🏟️ Can sports micro-cities revive dying downtowns?

🌹 Happy Mother’s Day, Best Ever readers!

In today’s newsletter, sports to the rescue, corporate HQs relocate, operators eye occupancy, and AI predicts rent growth.

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Let’s CRE!

🗞️ NO-FLUFF NEWS
CRE HEADLINES

Loan Limit Bill: Senators have introduced a bill to raise FHA multifamily loan limits for the first time since 2003, allowing developers to borrow over four times more per unit. Current outdated limits have reduced HUD multifamily commitments and forced most communities to be classified as "high-cost areas."

HQ Movement: Corporate headquarters relocations are rising as companies seek tax incentives and better business environments. Dallas has led all destinations with 100 HQ gains since 2018, followed by Austin (81), Nashville (35), and Phoenix (31). The San Francisco/Bay Area lost the most (156), followed by Los Angeles (106).

Stress Test: Multifamily resilience may be waning. Rents rose just 0.9% YoY in April, according to Yardi Matrix data. While Northeast markets like NYC gained 5.8%, Sun Belt rents fell 2.1%-5.6% as Q1 GDP contraction and tariff concerns threaten fundamentals.

Holding Pattern: Tariffs are causing some retail and industrial deals to pause. Retail saw its first negative net absorption since Q3 2020, while industrial vacancy hit 6.3%, the highest since Q2 2014, as many tenants take a "wait-and-see" approach.

Office Recovery: U.S. office leasing surged for the fifth straight quarter, exceeding Q1 2019 levels with 13% YoY growth. Return-to-office mandates and scarce new development drove gains. Premium spaces lead recovery while Grade B buildings struggle without capital investment.

🏆 TOP STORY
CAN SPORTS STADIUMS RESCUE DOWNTOWNS?

The NFL's Washington Commanders are the latest pro sports team to (tentatively) strike a multi-billion-dollar stadium deal as cities bet big on sports venues to revive their downtown cores. The team unveiled plans last week for a massive $3.8 billion football stadium complex in Washington, D.C., making it one of the priciest sports projects in America.

• Who’s Funding it? Commanders owner Josh Harris (the private equity guy) is putting up $2.7 billion — the biggest private investment D.C. has ever seen. Taxpayers would chip in the remaining $1.1 billion.

• The kicker: The 65,000-seat stadium is just the beginning. The 180-acre development will also include 6,000 housing units, with roughly a third designated as affordable housing. It will also feature hotels, retail, restaurants, and parks. No word yet on who's footing the bill for all those extras. 

Beyond D.C., over the next 15 years, there could be more than $100 billion of investment opportunity for sports-anchored mixed-use districts, Klutch Sports told The Wall Street Journal, and plans to renovate or newly build at least 39 major sports venues are currently underway across North America, including:

• Tennessee Titans (NFL): The Titans’ $2.2 billion football palace in Nashville will serve as the centerpiece for 1,550 apartments, three hotels, and office buildings. Doors open in 2027.

• Las Vegas Athletics (MLB): The A's are building a $1.7 billion ballpark alongside a massive casino resort featuring over 3,000 hotel rooms. Ready for play in 2028.

• NYCFC (MLS): NYCFC is building a $780 million venue with 2,500 affordable apartments and a 250-room hotel. Set to debut in 2027.

• Chicago Bears (NFL): The Bears want to build a $4.7 billion complex with 14 acres of parks, but they're stuck in limbo, as locals aren't thrilled about the $1 billion in state money the team's asking for. Target date: 2028. 

A New Model: Stadium-based neighborhoods represent a new business model for team owners, as they want to build expansive real estate portfolios in the form of mini-cities that make money year-round, not just on game days. D.C. officials are selling this as an economic lifeline, especially with a billion-dollar budget shortfall and federal job cuts looming.

WHAT IT ALL MEANS

D.C.'s deal still requires $1.1 billion in public funding and needs council approval. If it goes through, expect the next proposed stadium deal to be even bigger. With stadium projects driving 3-15% appreciation in nearby properties, stadium developments create opportunities in adjacent land, office conversions, hotels, parking facilities, and other niches. And with experts projecting that the global sports real estate market could hit a trillion dollars, the trend of sports micro-cities isn’t going away anytime soon.

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💰 CRE TRENDS
OPERATORS EYE OCCUPANCY OVER RENT GROWTH

Operators are prioritizing occupancy over rent growth as they enter the prime leasing season amid economic uncertainty. April occupancy surged to 95.7% after climbing 40 bps MoM — the strongest April increase since 2010 — while effective rent growth softened to just 0.2%, according to RealPage data, pulling annual growth down to 1.0%.

• High-supply markets with rent cuts saw the biggest occupancy gains. Charlotte and Nashville led with +80 bp gains despite marketwide rent declines, while Austin, Denver, and Raleigh/Durham posted 50-70 bp improvements.

• Regional performance diverged significantly as the South continued cutting rents annually (-0.5%), while the Midwest (3.6%) and Northeast (3.3%) maintained stronger growth.

• Leasing fundamentals remained healthy as renewal rates climbed to 55% on a trailing 12-month basis. Lead volume stayed robust, signaling strong future lease signings.

• Rent-to-income ratios held steady at 22.3% in professionally managed apartments, indicating affordability remains balanced despite the shift in operator strategy.

This strategic pivot reflects operators' recognition that maintaining high occupancy provides more stability than aggressive rent increases in today's competitive leasing environment. The data suggests a conscious choice to fill units quickly rather than hold out for higher rents, particularly in challenging markets facing oversupply issues.

🎙️ BEST EVER PODCAST
HE BUILT A RENT-GROWTH PREDICTOR. HERE’S WHAT IT SAYS.

Michael Episcope — co-founder of Origin Investments, which manages 5,000 units and has transacted on over 10,000 units — joined Matt Faircloth on the Best Ever CRE Show this week. He discussed why he's bullish on future multifamily rent growth, a view powered by his company's proprietary AI system, a machine learning model developed by two data scientists specifically for rent forecasting. They call it Multilytics. 

• How It Works: Multilytics processes billions of data points monthly, aggregating information from across the web to forecast rent growth. Unlike most industry models that only analyze down to the zip code level, Multilytics can generate predictions down to the property level. The system also differentiates between property classes and tenant demographics, creating a more nuanced view of market dynamics.

• The Evidence: In 2020, when first launching the model, Origin's data scientists didn't want to share their initial findings because it predicted 35% rent growth in Gilbert, Arizona — a number that seemed impossibly high when typical rent growth ranges from 1-5%. Thinking there must be an error, the scientists kept tweaking the system. It turned out the model was actually conservative, as rents in Gilbert ultimately grew by 40%, validating the system's predictive power.

Current Forecast: The model now projects 4-6% annual rent growth across Origin's target markets over the next five years, approximately double the historical average. This forecast, combined with factors like housing affordability challenges and construction constraints, has Episcope bullish. “I think you're going to see a significant amount of rent growth in the future,” he said. “That's what I'm excited about.”

🎙️ Listen to Michael’s full episode here.

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