🎨 How one trend changed the renter retention playbook

👋 Happy Sunday, Best Ever readers! We’ll be off this Thursday for Christmas, but we’ll be back next Sunday with a 2025 recap before looking ahead to 2026, which is already just 11 days away. Until then, Happy Holidays 🎄

In today’s newsletter, renters renovate, the labor market goes wild, development gets a lifeline, malls rebound, and much more.

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Let’s CRE!

🗞️ NO-FLUFF NEWS
CRE HEADLINES

🏗️ Permit Push: The House approved the SPEED Act this week, instituting NEPA reforms to accelerate multifamily development. This streamlines federal permitting processes that have created construction delays and regulatory burdens, marking bipartisan progress on addressing housing production obstacles.

💸 Concession Trend: Over 30% of multifamily properties have offered leasing incentives. The trend is projected to persist into 2026 as operators favor 12-month rent discounts over short-term deals and luxury properties deploy more concessions.

📉 Labor Market: November payroll growth slowed to 64,000 jobs while unemployment reached 4.6% — the highest since 2021 — as muted wage growth and labor market softness threaten to dampen renter demand and slow rent growth.

💵 Liquidity Rebounds: The Madison Real Estate Liquidity Index rose to 35.6 in Q3, marking six consecutive quarters of improvement and the highest point since Q1 2022, driven by stronger U.S. and European loan origination.

🏢 Office Space: Seventy percent of real estate leaders at large companies have said their 2026 strategy includes adding office space, up from 56% in 2024, though economic uncertainty could delay upgrades despite return-to-office momentum.

🏆 TOP STORY
THE NEWEST RENTER RETENTION TREND: CUSTOMIZATION

Wealthy renters are dropping $20,000 a month on luxury apartments and single-family homes, then immediately gutting them. Custom lighting. Home offices carved out of closets. Even swapping showers for soaking tubs. And landlords aren’t just allowing it — they're encouraging it, in some cases negotiating upfront renovation agreements before signing leases.

👉 In one case, a Manhattan condo owner approved $2 million in tenant-funded upgrades before move-in. The tenant has renewed every two years since 2016 at $50,000 monthly, and those modifications increased the property's value without touching the owner's budget.

While this ultra-luxury dynamic feels worlds away from institutional multifamily, the same retention thesis is reshaping strategies across classes. National apartment renewal rates dropped to as low as 55.1% in 2025, despite an industry target of 63%. With turnover averaging nearly $4,000 per unit, every renewal directly protects NOI.

Across Class A and B properties, developers are introducing personalization options that give residents control without major capital commitments:

• Pre-move-in Customization: Properties let residents select paint colors, fixture finishes, flooring options, and layout configurations before lease signing. Choices stay within pre-approved parameters that maintain future marketability while giving renters meaningful control over their living environment. 

• Flexible Spatial Design: Open floorplans with multi-use areas let residents define functionality without permanent modifications. Spare bedrooms convert to home offices or nurseries based on household needs — no contractors required, no restoration clauses, no turnover complications. 

• Digital Personalization: Customizable resident apps let renters control their experience through amenity booking preferences and communication settings. Properties with well-implemented technology report 85% of residents enjoy living in tech-enabled communities, creating retention without physical modifications.

Class C properties consistently post the highest retention rates, hovering near the top of the market. Operators in these segments have mastered the basics: quick maintenance, personalized communication, and avoiding unnecessary rent increases. Class A faces steeper challenges as new lease-ups pull upper-income renters with aggressive move-in incentives, but even here, operators focusing on resident experience are holding their own.

THE BOTTOM LINE

Personalization doesn't require luxury-level budgets — it requires recognizing that residents who feel connected to their living space renew leases. In a market where $4,000 turnover costs compound across every vacant unit, small investments in resident experience deliver measurable NOI protection through the one metric that matters most: lease renewals.

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💰 CRE TRENDS
INVESTORS CALL CONSUMERS’ BLUFF ON RETAIL

Investors are calling consumers' sentiment bluff. While the University of Michigan's Consumer Sentiment Index hit 53.3 in December — near its lowest level on record — nominal retail spending tells a different story. The Census Bureau reports seasonally adjusted annual spending reached $632 billion, up 3.9% annually, and mall transactions are surging in response.

Single-asset mall sales are on track to exceed 50 properties in 2025, the highest annual total since 2022. That represents a 4.9% turnover rate against the existing stock of roughly 1,000 operating malls nationwide. The fundamentals driving investor interest look solid:

• Occupancy rebounded to 91%, matching pre-pandemic rates from late 2019 as tenant rollover concerns fade.

• Market-to-contract rent spreads hit 7.5%, the widest among all retail subtypes, reflecting strong re-leasing potential as newer deals command premium pricing.

• Appraisal cap rates stabilized near 6.3% after climbing through 2023, signaling that pricing has found equilibrium even as interest rates remain elevated.

The weakest centers have cycled out of the market, leaving behind higher-quality assets with predictable cash flows. With 38 malls trading in the first three quarters of 2025 — matching all of 2024 — renewed energy behind mall transactions could mark an inflection point for the broader retail category heading into 2026.

🎙️ THE BEST EVER CRE SHOW
HOW THE HIRING DROUGHT IS HITTING SUN BELT MULTIFAMILY

The job market just fell off a cliff, and multifamily operators in high-growth markets could be feeling the impact soon.

John Chang took to the Best Ever CRE Show this week with sobering data. Jobs creation collapsed from 123,000 per month in early 2025 to just 17,000 per month from May through November. Three of those months posted negative growth. Unemployment climbed to 4.6% in November, the highest reading since 2021.

The damage hits multifamily demand directly through the cohort that typically drives new apartment absorption: young adults landing first jobs and signing first leases. That 20-28 age group now faces unemployment in the mid-7% range — exceptionally high for college graduates.

Here's how the breakdown has cascaded through multifamily fundamentals:

• Companies froze hiring after April's tariff announcement, waiting for clarity that never came.

• Young adults who can't find work moved in with parents or doubled up with roommates instead of leasing units.

• The $1,200-$1,300 monthly gap between renting and owning is keeping existing renters in place but generating zero new absorption.

High-growth Sunbelt markets — Phoenix, Dallas, Austin, Charlotte, Nashville — already carry elevated vacancy from the construction wave. Chang warns those markets risk getting stuck with elevated vacancy rates that prevent rent growth even on renewals, especially as three months of free rent concessions let tenants shop across the street for better deals.

Without the employment engine that typically drives household formation, absorption stalls just as those markets need it most. Chang sees pent-up demand building that could eventually flood the market, but the timing remains anyone's guess, and operators will feel every month of the wait.

🎙️ Listen to John's full episode here.