📈 Why office, multifamily are set to thrive in 2025

👋 Hello, Best Ever readers! In three weeks, it will be 2025, the time until which we were told to survive. Get your popcorn ready 🍿

In this week’s newsletter, job growth boosts key CRE sectors, immigration reform threatens construction, and one investor sees 20% office rent growth.

Got plans tonight? Join us and Sunrise Capital tonight, December 12, at 7 p.m. EST for a FREE live webinar — Mobile Home Park Investing: The Hidden Path to ‘Infinite Income’.

👉 Register here to save your seat.

Let’s go!

_{🗞 NO-FLUFF NEWS}
CRE HEADLINES

🔮 Future of Fannie, Freddie: Trump's re-election has revived plans to privatize Fannie Mae and Freddie Mac, sending their stocks soaring since November 5. The move could reshape the $11T mortgage securities market, where the agencies control $310B in daily trading through federal guarantees.

🐢 Industrial Slowdown: Industrial construction is sharply declining, with only 358.8M sqft under construction (1.8% of existing stock), following 2021-22's record 1.1B sqft delivery. Phoenix leads new construction at 6.7% of stock, while Dallas starts dropped to 13.3M sqft from a 42.6M annual average.

🎲 Betting on BTR: Wall Street firms are heavily investing in build-to-rent single-family homes, targeting renters priced out of homeownership by high rates and offering upscale homes with amenities that appeal to would-be buyers seeking alternatives to traditional apartments.

🏠 ADU Expansion: California has passed a landmark bill that expands ADU development rights, allowing up to eight detached units on multifamily properties. Building on the state's 80,000+ ADUs built in seven years, the law offers a blueprint for addressing housing shortages.

🎙️ 20% Rent Growth?!: Former hedge fund manager Josh Sason says his portfolio has seen up to 20% rent growth and stable concessions in carefully positioned "best-in-class" office assets, despite broader market challenges. He joined host Amanda Cruise on the Best Ever CRE Show this week to share the how and why behind it.

_{🏆 TOP STORY}
WHY OFFICE AND MULTIFAMILY COULD THRIVE IN 2025

The office and multifamily sectors appear poised to end 2024 on a high note and enter 2025 with an uptick in momentum, largely due to a thriving labor market.

Hiring hit a six-month high in November after weather and labor-relation disruptions led to a down October. The rebound of 227,000 net new roles in November, combined with the prior period's 36,000 job addition, resulted in an average gain of 131,500 over the two-month period.

This clocks in lower than the 191,000 average for the first nine months of the year and from what was typical pre-pandemic norms, but November’s strong showing proves October to be an anomaly and signifies the labor market, though softening (unemployment edged up 10 basis points to 4.2% in November), remains strong.

• The Office Impact: Office-using sectors showed strong November hiring, with 26,000 jobs added in professional/business services, stable information sector employment, and the strongest financial activities hiring since July 2023. This coincides with office space reporting its best absorption since late 2021, helping vacancy rates stabilize across all property classes, with suburban markets showing particular strength.

• A Multifamily Bump: Education, health services, and public sectors added 112,000 jobs in November, bolstering apartment demand. Q3 2024 saw the third-highest apartment absorption on record (excluding the pandemic era). While 2024 absorption won't match historic completions, reduced future deliveries combined with steady renter demand suggest improving multifamily vacancy rates and rents in 2025.

The November jobs report also strengthens the case for further Fed rate cuts at its December 18 meeting; however, potential tariffs on Mexican and Canadian imports could complicate the inflation picture.

WHAT IT ALL MEANS

Strong job growth directly drives commercial real estate demand, as companies typically need more office space for expanding workforces and employed workers need apartments near their jobs. Higher employment and wages give both companies and renters confidence to commit to spaces, supporting occupancy and rents across both sectors.

With office showing signs of rebounding and multifamily supply set to normalize in 2025 as deliveries wane, a strong job market in the early months of Trump’s second term could be the foundation for a fast start to the year in each sector.

_{🎟️ BEST EVER CONFERENCE}
COMPETE TO WIN SIX FIGURES FOR YOUR NEXT DEAL

💸 Neil Wahlgren of MAG Capital won a $400,000 investment at the Best Ever Conference. 

Now, it's your turn.

The Best Ever Pitch Slam is the Best Ever Conference's Shark Tank-style event where attendees pitch their investment opportunity to an audience of industry leaders, investors, and a panel of LPs who will invest money on the spot.

🤔 A few Pitch Slam FAQs:

• Who should apply?
  New or emerging syndicators and existing sponsors with a new opportunity are welcome to apply. 

• What is the application process like?
  Submit your application here for free. Applicants will go through a screening round with the Best Ever team to determine their eligibility. Finalists will be announced before the conference.

• Do I have to attend the Conference to win?
  Yes, finalists are required to present their deals live on stage at the Best Ever Conference. Your pitch will be evaluated by a panel of esteemed judges and will be seen by all attendees looking to place capital.

💰 Will you walk away with hundreds of thousands in investment money and bragging rights for life?

_{🗺️ ON THE MAP}
HOW IMMIGRATION POLICY COULD IMPACT CONSTRUCTION

The construction industry faces significant challenges from potential immigration policy changes under the upcoming Trump regime, with undocumented workers making up 13% of the national workforce and even higher percentages in key markets like Texas, Florida, and California.

Proposed deportation policies would likely impact smaller developments that often rely on undocumented workers, as they could face severe workforce shortages and cost increases, while large-scale, unionized projects may weather the storm due to documented workforces.

Developers are already mounting their response to the challenges. Many are accelerating current projects to get ahead of potential policy changes while building longer timelines into future developments. Others are increasing wage budgets to attract domestic workers and exploring automation alternatives that could reduce labor dependence.

For CRE investors, the implications are significant. Extended construction timelines and higher development costs are likely to become the norm, pushing investment dollars toward renovation over new construction. Markets with more stable, documented labor forces may see increased investment activity, while the industry as a whole accelerates its adoption of construction technology, artificial intelligence, and automation solutions to fill labor gaps.

_{🖥️ FREE WEBINAR}
THE HIDDEN PATH TO ‘INFINITE INCOME’

Join us and Sunrise Capital tonight, December 12, for a FREE live event — Mobile Home Park Investing: The Hidden Path to ‘Infinite Income’.

👉 Register here to join us TONIGHT at 7 p.m. EST.

In this 45-minute event, you’ll discover:

✅ Why MHPs are drawing attention as a uniquely attractive real estate asset class.

✅ How investing in MHPs provides exceptional tax benefits via accelerated AND bonus depreciation.

✅ Why it’s better to invest with a “buy-improve-hold” strategy instead of “buy-improve-sell”.

✅ How investors can receive “infinite income” by receiving full return of capital while staying in the deal.

Can’t make it tonight? Register anyway and we’ll send you the replay.

_{🏠 DEAL OF THE WEEK}
ADDING $7.9M IN VALUE WITH A 3.4X MOIC AND 347% IRR IN JUST 11 MONTHS

Matthew Ricciardella and the team at Crystal View Capital doubled the value of this property with 3.4X MOIC and 347% IRR in just 11 months.

Here's how they did it 👇

🏢 Property Details: This mobile home park features 311 sites and is located in Louisville, KY.

💸 Finances: The property was purchased for $7.1 million in February 2020. It was purchased as part of a fund, so there was no capital raised for the property specifically. The team secured an agency loan of $4.3 million fixed at 3% interest, which was transferrable to the next buyer.

💼 Business Plan: The team installed individual water and sewer meters for each unit, shifting utility costs to tenants based on actual usage. This not only improved cost recovery and incentivized conservation but also created an additional revenue stream, and generated an additional $144,000 in annual NOI (which went into effect the month of the sale). They also fixed multiple large water leaks from prior ownership, increased tree trimming throughout the park to improve curb appeal, installed new pavement and asphalt, and made the property ADA-compliant.

💪 Biggest Challenge: The biggest challenge was the pandemic and all of the CRE hurdles that came along with that, including uncertainty about performance, finding contractors to perform the necessary work, the cost of repairs and renovations, and more.

🍾 Results: The property sold in December of 2020 (11 months later) for $15 million. Initial investor projections at acquisition were 32.5% IRR and 2.7x MOIC, but the realized results were 347% IRR and 3.4x MOIC.

If you have a deal you'd like to feature here, respond directly to this email with “deal breakdown.”