Strong Apartment Demand Holds as Record Supply Hits 50-Year High

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Good morning. Despite a historic surge in apartment deliveries, U.S. rental demand remained strong in Q3 2024, keeping rent growth flat but steady across much of the country.

Today’s issue is brought to you by Lev — the data and workflow platform for CRE financing.

👉 As Florida recovers from Hurricane Milton, several subscribers reached out last week asking for ways to help and donate. Sarasota Magazine compiled a list of local, state, and national organizations offering support if you need it.

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• Priciest Zip Codes: Atherton, CA tops the list of the nation's most expensive zip codes with a median sale price of $7.9M, as California dominates with 66% of the top 100 zip codes.

• Sitting on land: Tito’s Vodka founder has quietly acquired nearly 13,000 acres in Bastrop County, Texas, but has yet to reveal any development plans for the property, unlike Elon Musk’s rapid projects nearby.

• Servicing surge: The CMBS special servicing rate increased for the ninth consecutive month, reaching 8.79%, with office properties leading transfers at 12.58% and accounting for 58% of the $3.27 billion in transfers.

• Construction costs: San Francisco’s construction costs rose 4.06% year-over-year in Q3 2024, below the 4.91% national average, as contractor availability improved due to fewer active projects.

• Massive impact: Hurricane Milton is projected to cause insured losses between $30 billion and $50 billion, potentially making it the costliest storm since 2022's Hurricane Ian, according to Fitch Ratings.

• Greyhound station: Dallas real estate developer Ray Washburne has purchased the downtown Greyhound station, with plans to take over in April 2025, though specific redevelopment plans remain unclear.

• Sun Belt drop: Jacksonville and Raleigh lead Sun Belt cities in significant rent declines as construction surges oversupply the market.

• Electrification rebate: California introduced an $80M rebate program to help low- and moderate-income households electrify homes and multifamily buildings, offering up to $14,000 in rebates.

• New focus: Investors are concentrating on multifamily properties built after 2017, which account for 80% of transactions over $50 million across 25 markets, with Austin, Dallas, and Miami leading in activity.

• Loss of equity: Tides Equities' $76 million acquisition of Ascend at Black Canyon fell through after a high-net-worth investor withdrew, leaving Tides unable to secure necessary financing.

• Rent control: San Francisco approved a rent control expansion for 16,000 units, contingent on Prop. 33, a state referendum that could repeal limits from the Costa-Hawkins Act.

• West Loop: JLL Income Property Trust sold its 28-story West Loop apartment building for $76.3M, a 20% loss from its 2016 purchase price.

• Vacancy spike: U.S. industrial vacancy rates hit a 10-year high of 7.4% in Q3, as leasing activity slowed and sublease space surged 45% year-over-year, according to Savills.

• Ohio sale: EQT Exeter acquired a fully leased 434,171-square-foot Gateway Commerce Center in Streetsboro, Ohio, for $40.2 million, highlighting Greater Cleveland's below-average industrial sales price of $49 PSF.

• Declining profits: 7-Eleven is closing 444 North American stores and plans a $520 million sale-leaseback as its parent company, Seven & i Holdings, restructures amid declining profits and investor pressure.

• Revlon revamp: Revlon appointed former CVS Health executive Michelle Peluso as CEO, following its 2023 bankruptcy exit and a $2.7 billion debt reduction.

• 20/20 vision: VSP Vision has agreed to acquire Eyemart Express, a chain of 250 optical stores across 42 states, from two private equity firms.

• Bouncing back: Manhattan's office market is seeing a resurgence, with Q3 leasing activity up 25% year-over-year and availability rates dropping to a three-year low of 18.7%.

• Shifting strategy: BXP Inc. proposes a new lab tower at 105 Broadway, while downsizing its 250 Binney St. project in Cambridge.

📈 CHART OF THE DAY