☀️ This region is outshining the Sun Belt.

👋 Hello, Best Ever Community!

In today’s newsletter, the Midwest outshines the Sun Belt, new CRE hotspots emerge, and one investor reveals how he raised over $1 million for his first two deals.

Plus, if you haven’t already, sign up for the Best Ever Book Club led by Joe Fairless. February’s book is Ted Talks: The Official TED Guide to Public Speaking by Chris Anderson.

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CRE HEADLINES

⚡️ SF's Tech Revival: AI startups dominate San Francisco real estate, leasing a significant portion of office space and revitalizing the market amidst post-pandemic challenges.

📉 Apartment Rents Dip: Multifamily rental rates continue to drop, marking six months of decline, with January seeing a 0.3% decrease to $1,373.

🔥 CrowdStreet Under Fire: Investors sue CrowdStreet for losses from Nightingale Properties' failed bid, seeking $3M+ damages and an injunction to halt operations.

🧑‍💻 Neumann's WeWork Redemption: WeWork co-founder Adam Neumann aims to regain control, with his company Flow Global and hedge fund manager Daniel Loeb seeking a buyout.

🏦 Small Banks, Big Risks: Regional banks are heavily invested in commercial real estate loans, posing concerns despite assurances of a healthy banking system.

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MIDWEST OUTSHINES THE SUN BELT

The Midwest region of the United States is experiencing a notable upswing in its multifamily real estate market compared to trendier coastal and Sun Belt markets in 2023–24, according to RealPage’s Jay Parsons. While most regions grapple with high apartment supply, the Midwest's largest markets are outperforming national averages in rent growth and occupancy rates. 

🏆 Anything But Average: Midwest apartment occupancy is 50 bps above the U.S. average, while year-over-year rent growth in the Midwest is 280 bps higher. The Midwest also has the U.S. average resident retention beat by 240 bps, while apartment construction is 220 bps lower than average. This scarcity of new supply relative to demand makes the Midwest an attractive option for multifamily investors seeking stability in a volatile market.

🏗 Supply & Demand: The Sun Belt’s oversupply problem has led to declining rents, increasing vacancy, and distress in the multifamily market — and it shows no signs of stopping. According to a recent RealPage report, 53% of apartment completions scheduled for 2024 are located in the South, while none of the “slow-and-steady” Midwest markets appear in the top 10 for supply deliveries in 2024.

🌟 Rising Stars: Key Midwest markets like Columbus, Indianapolis, and Kansas City, along with parts of Chicago, are doing well enough to warrant attention from institutional investors, Parsons says. And with the Midwest as a whole outperforming other regions, smaller markets such as Grand Rapids, Madison, Des Moines, and Sioux Falls are also working their way into the institutional conversation.

What It All Means

Despite concerns about scalability and liquidity, the Midwest's strong performance suggests its appeal for multifamily investment may continue, offering a low-beta option for long-term investment strategies. While the region may not always outperform, its reliability in uncertain times holds significant value for investors.

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_{✍️ BEST EVER BLOG}
FROM VYZER

When it comes to commercial real estate investment, choosing the right up-and-coming cities is crucial for value and growth potential. 

But how do investors spot the rising stars that will deliver returns now and into the future? The key is understanding the indicators of a strong emerging CRE market. Key factors include market dynamics, strategic location, economic strength, infrastructure, amenities, and market cycles and trends. 

🔥 Nashville, TN: Economically, Nashville is on a growth trajectory, ranking high in job growth among large metros. This economic expansion supports a consistent demand for commercial spaces.

🔥 Columbus, OH: In terms of economic development, Columbus has seen notable advances, particularly in the healthcare sector, which has significantly contributed to its overall GDP growth over the past decade. Additionally, Ohio's favorable property laws enhance the city's appeal for real estate investment.

🔥 Indianapolis, IN: Indianapolis, affectionately known as Indy, is rapidly evolving into a significant tech hub. The arrival of major corporations like Salesforce, Anthem, Inc., and Eli Lilly has brought a surge of talent and development, particularly influencing the multifamily real estate sector.

“For those considering investments in these cities, conduct a deep dive into their distinct market characteristics, infrastructure, and evolving trends to align with both market potential and individual investment objectives.” —Sam Miller, Vyzer

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💸 How an Investor Raised Over $1M for His First Two Real Estate Syndication Deals

If you were brand new to the real estate syndication niche, it’s unlikely that you would be able to raise over $1 million for your first deal. It would be even more unlikely that you’d be able to raise over $1 million for each of your first two deals. However, a client of mine was able to accomplish this improbable feat, and he explained how he was able to do so through his natural networks.

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—Joe Fairless