Multifamily Demand Surges in Key Metro Areas

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Good morning. Despite oversupply issues in many areas, certain metros are seeing exceptional multifamily demand and absorption. Plus, the top cities in the US for young job seekers are in the South.

Today’s issue is brought to you by Viking Capital.

🎙️ Episode 3 of No Cap is live! Jack and Alex delve into the latest commercial real estate headlines, including Biden's Rent Control Proposal, multifamily delinquencies, the economy, and more.

Market Snapshot

demand and supply

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Introducing Avondale Hills, a luxurious 240-unit apartment community built in 2022-2023. This A-class asset is hyper-connected via the neighboring MARTA transit station. Sitting directly in the path of progress, the property benefits from Atlanta's extensive amenities and economic growth.

Avondale Hills is surrounded by vibrant development and economic growth. The robust job market driving tenant demand is fueled by an influx of top-tier corporations, including Google, Microsoft, and JP Morgan,

Avondale Hills offers a modern living experience with premium amenities, positioning it as a best-in-class property. Avondale Hills offers a lower-risk strategy to add value by increasing below-market rents and stabilizing expenses and occupancy. At a 30%+ discount to replacement cost, Viking Capital is buying this property at a highly competitive basis.

• Southern success stories: The top cities in the US for young job seekers are in the South, with Raleigh, Atlanta, and Austin providing good salaries, job opportunities, and affordable living.

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• Are we there yet? Delinquency rates for US commercial property mortgages dipped in Q2—except for office loans, signaling growing stability in CRE markets.

• Almost at rock bottom: Nationally, foreclosures surged in Q2 across CRE sectors, with seized property portfolios growing 13% to $20.5B. But experts say it’s a sign the bottom is almost in.

• Million-dollar momentum: In June, home sales dropped overall, but ‘luxury’ sales of homes listed at $1M or more surged, driven by wealthy buyers with plenty of cash.

• Come one, come all: Houston's Cornerstone Capital Bank just launched a CRE capital markets platform. The platform will focus on lending to multifamily, industrial, office, and retail properties.

• Tax surge spurs sales: A record number of commercial sales went down in June, apparently driven by the new capital gains tax. Case in point: Colliers closed 156 deals, up 26% from 2023.

• High ambitions: Fort Worth aims to develop Panther Island with high-rise buildings, backed by $443M in federal flood-control funds and new zoning changes to encourage dense development.

• Mortgage debt surge: In Q1, commercial and multifamily mortgage debt outstanding rose by $40.1B to $4.7T, according to recent data from the Mortgage Bankers Association.

• Supply cliff incoming: National multifamily apartment deliveries are set to drop significantly, from 560K units in 2024 to 328K in 2027, impacting pricing.

• On the rise: Tenant evictions are rising sharply after the end of pandemic aid and eviction moratoriums, with 1,078,856 evictions recorded over the past year across 34 cities.

• Acquisition: Olivetree Management acquired a 344-unit multifamily portfolio in Maryland for $73.5 million, with $57 million in financing from Fannie Mae loans.

• Modern manufacturing: NIST is offering $70M in funding for an AI-focused Manufacturing USA institute to enhance US manufacturing resilience and productivity.

• Building buzz: Two industrial properties totaling 174.4 KSF in the San Fernando Valley neighborhood of Chatsworth just changed hands for a combined $62.5M.

• Quick flip: Staley Point Capital and Bain Capital Real Estate sold two Buena Park industrial assets for $53.3 million, a notable increase from their $41 million purchase price just two years ago.

• Cold storage: Lineage, the largest cold-storage operator, raised $4.4 billion in the year's biggest IPO, valuing the company at over $18 billion as it expands its logistics and temperature-controlled warehouse services.

• Extended sale: Westfield extended the exclusivity period for the sale of the Oakridge Mall in San Jose after receiving a $30 million deposit, allowing the undisclosed buyer more time to finalize the deal amid challenging market conditions.

• Sweet deal: Sephora renegotiated its lease at 520 Madison Avenue, securing a 66% rent reduction to $156 per square foot for the next 18 months, reflecting a broader trend of falling commercial rents in New York City.

• Convenient success: NNN REIT (NNN) CEO Jay Whitehurst spotlights the firm's diverse holdings, particularly in 600+ convenience stores across 30 states, which they’re very happy with.

• Raising cash: Miami-Dade County is issuing up to $265 million in bonds to fund the $182 million purchase and renovation of the Flagler Corporate Center.

• Pre-foreclosure: InterVest Capital Group filed a $126.4 million pre-foreclosure notice against Tribeca Investment Group for missed payments on its loan for the 477,000-square-foot 30 Broad Street office building in Manhattan.

• County vs. City: L.A. County aims to buy the Gas Company Tower for up to $210 million, potentially disrupting the city's lease plan as the building faces foreclosure auction.

• On second thought: The NYC City Council shelved a contentious proposed bill that would have mandated hotel licenses in the city, due to heavy industry opposition.

• Latest and greatest: In Q2, Preferred Hotels & Resorts added 30 new properties globally to its portfolio, featuring popular tourist destinations like South Africa and Italy.

📈 CHART OF THE DAY