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Together with
Good morning. The U.S. is set to add a record-breaking number of apartments this year, with over half a million new units expected to hit the market. Plus, Jamie Dimon still sees a 65% chance of a U.S. recession.
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Today’s issue is sponsored by Reap Capital.
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🎙️ Listen: Episode 5 of No Cap by CRE Daily is live! Jack Stone and Alex Gornik sit down with Michael Mandel, a former broker and CompStak® founder, to talk about the impact of data and AI on CRE.
Market Snapshot
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*Data as of 8/9/2024 market close.
Construction Outlook
U.S. Apartment Construction to Hit Record High in 2024
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The U.S. apartment market is set to break records in 2024, with over 518,000 new rental units completed, marking a historic high in construction.
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A record year: According to RentCafe, 2024 marks a historic milestone for apartment construction in the U.S. as the number of completions surpasses 500,000 units for the first time on record. This influx of new inventory is a 9% increase over 2023 and a 30% rise from 2022. For context, that’s enough units to house the entire population of Atlanta.
Source: RentCafe Analysis of Yardi Matrix
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Leading the way: For the third consecutive year, New York is set to lead completions with nearly 33,000 new units, driven by a surge in Brooklyn, which will account for almost 30% of this supply. Dallas is close behind, with 32,932 units, and Austin follows with 21,506 units. Together, these two Texas metros will contribute nearly 10% of all new apartments nationwide by the end of 2024.
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Close contenders: Phoenix and Atlanta round out the top five markets, expecting over 20,000 and 18,000 new apartments, respectively, by year’s end. These cities are benefiting from strong population growth and demand.
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Looking ahead: RentCafe says the U.S. is expected to add 2 million new apartments by 2028. Interestingly, about 47% of the 369 metros analyzed are projected to build more apartments over the next five years than they did between 2019 and 2023. However, a slowdown is anticipated in 2025, with a 15% decline in completions compared to 2024.
➥ THE TAKEAWAY
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Why it matters: The US apartment market is to reach new heights in 2024 for the third year in a row, but the focus is shifting towards lower-risk projects as developers brace for a slowdown in the coming years. By 2028, we could see another surge, but the path will be shaped by economic conditions and demand.
TOGETHER WITH REAP CAPITAL
1995 Vintage Core-Plus: 50% Below Replacement Cost
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Reap Capital is excited to announce its latest acquisition: The Calvin. It is located in a prime submarket of Plano, TX, with access to the highly coveted Plano ISD and a one-mile median income of $114k.
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Deal Highlights
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✅ Lender Forced Sale
✅ Acquiring at 50% of Replacement cost
✅ Exit price matches current sale comps
✅ 100% Depreciation on invested capital
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Investment Highlights
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✅ 17.88% IRR*
✅ 2.09x EM*
✅ 8.48% CoC*
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“By capitalizing on this forced sale, we are able to acquire a core plus asset at a price that is 20% below previous trade in 2021.” —David Lilley, CEO
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Click here for more information on The Calvin and access to Reap Capitals webinar on August 15th at 6:30 pm CST.
✍️ Editor’s Picks
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Going private? Bill Ackman’s Pershing Square Capital is considering taking Howard Hughes Corporation private, following the recent spinoff of Seaport.
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Healthcare JV: Catalyst Healthcare Real Estate and Heitman formed a $300M joint venture to develop healthcare properties across five states.
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Never coming back: Job listings are shifting from large city centers to smaller metro and rural areas, possibly signaling a long-term geographic redistribution.
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Ethics scandal: D.C.’s No. 2 buildings official, Caroline Lian, resigned after a probe revealed she secretly held a full-time job at Freddie Mac while working for the city.
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Red-hot: CRE brokerage stocks like CBRE, JLL, and Newmark are seeing stock increases of up to 23% over the past month, fueled by improved earnings and anticipated Fed rate cuts.
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Holding firm: Jamie Dimon sees a 65% chance of a U.S. recession, diverging from JPMorgan’s economists who estimate a 35% likelihood.
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Buffett’s bungalows: Three Palm Beach homes owned by the late Jimmy Buffett are listed for over $20M, offering potential buyers a “Key West meets Palm Beach” experience.
🏘️ MULTIFAMILY
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Deep discount: Ready Capital sold $20M in loans at $0.70 on the dollar and has $450M more in contract for Q3, expected to sell at even steeper discounts.
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Rising distress: Multifamily CLO distress is surging, with nearly $57B in troubled loans, threatening apartment flippers who invested during the pandemic’s low-interest boom.
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Slowing down: Nationwide single-family rental home inventory increased by 16.7% YoY in 1H24, leading to longer market times and slower rent growth, especially in Florida.
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Miami development: The owner of South Beach’s Sagamore Hotel plans a 561-unit multifamily project with 20K SF of retail space on a long-vacant North Miami site.
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Boston’s senior solution: Massachusetts’ $5.2B housing bond bill aims to tackle the severe shortage of affordable senior housing as the state’s elderly population grows rapidly.
🏭 Industrial
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Data Center deal: Thor Equities purchased a 270-acre site near Atlanta for $50M, aiming to convert the facility into a data center.
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Industrial expansion: Tempus Realty Partners acquired three industrial properties across Maryland, Alabama, and Wisconsin for $29M, marking their second portfolio addition this year.
🏬 RETAIL
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Rethinking retail: Ace Hardware is investing $1B in a new experiential store concept, “Elevated Ace,” featuring enhanced showrooms and outdoor spaces, with a rollout starting in Q4.
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Lucrative conversion: Montreal’s Centre Carnaval mall sold for $70M after securing approval to add 1,800 residential units, showcasing the profit potential in retail-to-mixed-use conversions.
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Acquisition: DLC and Meadow Partners acquired the Penn Mar Shopping Center near Washington, D.C., for $68.5M, enhancing their grocery-anchored retail portfolio in Prince George’s County.
🏢 OFFICE
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High-stakes gamble: Related California plans a $600M, 41-story hotel and office tower in San Francisco, betting on premium space despite high office vacancies.
🏨 HOSPITALITY
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Add it to the collection: Oracle founder Larry Ellison has acquired the luxurious Eau Palm Beach Resort & Spa, expanding his portfolio of high-end resorts.
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“Rock ‘n’ roll”: French-born baker Michel Suas bought the land beneath San Francisco’s Phoenix Hotel for $9M, with redevelopment options when the ground lease ends in 2025.
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A better choice: Choice Hotels sold its remaining $91M stake in Wyndham after a failed hostile takeover, shifting focus to expanding its own brands like Everhome Suites and Radisson.
📈 CHART OF THE DAY
MSCI
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