Luxury SFR Rents Surge, While Low-End Prices Decline

Good morning. The single-family rental (SFR) market is seeing diverging trends, with high-end rents climbing and low-end rents taking an unexpected dip.

🎙️ On this episode of No Cap by CRE Daily, we talk with Jonathon Barkl, CEO and co-founder of AirGarage, about his journey from college student to disrupting the parking industry. He reveals how AirGarage evolved from an "Airbnb for driveways" into a full-stack, tech-first parking operator.

Market Snapshot

Single-Family Market

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• Building better: CA’s Governor Newsom signed 7 bills addressing the state’s housing crisis, imposing fines of up to $50K per month on non-compliant cities to boost affordable housing.

• Southern charm: New home construction is still booming in the US South and West regions, with states like North/South Carolina and Idaho leading the way in terms of both affordability and growth.

• Financial funnies: In this video from CNBC, Colliers US CEO Gil Borok discusses ongoing CRE challenges, including unresolved loans, despite potential rate cuts signaling a peak in delinquencies.

• Big Green Apple: The Biden administration continues to fund green NYC projects, with $260M in grants for the Brooklyn Marine Terminal and Manhattan Waterfront Greenway.

• Building beyond limits: Developers are facing rising costs from various directions, with a slight relief in property insurance overall as construction costs begin to stabilize.

• Leverage meltdown: Despite September’s Fed rate cut, these highly leveraged landlords with floating-rate debt are still struggling, facing impending property losses and financial meltdowns.

• Rents dip, perks rise: San Diego's rental market sees rising vacancy rates at 5.2% and slowing rent growth at 0.5%, prompting landlords to offer more concessions to attract renters.

• Booms and busts: Single-family construction is strong due to pent-up demand, with US building permits increasing YoY, while multifamily development faces an oversupply and fewer starts.

• Brooklyn’s best: Apollo Global Management provided $159M in refinancing for The Greenpoint, a 368-unit luxury multifamily property in Brooklyn.

• Sustainable spring: The 463-unit Hillandale Gateway project in Silver Spring, which boasts mixed-income, multigenerational, and senior units, secured $303M in financing.

• Vertical expansion: Data centers are moving away from sprawling, boxy designs to taller, more visually appealing structures as urbanization and AI demands drive a shift in the industry.

• Revving up EVs: Federal officials recently allocated $3B in grants to boost US EV battery production, creating thousands of jobs in 14 states.

• Industrial innovation: Equus Capital Partners and a pension plan just purchased a nearly 300 KSF industrial campus in Lakeland, FL, for $38M.

• Doubling down: Simon Property Group's (SPG) subsidiary amended a $3.5B credit facility with a total capacity of up to $8.5B, supported by 28 banks and maturing in 2029.

• Shopping for success: Inland REIT (INRE) is evaluating sale options for its 52 US shopping centers, worth $1.4B, and is considering public listing or no action at all.

• Conveniently located: It’s no surprise that consumers still favor popular convenience store chains like 7-Eleven, with 60% more foot traffic now than compared to 2023.

• High returns ahead: Shorenstein Investment Advisers secured $78.3M from JPMorgan Chase (JPM) to acquire a 15-story, 388.4 KSF office tower along the Dallas North Tollway.

• Tech titans tango: OpenAI's largest office deal in San Francisco at 550 Terry Francois Boulevard expands its footprint to nearly 1MSF as the AI titan continues to expand.

• Boutique boom: Independent hotels in NYC boast around 38K rooms, accounting for 32% of the city's total hotel rooms, followed by Marriott (MAR) at 23.6%.

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📈 CHART OF THE DAY

FACT OF THE DAY

The largest mall in the world by total area is the Dubai Mall, covering over 12 million square feet—enough to house 50 soccer fields. Despite its size, retail makes up only half of the space, with the rest dedicated to attractions like an aquarium, ice rink, and even a luxury hotel.