Location Strategy Chartbook 03.21.2026

The 3m annualized change in core PPI rose sharply in February to +7.6%

Short-term interest rates around the world have jumped since the start of the war in Iran. The increase is a sign that investors expect central banks to be especially sensitive to inflation, given the recent memory of supply disruptions and the surge in inflation following the Covid pandemic, according to Goldman Sachs Research.

The gap between Brent crude and WTI is the widest since 2013, when taking out a couple days of wild price moves in April 2020. Brent is almost $20 more expensive than WTI as the Iran war disproportionately hits European oil supplies.

Matthew Klein, The Overshoot: Perhaps the most striking thing about Powell’s Wednesday press conference was the repeated—and wrong—insistence that excessive inflation was mostly about rising goods prices, which in turn were mostly about tariffs:

Inflation has eased significantly from its highs in mid-2022 but remains somewhat elevated relative to our 2 percent longer-run goal…These elevated readings largely reflect inflation in the goods sector, which has been boosted by the effects of tariffs.

To be fair, goods inflation was getting worse before the Iran conflict, and in some significant categories was worse than in the 2021H2-2022H1 price spike. In the years immediately preceding the pandemic, consumer goods prices regularly fell about 0.5%-1% each year. In 2024, those prices were flat. As of the eve of the war with Iran, consumer goods prices were rising by about 2% a year—and the pace was accelerating.

The picture looks worse when focusing on goods purchased by businesses, either as inputs or capital equipment.

Prices of “components for manufacturing” rose by 0.9% in January and by 1.1% in February on a seasonally-adjusted basis. The February increase was larger than in every month of the post-pandemic inflation except for January 2022. Capital equipment prices are rising about 5% annualized, up from about 3% in 2023-2024 and about 1% in the years before the pandemic. Prices of “supplies to manufacturing industries” have been accelerating rapidly, with the one-month increase in February the largest since April 2021.

Tariffs are not the only explanation for this. One of the biggest categories within “supplies to manufacturing industries” is “printed circuit assemblies, loaded boards, modules and consumer external modems”, which have mostly been excluded from tariffs because of their importance to the datacenter buildout. Those prices rose by 48% (!!) between January and February. Even if that were a typo, prices rose by 26% between January 2025 and January 2026, which is unprecedented in the history of the data going back to the early 1980s.

Office building owners are increasingly turning to move-in-ready suites to compete in a transformed leasing market.

The strategy of providing pre-configured space, which allows smaller occupiers to access desirable locations more quickly, appears to be paying off in increased deal flow and shorter lease timelines.

Smaller leases have become a standout feature of the office leasing landscape in recent years, with today's typical deal size approximately 15% below the pre-2020 average. However, the overall number of lease transactions has remained high since 2022, indicating an active market for smaller spaces.

In response to this shift, office building owners have been investing in small “spec suites,” finishing out interior construction before securing lease commitments from tenants. The goal for landlords is to gain occupancy quickly by marketing these turnkey spaces to smaller tenants. These tenants, in turn, gain speed to occupancy in desirable locations.

New home sales down sharply in January- 587,000

11.3 percent below January 2025 -662,000 sales

17.6 percent below December 2025 -712,000 sales

The inventory of completed homes for sale at 126k is 4x the record low of 31k in February 2022. Most since July 2009

The Federal Reserve released the Financial Accounts of the United States - Z.1 (sometimes called the Flow of Funds report) for Q4 yesterday. We can use that data to calculated how much equity homeowners withdrew from their homes last quarter.

Mortgage Equity Withdrawal is an aggregate number and is a combination of homeowners extracting equity - hence the name "MEW" - and normal principal payments and debt cancellation (modifications, short sales, and foreclosures).

Here is the quarterly increase in mortgage debt from the Federal Reserve’s Financial Accounts of the United States - Z.1. In the mid ‘00s, there was a large increase in mortgage debt associated with the housing bubble.

In Q4 2025, mortgage debt increased $99 billion, unchanged from $117 billion in Q3. Note the almost 7 years of declining mortgage debt as distressed sales (foreclosures and short sales) wiped out a significant amount of debt.

However, some of this debt is being used to increase the housing stock (purchase new homes), so this isn’t all Mortgage Equity Withdrawal (MEW).

Today, Trumark Homes—which has been majority owned by Japan-based Daiwa House since 2020—announced that it has struck a deal to acquire a Seattle metro-based homebuilder JK Monarch.

The deal is the latest in a recent string of U.S. homebuilder acquisitions by Japanese firms. Exactly five weeks ago today (February 13), Japan-based Sumitomo Forestry announced that it had agreed to acquire Tri Pointe Homes—a giant public homebuilder ranked No. 715 on the Fortune 1000—for $4.5 billion. Then on February 23, Stanley Martin Homes—which has been owned by Japan-based Daiwa House since 2017—announced that it has agreed to buy United Homes Group, which has a strong presence in the Carolinas, for $221 million. On March 10, Japan-based Iida Group Holdings announced that its subsidiary, Hajime Construction, will acquire a majority equity interest in Utah-based homebuilder Wright Homes.