📚 College towns are booming. But there's a problem.

👋 Happy Sunday, Best Ever readers! Merriam-Webster’s Word of the Day for Monday, July 7, was procrastinate, which means we’ve waited six days to post it. Whoops….

Speaking of not putting things off: Join The DeRosa Group for our next FREE live webinar, Hotel Investing Decoded: Cash Flow, Tax Benefits, and Market Opportunities, on July 24 at 7 p.m. EST. Save your seat here.

In today’s newsletter, student housing’s hidden crisis, the Fed is divided, dry powder piles up, hotels challenge multifamily, and much more.

Let’s CRE!

🗞️ NO-FLUFF NEWS
CRE HEADLINES

📉 A Fed Divided: Most Federal Reserve officials expect rate cuts later this year, but only two support a July reduction amid tariff uncertainty. Officials view inflation risks as more prominent than economic weakness, with current rates potentially near neutral levels.

🧟 Dead Zones: The Big Beautiful Bill made Opportunity Zones permanent, but the new program won't launch for 18 months, creating a gap where investors may lose tax benefits. Governors will redraw maps by 2027 with tighter criteria, while current zones face dwindling investment.

📈 Rate Plateau: Net lease cap rates stabilized at 6.79% in Q2 after three years of increases, rising just one basis point as markets find equilibrium. Premium tenants command sub-6% rates while struggling retailers see rates climb above 7%.

🚪 Closing Surge: Retailers announced 5,941 store closures versus 4,176 openings through July, creating 50 MSF of vacant space. Bankruptcies accelerated closures, while discount retailers like Dollar General dominated new openings with 611 planned stores.

🏭 Flight to Quality: Industrial net absorption held steady at 29.6 MSF in Q2 despite vacancy rising to 7.1% as supply outpaced demand. Modern warehouses built since 2023 captured most absorption, showing continued flight-to-quality trends.

🏆 TOP STORY
THE HIDDEN CRISIS LOOMING FOR STUDENT HOUSING

Student housing is having a moment — but it may only last just that … a moment. The sector is experiencing solid momentum heading into fall 2025, with preleasing rates trending above last year and several universities achieving exceptional occupancy levels. 

• Preleasing Strength: National preleasing rose 1.5% YoY to 79.9% as of May 2025, with 30 universities achieving over 90% preleasing and standout performers like the University of Cincinnati posting 22.5% growth.

• Rent Stability: Average advertised rates held steady at $918 per bed in May, just below the $919 record high set in March, though annual rent growth has cooled to 2.1%, the lowest since July 2021.

However … the current strength masks concerning fundamentals that threaten long-term viability. While average enrollment growth rose to 1.8% at U.S. colleges in fall 2024, multiple structural challenges are converging that could negatively impact demand. 

• Grad Rates: High school graduate numbers are expected to have peaked this year, creating a smaller domestic student pipeline just as policy changes affect higher education funding and increased visa scrutiny threatens international enrollment.

• Market Divergence: While 62 universities reported higher rent growth than last year, 133 experienced slowdowns, and 59 markets posted negative rent growth over the past year.

• Investment Cooling: Average sales prices dropped to $88,467 per bed from $105,252 last year, reflecting investor caution despite 36 properties trading year-to-date.

THE BOTTOM LINE

It’s a tale of two markets when it comes to student housing. Near-term fundamentals remain solid with strong preleasing at top universities, but demographic and policy headwinds create significant long-term risks. Many investors are focusing on flagship state universities with diverse enrollment, while developing exit strategies that account for potential enrollment declines in the late 2020s, which will shape the eventual new reality of student housing.

🎓 TOGETHER WITH THE DEROSA GROUP
FREE WEBINAR: HOTEL INVESTING DECODED

Join The DeRosa Group for our next FREE live webinar, as they provide a look inside the booming hospitality industry. They'll discuss why they decided to pivot from multifamily to hotels and conduct a deep dive into hotel deal analysis.

Here’s what you’ll learn from this FREE live webinar:

✅ Why Hotels? Discover why hospitality is a strong hedge against inflation and a powerful income generator in this market.

✅ Tax Efficiency: Learn how cost segregation and bonus depreciation can enhance your after-tax returns.

✅ Property Deep Dive: Explore DeRosa Capital 20, a dual-Hilton hotel offering, including business plan, risk mitigation, and projections.

✅ National Branding: Learn how working with a brand like Hilton creates predictable cash flow and long-term appreciation.

Matt, Jacob, and Hait will also give you an exclusive walkthrough of DeRosa Capital 20 — a dual-Hilton hotel offering that delivers immediate cash flow, institutional brand strength, and conservative upside.

💰 CRE TRENDS
A RECORD $350 BILLION IN DRY POWDER IS WAITING

Private equity firms are growing optimistic about deploying their record $350+ billion in uninvested CRE capital during the second half of 2025, despite early-year uncertainty over Trump administration policies. The urgency to deploy capital has intensified as funds face critical timing constraints.

• Over $63 billion held by funds formed three to five years ago are facing deployment deadlines.

• Blackstone leads with $177 billion available globally, followed by Brookfield and Ares.

• Redemption requests are rising, with outflows exceeding new fundraising for 10 consecutive quarters.

The deployment push comes as real estate fundamentals appear to be bottoming out, with new supply dropping dramatically and tariffs potentially reducing construction further. Investment focus is shifting toward alternative assets like data centers, which saw acquisitions surge over 60% in 2024, along with student housing (despite the headwinds we just discussed), and healthcare properties that offer consistent performance and structural demand drivers.

🎙️ THE BEST EVER CRE SHOW
MULTIFAMILY VS. HOTELS, THE OVERLOOKED CASH COW

This week on the Best Ever CRE Show, hotel investment specialist Hait Patel joined fellow DeRosa Group team member Matt Faircloth to explore why hotels could be the most overlooked cash cow in today's market. While multifamily investors scramble to make deals pencil in today's rate environment, hotel investors are quietly enjoying serious cash flow.

• Behind the Numbers: The cap rate spread tells the whole story. Hotels are trading at 8-9% caps while multifamily remains stuck at 5-6%. This isn't just a trivial discrepancy — it's a fundamental shift in which asset class actually rewards investors with immediate returns.

• Why This Matters Right Now: With borrowing costs at 6.5-6.75%, hotels enjoy healthy 150-250 bp spreads that translate directly to day-one cash flow, while multifamily deals often require creative financing gymnastics just to break even. Interest-only loans, cash flow reserves, and investor calls have become the norm for apartment deals that used to be slam dunks.

• The Truth About Cash Flow: Hotels can deliver 8-12% cash-on-cash returns from day one, while multifamily investors chase low single-digit returns and bank everything on 20%+ appreciation at exit. Hotels sacrifice explosive appreciation potential for consistent, predictable income streams, but in today's rate environment, immediate returns look increasingly attractive.

📣 “You can buy a hotel for $10 million today and sell it for $11 million in five years, but you're making serious money every year,” Hait says. “Multifamily? You'd better sell for $19 million or you make nothing."

🎙️ Listen to Hait’s full episode here.

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