3.8% Q2 GDP Surge Supports CRE Fundamentals Despite Inflation

Stronger consumer spending and business investment highlight that demand remains resilient while inflation continues to be persistent.

Second-quarter growth hit its fastest pace in nearly two years, with consumer spending up 2.5% and core inflation remaining elevated.

The U.S. economy grew at a 3.8% annualized rate in Q2 2025, revised up from 3.3%, marking the fastest pace in nearly two years and a sharp rebound from a Q1 contraction. Stronger consumer spending, now estimated at a 2.5% rate, and robust business investment including record data center construction drove the gains.

Final sales to private domestic purchasers, a key gauge of underlying demand, climbed 2.9% versus an earlier 1.9% estimate. Core PCE inflation was revised higher to 2.6%, which could temper the Fed’s pace of rate cuts.

CRE Takeaway: Solid consumer activity and increased business investment signal resilient fundamentals for commercial real estate demand, while persistent inflation and uncertain Fed policy keep borrowing costs in focus.