When you build “luxury” new apartments in big numbers, the influx of supply puts downward pressure on rents at all price points — even in the lowest-priced Class C rentals.

“In Florida — which continues to make itself a supply magnet with strong demand + the boost from the new Live Local legislation — three markets (Fort Myers, Sarasota, Daytona Beach) are seeing Class C rent cuts around 10-12%. “

via

Via Jay Parsons • Rental Housing Economist (Apartments, SFR), Speaker and Author

Yes, when you build “luxury” new apartments in big numbers, the influx of supply puts downward pressure on rents at all price points — even in the lowest-priced Class C rentals. Here’s evidence of that happening right now:

There are 12 U.S. markets where Class C rents are falling at least 6% year-over-year. What is the common denominator? You guessed it: Supply. All 12 have supply expansion rates ABOVE the U.S. average.

In Florida — which continues to make itself a supply magnet with strong demand + the boost from the new Live Local legislation — three markets (Fort Myers, Sarasota, Daytona Beach) are seeing Class C rent cuts around 10-12%. Not shown on this Top 12 list, but there are three large Florida markets with high supply also seeing Class C rent cuts of 4-5%: Orlando, Jacksonville and Tampa.

Other key markets nationally to highlight: Ultra-high-supplied big markets like Austin, Phoenix, Salt Lake City, Atlanta and Raleigh/Durham are all seeing sizable Class C rent cuts of at least 6%. Small markets on the list include Myrtle Beach, Wilmington NC, Boise and Colorado Springs.

Bear in mind that apartment demand is NOT the issue in any of these markets. They’re all demand magnets. Sure, they’ve seen some moderation / normalization for in-migration and job growth, but they’re still ranking among the national leaders for net absorption.

Simply put: Supply is doing what it’s supposed to do when you add an awful lot of it. It’s a process academics call “filtering” — which happens when higher-income renters in Class B apartments move up into higher-priced new Class A units … and then Class B units see vacancy increase, so they cut rents to lure up Class C renters. And down the line it goes.

But filtering works best when we build a lot of apartments. We didn’t see this phenomenon play out as clearly in past cycles when supply was relatively limited — and (crucially) failed to keep pace with demand.

Less anyone still in doubt, here’s another factoid: Where are Class C rents growing most? You guessed it (I hope!) — in markets with little new supply. Class C rent growth topped 5% in 18 of the nation’s 150 largest metro areas, and nearly all of them have limited new apartment supply. That list includes markets like: Midland/Odessa TX, Knoxville TN, Grand Rapids MI, Dayton OH, Wichita KS, Buffalo NY, Louisville KY, Little Rock AR, and Albany NY.

Among larger markets, Cincinnati and Chicago both saw Class C rent growth near 4% — and both ranked below the U.S. average for new supply.

Most new construction tends to be Class A “luxury” because that’s what pencils out due to high cost of everything from land to labor to materials to impact fees to insurance to taxes, etc.

So critics will say: “We don’t need more luxury apartments!”

Yes, you do. Because when you build “luxury” apartments at scale, you will put downward pressure on rents at all price points.

#multifamily #affordability #housing #rentsActivate to view larger image,

In 2024, Multifamily completions are outpacing new starts at the largest levels since 1975.

This research and article comes from Jay Parsons, Rental Housing Economist (Apartments, SFR), Speaker and Author. <— Click on link to see other articles and research from Jay.

So far here in 2024, U.S. multifamily completions are outpacing new starts at the widest levels since 1975. And that gap is likely to further widen. Ironically: Cheap debt helped fuel the multifamily construction boom, which in turn tamed rental inflation; and expensive debt is helping tame the multifamily construction boom, which could fuel renewed rent inflation.

Through the first four months of 2024, multifamily completions are at multi-decade highs while starts continue to rapidly plunge due to several headwinds: high rates, flat-to-falling rents for lease-ups (depending on the market), and construction costs often coming in above replacement value.

Simply put: It’s very difficult to start new unsubsidized apartment projects right now.

In the short term, supply will likely continue to exceed demand in 2024 — keeping vacancy elevated and putting downward pressure on rents.

In the mid and longer term, you can see how (assuming the job market stays healthy) demand could exceed supply again — perhaps even by next year in some markets, which would in turn put upward pressure on rents (though unlikely to the sky-high growth levels of 2021-22).

It’s difficult to see a scenario where multifamily starts could meaningfully accelerate prior to 2H’25 and more likely in 2026. Even if the Fed trimmed rates a bit, equity and debt players will want to see the current wave of lease-ups stabilize and rent growth return even at moderate levels. Plus, we’ll likely also need to see stabilized asset values rebound enough to bring back the discount to build versus buy (at scale).

hashtag#multifamily hashtag#construction hashtag#apartments

April jobs report

After a few months of unwanted growth in the employment market, the April 2024 jobs report indicated signs of cooling. The U.S. added 175,000 jobs, still more than the Fed would like, but fewer than was expected. Wage growth, which had previously increased, slowed to 2.4% and unemployment rose to 3.9%.

Earlier this year, markets were pricing in rate cuts for June, but a few discouraging inflation prints quickly shifted expectations. The Federal Reserve has a dual mandate for monetary policy: achieve maximum employment and stable prices. They are keenly focused on the latter, which you could argue is functioning at the expense of the former. A hot jobs market can keep price gains high, and the central bank’s key focus is to stabilize prices. Higher unemployment is a positive sign, but the trend will need to continue with a lower inflation print on May 15th before rate cuts are part of the Fed’s conversation again.

NNN STNL on the brink?

I follow Daniel Herrold on X and LinkedIn and he’s quite knowledgeable on the markets he dominates. It’s interesting insights for certain.

NNN STNL on the brink?

I follow Daniel Herrold on X and LinkedIn and he’s quite knowledgeable on the markets he dominates. It’s interesting insights for certain.

Tampa Retail Real Estate Market Report

Article via Bounat.com – Click Here for complete story and others similar to it.

The commercial real estate brokers at Bounat work diligently to compile a comprehensive list of the top commercial real estate activity in the Florida region on a frequent basis.

Retail leasing fundamentals in Tampa remain solid despite headwinds caused by continued disruptions in the supply chain and lingering concerns post-pandemic. However, these factors are being counterbalanced with the fact that Florida is the fastest growing state in terms of population in the country, and many people are moving to Tampa specifically.

In general, retail demand in Tampa has been consistently strong over much of the past decade, driven by solid population gains, wage growth, and steady consumer spending. Current vacancy is 3.3%, which is up +0.2% compared to Q3 2023, and the vacancy rate for retail real estate in Tampa remained steady over the past year and is well below the national average, estimated at around 4.5%.

Rent growth has accelerated in recent quarters due to strengthening overall leasing fundamentals following the lifting of some pandemic safeguards. Average asking rents as of Q4 2023 are at $25.56/SF, which is up $0.35 from Q3 2023 when the asking rate was $25.21/SF, up over 2% during the past 3 months (quarter to quarter).

There is currently 563,141 SF of new retail space underway, and nearly 1 million SF has been delivered in the trailing 12-month period. While the pace of new development is falling short of previous years, an uptick in demand bodes well for future development.

Retail investment sales activity over the last year has totaled roughly $1.6 billion in total transaction volume, fueled by considerable investment volume in Q4 and Q2 2022. Q1 2022, from a little over a year ago, still holds records for transaction volume with nearly $600M in retail property sales. It was the second highest quarter of retail real estate sales in the area, illustrating just how feverish investor appetite has been over the last year.

Retail investors continue to target deals in secondary markets like Tampa and Orlando as they seek higher yields, which is becoming harder and harder to achieve. Increased competition for assets is forcing an acceleration in overall retail pricing with the average price per SF growing by 10% year over year and by nearly 15% in the last two years. CoStar’s forecast calls for pricing to continue to rise through 2023 before beginning to level out in early 2024.

The most significant single-property trade over the last year took place in Q2 2023 when the Brandon Town Center (303 – 675 Brandon Town Court) sold for $220M at a price of $296/SF with a vacancy rate of 0% at the time of sale. The Tampa shopping center was built in 1995.

If you would like to discuss the Commercial Real Estate Markets or discuss your asset and its future, let’s connect.

http://www.DP-CRE.com

A New Workforce Housing Development Is Headed to Bradenton

The Nest at Robin’s Apartments will see 182 residential units all priced as workforce housing.

by Kim Doleatto via SRQ Magazine – Click here for this complete article and similar stories

The Nest at Robin’s Apartments will bring 182 new residential units to Bradenton—but unlike other projects going up in the region, these will all be priced as workforce housing. The units will be on a vacant five-acre lot next to Robins Apartments, just south of U.S. 301 on First Street East and east of South Tamiami Trail. Even though groundbreaking is next month and the project will take roughly 18 months to complete, builder and developer One Stop Housing has already received more than 100 applications.

Soaring local rents have made national headlines in recent years and interest rates have increased, making affordable housing a hot topic. It’s gaining some traction with local and state governments, with legislation like the Live Local Act, which, among other points, allows for increases in density and height in exchange for the creation of affordable units. It was recently applied to a downtown Sarasota project that’s still in its early stages. 

What’s different about The Nest is that 100 percent of the units will be—and remain—priced for working people, spanning 60 percent to 80 percent of the area median income (AMI).

Units will range from 300 square feet for a studio, (34), to 550 square foot, one-bedroom units (74) and 750 square foot, two-bedroom, two-bathroom units (74). 

The studios will be priced at 60 percent of AMI, which amounts to a one-person household earning no more than $42,240 a year. The one and two-bedroom units will be priced at 80 percent of the AMI, which amounts to $64,320 a year for a household of two.

New retirement regulation

The U.S. Department of Labor released new regulations on Tuesday expanding the scope of fiduciaries in relation to retirement accounts. With the peak of the baby-boom generation in or approaching retirement, rollovers of money from 401(k)s to IRAs are on the rise. Savers move close to $1 trillion each year out of their 401(k) employer-sponsored plans into IRAs and the new regulatory environment will ensure that investments are always in a person’s best interest.

Photo by SD

As a fiduciary ourselves, the regulation is an extension of our business model across financial services. The ruling should better align financial outcomes, lower fees, and decrease lock up requirements – all of which we’re major advocates for. Putting investors first is the ethos of our business and we view the new regulation as a major step towards industry wide best practices.

article via Titan Funds

Refer friends to Smart Cash to earn 6.0%* gross yield for up to 12 months. They’ll earn 6.0%, too. See details.

Home sales drop

via Titan Funds

Home sales for previously owned homes dropped 4.3% in March, and sales were 3.7% lower year over year. Although inventory improved significantly during the month, less people are buying homes due to increasing mortgage rates. All-cash purchases account for 28% of home sales, as more buyers are avoiding loans all together. 

Today’s pool of prospective homebuyers has shrunk compared to previous generations – more debt and higher housing costs have made it difficult to afford a first home. In 2020, 2% interest rates drove a surge in home buying that dried up much of the supply in the housing market. While timing is uncertain, rates will eventually decline and gradually bring buyers back to the table while also supporting a stable supply.

Norway has all the cheddah.

written by William Coulman, David Crowther via sherwood news.com

Norway’s nest egg The value of Norway’s sovereign wealth fund rose 6.3% last quarter, adding a whopping $110 billion to the country’s stockpile despite technically falling just shy of its target benchmark return. What started as the Norwegian government’s rainy day fund — somewhere to put its excess oil revenues in the 1990s — has become the largest investor on the planet. Today, 71% of its investment portfolio is in equities: a total of $1.1 trillion spread across more than 8,800 companies in 65 countries. Mirroring a diversified market index due to its sheer size, the fund has slices of every major sector. Visualized above are ~4,900 of the fund’s equity investments: the smallest dots in the chart, the ones that you can barely see, represent $10 million stakes in individual companies. Keeping it public But, while its equities portfolio returned a respectable 9% in Q1, its fixed income and unlisted real estate investments saw losses, pulling down the overall return. Indeed, in the past 2 decades, the fund’s equity investments have grown some 21x in value — and its success in public stocks is one reason why the Norwegian government last week confirmed it wants nothing to do with private equity, even as other institutional investors increase their exposure to the asset class. In case managing this behemoth portfolio wasn’t enough, you can catch the fund’s chief hosting his podcast, where he interviews the likes of Elon Musk and Satya Nadella — two CEOs of companies that the fund owns a large slice of. Slippery slope: When you’re managing a pot of $1.6 trillion, even a tiny Excel error can result in a $92 million miscalculation.