As the broader market experiences greater patterns of dispersion and dislocation, necessity-based retail outpaced inflation, marking the fourth consecutive quarter of growth. Signaling a functioning yet selective capital market, commercial mortgage-backed securities (CMBS) saw exceptional growth in the third quarter catalyzed by single-asset borrower transactions accounting for roughly two-thirds of year-to-date issuance. If sustained, this trajectory would represent the strongest annual issuance since 2007, underscoring renewed confidence in credit markets. FRE expects transaction liquidity to improve from here, albeit selectively and unevenly across asset classes.
Despite a softening labor market, aggregate macro-economic data suggested a more resilient third quarter: unemployment rate held steady at 4.3%, core Personal Consumption Expenditures (PCE) eased moderately towards the Federal Reserve's 2.0% target, and perhaps most poignantly, the real wage growth momentum. Through August, aggregate spending was outpaced by wages, catalyzing many to forecast an expanding holiday sales season. Further bolstered by several key intrinsic indicators such as Real Disposable Personal Income Per
Capita posting six consecutive positive quarters, GDP showing modest year-to-date gains, and consumer saving balances exceeding $1 trillion, this reflects a capable but cautious consumer base.
CRE values have been steadily improving since their trough in December 2023. Coupled with multiple secular growth engines, we believe the sector is approaching a steeper point in the recovery cycle, supported by surging transaction activity, muted new supply, and renewed extrinsic sentiment. The next phase of growth will reward well-capitalized operators executing with precision and conviction. We are built for this moment: FRE's emphasis on maintaining balance sheet discipline, operational excellence, and monetization when intrinsic and extrinsic values converge.