Company: MMI
Filing Date: 2025-05-07
Form Type: 10-Q
Source: 0001578732-25-000031
Chunk: 53

Company: Marcus & Millichap, Inc.
Filing Date: 2025-05-07
Form: 10-Q
Item: Part I, Item 1
Chunk 53
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, 10% tariffs on all countries aside from China, which faces 145% tariffs, has driven the net effective tariff rate to approximately 28%, the highest level since 1901. Limited insights into future trade policy has impacted decision making, increasing the risk of slowing economic growth.

The lack of clarity of the U.S. presidential administration regarding tariffs has made it increasingly difficult to predict the economic outlook, and many economists have raised their expectations of both recession and inflation risk in 2025. Nonetheless, some signs of a pullback on tariffs have emerged, suggesting that a trade war may be averted, which could revive the outlook for economic growth.

Within the broader economic context, commercial real estate fundamentals remain sturdy, with most property types delivering positive space absorption. Apartment demand remained robust through the first quarter of 2025, exceeding elevated construction completions and supporting modest but positive rent gains. Retail space demand was marginally negative for the quarter, but the resulting uptick in vacancy was minimal and may simply reflect a temporary market recalibration. Industrial space demand was positive for the quarter, and office space demand continued to gain momentum. 

Commercial Real Estate Supply and Demand 

Our business is dependent on the willingness of investors to invest in or sell commercial real estate, which is affected by many factors beyond our control. These factors include the supply of commercial real estate, coupled with user demand for these properties, and the performance of real estate assets, when compared with other investment alternatives, such as stocks and bonds.

Although apartment and industrial construction remains elevated, the supply additions are concentrated in select markets and the pace of deliveries is tapering. Oversupply risks in most markets are beginning to diminish as elevated capital costs join rising tariffs on building materials and construction labor shortages to drive construction costs higher. Retail and office development was already low entering 2025, with little sign of a revival. Apartment starts have fallen by 76% from their peak in 2022 and industrial completions in 2025 are expected to fall to approximately 210 million square feet, their lowest level since 2014. As a result, receding new supply risks in 2025 should aid commercial real estate performance in the coming quarters.

The commercial real estate space demand outlook for 2025 remains uncertain. Core drivers including job creation, retail sales and modest gains in office attendance entering the second quarter of 2025 suggest positive momentum, but the broader economic climate could impact the trajectory either positively or negatively. If the U.S. economy enters a recession, space demand for all