🏘️ Is this a perfect storm for multifamily?

👋 Hello, Best Ever readers!

In this week’s newsletter, multifamily gets an edge, a rent control bill gains momentum, and Phoenix industrial shines.

Today’s edition is presented by Vintage Capital, which is currently accepting investments in a diversified fund of recession-resilient mobile home parks. Discover more about investing in MHPs today.

👉 Plus, the Best Ever Conference is just days away, and it’s not too late to secure your ticket and join us! Grab your ticket here and use promo code hurry25 at checkout for 25% off.

Let’s CRE!

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CRE HEADLINES

📊 Industrial Correction: Following a 1.1 billion-square-foot boom from 2022-2023, industrial deliveries slowed to 358 MSF in 2024 while starts dropped to 236 MSF, down 35% from 2023 and more than 60% from 2022. 

🗳️ Rent Control Bill: A rent control bill limiting annual increases to 7% statewide has advanced through the Washington State Senate Housing Committee. While legislative hurdles remain, the committee approval suggests Democrats may have sufficient support to pass the bill.

💵 Affordable Luxury: Austin, TX, leads RentCafe’s list of U.S. cities that offer the most luxury apartments at below-average rents with 12 zip codes on the list. Atlanta and San Antonio are second and third, respectively, with nine zip codes each, followed by Denver with seven.

🎰 Back-to-Office Bet: Namdar Realty Group, previously known for snatching up “zombie malls,” has shifted to distressed office properties. Since 2021, they've invested over $480M to acquire 10 office buildings in prime urban locations at steep discounts, cutting costs while banking on the future impact of back-to-office mandates.

😎 CRE Confidence: According to a recent survey, brokerage executives are bullish on 2025 with nearly two-thirds expecting increased profitability (up from 18% in 2023), over two-thirds anticipating market share growth, and more than 70% projecting higher transaction volume (compared to just 20% in 2023) — all three-year highs.

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THE STATE OF MULTIFAMILY: A PERFECT STORM?

There's a shift happening in residential construction, and it may be part of a perfect storm that could make it a rebound year for multifamily in 2025, and beyond.

• The Multifamily Picture: A total of 588,000 multifamily units were delivered in 2024, the highest total since 1974. This contributed to rampant oversupply, which put downward pressure on rents and occupancy in many markets. However, there were just 337,000 multifamily starts in 2024, down 36% from the 2022 peak, signaling an imminent normalization of supply while demand remains high.

• The Single-Family Shift: While multifamily starts were down drastically, single-family starts increased 6% YoY in 2024, totaling over 1 million, and completions have remained stable since 2022.

These trends show no signs of slowing. By mid-2025, multifamily starts are expected to be 74% below their 2021 peak, according to CBRE, and 30% below their pre-pandemic average. Meanwhile, Realtor.com predicts a 13.8% rise in single-family housing starts in 2025, totaling 1.1 million. 

• With high-supply markets now past their peak for multifamily deliveries, occupancy rates have already begun recovering, CBRE said, and this recovery should accelerate, as markets with negative rent growth in 2024 are expected to turn positive in 2025 as completions slow dramatically. 

• In fact, CBRE also projects that as the construction pipeline shrinks, strong renter demand will lower the vacancy rate and lead to above-average rent growth in 2026.

Still, it’s important to note that multifamily’s rise may not come at the expense of SFRs. There is still a housing gap of between three and four million in the U.S., and there are only two metros where buying a home is cheaper than renting, according to Realtor.com. And with interest rates likely remaining higher for longer, the influx of SFR deliveries will likely add to the rising inventory of unsold homes, which bodes well for both multifamily and SFR investors as the affordability gap keeps more people in rentals.

WHAT IT ALL MEANS

Following record completions and historic oversupply, the 36% drop in multifamily starts signals improving conditions for landlords as inventory growth slows. With high homeownership costs keeping potential buyers renting and the affordability gap widening in 2025, multifamily investors face favorable near-term prospects as supply normalizes and demand remains strong.

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WHY MOBILE HOME PARKS, AND WHY VINTAGE CAPITAL?

Looking for stable returns in today's volatile market? Vintage Capital offers direct access to one of commercial real estate's most recession-resilient sectors: Mobile Home Parks.

With an $80+ million track record of successful deployments, Vintage doesn’t just talk about results. It delivers them.

Why Vintage Capital?

• Proven Performance: Track record of strong returns through multiple market cycles.

• Strategic Diversification: Recent investments in high-growth markets including Austin and Charleston.

• Institutional Access: Pooling capital opens up access to premium deals and operators typically reserved for large institutions.

• Flexible Options: Invest directly in properties or through Vintage’s diversified fund. 1031 exchanges are also possible. 

Mobile home parks offer remarkable stability with average tenant stays of 10-12 years — four times longer than multifamily residents — providing predictable cash flow and lower operating costs while serving the essential need for affordable housing. 

Now is the time to take advantage of this highly recession-resilient asset class. Get started today and enjoy the benefits of investing in mobile home parks with Vintage Capital.

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INDUSTRIAL RANKING REPORT: TOP 10 MARKETS

The industrial market showed stability in Q4 2024, with development pipelines slowing and vacancies gradually increasing as the market focused on absorbing the previous years' record development. All 30 major markets experienced YoY rent increases, and forecasts suggest vacancies will plateau in early 2025 before declining in H2 as supply is absorbed and new deliveries diminish.

This week, CommercialCafe explored the state of the industrial market, releasing its industrial ranking report of the top industrial markets.

• Phoenix, AZ, maintained its No. 1 ranking in Q4 2024 by leading in three metrics: most industrial space delivered (7.16 MSF), highest quarterly stock expansion (1.88%), and largest pipeline-to-inventory ratio (5.75%). Despite pipeline reduction from 32.6 MSF to 22.3 MSF QoQ, Phoenix remains America's strongest industrial market with balanced manufacturing and logistics bases.

• Orange County, CA, jumped eight positions to No. 2 with the nation's lowest vacancy rate (4.2%, down 110 bps from Q3) and highest average rent ($16.2/sq ft, up 8.1% YoY). This tight market has minimal relief coming, with just 1.5 MSF under development (0.75% inventory expansion), maintaining its status as America's most expensive industrial market.

• Inland Empire, CA, rose four spots to No. 3, despite being the largest market in the top 10 (667.1 MSF). Average sale prices reached $264/sq ft in 2024, up from $248 in 2023, while online search interest for industrial properties increased 33% YoY, even as California-wide searches declined.

The Best of the Rest: Kansas City and Atlanta rounded out the top five industrial markets, followed by New Jersey, Miami, and Bridgeport, CT. Houston came in ninth, leading Texas across key metrics, while Portland, OR, capped the list at No. 10 with its 7.2% YoY increase in rents and 130-bps increase in vacancies since Q3.

_{🖥️ FREE LIVE EVENT}
GARAGE CONDOS: THE NEXT HIGH-YIELD ASSET CLASS

Join us and some very special guests today, February 27, for a FREE live event — Garage Condos: The Next High-Yield Emerging Asset Class.

In this webinar, Gerrit Van Maanen and Ben Lapidus, the developers of Playground, will break down the garage condo investment thesis and how the asset class is vastly outperforming traditional CRE assets.

👉 Register here to join us today at 3 p.m. EST. And if you can’t join us, register anyway and you’ll receive the full replay.

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36% NOI BOOST IN YEAR 1 WITH $25 MILLION PROJECTED VALUE INCREASE OVER 5 YEARS

Gary Lipsky and the team at Break of Day Capital boosted the NOI on this property by 36% in the first year and anticipate a value increase of over $25 million over five years.

Here's how they did it 👇

🏢 Property Details: This 256-unit Class B multifamily property was purchased in December 2023 and is located in Tucson, Arizona.

💸 Finances: The property was purchased for $33 million. Gary and the team raised $7.1 million in preferred equity and $10.45 million in common equity. They also secured a $20.8 million loan (63% LTV) at a 7.95% fixed interest rate for three years. The CapEx budget was $2.4 million.

💼 Business Plan: The team installed a water savings program, added privacy walls to ground-level patios, updated paint in select areas, and added intermittent fencing along the front of the property. They boosted NOI by 36% ($538,000) in the first year by saving over $154,000 in water/sewer, $50,000 in payroll, $50,000 in insurance, $90,000 on repairs and maintenance, and $60,000 in admin.

🍾 Results: Break of Day Capital is projecting a sale in December 2028 for $58,859,000. They are currently paying 3% cash flow, which will continue to increase. They are looking into a refinance within the next 60 days to bring down the cost of the loan and pref equity, as the value has increased significantly. Projected returns are a conservative 15% IRR, 7% pref, and 2X equity multiple in five years.

💪 Biggest Challenge: “The biggest challenge was not being able to renovate units because we weren't getting the rent bumps we projected,” said Lipsky. “We had to find other ways to boost the NOI. We actually had to lower rents for a little bit, but that helped boost occupancy to a point where we were net positive. In the summer of 2024, we tested out upgrading units again to great success and we've been slowly rolling that out, getting the ROI we expected.”

If you have a deal you'd like us to feature, share it with us!

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FREE DOCUMENT DOWNLOAD

The 8-Step Process for Selling Your Apartment Community

You’ve acquired a new asset, completed your value-add business plan, and have been distributing higher than projected returns to your satisfied investors for the past few months. Think your investors are satisfied now? Well, they’re going to be ecstatic when they receive that massive distribution upon sale! So, when and how do you sell your apartment community?