🌙 Is the retail honeymoon over?

👋 Hello, Best Ever readers!

In today’s newsletter, tariffs hit retail, permits plunge, supply doesn’t peak (yet), and dollar stores in Iowa surprise everyone.

Today’s weekend edition is presented by Viking Capital, which is excited to announce its latest investment opportunity, The Hamilton, a luxurious 232-unit multifamily community in the Nashville MSA.

👉 Also, join us and our special guest from Neutral at Noon EST on May 8 for a FREE live event — Multifamily's Next Frontier: Wellness-Oriented Sustainable Development. Register here to save your seat today.

Let’s CRE!

🗞️ NO-FLUFF NEWS
CRE HEADLINES

Tariff Anxiety: The CRE Finance Council’s Q1 2025 Sentiment Index recorded its second-largest drop ever, falling 30.5% from 126.6 to 87.9, below the baseline of 100, for the first time since the pandemic. Following Trump's tariffs, 80% now expect worsening economic conditions over the next year amid escalating trade tensions.

Industrial Buying Boom: Industrial occupier purchases surged 32% last year as manufacturers seek ownership over leasing. Trump's April tariffs sparked a 250% increase in manufacturer inquiries, with rising rents and reshoring initiatives driving the trend.

Permits Plunge: Southeast apartment demand hit a record 56,000 units absorbed in Q1 2025, continuing the region's strong performance since 2021. However, multifamily permits have fallen 25% YoY, with Q1 permitting at a four-year low, signaling potential market constraints ahead.

Mall Revival: Class B malls nationwide are evolving into mixed-use developments as retail construction slows. With 250 such properties representing 28% of U.S. malls, their 89% occupancy and 9% traffic decline versus pre-2019 levels have investors seeking value-add conversions.

‘Junk Fee’ Ban: Colorado has become the latest state to prohibit landlords from charging undisclosed fees beyond base rent. The law requires property owners to advertise total rental costs upfront and bans charges for legally required services like pest control.

🏆 TOP STORY
IS THE RETAIL HONEYMOON OVER?

In the latest installment of “How President Trump's aggressive tariff policies will impact basically everyone,” let’s talk retail. The retail sector has been on fire, but like most sectors, Trump’s 10% across-the-board tariffs for most countries and 145% on Chinese goods have already triggered noticeable shifts in retailer behavior and market fundamentals, with national vacancy rates climbing and absorption turning negative for the first time since the pandemic.

Here’s a snapshot of what’s happening in retail right now:

• Softening Demand and Rising Vacancy: National retail vacancy rates increased to 5.5% in Q1 2025, up 20 bps YoY, while net absorption plummeted to -5.9 msf — the worst quarterly performance since Q3 2020. Absorption now averages -900,000 sf over the past four quarters compared to +4 msf a year earlier, with neighborhood centers accounting for 75% of this decline. All four U.S. regions experienced negative absorption, with the South (-2.57 msf) showing the largest contraction.

• Decelerating Rent Growth: Average asking rents reached $24.76 psf in Q1, a modest 2.3% YoY increase — significantly down from early 2024's +4.0% growth rates and now falling below inflation, signaling weakening pricing power as increasing store closures and mounting tenant cost pressures constrain landlords' ability to raise rents.

• Retailer Hesitation and Canceled Deals: Tariffs are causing retailers to withdraw from lease commitments as they navigate rising costs. Industry brokers report widespread hesitation across apparel, home goods, electronics, auto retail, and restaurant sectors, reflecting a fundamental recalibration of expansion plans amid economic uncertainty.

• Severe Consumer Cost Increases: Moody's projections show apparel prices potentially jumping 30% by year-end and food prices rising 6.4% due to tariffs. By 2026, if tariffs remain, apparel could cost 74% more, food 13.3% more, and housing 5.2% more. Major retailers — including Best Buy, Walmart, and Target — have already announced price increases, while some estimates say consumers could lose $46-78 billion in spending power under current tariffs.

• Regional Market Variations: Of 81 markets tracked by Cushman & Wakefield, 48 showed declining demand, while Raleigh/Durham, St. Louis, Charleston, Seattle, and Norfolk bucked the trend with positive absorption. Property performance varied significantly by type, with neighborhood centers and strip malls showing the greatest vulnerability, while tighter urban markets demonstrated more resilience due to limited supply options.

Despite these headwinds, retail appears positioned to weather the storm. Historically low vacancy rates, minimal new construction (just 10.6 msf under development nationally), and retailers having already right-sized their footprints provide insulation against dramatic market deterioration, all while vacancy rates are forecasted to rise to 6.0-6.5% by early 2026 before stabilizing.

WHAT IT ALL MEANS

The current retail trends represent more of a pause than a contraction — a period requiring caution, but not alarm. Those with patient capital may find opportunities as landlords become more flexible in negotiations, potentially creating favorable entry points for well-capitalized investors who can navigate this transitional market environment.

🏘️ VIKING CAPITAL
INTRODUCING THE HAMILTON

Viking Capital presents The Hamilton, a 232-unit, light value-add multifamily community built in 1985 and located in Hendersonville, Tennessee — one of Nashville’s most desirable, supply-constrained submarkets.

📚 Known for its top-rated school district and strong demographics, Hendersonville offers exceptional rent growth potential driven by limited new construction and robust tenant demand.

🔧 The Hamilton has undergone recent upgrades, including full interior renovations (2020) and new roofs (2024). With these improvements already in place, The Hamilton requires minimal CapEx budget moving forward, making it a low-risk opportunity.

📈 This asset benefits from strong tenant demand, a significant rent-to-own delta, and a proven high-occupancy track record. The Hamilton is well-positioned for continued appreciation.

💰 Offered with a loan assumption at a 4.889% fixed rate, The Hamilton provides a unique advantage by securing stable, low-interest financing in a volatile rate environment. This financing structure enhances the asset's cash-flow potential in a market poised for continued growth.

To learn more about Viking Capital and The Hamilton investment opportunity, which is available for you right now, click the button below and get started today.

💰 CRE TRENDS
WHERE APARTMENT SUPPLY HASN’T PEAKED (YET)

While national apartment supply has peaked, 13 major markets won't hit their highest supply volumes until late 2025 or beyond.

The next markets expected to peak are Boston, Detroit, Fort Lauderdale, Kansas City, and Memphis, which expect peaks by Q3 202, followed by Cleveland, Columbus, and New York in late 2025. Newark follows in early 2026, with several California markets and Greensboro peaking later in 2026.

🌎 FREE LIVE EVENT WITH NEUTRAL
WELLNESS-ORIENTED SUSTAINABLE DEVELOPMENT

Join us and our special guest on Thursday, May 8, for a FREE live event — Multifamily's Next Frontier: Wellness-Oriented Sustainable Development.

In this live event with Nate Helbach, founder and CEO of Neutral, you'll learn:

✅ Wellness-Oriented Development: Learn about the growing niche of wellness multifamily and how Neutral is pioneering this segment with innovative approaches to resident health and well-being.

✅ Mass Timber Advantages: Discover why mass timber construction represents the future of sustainable multifamily development and the benefits it offers to investors and residents alike.

✅ Tax-Advantaged Investment Opportunities: Explore high-performing debt and equity offerings in Neutral's groundbreaking multifamily developments.

✅ Midwest Multifamily Performance: Understand the current landscape of Midwest multifamily developments and what makes wellness-oriented properties a unique investment opportunity in today's market.

👉 Register below to join us at Noon EST on May 8.

🎙️ THE BEST EVER CRE SHOW
AN 8% PREF AND 15-18% IRR WITH DOLLAR STORES

Tom Rauen is crushing it in a specific niche. 

In a recent episode of Beyond Multifamily on the Best Ever CRE Show, Tom joined Ash Patel and Amanda Cruise to continue a conversation they started at the Best Ever Conference in March, with Tom sharing how he's generating 15-18% IRRs by focusing on dollar stores in Iowa.

• What He's Buying: Tom targets dollar store properties at a price point of roughly $1,050,000 with 8.25-8.5% cap rates. He focuses on 10,000-sf buildings at approximately $100 psf, primarily purchasing properties built around 2015.

• Where He's Buying: Tom exclusively invests in Iowa, creating a significant operational advantage for his tenants. With low property taxes and low cost of living, the wages they pay employees are much lower than in other markets. This means the revenue-to-expense ratio is substantially stronger for dollar stores in Iowa compared to other states.

• How He's Buying: Tom's strategy focuses on the spread between the cap rate and interest rate while analyzing rent growth patterns. "What we look at is really the spread between the cap rate and the rate that we're paying for interest from our borrowing rate from a lender,” he says. “It doesn't really matter if banks are lending money at 3% or 8%. You still just have to get the spread." He also leverages current economic conditions that discourage tenants from relocating due to increased construction costs.

His Results: Tom's dollar store investment strategy consistently delivers an 8% preferred return to investors with total returns averaging 15-18% IRR while producing stable cash flow. Unlike many other real estate sectors experiencing volatility, according to Tom, his portfolio has maintained identical quarterly distributions for an impressive 18 consecutive quarters since 2021.

🎙️ For more from Tom on dollar stores, the triple-net evolution, and more, listen to his full episode here.

🎓 BEST EVER COMMUNITY
CRE AI REDESIGN CHALLENGE

TRANSFORM A COMMERCIAL PROPERTY USING AI

Do you consider yourself a CRE visionary? Put it to the test and join the CRE AI Redesign Challenge in the Best Ever Community!

Here’s how it works:

• Choose any commercial property listing (retail, multifamily, industrial, office, or vacant land) and use an AI image generator like ChatGPT, Midjourney, etc., to visually transform it.

• Get Creative: Turn retail into mixed-use, vacant land into a community hub, industrial sites into sustainable business parks — there are no limits.

• Post your before/after images in the challenge thread along with brief property details, your redesign concept, and how your vision increases value, attracts tenants, benefits the community, etc.

This challenge is for Best Ever Community members only, so to participate, join the FREE community below. Submissions and voting start this week!