Apartment Rent Relief to Continue in 2024

A look at where debt and equity capital is going in 2024 due to recent rate moves

Apartment Rent Relief to Continue in 2024

A look at where debt and equity capital is going in 2024 due to recent rate moves

Good morning. Thanks to the 759 who responded to our CRE Daily survey last week. Your feedback is invaluable. Today, we're introducing sector-specific snippets based on your suggestions. We'd love to hear your thoughts on this new format below.

Today's issue explores the rise in apartment vacancy due to increased supply, impacting landlords' ability to hike prices. We also delve into the 51.6% drop in Industrial STNL sales and why investors are still bullish.

Today’s issue is brought to you by Reap Capital and Pine Peak Partners.

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Market Snapshot

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*Data as of 1/2/2024 market close.


Rising Apartment Supply Boosts Vacancy Rates, Paving Way for Ongoing Rent Relief

2023 saw a notable change in the apartment rental market, easing pressure on renters with a decline in rent hikes.

Tide is turning: In 2023, the rental market experienced a notable change with the halting of steep rent increases, which had previously soared by over 20% across 2021 and 2022. This shift was largely due to a surge in new apartment construction in cities like Austin and Nashville, resulting in higher vacancies and restraining landlords from raising rents.

Rent growth cooling: With the rise in housing supply, even against a backdrop of steady job growth and strong housing demand, rent prices are expected to stabilize into 2024. Predictions for the upcoming year, including a 1.2% increase by CBRE and 1.5% by Yardi Matrix, suggest a further moderation in rent growth, a stark contrast to the sharp increases in prior years.

Affordability still a pressing issue: Despite this stabilization, the issue of affordability continues to burden many tenants. Particularly, the 'renters by necessity' group is allocating around 32% of their income towards rent on average, a financial strain that has been aggravated since the pandemic due to the prolonged period of significant rent hikes.

But it’s not that simple: Contrary to the assumption that renting is only for those who can't afford to buy, RealPage housing economist Jay Parsons says recent studies reveal a dramatic increase in high-income renters. The number of renters earning above $100,000 has grown by 61% over the past five years. This shift indicates a growing trend of 'renters by choice' – individuals who could afford to buy but opt to rent for various lifestyle reasons.


Looking ahead: While the outlook for 2024 is cautiously optimistic, with more rent relief on the horizon, the demand for rental properties—especially single-family homes- is strong, which continues to be resilient. According to CBRE, approximately $250 billion in dry powder is ready for investment, particularly aimed at aiding cash-strapped landlords and builders. Economic factors such as the recent drop in Treasury yields could catalyze further investment activities.


Utilizing a $5,000,000 preferred equity investment from Pine Peak Partners, Reap Capital has closed on their 6th transaction of the year- 288 units in Arlington, TX.

Here's a breakdown of the deal. 👇

🏢 Property details

  • Purchased on December 22, 2023

  • Arlington, TX

  • 288 units, Class B

  • 88.2% occupancy at time of purchase

💸 Finances

  • LP Equity: $10,000,000

  • Preferred Equity: $5,000,000

  • Senior Loan: $29,700,000

💼 Business plan

  • Value-add improvements: The capex plan includes rebranding the property, repainting the exterior, and renovating the interior units.

  • Operational improvements: Currently operating at a 73% expense ratio, Reap plans to bring in their in house management team to streamline operations.

"David Lilley and his team at Reap Capital have established an outstanding reputation as a value-added multifamily sponsor," said Beau Hale, Managing Partner at Pine Peak Partners, a firm specializing in credit and preferred equity investments. "We are excited about the prospect of collaborating with them and contributing to their ongoing success."


  • Next phase: SoFlo developer David Martin is set to undertake the biggest project of his career. He’s closely monitoring market conditions and adjusting his playbook on the fly.

  • Deal of the year: A major multifamily property in California has been sold in one of the state's largest apartment deals of the past year, a major boost for the area.

  • Legal dispute: Soloviev Group is suing A&E Real Estate Management for backing out of a deal to buy a 56.3% stake in the 23-story Rivers Bend apartment building.

  • Multi-unit housing starts: In November, starts for buildings with five or more units dropped 33.7% year-over-year but increased 8.9% from October, reaching a rate of 404,000.

  • New market: A California real estate investor known for West Coast acquisitions recently entered the Dallas-Fort Worth market by purchasing a 20-story luxury apartment tower.


  • South Florida: Property Reserve, the real estate arm of The Church of Jesus Christ of Latter-day Saints, acquired most of Hialeah's Beacon Logistics Park for $174.3 million.

  • Outlook: Prologis offers bold predictions for 2024, anticipating increased private equity real estate investment, sub-4% 10-year Treasury yields, and cap rate reversals.

  • Growth markets: Dallas and Phoenix, despite a nationwide industrial start slowdown, remain top contributors, accounting for over 17% of all U.S. industrial development.

  • New Jersey: Faropoint, an affiliate of Hoboken-based Faropoint, bought a 142,415-square-foot Opa-locka industrial portfolio for $24.6 million, equating to $173 per square foot.


  • Retail center: Manor near Austin will get a 63-acre retail center anchored by H-E-B and Home Depot, part of a 95-acre mixed-use development with 600 multifamily units.

  • Store openings: Dollar General reported strong Q3 earnings but CEO Todd Vasos is taking steps to address inventory shrink, improve checkout staff, and optimize inventory management. They plan to open 800 new stores and remodel 1,500 in 2024.

  • Podcast: Doug Stephens, a retail and branding expert, suggests that the retail industry is holding onto outdated 20th-century practices that need to change as we move further into the post-pandemic era.

  • Costly returns: With the anticipated growth of e-commerce sales this holiday season, consumers are expected to generate up to $82.1 billion worth of returns, as reported by CBRE and Optoro.


  • Bright spot: In Q1-Q3 2023, U.S. law firms leased 12 million sq. ft. of office space, surpassing 2022's 14.8 million sq. ft. total.

  • Distress sale: In-Rel Properties bought a Bethesda office building for $29.85 million, a significant discount from its previous $100 million+ sale.

  • Back to office: The commercial real estate industry faces uncertainty with $1.2 trillion in maturing loans by 2025, influenced by office performance, remote work, and banking problems.


Single Tenant Industrial Net Lease Sales Drop 51.6%

Similar to other segments in the single-tenant net lease (STNL) market, industrial investment sales have also encountered considerable difficulties.

Market decline: The STNL market saw a downturn in the third quarter, with a notable drop in industrial investments. Northmarq's data shows a total STNL sales volume of $9.61 billion, marking a 9.8% decline from the previous quarter and a 48.3% drop from the same period last year.

Zoom in: Industrial STNL, accounting for 46.5% of this total with $4.47 billion in sales, experienced a sharper decline of 23.5% from the second quarter and 51.6% year-over-year, indicating specific challenges within this sector that exceeded those in other market segments.

Demand and growth: Despite the downturn, the industrial sector is still witnessing growth driven by the increasing needs of e-commerce and technology, leading to the development of new facilities in key markets. Significant investments like Intel's $20 billion semiconductor plants in Ohio and Amazon's large distribution center in Los Angeles highlight this growth. Additionally, smaller-scale developments and sale-leaseback transactions, especially by national and global retailers, are actively shaping the market.


Why it matters The industrial STNL market has seen significant shifts in cap rates, increasing to 6.21% in the third quarter, with regional differences: rises in the Southwest and Southeast, stability in the Midwest, and a slight drop in the Mid-Atlantic. These trends, affected by high interest rates, suggest a misalignment between buyers and sellers. Expectations of further cap rate hikes and market volatility are expected to continue into 2024.

Editor’s Picks

  • 2024 outlook: After a tough 2023, commercial real estate executives are preparing for 2024 with a positive outlook, seeing it as a pivotal year for the industry.

  • Disney expansion: Disney's second Storyliving community, Asteria, is set to be developed in Chatham County, NC, featuring over 4,000 residential units. Sorry, California and Florida.

  • DFW rebound: Experts predict a rebound for DFW CRE in 2024 after a tough 2023, despite a slowdown in office leasing and new projects and a 60% drop in sales.

  • SF tax delay: San Francisco has postponed its 2024 business tax increase to 2025 to support economic recovery and capitalize on the tech boom, especially in generative AI.

  • Booming demand: U.S. cities, including New York, Chicago, Baltimore, Los Angeles, and Minneapolis, are experiencing a significant increase in group demand at hotels.

  • Major risk: In its 2023 Annual Report, the FSOC identified CRE, with $6 trillion in loans, half held by U.S. banks and many maturing soon, as a major financial risk to the U.S. economy in 2024.


The declining trend in multifamily permitting, which started in mid-2022, is persisting. November's seasonally adjusted annual rate (SAAR) for these permits dropped 9.6% from October and 21.3% year-over-year, reaching 435,000 units.

This is significantly lower than the 513,600 units in the annual total for non-seasonally adjusted permits. This gap is largely due to timing differences. The SAAR for multifamily permits hit its peak in mid-2022, while the unadjusted total peaked around 5-6 months later.

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