📍 Where renters are moving, and why

👋 Hello, Best Ever readers!

In this week’s newsletter, migration stabilizes, Starbucks goes 3D, supply dips, and loan mods double.

Today’s edition is presented by Capital Gains Tax Solutions. Selling a property shouldn't mean losing 20-50% to taxes. Let Capital Gains Tax Solutions create your personalized exit plan and calculate your savings today.

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Let’s CRE!

🗞️ NO-FLUFF NEWS
CRE HEADLINES

Rent Hike Proposal: The NYC Rent Guidelines Board has recommended the largest rent hikes in years — 6.25% for one-year leases and 9.75% for two-year leases — as operating costs have surged with insurance up 18.7%, fuel 10.3%, and utilities 8.2%.

Warehouse Rush: U.S. importers are rushing to secure customs bonded warehouses to defer duty payments for up to five years amid impending tariffs. Demand has reportedly increased sixfold, with prices jumping to 60% above standard rates.

Development Delays: Nearly half of the $30 billion in clean tech factories planned for 2025 now face delays or cancellations as tariff volatility deepens construction planning challenges. Most developers are pulling back, with EV and tech manufacturing projects facing significant cancellations.

Bright Side: Tariffs could spark opportunities in industrial and multifamily assets amid economic volatility. Analysis highlights growth potential in pharmaceuticals, chips, and energy sectors, with industrial absorption increasing while housing shortages drive apartment demand.

3D Revolution: Starbucks is opening the first-ever 3D-printed cafe in Brownsville, Texas, later this month. The 1,400-square-foot, pick-up only location with drive-thru costs approximately $1.2 million to build.

🏆 TOP STORY
WHERE RENTERS ARE MOVING, AND WHY

Renter migration trends are shifting, albeit slightly, according to a recent report from Apartment List. The shift toward Sun Belt and Mountain West regions remains strong, but with 39% of renters searching in different metros and 25% looking across state lines, the Carolinas and Texas are capturing significant interest from coastal residents seeking more affordable housing.

• Stabilizing Migration Patterns: While pandemic-era trends dramatically shifted migration patterns, 2024 shows these patterns have stabilized. The percentage of renters looking to move to different metros (39%) or different states (25%) remained consistent with 2023, suggesting a new post-pandemic normal.

• Continued Sun Belt and Mountain West Dominance: Despite overall slowing migration, states like Texas, the Carolinas, Florida, and Tennessee continue to gain the most population from domestic migration, while California, New York, Illinois, New Jersey, and Massachusetts experience the largest outflows.

• The Carolina Phenomenon: North and South Carolina are particularly attractive destinations, with four of the top 10 metros attracting out-of-town interest being in the Carolinas. Durham (65% out-of-town searches) and Charleston (62%) top the list of metros with the highest percentage of searches from non-locals.

• Texas Attracting Coastal Outflows: Texas has become the No. 1 destination for renters looking to leave California (12.4% of outbound searches) and the No. 3 destination for New Yorkers looking to relocate (7% of outbound searches), suggesting Texas continues to benefit from coastal state outmigration.

Affordability-Driven Migration: The report reveals a pattern of renters being priced out of expensive markets and searching in more affordable neighboring areas (San Francisco to Stockton, New York City to Bridgeport, Denver to Colorado Springs), highlighting how housing affordability continues to drive migration decisions.

WHAT IT ALL MEANS

These trends highlight strategic opportunities in Southeast and Mountain West markets, especially in metros like Durham and Charleston, which are showing outsized interest from out-of-towners. While migration has moderated, the flow from high-cost coastal markets to affordable alternatives creates investment potential in emerging secondary markets. However, as remote work policies evolve and affordability challenges spread, investors should carefully analyze local economic fundamentals beyond migration trends to identify markets with sustainable long-term growth.

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💰 CRE TRENDS
BY THE NUMBERS: SUPPLY, LOAN MODS, EHVs, AND MORE

116,100 units delivered

U.S. apartment market delivered nearly 116,100 units in Q1 2025, marking eight consecutive quarters of record completions but showing a significant decline from the 159,000-unit peak in Q3 2024, signaling the market has moved past its historic supply peak. (See chart above.)

60,000 households at risk

The Emergency Housing Voucher program, a $5 billion pandemic initiative, is expected to run out of money by the end of 2025, affecting 60,000 households. Advocates warn that failure to extend could spur a wave of homelessness or unsafe conditions. 

95% occupancy

U.S. apartment occupancy reached 95% in Q1 2025, slightly below the pre-COVID five-year average of 95.2%, with 60% of the nation's 50 largest markets posting occupancy rates below pre-pandemic levels.

6,300 units to auction

Developer Moshe Silber's portfolio of approximately 6,300 multifamily units across multiple states is heading to auction while he serves a 30-month prison sentence for mortgage fraud.

78% of investors

With banks reluctant to finance senior housing despite rising demand, sovereign wealth funds and insurance companies are stepping in. A JLL survey reveals 78% of CRE investors plan to increase senior housing exposure in 2025, up dramatically from 24% last year, as baby boomer aging drives market growth.

$39.9 billion in loan mods

Loan modifications for CMBS, CLOs, and Freddie Mac debt nearly doubled to $39.3 billion for the year ending March, with $2 billion in modifications across 47 loans last month marking the largest monthly increase since May 2024 as economic uncertainty drives extend-and-pretend strategies.

9.7% decline in starts

Starts for buildings with five or more units fell 14.2% MoM in March and dropped 9.7% YoY to a seasonally adjusted rate of 371,000, according to a monthly report from HUD and the U.S. Census Bureau.

🏘️ DEAL OF THE WEEK
PROJECTED 15.2% IRR, $2M VALUE ADDED IN JUST 2 YEARS

Danny Flores and his team at Prime Capital Investments completed a $3.539 million renovation of this Phoenix multifamily property, increasing rents by $507 per unit monthly and adding $2 million in value in under two years.

Here's how they did it 👇

🏢 Property Details: This B Class multifamily property consists of 150 units built in 1983. It is located in Phoenix, Arizona, and was purchased in October 2022.

💸 Finances: The property was purchased for $24 million with $15.139 million in capital/equity raised. Debt consists of a $13.92 million loan at 6% interest-only for three years, then 9% interest-only for year four (owner carry). As of Q1 2025, the team is currently working on refinancing.

💼 Business Plan: With a renovation budget of $3.539 million, the strategy includes complete unit renovations with new cabinets, countertops, stainless steel appliances, light fixtures, flooring, and window coverings. The exterior renovations include rebranding the building, new paint, signage, pool remodel, and landscaping. They also installed new equipment in the owner-owned laundry room and brought in a new management company. The projected hold period is five years.

🍾 Results: The team completed full renovations in 17 months and stayed on budget. They increased rents by $507 per unit per month on average. Current valuation as of Q1 2025 during refinance is approximately $26 million. The property is expected to deliver preferred returns of 8% for common equity upon sale in 2027 with a 15.20% IRR at the LP level and a 1.8x equity multiple. Projected average cash-on-cash return is 6.87%.

💪 Biggest Challenge: After pushing rents higher post-renovation, the biggest challenge while working on this deal, Danny notes, has been keeping rent growth at 0% in the flattening Phoenix market. "However,” he says, “we have several advantages. We know the area well, we have an outstanding property management company, and we work with an excellent contractor."

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

🎓 EXPERT RESOURCES
FREE DOCUMENT DOWNLOAD

27 QUESTIONS TO ASK YOUR PROPERTY MANAGER

Selecting the right property manager is crucial for protecting your investment and ensuring optimal returns. This guide presents 27 targeted questions designed to evaluate experience, communication skills, fee structures, and operational processes. By thoroughly vetting candidates with these strategic inquiries, you'll identify a qualified professional who aligns with your property management goals and expectations.