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Together with
Good morning. Rent growth lagged in 2024 despite strong demand, but 2025 projections are looking promising. Plus, Brookfield tees up 36-year-old Connor Teskey as next CEO.
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Today’s issue is sponsored by Viking Capital.
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Market Snapshot
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*Data as of 7/19/2024 market close.
Rental Report
RealPage Forecast Points to Improved Rent Growth in 2025
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Despite a resilient economy and strong demand, rent growth in 2024 has been slower than expected, but projections for 2025 look more promising.
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The economy: In Q2 2024, the U.S. economy added over 532,000 jobs, contributing to a total of 1.3 million jobs created year-to-date. Significant employment gains are anticipated in New York, Los Angeles, Houston, Phoenix, and Dallas for the rest of 2024.
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Supply and demand: The supply of new apartments in 2024 is forecasted to reach just over 629,000 units, but a 20% decline is expected in 2025, with approximately 497,000 units. Demand is projected to absorb over 612,000 units in 2024, with a 12% decrease expected in 2025.
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Growth in 2024: Despite strong demand, rent growth has lagged in 2024 due to external factors. RealPage’s forecast shows that 50% of the top 50 markets will see 2%-3% growth, 24% will see 1%-2%, and 18% will see less than 1%. Only Atlanta and Jacksonville are expected to have rent cuts over 1%.
➥ THE TAKEAWAY
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Looking ahead: The forecast for 2025 is more optimistic. With weaker supply, strong demand, and a better economy, about 40% of the top 50 markets could see rent growth of over 3%. Around 55% will likely see 2%-3% growth and just over 5% may see less than 2% growth.
TOGETHER WITH VIKING CAPITAL
New Multifamily Investment in ATL
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Viking Capital presents Avondale Hills, their latest multifamily investment opportunity. This luxurious 240-unit apartment community, completed in 2023, represents a prime investment opportunity in one of Atlanta’s premier submarkets.
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🌟 Why Choose Avondale Hills?
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Prime location & Connectivity: This A-class asset is strategically located in a hyper-connected area along the path of progress. Residents benefit from Atlanta’s extensive amenities and economic growth.
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New Product with Below-Market Rents: This 2023 asset offers premium amenities with room for competitive rent increases.
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Strong Cost Basis: This off-market deal, discounted by $20 million, was brought to Viking Capital because of our strong reputation for execution.
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Low-Risk Fundamentals: This property supports the flight-to-quality during volatile economic
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Economies of Scale: With over 2,000 units in Atlanta, Viking Capital leverages economies of scale to drive operational efficiencies, organic appreciation, and enhanced property value.
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3-Year Hold: Strong returns in less time, giving you the opportunity to redeploy capital more quickly.
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This Is A Regulation D 506c Offering For SEC Accredited Investors Only. All Investors Will Need To Go Through A Third Party Accreditation Verification Process. This Is Not A Solicitation For Non-Accredited Investors To Participate In This Offering.
✍️ Editor’s Picks
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Succession plan: Brookfield CEO Bruce Flatt has picked 36-year-old Connor Teskey as his likely successor, with Teskey expected to gradually take on more leadership before becoming CEO.
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Rate caution: Jamie Dimon advises the Federal Reserve to delay rate cuts amid concerns of potential inflation resurgence.
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Empire: Tom Ford has expanded his property portfolio with a $250 million collection, including notable homes in Aspen, the Hamptons, and Palm Beach.
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Rejected: Miami’s Urban Development Review Board rejected two high-rise projects in Wynwood and Edgewater for being “out of scale” with their small lots and surrounding areas.
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Lifeline: A local developer is set to acquire the stalled Oceanwide Plaza skyscraper complex in Los Angeles for $500 million, aiming to revive the $1 billion project halted in 2019.
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Blocked: Haitong International seeks to block the sale of the unfinished Oceanwide Center in San Francisco, claiming exclusion from the foreclosure deal on the stalled $1.6B mega-project.
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Declining: The Fed’s July Beige Book reports weakening commercial real estate lending, with increased vacancies and cautious outlooks across several districts.
🏘️ MULTIFAMILY
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Falling ratio: Apartment rent-to-income ratios continue to decrease, with Detroit, Chicago, and Pittsburgh having the lowest ratios and California cities like Riverside and San Diego the highest.
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Shakeup: Project 2025’s proposals to maintain single-family zoning and cut housing vouchers could disrupt multifamily development, impacting affordable housing and urban landscapes.
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Foreclosure: Chetrit Group’s 157-unit Forest View Apartments in Baytown, Texas, part of a $481 million distressed portfolio, faces foreclosure auction on August 6 due to loan default.
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Filling the gap: Elliott Investment Management aims to form a new JV and finance $3B to $5B annually in housing projects, addressing the construction capital shortage.
🏭 Industrial
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Revenue decline: Prologis sees an 18% revenue drop amid rising warehouse vacancies but is optimistic about future growth driven by AI-related data center demand.
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Lending: Barings provided a $244 million loan to refinance a 6.4 million square foot industrial portfolio in Kansas City, largely leased to major brands like Amazon and Sam’s Club.
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Big deal: BlackRock Realty Advisors acquired a 1.2M SF Amazon-leased warehouse in Glendale, near Phoenix, for $128 million, marking the largest single-building sale in the area this year.
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Mega leases: The first half of 2024 saw a significant rise in mega leases, particularly in the Inland Empire, with wholesale and retail sectors leading the demand for large industrial spaces.
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Logistics platform: Brookfield Asset Management acquired a 14.6 million-square-foot light industrial portfolio covering 20 high-growth U.S. markets for $1.3 billion.
🏬 RETAIL
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Makeover: Ben Ashkenazy is transforming San Antonio’s Rivercenter Mall into an entertainment hub with attractions like climbing walls, shark tanks, and a revamped food hall.
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Exit: Sephora is closing its Water Tower Place location in Chicago, adding to the retail vacancies on the struggling Magnificent Mile.
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Expansion: American Ventures plans a large retail development in Elgin, TX, with a 90,000-square-foot anchor store on a newly rezoned 60-acre site.
🏢 OFFICE
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Credit quality: Office bank loans are deteriorating, with significant exposure to non-performing loans and rising portfolio stress, highlighting potential challenges ahead for lenders.
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Moving HQ: Indeed is relocating its Stamford headquarters to a newly renovated complex, downsizing from 200,000 to 124,000 square feet at The Link.
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Heading to auction: Brookfield’s 52-story Gas Company Tower in Downtown LA is set for a foreclosure auction on August 16, though it may sell earlier, with some showing early interest.
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Acquisition: Robinson Oil invests $39 million in a commercial portfolio in South San Jose, diversifying its holdings with office and industrial properties resistant to remote work trends.
🏨 HOSPITALITY
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Occupancy dip: Monthly room demand for economy hotels has been declining for 30 months, with annualized occupancy reaching 57.3% in June, down slightly from 57.4% in June 2019.
A MESSAGE FROM INNAGO
Cut Costs and Save Time with Innago
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Save time and money with Innago’s free property management software! Streamline your process with our user-friendly platform. Handle everything from tenant applications to rent payments with ease.
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No setup fees, no monthly fees, no contracts. Join us now and transform your management process!
📈 CHART OF THE DAY
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June 2024 Rental Report: All Units Saw Waning Rent Declines
Realtor.com
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In June 2024, median rents for two-bedroom units dropped 0.3%, marking the 12th consecutive month of declines, with one-bedroom and studio rents also falling but at slightly slower rates than previous months.
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