While much has been made of the negative headlines surrounding commercial real estate over the past two years, multifamily investments are poised to rebound in 2025 and beyond. After weathering an influx of new properties across the country and a difficult financing environment, apartments are now filling at a record pace as supply and demand come back into balance. Read More
The Federal Reserve held its key interest rate in check Wednesday, reversing a recent trend of easing policy as it examines what is likely to be a bumpy political and economic landscape ahead. In a widely anticipated move, the central bank’s Federal Open Market Committee left unchanged its overnight borrowing rate in a range between 4.25%-4.5%. The decision followed three straight cuts since September 2024 worth a full percentage point and marked the first Fed meeting since frequent Fed critic Donald Trump assumed the presidency last week and almost immediately made known his intentions that he wants the central bank to cut rates. The post-meeting statement dropped a few clues about the reasoning behind the decision to hold rates steady. It offered a somewhat more optimistic view on the labor market while losing a key reference from the December statement that inflation “has made progress toward” the Fed’s 2% inflation goal. Read More
Even a cooling Austin economy is plenty warm. That’s the upshot of a new report pegging recent economic growth in the city at its lowest point in nearly three years. Despite the notable slowdown, business activity in Austin is still expanding at a “healthy pace” and remains slightly above its long-term average, according to the report from the Federal Reserve Bank of Dallas. “You’d expect, after having very strong growth, that eventually you will see some deceleration” in Austin, Dallas Fed economist Christopher Slijk said. “So this isn’t really an indication of a downturn. All the signs continue to point toward a healthy economy.” The Dallas Fed’s main barometer for Austin, called the Austin business-cycle index, increased at an annualized pace of 6.3% in October — its lowest level since December 2016. The index’s long-term average growth rate is 6.2%, but it climbed 6.9% and 7.2%, respectively, in 2017 and 2018, and it topped 7.5% on an annualized basis in February this year. Read More
The economy slowed late last year but still turned in a solid performance as another burst of consumer spending was offset by a drop in business investment and stockpiling. The nation’s gross domestic product, the value of all goods and services produced in the U.S., expanded at a seasonally adjusted annual rate of 2.3% in the October-to-December period, the Commerce Department said Wednesday. That’s down from a 3.1% increase in the third quarter and an average 2.6% pace in the first nine months of the year. Economists surveyed by Bloomberg had forecast a 2.6% increase in output. Read More
With continued solid fundamentals, multifamily is the most preferred asset class for commercial real estate investors in 2025. For all the short-term negative effects brought on by rising interest rates and record levels of new supply, strong renter demand will drive improving occupancy and accelerating rent growth. This in turn will lead to increased multifamily investment activity. The average multifamily vacancy rate is expected to end 2025 at 4.9% and average annual rent growth at 2.6%. Developers will add more multifamily units to the U.S. housing market than in any period since the 1970s. Most of this new supply will be in the Sun Belt and Mountain regions, where some markets will grow their inventories by nearly 20% in just three years. However, many of these high-supply markets are now past their peak for deliveries, and occupancy rates have already begun recovering. This recovery will accelerate next year and markets with negative rent growth in 2024 are expected to turn positive in 2025 as completions slow considerably following the marked slowdown in construction starts. Read More
Hi there, I’m excited to share the latest insights from Glenn Mueller’s Real Estate Market Cycle Monitor for the third quarter of 2024. This report dives deep into the state of five major property types across 54 metropolitan statistical areas (MSAs) in the U.S., revealing how shifts in GDP, employment, and interest rates are impacting the real estate landscape. Core Insights: National Property Type Cycle Locations Mueller’s analysis shows where different property types (Office, Industrial, Apartment, Retail, and Hotel) currently stand in their respective cycles. Office Market Occupancy: Decreased by 0.2% this quarter and 0.6% year-over-year. Trends: Despite new completions, demand growth has slowed, and remote work is still impacting long-term occupancy. Industrial Market Occupancy: Down 0.3% this quarter and 1.4% year-over-year. Growth: New leasing is picking up, driven by companies like Amazon, but increased supply has led to a cyclical shift. Apartment Market Occupancy: Declined 0.1% in Q3, down 0.4% year-over-year. Supply: Expected to hit a 20-year high, with over 500,000 new units in 2024, particularly affecting the South and West markets. Retail Market Occupancy: Remained flat and close to historical peak levels. Trends: Strong retail sales and limited new supply have contributed to sustained demand, especially in retail strip centers. Hotel Market Occupancy: Down 0.2% in Q3, showing bifurcated demand with luxury and conference hotels performing better than economy-class hotels. RevPAR: Increased 0.4% for the quarter and 1.4% year-over-year. Chart: National Property Type Cycle Locations Apartment Market Cycle Analysis The apartment sector is facing unique challenges and opportunities as it navigates increasing supply and fluctuating demand. With over 500,000 new units expected by year-end, occupancy and rent trends vary widely by region. Mueller’s insights highlight current cycle positions and key influences in the apartment market. Chart: Apartment Market Cycle Analysis Credit: This information is sourced from the Real Estate Market Cycle Monitor – Third Quarter 2024 by Glenn Mueller, Professor Emeritus at Denver University and Director of Sharing Connexion.