📉 Will rent growth turn negative in September?

Hello, Best Ever Community!

In this week’s newsletter, rent growth threatens to go negative, Yardi gets hit with a rent-fixing lawsuit, and Vyzer drops a go-to guide for navigating new technology in the CRE space.

Plus, the Best Ever Conference is hosting a free virtual Economic Summit on September 20 featuring Neal Bawa, Bob Fraser, Kristin Matthews, and Ben Lapidus. Sign up here to save your seat!

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Let’s go!

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ON THE BEST EVER SHOW

👷 Jorge Abreu — Breaking Ground: Unveiling the Secrets of Lucrative Commercial Real Estate Development: From city hall showdowns to construction conundrums, Jorge spills the beans on what it takes to succeed in this high-risk, high-reward arena.  Listen here. 

 💼 Clive Davis — Lessons in Quitting Corporate America and Scaling a Multifamily Portfolio: Clive shares the key factors that propelled his journey from the corporate world to real estate riches, and how he's navigating today's dynamic market to attract investors. Listen here.

 🏨 Jonathan Twombly — Navigating the World of Independent Hotel Investments: With over a decade of experience, Jonathan shares his insights on finding, renovating, and managing these unique real estate assets. Listen here.

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RENT GROWTH FLATTENS

Rents in August were just 0.28% higher than in August 2022, compared to the 11% growth experienced at the same time last year, according to RealPage. Now, annualized rent growth is currently on pace to go negative in September, largely due to historically high supply levels.

Thanks to a construction surge during the pandemic, 1.2 million apartments have been added in the last three years, and 2023 is set to be a banner year with another 460,860 apartments to be completed by year’s end, according to RentCafe. The New York Metro leads the way, adding 33,000 apartments in 2023, while Dallas, Austin, Miami, and Atlanta round out the top five markets for new apartment construction in 2023.

Where There’s Smoke?: While rents haven’t gone negative yet nationally, they have in some markets, with Austin, (-4.9%), Phoenix (-4.9%), Las Vegas (-4.7%), Atlanta (-3.7%), and Jacksonville, Florida (-3.4%) seeing the biggest declines. About half the total construction pipeline is limited to 15 markets, according to a new report by Greg Willett of Institutional Property Advisors, potentially skewing the national data and leading some to believe that the period of negative rent growth could be short.

Just a Bump in the Road: The typical apartment community takes 18 to 24 months to complete, so according to Willett, delivery volumes should begin to wane in early 2025 and continue dropping throughout the year as current building projects cycle to competition, normalizing supply levels. RealPage Chief Economist Jay Parsons agrees, observing that “new construction starts have materially dropped off in 2023 due to financing issues and other challenges, pointing to significantly lesser supply by the second half of 2025 and into 2026.”

So, What About Rents?: “Rent growth seems likely to regain momentum as early as spring 2024 when the normal seasonal upturn in leasing velocity should coincide with obvious signs that today’s new supply excess is temporary,” says Willett. “Price increases should then prove robust during 2025.”

📰 Other CRE News

Rent-Fixing Allegations: Yardi Systems and 18 property management firms face a federal class-action lawsuit accusing them of engaging in a rent-fixing scheme via Yardi's RENTmaximizer tool.

Insurance Crisis: The average U.S. multifamily insurance premium rose a shocking 33% year over year while the national average rent rose only 4%, prompting Washington lawmakers to address the crisis.

WeWork Is Back?: WeWork has started the process of global engagement with its landlords to renegotiate nearly all its leases. CEO says the company is “here to stay.”

Banks Backing Off: Banks are likely to 'keep retreating' from CRE lending six months after Silicon Valley Bank failure.

Expenses Outpacing Rents: Operational costs for apartment companies grew by 8.6% on average YoY in Q2 2023, according to a new report from Marcus & Millichap.

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FREE VIRTUAL EVENT

These last months (or years!) have been a crazy rollercoaster ride for commercial real estate. So what’s ahead? How can you navigate the micro-economic climate, mitigate losses, and find new opportunities to grow wealth?

Join us on September 20 for a free, virtual Economic Summit 📊 featuring Neal Bawa, Bob Fraser, Kristin Matthews, Ben Lapidus, and Ryan Smith. In a rapid-fire format, they’ll discuss today’s most pressing economic issues and how they will impact investing in the months to come, including:

🔸 Inflation
🔸 Interest rates
🔸 Investor psychology
🔸 Labor & wages
🔸 Construction & development
🔸 Housing
🔸 And more!

👉 Secure your free seat before they're gone! 

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PRESENTED BY VYZER

💡 In today's dynamic landscape, technology is your secret weapon for commercial real estate success. This week on the Best Ever blog, Vyzer provides the go-to guide to the innovative digital tools, platforms, and data analytics capabilities that are reshaping the industry.

🌎 From AI-powered market discovery to blockchain-driven transactions and advanced portfolio management, here are just a few of the key ways technology can empower you on your real estate investment journey:

• Market Discovery and Evaluation With AI: AI-powered platforms can efficiently sift through vast amounts of data, identifying potential investments, and evaluating them with speed and precision that human investors can’t achieve alone.
  

• Efficient Transaction Processes With Blockchain: Smart contracts, built on blockchain, ensure accurate and timely completion of contractual obligations, making transactions quicker and more cost-effective.
  

• Portfolio Management and Analytics: Advanced data analytics and dashboard tools allow investors to monitor their portfolios in real time, providing a comprehensive overview of investment performance.

⚡️ These technological advancements can empower you to make smarter, faster, and more efficient investment decisions in the commercial real estate market, ultimately increasing your chances of success.

👉 Read the complete guide here. 

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WHAT WE’RE READING

This month, we're reading The Catalyst: How to Change Anyone’s Mind by Jonah Berger.

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Hope you have a Best Ever rest of your week!

—Joe Fairless