CompStat: Tariff Effects, Auto Impact, and Penn 2’s Verizon Lease

SKIP AHEAD TO

• Economic Highlights
• Verizon Inks Major Penn 2 Lease as Tenants Continue Flight to Quality Moves
• Net Lease Sales Surge 37% as Lease Term Gap Narrows
• Tariffs Squeeze Auto Industry as Landlords Like Prologis Could Face Potential Impact

Economic Highlights

The Impact of Tariffs:

• Imports from China to the U.S. have now declined for five consecutive months and, as of June 2025, are 3.5% below the March 2020 low, the height of pandemic-era trade disruption, when China’s borders were largely closed and factories were closed.
• Construction costs for nonresidential buildings continued to rise in July, increasing 0.4% month over month and 2.6% year over year. The index measures the average change over time in selling prices received by producers for materials used in the construction of nonresidential buildings;
• The Producer Price Index for automobile manufacturing was flat in July, remaining at a reading of 112.2, even as a 50% tariff on copper wire, tubing, sheeting, and other products used in auto manufacturing was announced at the end of July. Those duties follow a 50% tariff on steel and aluminum imports announced in early June;
• Except for the ports of Long Beach and Los Angeles, six of the eight ports tracked here posted month-over-month declines in June 2025 in terms of total TEUs handled. The jump in TEUs for West Coast ports likely reflects the impact of a temporary pause in tariffs earlier this year—future months are expected to show lower levels.
• The inventory-to-sales ratio for retailers was 1.3 as of June, on par with the previous month’s reading, indicating sellers held enough inventory on hand for 1.3 months. This reading remains below levels before the pandemic.

• The Census Bureau’s Advance Real Retail and Food Services Sales report for July showed consumer spending rose a less-than-expected 0.3% month over month, marking the second consecutive monthly increase;

State of the Economy and Recession Risk:

• The number of job openings fell month over month through June 2025 and is just 0.3% above June 2024’s level. Notably, office-using job openings were at their highest level since November 2024. Meanwhile, the number of unemployed increased in June 2025 and is now at its second-highest level since October 2021;
• Initial jobless claims fell in the week ending August 9th, registering at a seasonally adjusted 224,000, a decrease of 3,000 from the previous week. The reading was lower than the 225,000 forecast but businesses are reluctant to boost hiring in light of softening domestic demand;
• In July 2025, the monthly average share of paid full days worked from home was 220 basis points lower than in July 2024 and slightly below June’s level. Year-to-date, the 2025 average stands at 27.8% which is on par with last year’s overall average and indicates that work-from-home levels remain largely stable.
• While Q2 GDP rose at a 3.0% annualized rate after a 0.5% decline in Q1, the economy remains in growth mode, though at a slower pace. A sharp pullback in imports likely inflated the Q2 figure, with underlying domestic demand weaker than the headline suggests.
• The Federal Reserve held interest rates steady in July, though two governors dissented in favor of a cut. The FOMC will not meet again until September, when many expect the odds of a rate reduction to rise amid recent signs of labor market softening.

Ongoing concerns about inflation and consumer confidence:

• In the 12 months through June, the U.S. Personal Consumption Expenditures (PCE) Index rose to 2.6%, up 20 basis points, marking the second consecutive monthly increase in the annual rate amid tariff-driven price pressures. Elevated inflation remains a concern for the Federal Reserve and could compllicate future rate cuts.
• Inflation remained sticky in July as investors and market watchers continue to monitor the effects of tariffs, with the consumer price index rising by an annual 2.7%. Core inflation, which strips out food and fuel, rose at a slightly higher 3% year over year.
• The consumer sentiment index fell for the first time in four months in August, declining nearly 5% on inflation concerns. It now stands at its seventh-lowest level in the 38 months since the post-pandemic trough of June 2022.

Full Economic Data Series:

Verizon Inks Major Penn 2 Lease as Tenants Continue Flight to Quality Moves
Verizon has signed a 195,000-square-foot lease at Penn 2 near Penn Station in Manhattan, marking one of the largest New York City office deals of 2025. The move consolidates several locations, including Verizon’s space at 1095 Avenue of the Americas, and aligns with the company’s updated hybrid work policy, which now requires management-level staff in the office three days per week, up from eight days per month.

The lease comes amid a broader rebound in Manhattan office leasing. Total leasing volume in 2025 has surpassed 20 million square feet, while availability has fallen to 15.4 percent, the lowest level since early 2021, according to Colliers International Research. Verizon had previously planned to consolidate into new construction at Essex Crossing but abandoned those plans. Instead, its move reflects the broader post-pandemic trend of tenants upgrading into higher-quality or renovated space, even as the supply of new construction remains limited.

While 2 Penn Plaza is not a new building, Vornado completed a major renovation in 2024. The overhaul included a modern curtain wall, corner loggias, an expanded podium with double-height space, a relocated triple-height lobby opening to a tree-lined plaza, a gut renovation of 1.61 million square feet of office space, and new tenant amenities such as a town hall, lounges, outdoor terraces, a rooftop park, and a pavilion.

According to CompStak data, 2025 to date has recorded the lowest share of relocations by square footage moving from one building class to a higher one, at just 10 percent, since 2020. By contrast, 79 percent of all relocations by square footage have been moves from one Class A building to another, underscoring the strong demand among top-tier tenants for higher-quality space.

Moreover, relocations to newer office buildings remain a major driver. In 2025, 61 percent of relocation square footage has gone to newer space, up from 50 percent last year but below the post-pandemic peak of 64 percent in 2022. The average building age for relocations this year was 2019, matching 2023 as the youngest average in the dataset since 2020. Contributing to that newer building age figure are several headline deals, including Deloitte’s planned move from 30 Rockefeller Plaza to 70 Hudson Yards (completion in 2028), Citadel’s relocation to 660 Fifth Avenue (renovated in 2022), and Universal Music Group’s move from 1755 Broadway to 2 Penn Plaza (renovated in 2024).

Net Lease Sales Surge 37% as Lease Term Gap Narrows

Net lease property sales have jumped 37% in the 12 months ending in June, with investors spending $46.7B on net-leased assets, per data from CBRE and MSCI. Investors are looking for a safe harbor from the impacts of tariffs or a potential economic downturn. Under this lease structure, tenants are typically locked into a long-term lease and are responsible for most or all of the property expenses, creating a steady cash flow. According to CompStak’s data, According to CompStak data, average lease terms for single-tenant, net lease retail continue to exceed those of other retail, though the gap has narrowed since 2019–2021. In 2025 to date, average terms were about 27% longer than other retail leases, down from spreads of 42% and 53% in the prior two years. This reflects two consecutive years of declines in average net lease retail terms, while lease lengths for other retail have remained steadier. Examples of recent long-term net lease retail leases tracked by CompStak include a lease from Dave’s Hot Chicken for a full, 3,050-square-foot building in Salt Lake City for 126 months. 

Tariffs Squeeze Auto Industry as Landlords Like Prologis Could Face Potential Impact
Revenue from tariff duties is beginning to fill government coffers, and knowing who is footing the bill can help investors ascertain which companies could see their profit margins squeezed, according to Axios. Through May 2025, revenue collected from U.S. tariffs on imported goods increased for the third consecutive month, reaching $22.8 billion in May 2025, per data from the U.S. Treasury. Tariffs on automobiles are accounting for an increasing share of tariffs, reaching 15.0% in May 2025, up from about a 4.6% level in May 2024, according to the Census Bureau. CompStak data indicates that the top automotive landlords by total active leased square footage differ based on lease transaction sizes. For example, Prologis, The Blackstone Group, and AEW Capital Management have the highest total active square footage among transactions ranging from 10,000 square feet to 100,000 square feet. While Prologis, the largest industrial landlord in the nation, is also ranked first in terms of total square footage currently occupied by auto tenants in the 100,000 square feet and above tranche, EQT Exeter and Ares Management ranked second and third, respectively, according to CompStak data.