Why Developers Keep Building Luxury While Affordable Housing Lags

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Good morning. Developers are shying away from building affordable housing due to thin profit margins, exacerbating the challenges for low-income renters.

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• Banking risks: A Florida Atlantic University report reveals that 59 of the largest 155 U.S. banks faced CRE exposure exceeding 300% in Q3 2024.

• Wildfire risk: Trepp reports $1.3 billion in CMBS-backed CRE across 152 properties, including multifamily, retail, and office spaces, are threatened by wildfires in Los Angeles evacuation zones like Pacific Palisades and Eaton.

• Job surge: The U.S. added 256,000 jobs in December, exceeding expectations, while unemployment fell to 4.1%, tempering hopes for Fed rate cuts in 2025.

• Secondary offerings: U.S. REITs raised $12.5 billion in Q4 2024, contributing to a total of $70 billion for the year, as secondary offerings drove growth amid subdued M&A activity.

• Brooklyn pocket: The Pintchik family sold a 26-building, $102.5 million property portfolio in Prospect Heights and Park Slope to the Ostad family, marking a rare consolidation near Barclays Center.

• Aimco explores sale: Aimco is exploring selling parts or all of its business to bridge the gap between its stock price and asset value, following a $38M deposit on a $520M Miami property deal.

• Renter’s market: The median asking rent dropped 0.3% year-over-year to $1,594 at the close of 2024, as surging apartment completions and rising vacancies shifted power to renters, particularly in the Sun Belt.

• Fire-fueled frenzy: L.A.’s luxury rental market is seeing bidding wars and skyrocketing rents, with prices projected to rise 8-12% as wildfires deplete housing supply and intensify demand.

• Buying in Buffalo: Buffalo secured its title as the nation’s hottest housing market for a second consecutive year, driven by strong job growth, affordability, and high demand amid limited supply.

• Las Vegas expansion: The Calida Group acquired 13.2 acres in southwest Las Vegas for $18.3 million, planning a 398-unit luxury apartment complex next to the Durango hotel-casino.

• Rising tides: Tides Equities lost the 376-unit Tides on Haverwood in Dallas to Benefit Street Partners in a $61 million credit bid, as rising rates continue to strain its multifamily portfolio.

• Deal of the day: Brookfield Properties sold a 631,604 SF industrial outdoor storage portfolio spanning 13 properties in key logistics markets for $277M, marking another milestone in its active $ 3.4B deal volume for 2024.

• Pullman deal: Ryan Companies sold a 140,000-square-foot Whole Foods warehouse in Chicago to Radian Investment for $31.8 million.

• Record breaking: CIP Real Estate has acquired Broadway 101 Commerce Park, an 809,230-square-foot industrial campus in Mesa, Arizona, for $168.3 million, marking the largest industrial transaction in Phoenix last year.

• Jacksonville expansion: Kimco Realty Corp. has acquired The Markets at Town Center, a 254,000-square-foot retail center in Jacksonville, Fla., for $108M, marking its first purchase under its Structured Investment Program.

• WestShore shift: Macy’s is closing its 235,000-square-foot WestShore Plaza store in Tampa as Washington Prime Group moves forward with plans for a 3.5 million-square-foot mixed-use redevelopment of the site.

• Orlando uptick: Orlando’s office market rebounded in 2024 with rising occupancy, a 2% rent increase to $28.31 per square foot, and significant leasing activity, positioning it for continued growth in 2025.

• UFL secures HQ: The United Football League leased 111,400 square feet in Fort Capital’s Ballpark Circle in Arlington, marking one of Tarrant County’s largest office deals in two years.

• Houston buy: Radler Enterprises acquired the 207,000-square-foot Legacy at Fallbrook office building in Northwest Houston, a 96% leased property with future development potential.

📈 CHART OF THE DAY