern markets also attracted increasing attention from investors seeking higher-growth metros.

Year-over-year performance reflected those trends. The Southeast recorded one of the strongest gains, with returns rising more than 12 percentage points compared with 2024. Florida’s returns increased more than five points, while California posted a slight decline. Elsewhere, the Midwest delivered steady results and saw a late-year improvement in returns, while the West experienced volatility before rebounding in the fourth quarter.