Research & Market Insights

Austin, TX Medical Office Market Report Q2 2026

Austin’s medical office market continued to demonstrate stable fundamentals in Q2 2026, supported by consistent demand for outpatient care and physician services. Leasing activity remained healthy across both established medical districts and emerging healthcare corridors, helping the market maintain positive absorption. Rent growth moderated but remained positive, reflecting balanced market conditions and steady tenant demand. Existing properties also benefited from a limited supply of new competitive space, allowing well-located assets to maintain healthy occupancy. Investor interest remained resilient, with medical office continuing to stand out as one of the region’s more stable commercial asset classes. As Austin’s population continues to grow, the sector remains well positioned for sustained long-term performance. Key Findings Clinical Demand Remains Strong: Austin’s medical office sector continues to outperform the broader office market, supported by stable healthcare demand, strong occupancy, and resilient leasing activity across the metro. Expansion Moves Outward: Healthcare providers continue expanding into Austin’s fastest-growing suburbs, with Cedar Park, Round Rock, and Georgetown remaining focal points for new clinical space. Constrained Development Pipeline: Limited new construction is reducing future competitive supply, helping support healthy occupancy levels while creating favorable conditions for continued growth in asking NNN rents. Austin Medical Office Supply & Demand Dynamics Source: CoStar Group, Inc. Average asking rent reached $38.10 per SF in Q2 2026, continuing a trend of stable pricing across Austin’s medical office market. While rent growth has moderated, landlords have generally maintained pricing power due to consistent healthcare demand and healthy occupancy. Limited new development has also reduced competitive pressure, supporting gradual growth in asking NNN rents. Austin Medical Office Vacancy Source: CoStar Group, Inc. Vacancy measured 10.3% in Q2 2026, reflecting a healthy balance between tenant demand and available supply. Leasing activity remained steady throughout the quarter, allowing the market to continue absorbing available space. While vacancy may fluctuate as tenants relocate or expand, the limited pipeline of new development is helping prevent significant upward pressure. Austin Demographics Source: U.S. Bureau of Labor Statistics Unemployment Rate: 3.5% Current Population: 2,620,945 Households: 1,061,155 Median Household Income: $99,897 Austin Medical Office Construction Construction activity remained limited in Q2 2026, with 228,685 SF under construction and just 54,580 SF delivered during the quarter. Elevated construction costs and tighter financing conditions continue to restrain new development, keeping the pipeline below historical levels. The lack of significant new supply is helping existing properties maintain healthy occupancy while supporting stable market fundamentals. As a result, Austin’s medical office market remains well positioned for measured, long-term growth. SF Under Construction Source: CoStar Group, Inc. Sales Sales activity remained active in Q2 2026, with 29 transactions recorded at an average sale price of $291 per SF. Investor demand for Austin’s medical office sector remained steady, supported by the asset class’s resilient operating fundamentals and stable occupancy. Medical office continues to attract buyers seeking defensive investments, particularly as broader office market conditions remain challenged. Overall, transaction activity reflects continued confidence in the sector’s long-term performance and growth prospects. Austin Medical Office Cap Rate Source: CoStar Group, Inc. Significant Sales Q2 2026 | Source: CoStar Group, Inc. Address Year Built SF Sale Date 13341 W Highway 290 2023 8,952 6/23/2026 2500 W William Cannon Dr #103 2008 1,591 6/01/2026 4913 Moreland Dr 2022 4,153 5/19/2026 By the Numbers Q2 2026 | Source: CoStar Group, Inc. # of Sales: 29 Price Per SF: $291 Vacancy Rate: 10.3% Rent Growth (YOY): 1.4% Asking Rent Per SF: $39.43 SF Under Construction: 228,685 SF Delivered: 54,580 SF Absorbed: 87,513

Andrew Richmond

Senior Associate

7/17/26

Authenticity Isn’t Optional in a Relationship Business

One of the worst pieces of career advice young people receive is that they need to “sell themselves.” The problem isn’t the concept, it’s what most people do with it. Far too many people hear the words “sell yourself to me” and immediately create a version of themselves they believe everyone else wants to meet. They lower their voice. They force confidence they don’t possess. They memorize lines and suppress opinions. They become a collection of rehearsed mannerisms and borrowed phrases designed to project success rather than demonstrate competence. In other words, they put on a sales persona. That persona may carry them through a first meeting or an interview, but it rarely survives the second, the tenth, or the hundredth interaction. Eventually, the mask slips and those “relationships” reveal themselves as performance. Relationship businesses don’t reward people for appearing authentic. They reward people for actually being authentic. That distinction matters. There is no winning personality type The longer I’ve spent in sales and around successful producers, the more convinced I’ve become that there is no universal personality type that wins business. The analytical advisor wins because clients believe every recommendation has been carefully considered. The naturally outgoing personality wins because people feel energized in their presence. The calm, understated professional wins because they project stability when circumstances are uncertain. The intense competitor wins because clients believe nobody will outwork them. The storyteller wins because they make complexity feel manageable. The quiet listener wins because they make clients feel genuinely understood. None of these people succeed because they are the same. They succeed because they lean into who they are. Imitation rarely produces conviction Too often, young professionals think they have to become someone else to succeed. They watch the highest producer in the office and begin copying vocabulary, gestures, cadence, even personality traits. It almost never works. Not because those habits are bad, but because imitation rarely produces conviction. Clients are remarkably perceptive. They may not identify exactly what feels off, but they can sense when someone is presenting rather than communicating. They can tell when answers sound memorized instead of believed, when confidence is manufactured rather than earned. Trust is built in authenticity. And trust, not charisma, is ultimately what clients are buying. Authenticity requires self-awareness Ironically, authenticity is often mistaken for simply “being yourself.” That advice, while directionally correct, is incomplete. Authenticity is not saying whatever comes into your head. It is not refusing feedback. It is not using honesty as an excuse for a lack of professionalism or emotional intelligence. Real authenticity requires self-awareness. It requires understanding your own strengths and weaknesses, a clear sense of how other people perceive you, and enough confidence that your words consistently align with your beliefs and your actions. Self-awareness creates advisory credibility because clients can quickly identify someone who understands their own limitations. I’ve trusted countless professionals who have looked me in the eye and said, “I don’t know, but I’ll find out.” I’ve immediately distrusted others who clearly didn’t know but desperately wanted me to think they did. The first demonstrated confidence. The second demonstrated insecurity. Ironically, vulnerability, handled well, often projects more authority than false certainty could. Focus on the problem, not the impression The strongest advisors I’ve worked with are not trying to impress people. They are trying to solve problems. Their attention remains external rather than internal, and that’s a subtle but enormous distinction. When you’re worried about how you sound, you’re thinking about yourself. When you’re focused on helping someone else make a better decision, you’re thinking about them. Clients notice. Perhaps the greatest misconception in modern sales is the belief that people are persuaded primarily by charisma. Of course, communication skills matter. Presence matters. Confidence matters. But clients do not need another polished personality. They need conviction. They need someone willing to push back against things that aren’t in their best interest and against unrealistic expectations. They need someone willing to deliver uncomfortable truths instead of convenient ones. Conviction cannot be manufactured because it comes from belief, and belief becomes visible. People can feel it in your tone, your pace, your willingness to pause before answering, and your comfort saying something unpopular when you know it’s right. The most persuasive professionals I’ve ever met were rarely the loudest people in the room, they were simply the people who genuinely believed what they were saying. Over enough years and enough interactions, authenticity compounds in exactly the same way trust compounds. People know what to expect from you. Your advice, your character, your motives become predictable. And in a relationship business, predictability is another word for trust. The remarkable thing is that authenticity isn’t just better for your clients, it’s better for you. Pretending to be someone else is exhausting. Keeping track of the version of yourself each audience is supposed to see is exhausting. Constantly filtering every interaction through the lens of perception instead of principle is exhausting. There is an incredible amount of freedom in simply becoming exceptionally good at being yourself. Not the unpolished or complacent version, but the self-aware, continually improving authentic version. In the long run, people aren’t looking for a salesperson. They’re looking for someone they believe. And those are rarely the same person.

Cory Rosenthal

Executive Managing Director & National Director, Multifamily

6/23/26

Q4 2025 Shopping Center REIT Earnings Report

Macroeconomic & Market Backdrop The U.S. retail real estate market turned a definitive corner in the fourth quarter of 2025, validated by multi-year volume highs and robust REIT earnings. Performance proved more resilient than feared, fueled by sustained equity and home price appreciation among higher-income households. While lower-income consumers leaned increasingly on borrowing, this divergence created a pronounced K-shaped economy. The resulting bifurcation has disproportionately benefited necessity-based and service-driven formats, providing a direct tailwind for grocery-anchored, open-air, and net lease REIT strategies. National Retail Fundamentals At the market level, the structural dynamics underpinning retail real estate remain as favorable as they have been in years. CoStar Group, Inc. reports national vacancy of just 4.4% as of Q1 2026, sitting significantly below the 5.3% historical average and modestly above the 4.0% cycle through hit in late 2023. Leasing momentum reached a three-year peak in Q4 2025 following three quarters of consistent growth. This surge drove the median time to lease to a record low 7.2 months, though high-quality space often moved significantly faster. Critically, store closure announcements fell 45% in 2025, representing a decisive improvement in retailer health following bankruptcy-heavy disruptions in 2024. More than half of leases signed in 2025 applied to spaces vacant for under 10 months, and nearly onethird were absorbed within five months, underscoring the depth and speed of backfill demand. Service-based tenants, fitness, food service, personal care, and wellness, outpaced goods-oriented retailers in 2025 leasing for the first time ever. This milestone confirms a long-predicted structural shift toward necessity and experiential retail formats. Supply constraints remain the sector’s most potent fundamental tailwind. National under-construction volume sits near a historic floor of 50 million square feet, as financing challenges and higher terminal cap rates continue to suppress new development. Since 2020, developers have removed or repurposed more than 150 million square feet of obsolete inventory, further tightening the effective supply picture. Modern, well-located space remains at a premium. With 40% of the market rated two stars or lower and only 25% of inventory built this century, the lack of high-quality options is a primary driver of demand. Robust rent spreads across the sector highlight this scarcity, as seen in Brixmor’s 39% and Regency’s 25% new lease gains. These figures underscore the wide gap between legacy and current market rates, ensuring a sustained runway for mark-to-market growth. National asking rent growth moderated to approximately 2.0% year-over-year as of Q1 2026, a normalization from the rapid post-pandemic gains, though spreads on longer-term leases remain near multi-decade highs. Sun Belt markets such as Dallas, Austin, Atlanta, Orlando, Charlotte, and Nashville continue to outperform, while select coastal and slower-growth markets lag. Investment sales volume rose 14% in 2025 to $73 billion, the second consecutive year of improvement, as bid-ask spreads narrowed and cap rate expansion largely stabilized after peaking around 7.3% nationally. Open-Air & Shopping Center REIT Performance Within the open-air and shopping center sub-sector, the operating metrics on display entering 2026 are extraordinary by any historical measure. Regency Centers reported its strongest operational year as a public company, led by 5.3% same-property NOI growth and a record $70 million in ABR leasing volume. Small-shop occupancy reached an all-time high of 94.2%, while the company delivered $160 million in developments at a 9% blended return. With $300 million in 2025 starts and a $600 million active pipeline, Regency’s development platform is arguably the most differentiated in the open-air sector. The company’s three-year goal of $1 billion in new starts targets development yields above 7%, representing a significant 150+ basis point spread to market cap rates. Brixmor capped 2025 with record leasing of $70 million ABR and a historic 100-basis-point sequential occupancy gain to 95.1%. Simultaneously, maintenance CapEx hit its lowest level since 2016, signaling genuine portfolio improvement rather than deferred investment. Early initiatives under new CEO Brian Finnegan, specifically the use of AI for tenant health monitoring and prospecting, suggest emerging operational efficiencies that should compound over time. Kimco Realty delivered a standout 6.7% NAREIT FFO per share growth in 2025, among the strongest in the shopping center sector. This performance is backed by an elite balance sheet, with an A3 rating from Moody’s, placing Kimco among just 13 REITs with A-level ratings across all three major agencies. Portfolio occupancy reached an all-time high of 96.4%, with a record $73 million signed-but-not-open pipeline representing 390 basis points of embedded future rent. Kimco’s 2026 strategy pivots toward capital recycling, targeting $300-$500 million in dispositions of flat ground leases and lower-growth assets. This capital will be redeployed into grocery-anchored centers, capturing roughly 100 basis points of incremental yield and a 200-basis-point increase in NOI CAGR. This accretive portfolio pruning effectively improves longterm growth rates without the need for dilutive new equity. Phillips Edison led its peer group with 97.3% portfolio occupancy, driving 7.2% growth in NAREIT FFO per share in 2025. This performance underscores the strength of its specialized grocery-anchored, necessity-based strategy. PECO’s “Everyday Retail” initiative targeting unanchored convenience-oriented centers is an emerging growth supplement that has already validated its thesis, posting 45%+ new leasing spreads and occupancy improvement from 91.6% to 94.7% since acquisition across its pilot portfolio. Federal Realty continues to distinguish itself through its high-quality mixed-use platform, delivering 4.3% full-year FFO growth in 2025. For 2026, core FFO growth guidance sits near 6%, though excluding a 170-180 basis-point headwind from refinancing legacy 1.25% bonds, the midpoint trajectory is closer to a sector-leading 7.5%. Its capital recycling strategy of selling peripheral residential assets at sub-5% cap rates and redeploying the proceeds into dominant retail acquisitions at 7%+ yields is a textbook execution of value-creating capital allocation. Acadia Realty’s differentiated street retail strategy remains concentrated on high-demand urban corridors in SoHo, Williamsburg, Georgetown, and Dallas’s Henderson Avenue. These high-barrier markets produced a fourth consecutive year of same property NOI growth exceeding 5%, with rent spreads consistently above 50%. This performance highlights the deep valuation gap in Acadia’s urban corridors, where legacy leases continue to reset to significantly higher market rates. Net Lease REIT Performance The net lease sub-sector tells an equally constructive story, though differentiated by scale, credit, and the pace of external growth. Agree Realty’s A- credit rating from Fitch places it among an elite group of just 13 publicly listed U.S. REITs at that level. This rating provides a material advantage by lowering the company’s cost of capital and expanding its institutional investor base, enabling it to compete more effectively for sale-leaseback transactions. With $716 million of unsettled forward equity and no material debt maturities until 2028, Agree enters 2026 with a balance sheet capable of executing $1.4-$1.6 billion in investment activity. Combined with a two-year stacked AFFO-per-share growth of roughly 10%, this capital profile offers one of the most consistent and transparent earnings trajectories in the net-lease sector. NETSTREIT remains the high-growth story in the sub-sector, closing 2025 with a record $657 million in gross investments at a 7.5% blended yield. This expansion included 31 new tenants and culminated in Fitch assigning a first-time investment-grade rating (BBB-) in December. With leverage at just 3.8x, the company maintains substantial dry powder to exceed its 5% AFFO growth guidance for 2026 as its cost of capital improves. Realty Income continues to execute at a massive scale, raising its 2025 investment guidance to approximately $5.5 billion. A significant 72% of Q3 volume was directed toward European markets at 8% blended yields, benefiting from euro-denominated debt priced roughly 100 basis points inside U.S. dollar equivalents. Beyond traditional acquisitions, the launch of its perpetual-life private capital fund marks a strategic evolution, positioning the company as a multi-channel institutional vehicle rather than a traditional public REIT. Kite Realty is aggressively leaning into capital recycling, announcing $500 million in power center dispositions to fund buybacks, debt reduction, and special dividends. This pivot reflects management’s conviction that its public market valuation significantly lags the private market worth of its repositioned portfolio. The long-term objective is a higher-growth mix of lifestyle and mixed-use assets that eventually commands a narrower implied cap rate. Site Centers/CurbLine’s spin represents the most conceptually novel strategy in the group. As a first-of-its-kind convenience retail REIT, it focuses on small-format curb-line assets in high-income suburban markets and launched with zero debt and $600 million in cash. This liquidity allows it to scale rapidly into a fragmented, 950+ million-square-foot addressable market. With trailing 12-month new leasing spreads of nearly 50% and one of the most capital-efficient business models in the REIT universe, CurbLine is a vehicle worth watching closely. Risks, Outlook & Synthesis While the operating environment entering 2026 is broadly favorable, several meaningful risks warrant attention. CoStar Group, Inc. ‘s base case projects vacancies to rise minimally in early 2026 before drifting lower into 2027, with net absorption of 16 million square feet for the full year. However, this forecast remains sensitive to a weakening labor market, renewed retailer distress, and tariff-related pressure on household budgets. Tier retailers facing debt refinancing pressure in late 2026 and early 2027 could accelerate bankruptcy activity, and a softening of wage growth below the pace of inflation would disproportionately affect the lower-income consumer base that supports value and discount-oriented tenants. At the REIT level, the near-term common headwind across the group is the drag from refinancing legacy low-coupon debt issued in 2020-2022, which is suppressing FFO growth for Kimco, Federal Realty, and Realty Income even as their underlying operating performance is excellent. The synthesis of both CoStar Group, Inc. national data and company earnings is one of durable structural strength overlaid with tactical caution. The supply picture, with construction near multi-cycle lows, demolitions persistently running, and quality space increasingly scarce, is likely to remain supportive of landlord pricing power well into the back half of the decade. Demand is structurally shifting toward service, necessity, and value formats, precisely where the majority of this coverage universe is concentrated. Balance sheets are generally in excellent shape, with multiple companies holding A-level credit ratings, minimal near-term maturities, and significant liquidity. The signed-not-open (SNO) pipelines across Kimco, Regency, Brixmor, and Acadia collectively represent hundreds of millions of dollars in future rent. This backlog will mechanically convert into revenue over the coming quarters, providing a level of forward earnings visibility that is rare in the real estate sector. Against this backdrop, and with transaction markets recovering ($73 billion in 2025 sales volume, up 14% year-over-year), the retail REIT sector is better positioned today than at virtually any point in the post-financial-crisis era.

Austin, TX Multifamily Market Report Q1 2026

Austin’s multifamily market remained soft in Q1 2026, with asking rents averaging $1,500 per unit. Rent growth declined by 4.7%, reflecting continued pressure from elevated vacancy and competition across newly delivered communities. Vacancy stood at 13.5%, signaling that the market remains oversupplied relative to current demand conditions. Despite this, absorption totaled 3,800 units during the quarter, indicating that renters are still moving into the market at a meaningful pace. Importantly, absorption exceeded the 2,000 units delivered during the quarter, which suggests that demand is beginning to work through some of the recent supply overhang. However, the high vacancy rate indicates that operators are likely continuing to use concessions, flexible lease terms, and pricing adjustments to maintain leasing velocity. Demand remains strongest in well-located assets near major employment nodes, retail amenities, and transportation corridors. Key Findings Austin multifamily fundamentals remained pressured in Q1 2026 as elevated vacancy and negative rent growth reflected continued supply-side challenges. Leasing activity has shown resilience, with demand keeping pace and beginning to make progress against recent deliveries. A sizable construction pipeline is expected to sustain competitive pressure, delaying a full recovery in occupancy and rent growth. Austin Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.7% Current Population: 2,634,190 Households: 1,101,663 Median Household Income: $103,299 Austin National Accolades Source: Opportunity Austin 3rd Highest Labor Force Participation 4th Highest Educational Attainment 7th in Startup Density Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Austin Multifamily Construction Construction activity remained elevated in Q1 2026, with 14,600 units under construction across the Austin market. This pipeline continues to represent one of the most important headwinds facing near-term multifamily performance. Deliveries totaled 2,000 units during the quarter, adding to an already competitive leasing environment. While quarterly absorption exceeded deliveries, the broader volume of units under construction suggests additional supply pressure will continue through the near term. New communities are likely to compete aggressively for renters, particularly in submarkets with concentrated development activity. This may keep concessions elevated and limit landlords’ ability to increase rents. Properties delivered during the current cycle may face a longer stabilization period than in prior years due to elevated vacancy across the market. Over time, slowing starts should help the market rebalance, but the existing pipeline remains large enough to weigh on fundamentals in 2026. Units Construction Starts Source: CoStar Group, Inc. Units Under Construction Source: CoStar Group, Inc. Austin Multifamily Sales Investment activity remained cautious in Q1 2026 as investors continued to evaluate pricing against softer operating fundamentals and higher capital costs. The market cap rate stood at 5.7%, reflecting a higher-yield environment than during the peak of the prior cycle. Buyers are likely placing greater emphasis on stabilized cash f low, basis, submarket positioning, and the ability to achieve long-term rent recovery. Capital market conditions are also influencing transaction volume, as financing costs and lender scrutiny remain important constraints. Despite these challenges, Austin continues to attract investor interest, owing to its long-term demographic growth, employment base, and institutional market profile. Investors with longer hold periods may view current softness as a potential entry point, particularly for well-located assets trading below prior pricing expectations. Overall, sales activity is likely to remain measured until rent growth stabilizes, vacancy improves, and buyer-seller pricing expectations narrow. Cap Rate Source: CoStar Group, Inc. Buyer Composition Source: Real Capital Analytics By the Numbers Q1 2026 | Source: CoStar Group, Inc. Cap Rate: 5.7% Vacancy Rate: 13.5% Rent Growth: (4.7%) Asking Rent Per Unit: $1.5K Units Under Construction: 14.6K Units Delivered: 2K Units Absorbed: 3.8K

Richard Waterhouse

Senior Associate

5/8/26

Austin, TX Industrial Market Report Q1 2026

Vacancy reached roughly 14.5% in Q1, a more than 20-year high, as the market continues to absorb a surge of new supply. Inventory growth since 2022 has been driven by large-scale logistics development, with pressures most evident in big-box space where speculative deliveries have outpaced demand and extended lease-up timelines. Tenant decision-making has become more cautious amid policy uncertainty, slowing leasing activity and pushing volumes to multi-year lows. While demand remains positive, absorption has moderated, particularly in non-owner-occupied space. Rising availability has placed downward pressure on rents, with overall asking rates declining and logistics space averaging roughly $12.60–$12.70 per square foot. Key Findings Elevated vacancy continues to define market conditions as supply outpaces demand, particularly in large-format logistics space. Vacancy is 14.5%, with over 15 million square feet underway. Leasing has slowed amid economic uncertainty, though demand remains for modern, high-quality assets. Absorption totaled roughly 678,000 square feet. Rent growth has turned negative as landlords compete for tenants. Asking rents are down about 1.1% year over year to roughly $14.17 per square foot. Austin Industrial Supply & Demand Dynamics Source: CoStar Group, Inc. Austin Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.7% Current Population: 2,633,441 Households: 1, 101, 270 Median Household Income: $103,270 Austin’s population stands near 2.6 million and continues to expand at a pace that ranks among the strongest nationally, even as growth has eased from earlier highs. The metro added roughly 43,000 residents over the past year, supported by steady domestic inflows and international migration. Much of this expansion is occurring in suburban submarkets, with Williamson County capturing a large share of new residents due to its relative affordability, available land, and ongoing infrastructure development. Top Tenant Leases Compal USA Technology Digital Brands Group, Inc. Firefly Aerospace Inc Valstad Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Austin Industrial Construction Development activity continues to concentrate in high-growth suburban submarkets, led by Round Rock and Southeast Austin. Round Rock remains anchored by Samsung’s 2.8 million square foot semiconductor facility in Taylor, which is expected to support long-term demand and attract a network of suppliers and related users. In contrast, Southeast Austin faces more pronounced near-term lease-up risk, with a significant share of space under construction remaining unleased and preleasing levels notably below historical norms, reinforcing near-term supply-side pressure. SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc. Austin Industrial Sales Sales activity has slowed alongside softer fundamentals and higher borrowing costs, placing downward pressure on pricing and increasing investor selectivity. Despite this, Austin remains an active industrial market relative to its size, supported by long-term growth expectations. Activity has concentrated in newer assets, with investors targeting modern product and selectively taking on lease-up risk at adjusted pricing. Stabilized assets in high-growth suburban submarkets continue to command premiums, while vacant or partially leased properties trade at a discount. Institutional capital has re-emerged as a key driver, with sentiment remaining constructive despite near-term volatility. Austin Industrial Sales Volume Source: CoStar Group, Inc. By the Numbers Q4 2025 | Source: CoStar Group, Inc. Sales Volume: $3.8M Price Per SF: $173 Cap Rate: 7.6% Vacancy Rate: 14.5% Rent Growth: -1.1% Asking Rent Per SF: $14.17 SF Under Construction: 15.3M SF Delivered: 2.4M SF Absorbed: 678K

Waco, TX Multifamily Market Report Q1 2026

Waco’s multifamily market in Q1 2026 continued to demonstrate relative stability compared to larger Texas metros, benefiting from its smaller scale, diverse renter base, and lower cost of living. While the market has experienced some softening due to elevated supply levels delivered over the past several years, fundamentals remain more balanced than in major markets like Austin or Dallas, where sharper rent declines have occurred. Demand has remained steady, particularly in higher-quality assets, helping to offset the impact of new supply. At the same time, broader capital market conditions, particularly elevated interest rates and tighter lending standards, have weighed on transaction activity and investor sentiment. Despite these headwinds, pricing has remained relatively stable, reflecting a degree of confidence in Waco’s long-term fundamentals. Overall, the market is transitioning into a more normalized phase, characterized by slower growth, stabilized occupancy, and more disciplined investment activity. Highlights The market recorded a 9.1% vacancy rate, reflecting moderate softening but still outperforming larger Texas metros. Asking rents averaged $1,240/unit, with 0.6% year-over-year growth, indicating stable but muted rent performance. Investment activity remains measured, with cap rates around 7.1% and pricing in the $65,000-$80,000/unit range, as capital markets remain cautious. Waco Demographics Source: CoStar Group, Inc. Unemployment Rate: 4.2% Current Population: 309,692 Households: 117,825 Median Household Income: $69,929 Waco Multifamily Rents, Vacancy, & Construction Rents Asking rents averaged $1,240 per unit, with 0.6% year-over-year growth, signaling a period of stabilization following stronger gains in earlier cycles. Rent performance has remained positive despite elevated vacancy, supported by relatively limited new construction in lower-tier assets and steady renter demand. More affordable segments have shown particular resilience, helping to anchor overall market performance. Looking ahead, rent growth is expected to remain modest as supply-demand dynamics continue to normalize. Market Asking Rent Per Unit Source: CoStar Group, Inc. Vacancy Vacancy in Waco reached 9.1% in Q1 2026, reflecting an increase from prior lows but still remaining competitive within the region. The rise in vacancy is largely attributable to recent supply additions over the past few years, though absorption, particularly in higher-end product, has helped prevent more significant softening. Notably, vacancy spreads between asset classes have narrowed, indicating more balanced demand across quality tiers. While vacancy remains elevated in the near term, it is expected to stabilize as new supply is absorbed. Vacancy Rate Source: CoStar Group, Inc. Construction Development activity remains active but measured, with approximately 1,100 units currently under construction and no new deliveries reported in the latest quarter. This represents a meaningful pipeline relative to the market’s size and suggests continued pressure on vacancy in the near term. However, the pace of new supply appears to be moderating compared to prior years, which could help rebalance fundamentals moving forward. Additionally, most of the pipeline is concentrated in higher-quality assets, which may continue to shift the market’s overall composition. Units Under Construction Source: CoStar Group, Inc. Waco Multifamily Sales Multifamily sales activity in Waco has slowed considerably, with fewer transactions occurring over the past year as investors remain cautious in the current interest rate environment. Despite this slowdown, the market has maintained relatively stable pricing fundamentals. Cap rates have expanded to approximately 7.1%, aligning with broader repricing trends across the country, while average pricing has held near $65,000 to $80,000 per unit. This stability suggests that while buyers are underwriting more conservatively, sellers have not yet significantly discounted assets. Going forward, transaction activity is likely to remain muted until there is greater clarity on interest rates and rent growth prospects, though Waco’s relative affordability and steady fundamentals may position it well for renewed investor interest as market conditions improve. Waco Multifamily Cap Rate 4-5 Star | Source: CoStar Group, Inc. By the Numbers Q1 2026 | Source: Matthews™ Research, CoStar Group, Inc. Sales Volume: – Cap Rate: 7.1% Price Per Unit: $65K-$80k Vacancy Rate: 9.1% Rent Growth (YOY): 0.6% Asking Rent Per Unit: $1,240 Units Under Construction: 1.1K Units Delivered: – Units Absorbed: –

Buddy Gaston

Associate

5/1/26

Austin, TX Medical Office Market Report Q1 2026

Austin’s Medical Office Market continued to show signs of stabilization in Q1 2026 as the sector moved further away from the supply-driven pressure of prior years. While vacancy remained elevated at 12.2%, the market still posted 1.7% year-over-year rent growth, indicating that fundamentals are beginning to improve. At the same time, investment activity remained active with 34 sales recorded during the quarter, while the development pipeline stayed well below the levels seen throughout 2023 and 2024. Taken together, these trends suggest the market is gradually regaining balance as supply pressures ease and overall performance becomes more stable. This continued moderation in new supply should help support healthier leasing conditions and more sustained market improvement in the quarters ahead. Key Findings Stabilizing Market Conditions: Austin’s medical office market showed signs of improving balance in Q1 2026, with 12.2% vacancy, 1.7% year-over-year rent growth, and a lower construction pipeline supporting more stable fundamentals. Reduced Development Pipeline: Construction activity totaled 131,005 SF, remaining well below the much higher levels seen throughout 2023 and 2024, easing future supply pressure. Stable Investment Activity: The market recorded 34 sales at an average 6.0% cap rate, reflecting continued investor interest and relatively stable pricing despite still-elevated vacancy levels. Houston Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.6% Households: 1,094,265 Current Population: 2,616,899 Median Household Income: $103,006 Rents Average asking rent reached $38.26 per SF in Q1 2026, with 1.7% year-over-year growth, highlights continued rent increases even as the market worked through elevated vacancy. That growth suggests landlord pricing has remained relatively stable despite broader occupancy pressure, and in a market recovering from heavy deliveries, even modest gains are still meaningful. With construction activity now well below prior peaks, Austin’s medical office market is better positioned to support steadier, healthier, more durable, and more sustainable rent growth moving forward. Market Asking Rent Per SF Source: CoStar Group, Inc. Vacancy Vacancy reached 12.2% in Q1 2026, remaining elevated as the market continues to absorb new supply delivered over the past several years. Leasing activity remained modest, with 852 SF of positive absorption recorded during the quarter, indicating that demand is still present but not yet strong enough to rapidly compress vacancy. However, with construction activity slowing considerably, the pace of new deliveries is no longer putting additional upward pressure on vacancy. Vacancy Rate Source: CoStar Group, Inc. Construction Construction activity totaled 131,005 SF in Q1 2026, reflecting a slight increase from the prior quarter but remaining significantly below historical levels. The development pipeline has declined sharply from the 300K-700K+ SF range seen throughout 2022-2024, signaling a clear pullback in new projects. This sustained slowdown in construction reduces future supply pressure and allows existing space more time to lease. SF Under Construction Source: CoStar Group, Inc. Sales Sales activity remained steady in Q1 2026, with 34 transactions recorded and an average 6.0% cap rate, indicating continued investor interest in Austin’s medical office sector. Despite elevated vacancy, pricing has held relatively stable, reflecting confidence in the market’s long-term fundamentals. Deal volume at this level suggests buyers remain active and willing to transact, particularly as improving supply conditions create a more favorable outlook. Overall, the investment market continues to demonstrate resilience and stability heading into the remainder of the year. Cap Rate Source: CoStar Group, Inc. By the Numbers Q1 2026 | Source: CoStar Group, Inc. # of Sales: 34 Sales Growth (QOQ): 25.0% Price Per SF: $299 Vacancy Rate: 12.2% Rent Growth: 1.7% Asking Rent Per SF: $38.26 SF Under Construction: 131K SF Delivered: – SF Absorbed: 852

Andrew Richmond

Senior Associate

4/14/26

Multifamily Supply Paradox: When Oversupply Meets Undersupply

The U.S. multifamily market finds itself at an inflection point. On a national level, the country remains structurally undersupplied relative to long-term housing demand. Many institutions report that the U.S. still faces a deficit of three to five million housing units, especially for renters earning below median income. Yet, at the same time, many major multifamily metros are grappling with elevated vacancy, slowing rent growth, and historically aggressive concessions due to over building. This contradiction has raised the question of whether today’s softness represents a fundamental shift in renter demand or merely a temporary imbalance in the supply cycle. The core paradox shaping today’s market is the coexistence of a national housing shortage with localized oversupply in a handful of major metros. Between 2023 and 2025, high-growth markets experienced an unprecedented surge in multifamily deliveries. Developers responded to the postpandemic signals, rapid household formation, record-low vacancy, and double-digit rent growth, by launching the largest construction pipeline in decades. However, this supply was delivered in a highly concentrated manner. Rather than evenly addressing the national housing shortfall, new construction clustered in select metros and largely targeted the Class A segment. While population growth and job creation in these markets remained healthy, they were not sufficient to absorb the volume of new units immediately upon delivery. The result has been a lag between supply delivery and demand absorption that has weighed on nearterm fundamentals. The current imbalance is most acute in a handful of large, high-supply Sunbelt markets where new deliveries have clearly outpaced near-term demand. Austin stands out as the most severe case, with falling occupancy, sharp rent resets, and elevated concessions reflecting a prolonged period of capital overshooting fundamentals. DFW and Atlanta follow in scale, where massive delivery volumes have overwhelmed absorption despite long-term population and employment growth, limiting pricing power and keeping vacancy elevated. Phoenix remains the classic supply-stress market, as post-pandemic development materially exceeded household formation, forcing operators to prioritize occupancy over rent. Denver, while smaller, is increasingly constrained by flat employment growth, removing a key demand backstop and prolonging oversupply conditions. While these markets retain strong long-term growth narratives, the data clearly shows that near-term fundamentals remain under pressure, with normalization dependent on sustained absorption and a meaningful slowdown in new supply, despite positive employment gains. The True State of Fundamentals Vacancy rates across many supply-heavy markets have risen by roughly 100 basis points or more over the past 12 to 18 months, with stabilized vacancy generally hovering in the mid-to-high 7% range. In 2026, vacancy is expected to tighten an additional 30 to 50 basis points, driven primarily by stabilized assets rather than newly delivered properties still in lease-up. Once concessions, bad debt and non-paying tenants are factored in, economic vacancy is often materially higher. Class A properties, in particular, face extended lease-up timelines, and aggressive incentives are often more economical than allowing physical vacancy to spike. Concessions have become a defining feature of the current leasing environment. Across many Sunbelt markets, operators are offering six to eight weeks of free rent not only on new leases but increasingly on renewals as well. What was once a tactical lease-up strategy has evolved into a widespread tool for occupancy preservation. Rising delinquency and missed payments also reflect nearterm affordability stress rather than a collapse in renter demand, underscoring the cyclical nature of the current environment and reflecting the late-cycle dynamics of oversupply. National rent data reinforces this interpretation. According to CoStar Group, U.S. rents declined month-over-month in November 2025 at the steepest pace in more than 15 years (0.18%), extending a run of flatto-negative monthly growth. While headlines focus on the weakness, these metrics are consistent with a market digesting temporary supply, rather than entering a prolonged downturn. Rent growth is expected to fall in the 2% to 3% range by year-end 2026. The 2026 Inflection Point Elevated construction costs, limited availability of construction financing, and materially tighter underwriting standards since 2023 have caused new starts to fall dramatically. Additionally, permitting activity across most major metros points to an increasingly thin pipeline, with new deliveries set to decline meaningfully in 2026. Markets that overshot the most, such as Austin, Phoenix, Nashville, Dallas, and Denver, are likely to experience a longer absorption runway. In contrast, much of the Midwest and parts of the Northeast, where new supply has been more measured, appear positioned to stabilize sooner. Importantly, any increase in construction activity sparked by improving capital market conditions will begin from a historically low baseline, limiting the risk of another supply surge before 2027 at the earliest. Demand Signals to Watch As supply pressure eases, the timing of recovery will hinge on three key demand indicators that historically precede tightening fundamentals: Population Growth, particularly amoung prime renting age cohorts. Job Growth, with emphasis on professional and service sector. Net in-migration Despite near-term softness, migration into many Southeast markets remains positive, reinforcing long-term demand durability even as rent growth pauses. Once equilibrium is reached, rent growth is expected to resume at a modest but sustainable pace, while concessions gradually burn off as occupancy normalizes. Risks That Could Delay the Timeline While the outlook is constructive, several risks could push the absorption-equilibrium timeline further out. Prolonged weakness in consumer balance sheets, rising delinquency, or increased renter “doubling up” could slow household formation. Affordability pressures have pushed some renters to delay household formation, take on roommates, or temporarily move back in with family. Job losses or slower hiring in supply-heavy markets would also extend lease-up periods. That said, these risks remain cyclical rather than structural and are unlikely to derail the long-term demand backdrop. A Healthier Cost of Capital Environment Capital markets conditions are quietly improving. Both short- and long-term interest rates are expected to drift lower through 2026, settling into a new equilibrium in the 4%-5% range rather than returning to the ultra-low rates of the prior decade. This shift should unlock pent-up transaction volume, narrow bid-ask spreads, and drive refinance activity for assets with 2025-2027 maturities. Many owner decisions today remain maturitydriven. Borrowers without near-term loan expirations continue to defer transactions, contributing to suppressed sales volume. As financing costs ease and valuation expectations stabilize, this logjam is likely to break. Transaction activity is expected to increase meaningfully in 2026, supported by improving lender sentiment and expanded agency allocations. Lower short-term rates will also reduce the cost of floating-rate construction loans, encouraging selective new starts. Importantly, any new development will deliver into a materially tighter market, rather than exacerbating oversupply. Implications for Investors, Developers and Operators For investors, the current window offers an opportunity to acquire assets ahead of meaningful fundamental improvements. As bidask spreads narrow, transaction velocity should increase, particularly for well-located assets with near-term upside. Developers face a narrower but more rational window beginning in late 2026 and 2027. Projects initiated during this period are more likely to deliver into a balanced market with healthier rent growth. Operators stand to benefit from stabilizing occupancy, declining concessions, and the ability to push rents modestly. A more predictable expense environment and improved access to capital should support NOI growth and balance sheet repair. Bottom Line: The multifamily market is recalibrating. As supply pressure fades and capital markets heal, 2026 is shaping up to a critical inflection point that resets the sector for its next cycle of sustainable growth.

David Treadwell

First Vice President

3/17/26

Top 10 Multifamily Markets in 2026

New York, NY By the Numbers 2025 | Source: Matthews™ Research Sales Volume: $8.3B Average Price Per Unit: $404.5K Cap Rate: 5.3% Vacancy Rate: 3.0% Annual Rent Growth: 7.0% Annual Net Absorption: 14,580 Units New York’s multifamily sector remains one of the tightest and most resilient leasing markets in the country, supported by strong fundamentals and sustained investor interest. Manhattan continues to assert itself as the premium rental market with effective rents surpassing pre-pandemic highs, while Brooklyn has evolved into a primary economic hub, attracting a younger, renter base that’s driving competition across the borough. Year-to-date total sales volume in New York has reached $8.3 billion, paired with an average price per units of $404, 500, reflecting continued confidence in the market despite elevated borrowing costs. Performance remains competitive with a 5.3% cap rate, underscoring New York’s status as a high-barrier metro. While investors have retreated from Manhattan’s most expensive core submarkets, capital is aggressively targeting high-yield opportunities in areas like Harlem and the Financial District, where redevelopment potential and discounted pricing remain compelling. The borough’s cap rates have stabilized between 6.0% and 6.3%, with per-unit pricing rising for six consecutive quarters, signaling the early stages of recovery. Brooklyn has also seen sales accelerate, with institutions accounting for a growing share of activity. Cap rates have compressed modestly, now aligning with Manhattan in the low 6%- range, while pricing remains elevated for waterfront assets. Operating conditions continue to outperform national benchmarks. The market’s 3.0% vacancy rate is well below the U.S. average, driven by structural undersupply, muted construction, and stable in-migration. Manhattan’s limited construction is hampered by construction costs and regulatory hurdles, causing a sharp drop in building filings. This is keeping the borough’s vacancy rate low, and is expected to fall to roughly 2.4% by 2026. Brooklyn, despite experiencing the highest level of completions in more than a decade, maintains one of the lowest vacancy rates nationally at 2%, supported by demographic tailwinds and demand for larger floor plans. These dynamics have propelled strong rent momentum market wide. Annual growth sits at 7.0%, with Manhattan expected to post gains near 6.8% by year-end 2025 and Brooklyn recording 6.7% growth alongside a cumulative 44% rent increase since 2019. Demand remains healthy across all boroughs, evidenced by 14,850 units of annual net absorption, supported by a strengthening labor market. New York City is projected to add 38,000 jobs in 2025, and in-person office attendance (particularly in Manhattan) has surged to 95% of its 2019 levels. The workers returning to office is amplifying demand for centrally located, premium rental housing. Looking ahead to 2026, slow entitlement processes, ongoing supply constraints, and durable demand drivers will continue to support low vacancy and positive rent growth. Manhattan’s long-term development opportunities increasingly lie in conversions, value-add repositioning and niche submarket plays, while Brooklyn’s most compelling strategies focus on delivering larger, family-sized units through reconfigurations of existing small stock. The recent election of Mayor Zohran Mamdani introduces increased attention around affordability and tenant protection policies, including the discussion of a rent freeze for stabilized units. While these proposals may influence sentiment at the margins, the market’s global prominence, economic depth continue to anchor its long-term performance. Maintaining quality of life is Manhattan is a demand driver that has been top of mind for developers and investors alike. Police Commissioner Jessica Tisch has agreed to remain in her role, and under her leadership the NYPD recently reported the fewest shooting incidents for the month of October since safety and private sector investment will be key in ensuring New York City’s prosperity for the years to come.” -Brock Emmetsberger, Executive Vice President Brooklyn, Manhattan, & U.S. Rent Growth Source: Matthews™ Research, CoStar Group, Inc. New York Vacancies Remain Well Below U.S. Norms Source: Matthews™ Research, CoStar Group, Inc. Bay Area: San Francisco & San Jose By the Numbers 2025 | Source: Matthews™ Research San Francisco Sales Volume: $8.3B Average Price Per Unit: $404.5K Cap Rate: 5.3% Vacancy Rate: 3.0% Annual Rent Growth: 7.0% Annual Net Absorption: 14,580 Units San Jose Sales Volume: $8.3B Average Price Per Unit: $404.5K Cap Rate: 5.3% Vacancy Rate: 3.0% Annual Rent Growth: 7.0% Annual Net Absorption: 14,580 Units The San Francisco Bay Area is entering 2026 on new footing, reasserting itself as one of the nation’s most dynamic multifamily markets. Supported by a powerful combination of tech-led job creation, population stabilization, and strengthening investor confidence, demand has reinvigorated investment. Across the region, demand is being reshaped by the rapid expansion of the AI ecosystem. San Francisco is experiencing a sharper and more immediate surge in activity driven by AI firms expanding office footprints and accelerating hiring. In comparison, San Jose’s performance is tied to Silicon Valley’s long-standing economic gravity and a renter base shaped by decades of exceptional wage growth and high barriers to homeownership. AI companies (databricks, openAI, and anthropic being a few of the many) have pushed office vacancy way down and helped increase multifamily rent growth. [In addition,] San Francisco’s unemployment rate compared to the rest of California, was around 3.5% [with] California’s above 5%. This has helped bring private and institutional buyers back to the market. – Jack Markey, Associate San Francisco posted $2.3 billion in annual sales volume, with assets trading at an average of $428,000 per unit and cap rates compressing to 4.5%, signaling investors’ increasing willingness to price in near-term rent acceleration tied to AI-driven demand. San Jose recorded $1.9 billion in sales, with average pricing at $488,000 per unit and slightly higher cap rates at 4.6%. While San Francisco is seeing faster cap rate compression amid strong bidding for well-located product, San Jose continues to attract capital seeking stability, income durability, and access to one of the wealthiest and most credit-stable renter populations in the nation. Across both metros, the investment narrative is improving, but San Francisco’s upside thesis is more growth-oriented, while San Jose’s is grounded in consistency and long-term absorption. Operating conditions are tightening throughout the Bay Area. San Francisco’s vacancy rate fell to 3.3% and annual rent growth reached 5.3%. This strength is supported by renewed population gains, limited new supply, and an inflow of high-income workers in the AI sector. The market’s acute supply-demand imbalance is highlighted by the absorption of 4,094 units outpaced deliveries. San Jose posted slightly higher vacancy at 3.6%, paired with 3.1% annual rent growth and a similar 4,191 units of net absorption. This is one of the strongest demand performances the metro has recorded in the past decade. Supply levels remain constrained across both metros, though San Francisco faces the most severe development limitations. Rising construction costs, zoning restrictions, and protracted entitlement timelines continue to suppress new starts, allowing demand to outpace completions and strengthening landlords’ pricing power. San Jose’s supply environment, while also tight, is less structurally constrained. The metro’s pressure comes from decades of undersupply relative to household formation and for-sale housing costs that consistently rank among the highest in the country. With mortgage rates near 7% and home prices continuing to climb, San Jose now has the nation’s largest rent-versus-own affordability gap, pushing new households directly into the renter pool and reinforcing long-term multifamily stability. Looking ahead to 2026, the AI sector plays a pivotal role in reshaping the market’s trajectory and both cities are well positioned. The expanding cluster of major AI and tech firms has fueled renewed office activity, contributed to a 1.3% uptick in population, and supported what is shaping up to be the strongest demand cycle since before the pandemic. Constrained supply, tech-driven job creation, and mounting investor interest positions the Bay Area as one of the top multifamily markets to watch, particularly for those looking to capitalize on the momentum of the burgeoning AI economy. Bay Area Rent Growth Leads California Source: Matthews™ Research, CoStar Group, Inc. Boston, MA By the Numbers 2025 | Source: Matthews™ Research Sales Volume: $3.1B Average Price Per Unit: $499K Cap Rate: 5.1% Vacancy Rate: 3.8% Annual Rent Growth: 0.2% Annual Net Absorption: 5,982 Units The Boston MSA enters 2026 as one of the most stable and opportunity-rich multifamily markets in the country, supported by strong population gains, a deep reservoir of high-earning renters, and a rapidly expanding tech, life sciences, and employment base Unlike many Sunbelt metros that are still absorbing a surge of new construction, Boston’s fundamentals benefit from a more measured supply pipeline, despite strong employment pull. Major employers, including Meta, Google, and Amazon, continue to scale engineering and R&D operations across the market, attracting high-earning renters and reinforcing the metro’s appeal as a premier innovation hub. This strength helped drive $3.1B in sales volume, average pricing of $499,000 per unit, which is nearly double the U.S. average, and a market cap rate of 5.1%. 34% of transaction volume over the previous five years involved public and institutional buyers. Within the same period, private capital accounted for 65% of seller volume and nearly half of buy-side volume. The delta between the average sale price of $13.6 million and trailing four quarters’ median sale price of $2.4 million, suggests that while public and institutional players continue to be involved in a smaller amount of large deals, smaller private buyers account for the majority of deal activity. Across the market, leasing has remained steady with annual net absorption reaching 5,982 units. The vacancy rate is about 200 basis points below the national rate of 8.4%, at 6.5%. These conditions indicate that new and existing renters are quickly filling available units, and underscores the structural demand. At the same time, Boston’s renter preferences are shifting decisively toward higher-tier apartments. While rent growth has decreased from 2022 double-digit, rents remain among the highest nationally and growth exceeds the U.S. average. Class A units maintain the highest rents and continue to post meaningful absorption. This trend, combined with steady investor activity and a development pipeline increasingly concentrated in desirable urban nodes, reinforces the market’s long-term stability. With a highly educated, growing population and sustained demand from the region’s thriving tech and innovation sectors, Boston is poised for tightening fundamentals and improved rent performance in 2026. While political attention around housing affordability remains heightened, with discussions around rent stabilization drawing close scrutiny, market conditions remain fundamentally sound. Renter Appetite for Class A Apartments is Evident, Outpacing Class B Absorption Source: Matthews™ Research, CoStar Group, Inc. Boston’s Net Population Sees Spike in the Last Year Source: Matthews™ Research, CoStar Group, Inc. Chicago, IL By the Numbers 2025 | Source: Matthews™ Research Sales Volume: $3.1B Average Price Per Unit: $499K Cap Rate: 5.1% Vacancy Rate: 3.8% Annual Rent Growth: 0.2% Annual Net Absorption: 5,982 Units Chicago’s multifamily market enters 2026 as one of the most undersupplied and demand-driven major metros in the country. Demand continues to outpace new supply, with the region absorbing roughly 7,500 units in 2025, well above the 4,800 units delivered in the same period, pushing vacancy down to 3.5%. This supply imbalance is expected to intensify in 2026 as only 10,000 units remain under construction, representing just 1.8% of total inventory, far below the national average and the market’s long-term average. With scheduled deliveries projected to fall to some of the lowest levels since 2012, Chicago is set for continued vacancy compression and rent gains. Rents are accelerating across every submarket and asset class. Annual rent growth reached 3.7% market-wide, with premium Class A properties posting a stronger 4.0% increase as renters demonstrate a pronounced “flight to quality” in a constrained supply environment. Demand remains strong in Downtown Chicago and the North Lakefront, accounting for more than one-third of total absorption and continuing to benefit from their concentration of employment, transit access, and amenity-rich neighborhoods. Investment activity mirrors this optimism: sales volume has risen sharply to $3.8B in 2025, cap rates average 6.7%, and premier assets often trade at even tighter yields as investors price in ongoing rent growth and stable occupancy. Major employers across finance, consulting, healthcare, manufacturing, and life sciences continue to deepen their presence, while transformative projects such as the Illinois Quantum and Microelectronic Park further elevate Chicago’s position as a tech and research hub. This enhances the market’s ability to attract and retain a high-earning renter pool. Together, these forces of a high-income renter pool, strong absorption, and limited new supply, position Chicago as one of the nation’s top-performing multifamily markets heading into 2026. Chicago Leads the Nation in Apartments Rent Growth Source: Matthews™ Research, CoStar Group, Inc. Deliveries Decreased Significantly Over the Last 12 Months Source: Matthews™ Research, CoStar Group, Inc. Miami, FL By the Numbers 2025 | Source: Matthews™ Research Sales Volume: $1.7B Average Price Per Unit: $330K Cap Rate: 5.3% Vacancy Rate: 4.3% Annual Rent Growth: 0.7% Annual Net Absorption: 5,846 Units Miami enters 2026 as one of the nation’s most demographically advantaged multifamily markets, supported by strong fundamentals and one of the deepest in-migration pipelines in the country. The region continues to attract high-income households, young professionals, and remote workers drawn to Miami’s tax advantages, lifestyle appeal, and growing corporate presence. More recently, high-income policy refugees are anticipated to leave New York and choose Florida markets like Palm Beach and Miami. This adds a new layer of durable, upper-income demand that will help solidify the rent floor and support the next phase of growth. These powerful demographic forces helped fuel 5,846 units of net absorption in 2025, keeping vacancy at a healthy 4.3% despite substantial new deliveries across the metro. While rent growth moderated to 0.7% in 2025 due to the heavy wave of new deliveries, Miami is expected to regain momentum in 2026 as supply pressure eases and demand continues to deepen. Much of the elevated pipeline is beginning to taper, setting the stage for improved performance as thousands of new units lease up and population inflows remain robust. Investor activity remains strong, with $1.7B in sales volume, an average price per unit of $330,000, and cap rates holding at 5.3%, signaling sustained confidence in Miami’s long-term growth trajectory. Miami’s expanding finance, technology, hospitality, and healthcare sectors, reinforced by ongoing corporate relocations and international investment, continue to diversify the local economy and strengthen the renter base. With absorption outpacing expectations, vacancy tightening, and supply set to normalize, Miami enters 2026 with the foundation for renewed rent growth and sustained investor interest, placing it firmly among the top multifamily markets to watch. Asking Rents in Miami Trend Higher than the U.S. Average Source: Matthews™ Research, CoStar Group, Inc. The Sunshine State is the No. 1 Destination for Migrating New Yorkers Source: Matthews™ Research, MovingPlace Atlanta, GA By the Numbers 2025 | Source: Matthews™ Research Sales Volume: $16.5B Average Price Per Unit: $174.5K Cap Rate: 5.2% Vacancy Rate: 6% Annual Rent Growth: 0.6% Annual Net Absorption: 20,576 Units Atlanta enters 2026 from a position of emerging strength as the market begins to stabilize after several years of historically elevated supply. Despite vacancy averaging 6% in 2025 and rent growth holding at a modest 0.6%, the metro posted a substantial 20,576 units of net absorption, signaling renewed momentum as demand once again outpaced new deliveries. Investor confidence remained firmly intact, with $16.5B in multifamily sales, an average price per unit of $174,500, and cap rates at a competitive 5.2%, underscoring long-term conviction in the region’s demographic and economic fundamentals. The market’s near-term challenges, primarily elevated vacancy and competitive lease-up conditions, are beginning to recede. The development pipeline is contracting sharply, with expected 2025 deliveries down roughly 40% from the prior year’s peak, marking a decisive shift toward more balanced supply conditions. This moderation is pivotal: for the first time since 2021, absorption is poised to consistently keep pace with, and potentially exceed, new supply. Demand drivers remain firmly entrenched. Metro Atlanta continues to outperform in population and household growth, supported by a broad-based employment ecosystem spanning logistics, education and health services, technology, and professional services. Even as certain office-using sectors cooled in 2025, the region’s overall economic profile remained resilient, ensuring a steady inflow of renters seeking relative affordability and proximity to expanding job centers. Growth nodes such as Midtown, West Midtown, and North Fulton continue to benefit from ongoing corporate relocations and high-skill employment announcements. Atlanta’s strong absorption, moderating construction pipeline, and durable economic base position the metro for a meaningful inflection in 2026. We’re optimistic that we will see an increase in transactional velocity in 2026 – Connor Kerns & Austin Graham, First Vice Presidents & Associate Directors With rent growth expected to return to positive territory by mid-year and investor appetite remaining elevated, Atlanta stands out as one of the nation’s most compelling multifamily markets heading into the next cycle. Atlanta Multifamily Demand Nears Pandemic-Era Peak Source: Matthews™ Research, CoStar Group, Inc. Atlanta Multifamily Transaction Volume Source: Matthews™ Research CoStar Group, Inc. Washington, D.C. By the Numbers 2025 | Source: Matthews™ Research Sales Volume: $4.4B Average Price Per Unit: $313K Cap Rate: 5.6% Vacancy Rate: 4.1% Annual Rent Growth: 0.8% Annual Net Absorption: 7,709 Units Washington, D.C. enters 2026 with strengthening multifamily fundamentals supported by one of the most stable, recession-resistant demand bases in the country. The region experienced a temporary pause in rent growth in 2025 due to elevated deliveries, yet leasing performance remained exceptionally resilient. The market absorbed a substantial 7,709 units over the last year, pushing vacancy down to 4.1% and reaffirming the region’s depth and durability. Investor activity remained robust, with $4.4B in sales volume, an average price per unit of $313,000, and cap rates holding at 5.6%, reflecting long-term confidence in the metro’s steady leasing velocity and strong income stability. Demand continues to be anchored by the region’s diversified economic foundation. Federal government agencies, legal services, education and research institutions, and professional and business services collectively sustain one of the country’s most reliable employment ecosystems. These sectors not only support consistent household formation but also create a resilient base of high-credit renters who value proximity to major job centers, transit infrastructure, and urban amenities. Even as portions of the national economy softened in 2025, D.C.’s employment profile remained steady, enabling the market to absorb new supply at a pace that outperformed expectations. Looking ahead to 2026, D.C.’s outlook is bolstered by several key tailwinds. Supply growth is set to moderate from its recent highs, reducing pressure on vacancy and setting the stage for a more balanced leasing environment. Population and job growth remain concentrated in high-income, urban neighborhoods with sustained demand for quality rental housing. The market’s ability to quickly absorb new units in 2025, combined with its structurally stable employment base and durable renter demographics, positions Washington, D.C. for above-average investment appeal as it heads into 2026. D.C.’s Population Growth Follows National Trends, But Continues to Outperform Source: Matthews™ Research, CoStar Group, Inc. Northern New Jersey By the Numbers 2025 | Newark & Hudson County | Source: CoStar Group, Inc. Sales Volume: $1.1B Average Price Per Unit: $314K Cap Rate: 5.7% Vacancy Rate: 3.0% Annual Rent Growth: 6.2% Annual Net Absorption: 4,329 Units Northern New Jersey’s multifamily market is shaping up for a standout 2026 as it benefits from powerful cross-currents of demand, ranging from New York City spillover to robust local household formation and an increasingly affluent renter base. After another year of exceptional performance the market enters 2026 with some of the enters 2026 with robust fundamentals. Net absorption reached 4,329 units, easily outpacing new supply and driving vacancy down to just 3.0%. Vacancy tightened across every major submarket over the past year, falling 150 basis points in Newark, 190 basis points in Jersey City, and 90 basis points in Hoboken. Rent growth surged to 6.2% in 2025, one of the strongest increases among major U.S. metros. Hudson County commands rents $1,200 to $1,500 above Newark due to superior transit access to Manhattan. Yet relative affordability still favors New Jersey, a dynamic that is likely to intensify if New York expands rent regulations. Rent growth has not recorded negative performance since 2017, marking Northern New Jersey as one of the very few metros to post consistent gains throughout the pandemic and recovery period. With $1.1B in sales volume, $314,000 average price per unit, and cap rates at 5.7% reflect a market that offers both near-term momentum and long-term durability. Should new rent controls be implemented in NYC, demand is expected to shift even more aggressively into Northern New Jersey’s nonregulated stock, accelerating rent growth and further tightening occupancy. Employment conditions further reinforce the market’s trajectory. While statewide job growth has appeared modest, Northern New Jersey’s economy tells a more robust story of diversification and resilience. Education and health services, along with the trade, transportation, and utilities sectors tied to the Port of Newark-Elizabeth, create a massive, stable base of employment. Northern New Jersey is also nearing the peak of its construction cycle. Nearly 7,700 units were delivered over the past 12 months, yet developers have started just 5,500 units over the same period. Looking ahead, Northern New Jersey is poised to maintain this strength in 2026 as several tailwinds converge. Limited construction activity across most submarkets will keep supply pressures minimal, allowing rents to continue rising from a position of already tight occupancy. At the same time, ongoing in-migration from Manhattan, driven by relative affordability, new luxury development in places like Jersey City and the Gold Coast, and expanding transit-oriented districts, is expected to sustain deep demand for high-quality rentals. Northern New Jersey enters 2026 with a compelling foundation for continued outperformance. Northern NJ Sees Highest Cap Rate in a Decade Source: Matthews™ Research, CoStar Group, Inc. San Diego, CA By the Numbers 2025 | Source: Matthews™ Research Sales Volume: $2.2B Average Price Per Unit: $403K Cap Rate: 4.7% Vacancy Rate: 4.1% Annual Rent Growth: (0.2%) Annual Net Absorption: 4,763 Units San Diego enters 2026 with one of the most stable and supply-constrained multifamily landscapes on the West Coast. In 2025, the market absorbed 4,763 units, enough to keep vacancy at a tight 4.1% despite a recent wave of deliveries, as a 20-year high of roughly 5,600 units have been completed so far this year. Although annual rent growth temporarily dipped 0.2%, the region’s underlying demand drivers remain among the strongest in the nation. These drivers include a high-income workforce, continued population gains, and a steady influx of renters priced out of homeownership in one of the nation’s least affordable for-sale housing markets. Investor confidence mirrors these fundamentals, with $2.2B in sales volume, an average price per unit of $403,000, and cap rates at 4.7%, signaling long-term optimism about the market’s trajectory. Conditions are set to strengthen further in 2026 as construction activity begins to moderate and the market rebalances. Much of the elevated supply delivered in 2024-2025 has already seen strong lease-up, particularly in coastal and infill submarkets where land scarcity and restrictive zoning limit future development. In addition, developers have notably pivoted towards smaller units. With fewer projects breaking ground and structural barriers keeping pipeline growth in check, vacancy is expected to tighten further over the next year. At the same time, the region’s expanding life science, defense, biotech, and technology sectors continue to attract high-earning talent. These dynamics point to a market poised for renewed rent growth, sustained occupancy strength, and competitive investor interest in 2026. San Diego Multifamily Supply & Demand Dynamics Source: Matthews™ Research, CoStar Group, Inc. Orange County, CA By the Numbers 2025 | Source: Matthews™ Research Sales Volume: $917M Average Price Per Unit: $453K Cap Rate: 4.4% Vacancy Rate: 4.2% Annual Rent Growth: 1.3% Annual Net Absorption: 4,725 Units Orange County continues to distinguish itself as one of Southern California’s most resilient multifamily markets, supported by exceptionally tight vacancies, durable renter demand, and a pronounced “flight to quality” that is reshaping leasing trends. The county benefits from structural supply constraints, high household incomes, and steady population drivers—all of which position it for strong performance in 2026. The median household income is almost $120K compared to the national average of about $89K, as the labor market continues to attract new residents. Orange County boasts an unemployment rate of -0.09% in comparison to the US rate of 0.54%. Investor sentiment remains confident despite elevated borrowing costs. Sales activity reached $917M in 2025, supported by sustained institutional interest. At $453,000 per unit, Orange County remains among the nation’s most expensive apartment markets, with pricing reinforced by limited land availability and consistent buyer competition. Cap rates hold firm at 4.4%, among the lowest in the country, underscoring the depth of capital targeting high quality, well-located assets. Operationally, the market is anchored by a 4.2% vacancy rate, which is materially below the national average and supported by steady demand from employment centers in Irvine, Costa Mesa, and the coastal submarkets. Even with moderate annual rent growth of 1.3%, absorption remains healthy, with 4,725 units absorbed, nearly matching new deliveries. Importantly, the market’s “flight to quality” trend continues to favor newly built, amenity-rich Class A properties, which are capturing a disproportionate share of leasing activity as high-income renters pursue upgraded, amenity-rich products in a limited-supply environment. With development heavily concentrated in Irvine and minimal new supply elsewhere, Orange County is poised to maintain tight occupancy levels into 2026. With this flight to quality, we are seeing more and more deals sell with negative leverage. We believe this to be a testament to the strength of Orange County multifamily. -Mark Bridge, Executive Vice President With a constrained pipeline, rising household incomes, and rebounding in-migration, Orange County is positioned for firmer rent growth and strengthening investment performance in 2026. As supply remains concentrated in only a handful of submarkets while demand deepens across the county, the market is set to maintain its standing as one of the most competitive and stable multifamily markets in the nation. OC Defies National Trends with Steady Apartment Development Source: CoStar Group, Inc. *Data was compiled through the research via Real Capital Analytics, CoStar Group, Inc. and Real Page, Inc.

Mark Bridge

Executive Vice President & Senior Director

3/5/26

Texas Retail Market Report | Recap & Future Expectations

The Texas retail market continues to serve as a top location for resilience and growth in 2026. Driven by robust inward migration and a diverse corporate sector, the state’s major metros are successfully navigating the headwinds of high interest rates and national tenant shifts. While Austin maintains its status as the occupancy leader and Houston enters a strategic recovery, Dallas-Fort Worth stands out for its development pipeline. With construction levels reaching decade-highs and a clear shift toward experiential, grocery-anchored suburban hubs, the Texas retail landscape is evolving. By the Numbers | Q4 2025 CoStar Group, Inc. Dallas-Fort Worth Sales Volume: $84.1M Price Per SF: $276 Cap Rate: 6.7% Vacancy Rate: 4.9% Rent Growth: 3.4% Asking Rent Per SF: $224.98 Under Construction: 7.8M SF Delivered: 595K SF Absorbed: 791K SF Austin Sales Volume: $62.6M Price Per SF: $340 Cap Rate: 6.3% Vacancy Rate: 3.1% Rent Growth: 2.6% Asking Rent Per SF: $31.64 Under Construction: 2.8M SF Delivered: 545K SF Absorbed: 383K SF Houston Sales Volume: $368M Price Per SF: $248 Cap Rate: 7.3% Vacancy Rate: 5.3% Rent Growth: 2.1% Asking Rent Per SF: $24.59 Under Construction: 3.4M SF Delivered: 537K SF Absorbed: 556K SF Dallas Leads Nation in Retail Growth Across Dallas-Fort Worth, retail fundamentals continue to show strong resilience and balanced performance. The metro has maintained positive tenant demand for 20 consecutive quarters, despite navigating headwinds from national tenant bankruptcies. Dallas-Fort Worth is currently a national leader in retail construction, with nearly twice the new supply as Houston. While vacancy rates are projected to reach 5% in the first half of 2026 due to new deliveries, demand remains robust across the metro. North DFW Surge in Demand Investor and developer interest has increasingly focused on the high-growth northern areas of the metro. Denton and Collin Counties account for roughly 65% of all current construction projects. Submarkets like Allen, McKinney, Frisco, and Prosper are primary targets for capital, due to rapid population growth and high household incomes. Specifically, Northern Collin County has seen the time to lease fall to historic lows of approximately five months, driven by a lack of new developments in established trade areas. The market’s expansion follows opportunities in outlying areas, where major grocery-anchored developments aid further strip mall and traditional shopping center construction. In areas like Collin County, the premium on land has pushed starting rents around $40 to $45 per square foot. Metro Reaches Record-Breaking Construction Levels DFW is experiencing an ongoing supply wave, reaching 7 million square feet underway at the end of 2025. This is one of the highest development rates recorded for the metro in 10 years. In 2025, the market completed 18% of all net retail deliveries in the country. Despite this surge, supply-side risk is limited as approximately 80% of the retail space currently under construction is already pre-leased. Mixed-use projects are also driving significant activity. In Collin County, major developments like The Farm in Allen and Fields West in Frisco are creating new retail and residential hubs that feature experiential retailers and unique luxury offerings. Austin Achieves Robust Retail Activity Across the Austin metro, retail fundamentals are strong, backed by high occupancy, disciplined new development, and constant population growth. According to Matthews™ First Vice President and Director Andrew Ivankovich, the strong transaction velocity seen at the end of 2025 will continue through 2026. “The market experienced such a frenzy from 2019 to 2022 that it made it challenging for deals to pencil in the few years that followed,” he said. “Sellers’ expectations did not change and high interest rates prevented buyers from acting. Today, both sides have improved and we expect it to be reflected in the year-end velocity report.” Shift to the Suburbs Ivankovich added that retail capital has begun to exit Austin’s CBD and is entering suburban markets. In particular, Hays County and Georgetown accounted for an increased amount of the metro’s deals. Private buyers are attracted to Hays County, with the submarket noting a total $21 million in sales for 2025. Meanwhile, Georgetown recorded a rise in deals for newly-built properties and noted a total $51.5 million for its 2025 sales volume. Both submarkets will be crucial to track moving forward given their constant population growth, as well as Round Rock and Cedar Park. In 2025, Austin’s retail under construction level saw a 38% year-over-year increase, reaching 2.1 million square feet. The metro’s suburbs accounted for more than 96% of all completions last year. Manor is one suburb that stands out from the pack as its inventory grew by 50% throughout the year. The majority of its growth is attributed to the addition of Manor Crossing, a 425,000-square-foot shopping center that was almost fully pre-leased by its completion date. This year, Cedar Park is the next Austin suburb to note an influx of deliveries. The suburb accounts for 33% of ongoing construction, with Cedar View as the largest development. The new project is a mixed-use site that will feature a hotel, a Scheels sporting goods store, and NFM as its anchor. Houston is Set to Recover from 2025 Performance Throughout 2025, Houston’s fundamental activity dropped to historic lows. Its total absorption level for 2025 was 2 million square feet, a decrease from the 2024 absorption rate of 2.5 million square feet. Despite this trend, Houston’s sales volume jumped from 2024 and totaled $1 billion by year-end 2025. Josh Longoria, Senior Associate at Matthews™, expects this activity to continue as the federal funds rate slows down. “As we head into the second month of the year, the federal funds rate has been stable and it seems like there will be no more rate cuts until the new Fed chair is elected,” Longoria said. “I think this will lead to more stability in the market and buyers having more clear expectations of where rates will be, and therefore I think transaction velocity will pick back up.” Tenants Thriving Across Houston 7 Brew and Crunch Fitness are currently two of the largest players in the metro. Crunch Fitness is absorbing sites left by big-box retailers, while 7 Brew is taking up pad sites around 500 to 700 square feet. Texas is a major market for Crunch Fitness, with a strong presence in the Houston submarkets of Kirkwood, League City, and Humble. Crunch Fitness is a preferred tenant for landlords with vacancies over 35,000 square feet. In 2025, the tenant reached 3 million gym memberships. Specifically in Houston, their locations boast fully booked exercise classes, which signals its robust consumer demand. Crunch Fitness’ growing visitations display its positive activity and add to its strong tenant potential. 7 Brew is one of the fastest-growing coffee chains across the country, doubling its national footprint by the end of 2025. In Houston, its expansion is prominent in outer submarkets, with its most recent and upcoming locations in Conroe, Tomball, Spring, Livingston, and Cleveland. With more openings planned across the metro, 7 Brew will maintain its top performance levels as its format allows for easy store placement and a shorter timeframe for opening than a traditional buildout. Top Trends to Watch Moving ahead, Longoria advises landlords to pay attention to their tenants and their sales trends. “I have heard from multiple landlords that the restaurants and beverage concepts are doing as well as they have previously,” he said. “High-end restaurants are not getting as much traffic, which is helping the lower-priced options.” Longoria added that he expects construction activity to pick back up as it has been slow throughout the past few years. “Development is going to come back into full effect as the cost breakdown to build new construction did not make sense and the spread was too thin,” Longoria stated. Specifically, Longoria said that new developments are likely to grow in the 610 Loop. One of the largest additions inside the 610 Loop is Midway’s East River project. The facility is located on the former KBR industrial site east of Downtown, and will add more than 1 million square feet to the area.

Andrew Ivankovich

First Vice President & Director

2/13/26

NMHC Las Vegas Recap: Multifamily Fundamentals Stabilize as Pricing and Liquidity Reset Continues

Discussions at last week’s National Multifamily Housing Council conference in Las Vegas pointed to a multifamily market that is stabilizing at the operating level but still working through valuation and capital market constraints. While confidence in long-term fundamentals remains intact, transaction activity continues to lag as pricing, underwriting, and macro uncertainty work toward alignment. Recent data from the National Multifamily Housing Council’s January 2026 Quarterly Survey reinforces this dynamic. The Market Tightness Index remained below breakeven, signaling looser conditions, while the Sales Volume Index also stayed below 50, reflecting continued friction in deal activity. Financing conditions showed modest improvement, particularly on the debt side, as lenders selectively reenter the market for stabilized assets with conservative leverage and structure. At the asset level, sentiment around rental fundamentals has improved, especially in markets that experienced elevated new supply. In Austin, owners increasingly believe rents are nearing a cyclical floor, though pricing expectations have yet to fully adjust. Senior Associate, Richard Waterhouse, noted that while rental performance appears to be bottoming, asset values remain under pressure, contributing to a continuation of the same pricing challenges that have defined recent quarters. Capital availability was a recurring topic throughout the conference. There remains a meaningful amount of equity on the sidelines, but underwriting discipline has tightened materially. First Vice President and Associate Director, Austin Graham, observed that both lenders and sponsors are prioritizing in-place cash flow over forward-looking growth assumptions. At the same time, distress and REO activity continue to surface, creating targeted opportunities rather than broad-based repricing. Several conversations also pointed to early signs that the bid-ask spread is beginning to compress after multiple years of misalignment. Associate, Richard Lindsey, shared that most investors and operators remain constructive on the mid- and long-term outlook, citing expectations that supply has peaked, rents have largely stabilized, and demand will remain durable. For groups that were able to withstand the volatility of the past cycle, particularly in high-supply markets, conditions are gradually becoming more conducive to deployment. Despite improving sentiment, near-term uncertainty continues to influence decision-making. Interest rate direction, broader economic conditions, geopolitical risk, and the transition to a new Fed chair remain key variables shaping underwriting assumptions and transaction timing. Overall, the NMHC conference reinforced that the multifamily sector is transitioning from dislocation to recalibration. Fundamentals are stabilizing and capital is available, but transaction activity will remain selective as pricing, underwriting discipline, and macro conditions continue to converge.

Richard Waterhouse

Senior Associate

2/6/26

Austin, TX Medical Office Market Report Q4 2025

The Austin medical office market closed Q4 2025 in a period of recalibration following several years of out sized growth. Vacancy increased to 10.8%, driven by -67,047 SF of net absorption as tenant expansion slowed and recently delivered space came online. Despite softer occupancy, fundamentals remain supported by 1.48% year-over-year rent growth, pushing average asking rents to $38.13/SF, underscoring landlords’ pricing power in well-located assets. Supply additions remain manageable, with 59,312 SF delivered and 33,643 SF under construction, limiting long-term oversupply risk. Investment activity remained steady with 28 sales, average pricing of $513/SF, and 6.0% cap rates, signaling continued investor confidence amid near-term leasing headwinds. Key Findings Market Vacancy and Demand: Vacancy rose slightly to 10.8% from 10.0% in Q3, reflecting a temporary softening as absorption slows. While leasing activity slowed, fundamentals remain supported by Austin’s growing population and strong healthcare demand. Rent Trends and Pricing: Asking rents continued a steady upward trajectory, reaching $38.13/SF. Growth has been modest but consistent over the past year, showing that landlords are maintaining pricing power even amid higher vacancy. Development and Investment Activity: Construction under way fell sharply to 33,643 SF, signaling a pause in new supply. Investment activity remained active and diversified, with private buyers, REITs, users, and institutional investors all participating. Austin Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.5% Households: 1,086,848 Current Population: 2,608,331 Median Household Income: $106,059 Austin Medical Office Rents Asking rents in the Austin medical office market continued a steady upward trajectory in Q4 2025, reaching $38.13/SF, up 1.48% year over year. Rent growth has remained consistent despite rising vacancy, reflecting the sector’s resilience and sustained demand for well-located, high-quality medical space. Since early 2022, average asking rents have increased more than 6%, supported by elevated replacement costs, limited long-term supply risk, and Austin’s strong demographic fundamentals. While near-term leasing softness may temper further acceleration, with concessions more common than headline rent cuts in competitive submarkets. Market Asking Rent Per SF Source: CoStar Group, Inc. Austin Medical Office Vacancy Vacancy in the Austin medical office market continued to trend upward in Q4 2025, reaching 10.8%, the highest level of the past four years. The increase in vacancy is reflecting slower tenant expansion and the cumulative impact of recent deliveries. The most notable acceleration occurred throughout 2025, with vacancy rising from 9.14% in Q1 to 10.80% by Q4. While current levels signal a softer leasing environment, vacancy remains below historically distressed thresholds, suggesting the market is undergoing a period of normalization rather than structural oversupply. Vacancy Rate Source: CoStar Group, Inc. Austin Medical Office Construction Construction activity in the Austin medical office market continued to decelerate in Q4 2025, signaling a clear pullback from prior peak development levels. New construction starts totaled just 16,347 SF, well below quarterly averages seen in 2022–2024, reflecting more cautious developer sentiment amid rising vacancy. As a result, space under construction declined sharply to 33,643 SF, down nearly 90% from mid-2022 highs. This contraction marks a turning point in the supply cycle and should help ease future vacancy pressure as the market absorbs recently delivered space. SF Under Construction Source: CoStar Group, Inc. Austin Medical Office Sales The Austin medical office market recorded 29 transactions in Q4 2025, up from 23 in Q3 but down from earlier quarters. 2025 had a total of 117 transactions compared to 150 in 2024, reflecting a modest slowdown in investor activity amid rising vacancy. Pricing remained strong, with an average of $513/SF and cap rates around 6.0%, underscoring continued confidence in stabilized, high-quality medical office assets. Notable Q4 sales included 5200-B Davis Ln ($16.52M, $606/SF), 1513 E New Hope Dr ($3.25M, $410/SF), and 4701 West Gate Blvd ($1.83M, $385/SF), illustrating a wide pricing range influenced by property age, size, and location. Premium pricing continues to favor newer or well-located properties with stable tenants, while smaller or older assets trade at a discount. Private investors remain the largest group, but REITs, users, private equity, and institutional buyers are all participating, keeping demand broad-based. By the Numbers Q4 2025 | Source: CoStar Group, Inc. # of Sales: 28 Cap Rate: 6.0% Price Per SF: $513 Vacancy Rate: 10.8% Rent Growth: 1.48% Asking Rent Per SF: $38.13 SF Under Construction: 33.6K Delivered: 59.3K SF Absorbed: (67K) SF

Andrew Richmond

Senior Associate

1/22/26

Austin, TX Industrial Market Report Q4 2025

Vacancy reached 13.9%, a two-decade high, reﬂecting a sharp reversal from the market’s prior cycle low and highlighting how speculative development has pulled demand forward. The vacancy increase has been concentrated in newer inventory, with product delivered since 2021 accounting for the majority of vacant space, underscoring lease-up challenges for recently completed big-box logistics facilities. Tenant decision-making has become more cautious, particularly among larger users, where fewer leases over 100,000 square feet were executed versus the prior year. As availability rose, logistics asking rents began to decline, with average asking rates around $12.50 per square foot, down from the 2024 peak, and landlords increasingly competing on economics rather than scarcity. Key Findings Market conditions softened further in late 2025 as speculative deliveries continued to outpace tenant demand, pushing vacancy higher and extending the lease-up cycle for new product. Rent momentum shifted decisively in favor of tenants, with logistics landlords leaning into concessions and rate ﬂexibility amid elevated availability in big-box facilities. Capital markets showed early signs of re-engagement as a pricing reset created entry points for long-hold investors, though transaction velocity cooled late in the year as fundamentals weakened. Austin Industrial Supply & Demand Dynamics Source: CoStar Group, Inc. Austin Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.5% Current Population: 2,608,790 Households: 1,087,122 Median Household Income: $106,086 The metro’s population has reached approximately 2.6 million residents, with growth still among the strongest nationally even as the pace has moderated from the prior decade. New migration has ﬂowed to suburban areas, particularly Williamson County, where household formation is being reinforced by relative housing affordability and expanding amenity infrastructure. Austin’s younger age demographic, with an outsized concentration of residents aged 25–44, supports long-term consumption and labor force expansion, both of which are critical inputs to industrial demand. Top Tenant Leases Valstad Firefly Aerospace Inc Comapal USA Technology Digital Brands Group, Inc. Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Austin Industrial Construction Austin remains in an elevated construction cycle, with total industrial space under construction increasing to 14.1 million square feet at the end of 2025, placing the metro among the most active development markets nationally. Construction has shifted to high-growth suburbs, with Round Rock and Southeast Austin accounting for more than half of the space underway. The Round Rock submarket is being reshaped by Samsung’s owner-occupied semiconductor fab in Taylor, a multi-phase project that is likely to deepen industrial’s presence in the northern corridor. Meanwhile, Southeast Austin carries near-term lease-up risk, given that a large part of its pipeline remains uncommitted. SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc. Austin Industrial Sales Investment activity in Austin remained mixed throughout 2025, shaped by the combination of softer occupier fundamentals and improving price discovery. Elevated vacancy and declining rents have strained property-level performance, particularly for newer big-box assets, and higher cost of capital has continued to pressure valuations and seller expectations. Transaction activity has shifted toward newer product, with a meaningful share of volume concentrated in assets delivered within the last few years, including properties still in lease-up where buyers are willing to assume stabilization risk. Austin Industrial Sales Volume Source: CoStar Group, Inc. By the Numbers Q4 2025 | Source: CoStar Group, Inc. Sales Volume: $26.7M Price Per SF: $172 Cap Rate: 7.5% Vacancy Rate: 13.9% Rent Growth: -2.1% Asking Rent Per SF: $14.13 SF Under Construction: 14.1M SF Delivered: 2.2M SF Absorbed: 803K

Austin, TX Multifamily Market Report Q4 2025

In Q4 2025, Austin’s apartment market showed clearer signs of stabilization as vacancy pressures began to ease, even as rents remained under stress. The vacancy rate stood at 14.2%, reflecting improvement from earlier peaks as strong absorption of 3,000 units in the quarter started to better align with a slowing delivery pace. Despite this progress, owners continued to prioritize occupancy and aggressively competing for tenants, resulting in asking rents averaging $1,530 per unit and annual rent growth of -4.5%, the steepest decline among major U.S. markets. The combination of moderating supply, sustained demand, and a narrowing gap between deliveries and absorption suggests the market is moving past its worst imbalance, setting the stage for gradual improvement heading into 2026. Key Findings Austin is seeing demand outpace supply for the first time since 2021, driving a 150 bps year-over-year drop in vacancy to 14.2%, one of the sharpest improvements nationally. After a record 2024, deliveries fell 46% in 2025 and could drop another 73% in 2026, setting up meaningful relief for operators and faster market rebalancing. Rents are down 4.5% year-over-year (the steepest decline among major U.S. markets), but constrained development and steady absorption point to stabilization in 2026 and potential rent growth by 2027. Austin Multifamily Supply & Demand Dynamics Source: CoStar Group, Inc. Austin Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.5% Current Population: 2,607,298 Households: 1,086,231 Median Household Income: $105,998 Austin’s economy continues to outperform nationally, underpinned by strong population growth, diversified employment, and sustained in-migration. The metro has reached 2.6 million residents, growing 1.8% year-over-year, the fastest pace among major U.S. metros, driven roughly equally by domestic and international migration. The region benefits from a business-friendly climate, a young and highly educated workforce, and its position as a lower-cost alternative to coastal tech hubs. Suburban expansion, particularly in Williamson County, continues to capture much of the growth, while large-scale investments such as Samsung’s semiconductor expansion are expected to support long-term economic momentum and keep Austin growing faster than the national average. Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Austin Multifamily Construction Construction moved past its peak by Q4 2025, following one of the largest supply waves in the market’s history. Although 2,700 units were delivered during the quarter, strong leasing activity helped blunt the impact of new supply and signaled that demand is beginning to catch up. The construction pipeline continued to shrink, with 15,900 units under construction, reflecting a sharp pullback in new starts as higher financing costs, tighter underwriting, and elevated vacancy discouraged additional projects. While recent deliveries have left a lasting imprint, particularly in suburban and high-growth corridors, the slowdown in construction activity is reducing future supply pressure and supporting the market’s ongoing recovery. Units Construction Starts Source: CoStar Group, Inc. Units Under Construction Source: CoStar Group, Inc. Austin Multifamily Sales Investment activity remained cautious but showed early signs of renewed momentum as fundamentals began to stabilize. Elevated vacancy and declining rents continued to weigh on pricing, with stabilized yields near a 5.6% cap rate. Still, improving leasing conditions, supported by solid absorption relative to deliveries and a shrinking construction pipeline, helped narrow the bid-ask spread that had sidelined many buyers earlier in the cycle. Investors, particularly public REITs and active private buyers, focused on high-quality assets in fast-growing suburban submarkets, signaling confidence in Austin’s long-term demand drivers. With supply pressures easing and vacancy expected to trend lower, investor sentiment is gradually improving, setting the stage for stronger transaction activity as pricing stabilizes. Austin Multifamily Sales Volume Source: CoStar Group, Inc. Buyer Composition Source: Real Capital Analytics By the Numbers Q4 2025 | Source: CoStar Group, Inc. Cap Rate: 5.6% Vacancy Rate: 14.2% Rent Growth: (4.5%) Asking Rent Per Unit: $1.5K Units Under Construction: 15.9K Units Delivered: 2.7K Units Absorbed: 3K

Richard Waterhouse

Senior Associate

1/13/26

The Rising Tide of Hotel Delinquency

While post-pandemic tourism seemed to promise a robust recovery for the hotel industry, 2025 has emerged as the year of significant financial headwinds, with growing loan delinquencies indicating underlying stress. An analysis of hotel delinquency reveals an increase in loan distress driven by broader macroeconomic pressures, shifting consumer behavior, and a complex capital markets environment. These challenges are disproportionately affecting specific hotel sectors and metropolitan areas, creating a nuanced and uncertain outlook for the industry going forward. The overall CMBS delinquency rate rose through mid-2025, driven partly by lodging loan distress. For instance, Trepp data shows the CMBS delinquency rate climbing to 7.03% in April 2025, the highest since January 2021. While the lodging delinquency rate showed volatility, it contributed to the broader upward trend. The overall outlook for lodging performance in 2025 is modest, with projected Revenue Per Available Room (RevPAR) growth under 1%. Industry forecasts suggest a modest recovery beginning in 2026, assuming improved economic conditions, more certain federal policy, and stabilizing inflation. Economic Drivers of Delinquency High Interest Rate: The prolonged period of elevated interest rates has made refinancing difficult and more expensive for hotel owners, increasing the risk of maturity defaults. Persistently High Inflation: Elevated inflation has increased operating and ownership expenses for hotels faster than revenue growth, squeezing profit margins. Weakened Economic Growth: A projected slowdown in U.S. GDP growth in 2025 dampens overall consumer and business spending, negatively affecting hotel demand. Slowing Consumer Spending: High inflation and macroeconomic fatigue are impacting consumer behavior, with a noticeable decline in travel intent, especially in certain market segments. How Capital Markets Environment is Impacting Distress Tightened Lending Standards: Banks and other lenders have become more selective and conservative in underwriting new hotel loans, tightening coverage requirements and reducing leverage. Bank Pullback: Regional and mid-tier banks, a vital source of financing for many hotel owners, have significantly pulled back from commercial real estate lending. Increased Maturity Defaults: The combination of higher interest rates and tight lending has led to an increase in loan maturity defaults, forcing borrowers to seek extensions or face special servicing. Sector-Specific Distress Facing the most acute wave of refinancing stress since the Global Financial Crisis, the data for Q4 2025 reveals a nationwide swell of loans reaching maturity between late 2025 and early 2026, with an alarming concentration of full-service hotel assets on watchlists or already transferred to special servicers. According to data, roughly 40-45% of full-service loans are flagged as “potentially troubled”, “troubled,” or “transferred to special servicer.” The distress is particularly concentrated in gateway and convention-heavy markets such as: New York City San Francisco Los Angeles Atlanta Miami Boston These are properties that were historically resilient due to strong business and international travel demand but are now struggling under the weight of variable-rate debt, declining RevPAR recovery trajectories, and inflated expense structures (labor, insurance, property tax). Meanwhile, limited-service hotels — though not immune — show greater stability, with distress levels closer to 15–20%, mostly among older assets in secondary or tertiary markets. Sector Breakdown Economy and Extended-Stay Segments: Recent trends show rising strain in the economy and extended-stay categories, particularly concerning the latter. While initially resilient during the pandemic, extended-stay delinquency rates surged in 2024 and 2025, possibly due to oversupply in some areas and macroeconomic pressure on budget-conscious consumers. Full-Service Properties: This segment has seen a slower recovery than limited-service hotels as, as of July 2025, remains well above pre-pandemic delinquency levels. Their reliance on business, group, and international travel makes them vulnerable to shifts in these demand channels. Luxury and Upscale Segments: These properties generally fare better, as high-income travelers have maintained their spending, allowing these hotels to maintain stronger performance. However, not all luxury and upscale hotels have scrapped by. Some high-profiles assets have been flagged as distressed, with nearly 60% having variable-rate loans, often structured as fully interest only, these include: The Ritz-Carlton Kapalua Embassy Suites Denver Downtown Ritz-Carlton San Francisco Renaissance Atlanta Midtown Marriott Charlotte City Center The floating-rate structure has compounded stress as benchmark rates surged, doubling interest costs in under 24 months. The Maturity Wall Effect The data shows over 70% of loans maturing in Q4 2025, corresponding with refinancing vintages from 2015 and 2020. These loans originated during eras of either: historically low interest rates (2015–2020), or COVID-era forbearance extensions. As these mature into a 2025 environment with rates 300–400 bps higher, debt service coverage ratios are collapsing — especially for hotels with variable-rate or interest-only structures. Geographic Concentration of Risk Oversupply and Market-Specific Factors: Banks and other lenders have become more selective and conservative in underwriting new hotel loans, tightening coverage requirements and reducing leverage. Reliance on Specific Travel Types: Metro areas heavily dependent on business or international travel may experience heightened risk, while leisure-driven or drive-to markets may be more insulated. For example, a decline in inbound international travel impacted major U.S. markets in 2025. Political or Economic Events: Localized events, such as the deployment of National Guard troops or FEMA have also been noted as affecting hotel performance and occupancy. West Distress Concentrated Maturity Risk: Nearly half the regional hotel debt will mature by 2027, the peak point of refinancing risk due to higher interest rates and slower RevPAR recovery. Limited-Service Weakness: While full-service hotels capture headlines, the distress here is deeply structural and operational, concentrated among smaller franchised assets in suburban markets that lack pricing power and have absorbed operating cost inflation. California’s Market Divide: Northern California’s tech-linked metros (San Jose, East Bay, Sacramento) show more stress than Southern California, where leisure demand remains resilient. Institutional Fallout ahead: Given the clustering around major flagged portfolios (Larkspur and Marriott-affiliated loans), expect loan sales, recapitalizations, or CMBS transfers through 2026-2027. Southwest Distress Texas: The Epicenter of Refinancing Risk: With over 70% of Southwest exposure, Texas is the region’s stress point—especially Dallas, Houston, and Austin, where high concentrations of CMBS debt originated during the 2016-2018 boom now approach maturity. Limited-Service Saturation and Margins: The distress curve is driven by margin compression rather than occupancy collapse. Labor and insurance costs are eroding NOI for franchised, limited-service hotels. Maturity Wall Alignment with National Pattern: The Juen 2027 concentration mirrors the West’s pattern, signaling that across both regions, the 2027-2029 refinancing window will likely trigger a broader restructuring cycle. Brand-Level Vulnerability: Brands like Travelodge, Hampton, and Holiday Inn Express dominate distress counts, signaling systemic exposure for select-service operations tied to midscale demand Northeast Distress Urban/Suburban-Weighted: Northeast distress is anchored by legacy business travel metros and secondary cities with aging hotel infrastructure. Structural Loan Risk—Mezzanine Exposure: At 22% mezzanine loans, the region shows one of the highest mezz debt shares of all regions, a key indicator of capital stack complexity and limited refinance flexibility. Cross-Brand Refinancing Risk: Even upper-midscale brands (Residence Inn, Courtyard, Hilton Garden Inn) are facing refinancing pressure. This suggests the issue is macro-financial (interest rate and NOI compression) rather than localized underperformance. Maturity Wall Alignment with National Trend: The June 2027 spike aligns with the cross-regional pattern, confirming that most of the U.S. hospitality sector will hit a refinancing wall in mid-2027. Midwest Distress Twin Maturity Cliffs: The Midwest will face two separate stress waves—a 2027 maturity surge driven by 2017 loan vintages, and a 2029 wave tied to later-cycle CMBS issuance. This will extend refinancing risk deeper into the decade. Limited-Service Saturation and Margin Pressure: High exposure to limited-service hotels (89%) creates systemic vulnerability. Persistent operating cost inflation (labor, utilities, insurance) continues to erode debt coverage, especially for older franchised assets. Diffuse Distress, Localized Pain: The Midwest’s pattern is broad and diffused, reflecting a slower bleed rather than a single collapse. Tertiary metros in Ohio and Kansas will face the most acute refinancing hurdles due to limited lender appetite. Economy and Extended-Stay Weakness: Both extremes of the market—low-end economy chains and older extended-stay brands—are struggling. This reflects a bifurcated recovery, limited ADR growth for economy properties and prolonged business travel softness for long-stay assets Southeast Distress Early Maturity Wall: The Southeast faces an earlier maturity surge in mid-2026, setting it up as the first regional test case for hotel refinancing outcomes. Florida, Georgia, and the Carolinas will likely see repricing events in early 2026 as institutional owners seek discounted refinances or sell debt at par losses. Diverse Market Exposure, Concentrated Risk: Distress is concentrated in Sunbelt metros (Atlanta, Charlotte, Raleigh, Nashville, and New Orleans). Many high-growth markets that overbuilt between 2015-2019. Furthermore, the highest exposure sits in suburban corridors and interstate-linked nodes (outside primary business districts) leaving them more exposure to cap rate expansion. Brand-level Stress Across Chain Scales: Distress extends from budget (WoodSpring, La Quinta) to upscale (Embassy Suites, Courtyard) — revealing that rate pressure and higher debt costs are sector-wide issues, not confined to lower-tier operators. Refinancing Complexity Rising: The 14% mezzanine share signals layered capital stacks, making workouts more complex. Many mezz positions likely originated during the 2020–2021 recovery wave, meaning borrowers now face constrained equity and debt yields. Outlook The overlap between maturity walls and rate resets implies distress will intensify into Q4 2025–Q1 2026. For many borrowers, refinance proceeds won’t cover existing debt balances, forcing capital calls, equity dilution, or hand-backs to lenders. As hotel owners navigate this environment, they will seek loan extensions, focus on operational efficiencies, and in some cases, target value-add properties that can be repositioned. Vulnerability to Continued Distress Consumer Credit Stress: Growing credit card delinquency rates, particularly among lower-income consumers, pose an ongoing risk to the economy hotel segment. Rising Expenses: Inflationary pressures and a tightening labor market continue to increase operating costs, eating into profit margins and pressuring hoteliers. Capital Expenditures (CapEx) Challenges: With thinner margins, some limited-service properties may defer necessary maintenance and renovations, leading to asset quality deterioration and longer-term risks. The increasing hotel delinquency market is a complex issue driven by high interest rates, inflation, and shifting consumer behavior. The impact is not uniform, with economy and extended-stay properties showing rising distress, while luxury segments remain relatively stable. The ability of individual markets to recover depends on local demand drivers and overall economic health. The delinquency trend highlights the broader stress in the commercial real estate market and is susceptibility to macroeconomic shocks. It underscores the importance of resilient capital structures and agile management strategies. The coming years will test the resilience of many hotel owners as they navigating refinancing hurdles and a more cautious consumer climate.

Mabelle Perez

Vice President

12/12/25

Austin, TX Industrial Market Report Q3 2025

Austin’s industrial market continues to soften as vacancy reaches a two-decade high of 13.3%, driven largely by an unprecedented wave of uncommitted big-box logistics development. Deliveries have outpaced demand for six consecutive quarters, and although 860,452 SF was absorbed in 25Q3, it was not enough to offset the rapid expansion of supply. Since 2021, inventory has grown by nearly 50%, with properties built during this period now making up 60% of all vacant space. Pre-leasing remains weak, with only 35% of the 10.4 million SF delivered in early 2025 leased prior to completion, while leasing activity has slowed sharply, leading to negative rent growth. With 7 million SF of uncommitted space still underway, vacancy is expected to rise further before stabilizing in late 2026. Key Findings Austin’s industrial vacancy rate has climbed to 13.3%. This sharp rise is driven by a massive wave of speculative big-box development and six consecutive quarters of deliveries outpacing absorption. Developers continue to build aggressively, with 15.3 million SF under construction, the fourth-largest total nationally. Nearly 7 million SF of this space remains unleased. Investors are targeting recently built industrial properties, which make up 40% of sales volume, and assets over 100,000 SF, accounting for 57% of transactions. Austin Industrial Supply & Demand Dynamics Source: CoStar Group, Inc. Austin Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.5% Current Population: 2,602,167 Households: 1,083,490 Median Household Income: $105,607 Austin demonstrates resilience and long-term growth potential despite a cooling in its labor market. Much of the newest job expansion has come from non-cyclical sectors such as education, health services, and government, which together account for 40% of the one million jobs created since August 2024. Austin’s business-friendly environment, absence of state corporate and income taxes, and deep talent pipeline continue to attract companies at a nation-leading pace, aiding population growth. Top Tenant Leases Source: CoStar Group, Inc. Zellerfeld Colt Recycling Base Power Avride Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Austin Industrial Construction Austin’s industrial construction pipeline remains one of the most active in the nation, with developers breaking ground on 8.7 million SF in 2025 amid confidence in long-term demand. Nearly half of this new space is unleased, reflecting a shift toward build-to-suit and owner-occupied projects, which now exceed historical averages. With 15.3 million SF underway, submarkets like Round Rock and Southeast Austin are driving much of the activity, supported by major projects like Samsung’s 2.8 million SF semiconductor facility. However, a mismatch between delivered building sizes and tenant requirements is contributing to rising availability, signaling elevated vacancy risk. Construction Starts (SF) Source: CoStar Group, Inc. Under Construction (SF) Source: CoStar Group, Inc. Austin Industrial Sales Sales across industrial are adjusting to rising vacancies and softening fundamentals, pushing asking rents down and motivating sellers to recalibrate pricing. This has opened the door for investors seeking long-term value, particularly in recently built properties, which made up 40% of sales activity. Suburban assets remain highly sought after, with stabilized buildings trading above $200/SF and non-stabilized properties in northern suburbs selling for $140–$170/SF. Institutional buyers have reemerged as major players, led by Ares Management, helping drive quarterly sales volume to $28.5 million. While sales slowed in 25Q3 amid inflation concerns, Austin remains one of the nation’s most actively traded industrial markets. Austin Industrial Sales Volume Source: CoStar Group, Inc. By the Numbers Q3 2025 | Source: CoStar Group, Inc. Sales Volume: $28.5M Price Per SF: $165 Cap Rate: 7.5% Vacancy Rate: 13.3% Rent Growth: (1.0%) Asking Rent Per SF: $14.26 Under Construction: 15.3M SF Delivered: 1.7M SF Absorbed: 860K SF

Austin, TX Multifamily Market Report Q3 2025

Austin’s multifamily fundamentals showed early signs of stabilization in Q3 2025, as strong leasing demand began to chip away at excess supply. The metro posted 5,700 units of absorption, outpacing 3,800 deliveries and pulling the vacancy rate down to 14.5%, its lowest level since early 2024. While asking rents fell 4.3% year-over-year, one of the steepest drops nationally, the lingering effects of oversupply and aggressive concessions still weigh on the market. However, concessions remain widespread, particularly in higher-end assets where vacancy has begun to tighten, in turn aiding occupancy. With absorption consistently ranking among the top three U.S. markets, Austin’s rent and vacancy trends indicate the market may have reached an inflection point, shifting from oversupply toward gradual stabilization. Key Findings Vacancies decreased by roughly 60 basis points since Q2 2025, paired with a 41% drop in quarterly deliveries, signaling the beginning of a long-awaited pullback in supply. Rent fell 4.3% year-over-year, the sharpest decline among major U.S. markets, driving the average asking rent to $1.6K per unit. Despite $205M in sales, well below pre-pandemic levels, the pause in upward cap rate movement suggests the market is reaching a valuation floor, setting the stage for renewed trading momentum as vacancies compress further. Austin Multifamily Supply & Demand Demographics Source: CoStar Group, Inc. Austin Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.5% Current Population: 2,598,750 Households: 1,081,706 Median Household Income: $105,335 Austin’s economy remains resilient despite a cooling labor market, with job growth increasingly anchored by stable, non-cyclical sectors. Education, health services, and government now account for 40% of the 17,300 jobs added since August 2023, aiding offset softness in the tech industry, which decreased by 5% over the past year. The metro’s strong fundamentals, influenced by expansions from Samsung and Tesla, a business-friendly climate, and a deep talent pipeline from UT Austin, continue to attract employers and residents alike. With 1/4 of the population between 20 and 34, Austin’s young, educated workforce supports sustained economic and income growth, reinforcing its position as one of the nation’s fastest-growing and most dynamic metros. Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Austin National Accolades Source: Opportunity Austin 3rd Highest Labor Force Participation 4th Highest Educational Attainment 7th In Startup Density Austin Multifamily Construction Construction activity in Q3 2025 continued to cool as Austin moved past the peak of its development cycle. Over the past 12 months, developers completed roughly 21,000 units, while quarterly deliveries fell to 3,800, marking a second consecutive slowdown and a broad pullback in starts. The construction pipeline now totals about 16,100 units, just over 4% of existing inventory. Elevated vacancies and normalized lending conditions have sidelined many projects, leading to the fewest new starts since 2011. As supply pressure finally eases, this slowdown is aiding in the rebalance of fundamentals and setting the stage for a gradual market recovery. Units Construction Starts Source: CoStar Group, Inc. Units Under Construction Source: CoStar Group, Inc. Austin Multifamily Sales The sales market showed signs of growth in Q3 2025 driven by loan maturities and workouts. Velocity ticked upwards but still remains below pre-pandemic levels, with most buyers seeking to capitalize on dislocated pricing. Quarterly sales volume reached roughly $205 million, with pricing averaging $224,000 per unit and cap rates holding steady around 5.5%, suggesting investors believe the market may be nearing a floor. Most transactions were focused on Class A assets in northern suburbs like Round Rock and Georgetown, where population growth and long-term fundamentals continue to attract institutional capital. With the supply pipeline tightening and performance metrics showing resilience, confidence is increasing in Austin’s multifamily market. Austin Multifamily Sales Volume Source: CoStar Group, Inc. By the Numbers Source: CoStar Group, Inc. Sales Volume: $205M Price Per Unit: $224K Cap Rate: 5.5% Vacancy Rate: 14.5% Rent Growth: (4.3%) Asking Rent Per Unit: $1.6K Under Construction: 16.1K units Delivered: 3.8K units Absorbed: 5.7K units

Richard Waterhouse

Senior Associate

10/27/25

Houston, TX Healthcare Market Report Q3 2025

Houston’s healthcare sector serves as a critical engine of economic growth, anchoring the city’s broader diversification efforts beyond its traditional energy base. The Texas Medical Center (TMC), the world’s largest medical complex, employs over 100,000 people and draws patients globally, and with the TMC3 life sciences campus under construction, Houston is positioning itself as a major healthcare hub. Combined with the metro’s relatively affordable cost of living, high median household income, and strong talent pipeline from local universities, Houston’s healthcare ecosystem is expected to remain a cornerstone. Highlights Medical office buildings remain attractive, but looming loan maturities and higher refinancing costs motivate some owners to sell rather than refinance. Rising vacancy rates and slower lease-up periods are beginning to weigh on property performance and valuations. While construction is currently limited, Houston’s history of heavy development cycles raises long-term risks of oversupply compared to peer markets like Austin and San Antonio. Houston Demographics Source: CoStar Group, Inc. Unemployment Rate: 4.4% Current Population: 7,883,927 Median Age: 34.3 years Household Income: $81,844 Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Rents Average asking rents rose from $26.96/SF in Q1 2022 to $28.68/SF in Q3 2025, marking a gain of roughly 6.4%. While these increases appear modest on a quarterly basis, the trend highlights consistent upward momentum, even as traditional office continues to face record-high vacancy rates and steep concessions. This measured, incremental rent growth reflects the strong underlying fundamentals of healthcare real estate in Houston, supported by the city’s rapidly expanding medical ecosystem anchored by TMC and demand from providers who require long-term, strategically located facilities. Vacancy MOBs have held up better than traditional office, though vacancy has inched up from 21.0% in Q1 2022 to 28.1% in Q3 2025 as new supply and repositioned space entered the market. This rise masks stronger underlying fundamentals: job growth in ambulatory healthcare rose about 4% over the past year, outpacing overall office-using employment and ensuring sustained demand from providers tied to Houston’s expanding healthcare ecosystem and the Texas Medical Center. Construction With the TMC3 life sciences campus under construction, Houston is positioning itself as a national leader in biotechnology and commercial research, aiming to rival innovation hubs like Cambridge and San Francisco. The project is projected to generate more than 26,000 jobs and billions in economic benefits, while also catalyzing additional private investment in research facilities, labs, and mixed-use developments. Beyond TMC3, multiple large-scale life sciences and healthcare-oriented developments are underway, further entrenching Houston’s role as a hub for medical advancements. Houston Healthcare Sales Houston’s medical office investment market has remained a relative bright spot, drawing steady interest from private buyers and specialized funds. Sales volume has been resilient, with activity accelerating in 2025 after a slower 2024. Transactions totaled $55.4M in Q3 2025, the highest quarterly tally in more than two years, while pricing has held firm near $195/SF. MOBs continue to trade with compressed cap rates in the 7%–8% range, and premier properties can achieve sub-7% yields due to long-term leases and stable tenancy from healthcare providers. Recent examples, such as the Grand Parkway Professional Building trading at a 7.1% cap rate, highlight investor appetite for reliable income streams tied to Houston’s expanding healthcare base. By the Numbers Q3 2025 | Source: CoStar Group, Inc. Sales Volume: $55.4M Cap Rate: 7.25% Price Per SF: $195 Vacancy Rate: 28% Rent Growth: – Asking Rent Per SF: $28.67 SF Under Construction: 97,552 SF Delivered: 75,135 SF Absorbed: (113,114)

No Anchor, No Problem: Unanchored Strip Center Report

Unanchored strip centers—those smaller, convenience-driven retail properties ranging from 10,000 to 50,000 square feet—are stealing the spotlight in 2025. They might not have a big-name grocery chain or anchor tenant, but they’re more than holding their own. With tight retail supply and resilient consumer spending, these centers are commanding high occupancy, steady rent growth, and increased investor interest. Once seen as a secondary retail type, their adaptability, neighborhood-focused tenant mix, and ability to handle turnover with ease have redefined them as dynamic, core retail assets. This report breaks down the numbers behind this transformation, analyzing performance from coast to coast. Performance Overview Consumer Spending Fuels Growth The overall outlook for retail in 2025 is positive, supported by resilient consumer spending, easing financial pressures, and productivity gains. With job growth and rising wages continuing to put money in shoppers’ pockets, consumer spending, the lifeblood of retail, is strong despite uncertainties in the market. The Metrics: Occupancy and Rent Growth Proving that you don’t need a heavyweight tenant to be a heavyweight contender. Retail space is hard to come by in 2025, with national vacancy at historically low levels, around 4% to 5%. Unanchored strip centers, while slightly trailing their grocery-anchored counterparts, average a 4.5% vacancy rate. Occupancy at unanchored strip centers is holding steady and likely contributing to the overall tightness in the market. Power centers see a vacancy rate of 4.3% and enclosed malls 8.7%. Unanchored strip retail resilience stems from a few key strengths: • Demand for high-quality retail space that far exceeds supply • Resilience of service-oriented and local businesses • Flexibility to accommodate a diverse tenant mix In today’s constrained development environment, where limited new retail construction is coming online, existing unanchored strip centers are well-positioned to capture demand and maintain high occupancy. These same fundamentals are fueling steady rent growth. The average asking rent for strip centers rose from $17.10 in Q1 2019, to $20.85 in Q2 2025, a clear signal of the value tenants place on visibility, convenience, and accessibility. With landlords in a strong position amid elevated occupancy and limited competition, unanchored centers are expected to meet or slightly exceed the projected 2% national retail rent growth rate for 2025. Taking Center Stage Investment Momentum Builds Investor interest in unanchored strip centers has reached new heights. At the heart of their appeal is the relatively low acquisition cost, steady cash flow, and flexibility to adapt leasing strategies to local demand. While private investors have long dominated this space, institutional capital is increasingly entering the fold. Large funds and institutions are drawn to the sector’s straightforward investment and potential for scale, particularly in today’s yield-constrained environment. A growing focus on value-add opportunities is further fueling momentum, as investors seek to unlock upside through improved management, strategic leasing, and targeted renovations. Many of these assets, historically held by private owners, offer room to reposition rents, optimize tenant mixes, and enhance operational efficiency, better positioning them for revenue growth and broader investor appeal. Data shows that cap rates for unanchored strip centers in Q2 2025 average: • Class A: 6.9% • Class B: 7.2% By contrast, grocery-anchored retail centers show slightly lower cap rates in Q2 2025: • Class A: 6.1% • Class B: 5.4% This shift is supported by cap rate trends that suggest healthy return expectations. As of H2 2025, cap rates for unanchored strip centers average 7.0%. These yields remain generally higher than those for grocery-anchored centers, which average 5.7%, reflecting both the slightly higher perceived risk and the value-add potential unanchored centers offer. Many investors are capitalizing on this spread by pursuing active management strategies to boost NOI through improved leasing and repositioning efforts. These assets are increasingly viewed as stable alternatives to other asset classes such as office and multifamily, where returns may be compressing in many markets. However, the segment is not without nuance. Some unanchored centers, particularly those overlapping with categories like freestanding retail or housing vulnerable tenants such as pharmacies and discount retailers, may face short-term challenges. Closures and consolidation in these categories could temporarily raise vacancy rates, primarily in centers with concentrated exposure. Yet, landlords able to backfill with more resilient, service-oriented tenants often see limited disruption. Retail’s Quiet Climbers Trends in the Unanchored Space Resilience of Local Businesses Small, entrepreneurial “mom-and-pop” tenants continue to be a stabilizing force in unanchored strip centers. Their strong personal investment, adaptability, and long-term commitment make them reliable and valuable tenants. Rise of Experimental and Service-Oriented Retail Fitness studios, salons, medical clinics, and diverse restaurants are increasingly occupying space, reflecting consumer demand for convenience and in-person services less vulnerable to e-commerce disruption. Omnichannel Integration Retailers are leveraging unanchored centers as key touchpoints for e-commerce fulfillment—facilitating in-store pickups, returns, and last-mile logistics. These centers help bridge online and physical retail in a consumer-centric way. Regional Deep Dive: Standout Markets of Unanchored Strip Retail West Rebounding with strong, urban core demand in H1 2025 • Los Angeles: $239M • San Diego: $235M • Seattle: $110M • Vegas: $100M Southwest Stable growth with high pricing resilience in H1 2025 • Dallas: $324M • Houston: $175M • Phoenix: $120M • Denver: $113M Midwest Stabilizing, but still in early recovery • Chicago: $334M in 2024, $93M in H1 2025 Northeast Pricing in strength returns amid cautious optimism • NYC: $336M in 2024, $70M in H1 2025 • Boston: $155M in 2024, $48M in H1 2025 Mid-Atlantic Reacceleration led by D.C. and institutional capital • D.C.: $212M in 2024 (3x 2023), $100M in H1 2025 Southeast Consistently leads in volume and momentum throughout H1 2025 • Nashville: $111M • Lexington: $137M • Jacksonville: $113M • South Florida: $100M • Atlanta: $157M • Tampa $131M Regional Deep Dive: Mid-Atlantic The Mid-Atlantic unanchored strip center market entered a transitional phase in 2024, showing signs of recovery after a volatile few years. Total transaction volume reached $494 million for the year—a 6% increase over 2023—fueled by a dramatic 925% surge in portfolio sales, even as individual deal volume declined 11.5% year-overyear. Despite a soft pricing environment in late 2024, with the average price per square foot dropping to $139 and cap rates rising to 9%, the market gained traction heading into 2025. In the first half of 2025, volume reached $243 million and pricing rebounded sharply to $219 per square foot, indicating a flight to higher-quality assets. According to Ed Laycox, EVP of Single & MultiTenant Retail at Matthews™, the Mid-Atlantic remains “a premier investment geography for any investor type,” owing largely to strong demographic trends. “The robust population growth in Virginia and the Carolinas has only fueled the investment appetite more,” he explains, noting that REITs, private equity firms, and family offices have all been especially active. The D.C. Metro and Secondary Market Dynamics In 2024, performance was led by the D.C. metro, which posted $211.8 million in volume–more than tripling its 2023 total and making it the clear focal point for regional investor interest. Laycox attributed the sharp pricing rebound in D.C. largely to replacement cost dynamics. “The cost to construct a new space for a tenant is very prohibitive in today’s market–the D.C. market in particular,” he says. “When you can buy a center 50-60% below replacement cost and still get a market cap rate, your future downside is limited.” This affordability relative to new construction is also helping drive retail vacancy rates in unanchored strip centers to all-time lows. Richmond also emerged as a bright spot, matching its prior peak with $52 million in volume. Meanwhile, markets like Philadelphia and Baltimore saw pullbacks, and Pittsburgh, Harrisburg, and Norfolk remained relatively muted. Small investors are moving to secondary markets of the Mid-Atlantic, chasing yield and lower price per square foot. Early 2025 data shows the D.C. metro leading the region with over $100M in transactions year-to-date, while Philadelphia is growing with $65M already transacted in H1 2025, already above 2024 volume. Shifting Capital Composition and Tenant Demand The capital composition of the market also began to shift. Institutional investors, after net selling nearly $97 million in 2024, returned in force in early 2025 with $55.7 million in net acquisitions— signaling renewed confidence in Mid-Atlantic retail opportunities. REITs were also active buyers in 2024, posting their largest net inflow in over a decade at $65.2 million. However, they have yet to record any deal activity in early 2025, suggesting a strategic pause or wait-and-see approach. As Laycox puts it, “the REIT and institutional investors are focused on the growth markets as they view these areas as opportunities for rent growth.” Laycox also notes a significant shift in tenant mix and demand patterns across the region. Big and medium-box spaces are increasingly being filled by experiential retailers and medical users such as “kids’ play concepts, bounce zones, urgent cares, and outpatient surgery centers.” Asset Performance: Urban Infill, Suburban, and Value-Add Urban infill and suburban strip centers are performing well across the region, buoyed by the replacement cost advantages and tenant demand trends Laycox highlights. However, he points out that value-add opportunities are rare. Because retail vacancy is low just about everywhere in the Mid-Atlantic, finding a value-add investment is VERY difficult. The ones that are out there generally have some challenging issues or are priced too high—or both. Altogether, these trends point to a market in the early stages of reacceleration, with institutional and private capital leading the way and investor sentiment steadily improving. Regional Deep Dive: Midwest The Midwest unanchored strip center market began showing signs of stabilization and recovery in the second half of 2024, following a two-year slump from the post-pandemic peak. After substantial yearover-year declines through 2023 and early 2024, quarterly sales volumes rebounded sharply–up 50.4% YOY in Q3 and 82.9% in Q4. The year ended with $986 million in total sales, primarily driven by individual asset trades, which comprised more than $950 million of the total. As of H1 2025, $517 million in deals have traded. According to Patrick Forkin, SVP at Matthews™, this surge is “a strong signal that buyer confidence is returning,” underscoring a shift in market sentiment. While transaction activity is on the mend, the market remains well below its 2022 peak of $1.75 billion. Still, pricing trends are encouraging. The average price per square foot is $145 as of H1 2025, and Class A assets record $310/SF, reflecting a clear flight-to-quality. Cap rates rose to 8.2% in Q4 but decreased to 8% as of Q2 2025. Forkin explains that while these elevated cap rates “reflect continued risk pricing, they’re also driving interest from yield-focused private buyers who dominate the region.” He notes that bid-ask spreads are narrowing and that “high-quality deals are moving,” especially in core cities like Chicago, Milwaukee, Indianapolis, and St. Louis. While the cap rate spread between premium and value assets has widened, the volume and pricing data suggest growing buyer appetite, particularly for well-located or stabilized properties. Supply Constraints and Owner Behavior The region’s inventory remains tight, largely due to the ownership profile. “The majority of these properties are privately owned by long-term holders who aren’t under pressure to sell,” Forkin explains. “When sellers believe they’re in a strong pricing window, they’re realistic and ready to transact. Otherwise, they’re comfortable holding for longer.” This dynamic has kept competition strong for quality assets and limited the flow of new listings to the market. Leasing Momentum Driven by Services and Restaurants On the leasing front, service-oriented users have taken the lead. Forkin highlights tenants like medical, dental, urgent care, pet services, salons, and fitness centers as the primary drivers of demand. “These tenants are prioritizing visibility and accessibility over co-tenancy with a traditional anchor,” he notes. Additionally, restaurant demand has increased, with fast casual and local operators expanding in suburban locations offering patio space and drive-thru capabilities. National credit tenants are still active, but the real change has been the rise of experiential and neighborhood-serving users over traditional soft goods. Private Capital Leads, Institutions More Selective ate investors have carried the momentum through the downturn and into the early stages of recovery, accounting for nearly 90% of volume in 2023 and 2024. Institutional and REIT buyers, while still present, have become more selective. “Capital hasn’t disappeared—it’s just more selective,” Forkin says, pointing to continued interest in large metros like Chicago and Minneapolis. He emphasizes that institutional capital is still drawn to the Midwest’s value proposition: “Cap rates here are often 100 to 150 basis points higher than in the Sunbelt or on the coasts.” However, he also notes that many assets in the region are smaller and individually traded, which “doesn’t always match the acquisition strategies of larger institutional players.” Cross-border capital, once a small but steady contributor, has almost entirely exited the market since 2020. If private capital continuous to lead and macro conditions stabilize, the Midwest strip center market is well-positioned for a more sustained recovery in the second half of the year. Suburban Strength and Urban Challenges Suburban strip centers are currently outperforming. “Suburban centers with strong demographics and daily-needs tenants are leading in terms of performance and liquidity,” Forkin affirms. These assets typically offer features like ample parking, high visibility, and flexible layouts—ideal for today’s tenant base. Urban infill assets, while still appealing for their long-term potential, face more immediate headwinds. Forkin cites reduced office occupancy, rising taxes, and population outflows in some cities as contributing factors to softened demand. “Several headwinds have impacted performance in recent years,” he notes, even as these assets maintain strategic value in dense, high-barrier markets. Focus on Stabilized and Light Value-Add Plays New construction remains limited, keeping investor focus on stabilized or lightly value-add assets. “Most investor activity is focused on centers where there’s upside through lease-up, renewal, or modest cosmetic improvements,” Forkin observes. The common thread? “The ability to support modern tenancy needs is key.” Regional Deep Dive: Northeast In 2024, the unanchored strip center market in the Northeast began a clean and measurable recovery after a turbulent 2023. Total transaction volume for the year reached $576.7 million, up 12.9% year-over-year, with a particularly strong Q4 showing $171.2 million, a 43.2% YOY increase. This rebound was driven largely by individual property sales, which totaled $526 million for the year–up 15.5% YOYwhile portfolio activity remained limited, accounting for just $50.7 million. In 2025, pricing strength returned. approximately $206.3 million in deals traded in the first half. While the average price per square foot increased to $201 in Q2, up 4.5% YOY and 16.4% above year-ago levels. Confidence among Northeast buyers remains strong despite modest growth, as investors pay premiums for high-quality, well-located centers. Joanna Manfro, Vice President at Matthews™ explains, Confidence stems from the Northeast’s historical resilience in all economic climates, often acting as a ‘flight to safety’ during turbulent markets. She notes that market downturns in the region tend to be less severe, often followed by quicker recoveries compared to trend-driven areas. This consistent historical performance continues to support buyer optimism, even amid broader economic uncertainty. Strength in Leasing and Pricing Following a strong finish in 2024, investor activity remained measured but focused in the first half of 2025. While overall transaction volume moderated, particularly in Q2, the market continued to reflect a selective but steady flow of capital targeting high-conviction opportunities. A total of 34 properties traded in H1 2025, with the majority occurring in Q1, underscoring a continued appetite for quality assets despite macro uncertainty. Cap rates held firm at 7.3%, unchanged from the prior year, suggesting sustained competition and disciplined pricing. Leasing fundamentals across the Northeast continue to support firm pricing. “The Northeast’s high barriers to entry and consistent demand generally support higher PPSF,” Manfro notes. She points out that while rent growth may be steady rather than rapid, the region’s lower risk profile and historical stability “justify the pricing for many investors,” helping to sustain elevated values. Early 2025 Momentum and Buyer Trends Looking into early 2025, momentum has continued, though at a more tempered pace. Investor appetite remains active, with private capital continuing to drive most activity. However, Manfro states that the buyer pool is broadening. “There’s increasing cross-regional interest, notably from California investors seeking stability amidst their market dynamics,” she says. “Some Southeast investors are also evaluating the Northeast for slightly better yields,” viewing the region as less competitive, but still fundamentally Sales Volume Source: RCA $1B strong, an alternative to their home markets. Institutional buyers also remain engaged, drawn by the Northeast’s long-term reputation for stability. Market Hotspots and Evolving Demand Certain submarkets within the Northeast are drawing heightened investor attention. “Suburban urban cores near major cities are attracting significant investor interest,” Manfro explains, highlighting areas such as Westchester, NY and Fairfield, CT, Northern New Jersey, NASA and Suffolk County, NY and Boston’s MetroWest region inside the 495 Corridor. These locations have “not only weathered the post-COVID landscape but have sustained growth and investor interest due to their appealing live-work-play lifestyle and accessibility to urban hubs.” Necessity-based retail remains the cornerstone of demand across the region. Manfro emphasizes that essential services—food, health, and fitness— continue to underpin stable occupancy, but she also sees emerging shifts. “The resilience of these core sectors suggests continued strong occupancy alongside potential growth in experiential retail and services catering to evolving suburban lifestyles,” she notes, pointing to a gradual diversification in tenant mixes as suburban consumer preferences evolve. Regional Deep Dive: Southeast The Southeast unanchored strip center market surged in 2024, emerging as one of the most active regions nationwide. Total transaction volume reached $2.14 billion–a 33.2% year-over-year increase–driven by robust growth in both individual and portfolio-level trades. Pricing metrics also strengthened, with the average price per square foot climbing to $230 and cap rates compressing to 7.1%, reflecting strong demand for neighborhood retail across the Sunbelt. That momentum has carried into 2025, with $1.5B closing as of Q2. Pricing rose further to $264 per square foot, though cap rates have ticked up to 7.3% amid recalibrated risk premiums and tighter financing conditions. According to Jeff Enck, Senior Vice President at Matthews™, the sustained surge in activity is no surprise. “Historically, the Southeast has imported a lot of capital from the West Coast and Northeast due to higher yields,” Enck explains. “That gap is narrowing, but the Southeast remains relatively attractive in terms of cap rates and price per square foot. Migration to metros like Miami, Atlanta, and Charlotte continues to rise–driven by job growth, business-friendly policies, and no or low income taxes. These factors are translating into persistent demand for essential-service retail.” Market Leaders and Regional Hotspots Miami/South Florida led all Southeast metros in 2025 with $283 million in sales, followed by Atlanta at $160 million, underscoring investor confidence in major gateway markets. Vacancy rates across the Southern U.S. remained exceptionally low, averaging under 4%, with standout markets like Nashville, Miami, and Raleigh/ Durham posting vacancies below 3%. The Carolinas, in particular, have emerged as a national hotspot for retail, supported by high occupancy (around 97%) and population growth across both urban and suburban corridors. Tourism-driven demand, especially in Florida’s coastal cities, further enhances the region’s appeal. Nearly every major MSA in the Southeast is in high demand. We’re seeing the most heat in high-income suburbs and dense, urban infill locations–particularly South Florida. That’s where some speculative pricing has emerged, but it’s really limited to those rare, high-end corridors. Shifting Capital Stack and Competitive Dynamics Private investors remained the dominant force in 2025, accounting for 79.4% of acquisitions, but the tide is beginning to shift. Private investors have become net sellers, prompted by refinancing pressures, maturing debt, and capital market headwinds. REITs, by contrast, stepped in aggressively, acquiring $141 million in 2024 and $136 million in H1 2025. Their share of acquisitions now hovers near 20%, signaling a growing appetite for high-quality, yield-generating strip retail. Enck says, There are still very few true institutions acquiring unanchored retail centers. Curbline is a rare exception–they’re replacing their entire portfolio of grocery and power centers with strip centers. Meanwhile, quasi-institutional groups and funds are focusing on well-located strips that trade below replacement cost and offer long-term upside. The challenge? There just aren’t enough quality properties to go around. Buyer demand continues to outpace quality supply, particularly for centers offering stable tenancy, belowmarket rents, or redevelopment potential. Enck notes that while public and private interest is rising, buyers are struggling to compete–especially in a landscape where top-tier assets are increasingly scarce. Interest Rate Pressure and Financing Trends High interest rates have reshaped the market’s financing dynamics. “Treasury yields have remained fairly flat in recent quarters, with some short-term dips,” Enck observes. “Savvy buyers have been able to lock in opportunistic rates, but in general, we’re seeing fewer deals close unless the asset is high quality and offers long-term stability.” Most financing is now coming from credit unions and life insurance companies. CMBS lending, once a staple of strip center financing, has all but dried up for these smaller assets. “Buyers are largely steering clear of short-term; high-leverage capital. Instead they’re targeting Class A or well-located Class B properties that pencil out under positive leverage. Class B and C assets are still trading, but only when they deliver yields above borrowing costs,” he adds. Tenant Mix and Leasing Fundamentals Tenant fundamentals remain strong in the Southeast, with unanchored strip centers attracting a growing mix of convenience, dining, and medical uses. “Coffee is still in growth mode,” Enck says, “Along with both franchise and local restaurants, urgent care clinics, dental offices, and veterinary users.” This evolving tenant-mix has helped keep demand high for available space, driving steady rent growth and keeping vacancy tight. In many cases, these newer tenants are backfilling older vacancies and stabilizing income streams, particularly in fastgrowing suburban trade areas. Outlook: Stability and Strategic Positioning The Southeast remains one of the most liquid and competitive regions for unanchored strip center investment in mid-2025. Private capital continues to drive the market, but institutional and REIT activity is rising. The investor profile is shifting toward buyers with long-term hold horizon and value-add strategies centered around demographic tailwinds and essential-service tenancy. “Southeast retail continues to offer compelling fundamentals,” Enck concludes. “You’ve got population growth, tax advantages, a strong tenant base, and pricing that still looks attractive relative to other regions. That’s a powerful combination–and one that keeps buyers coming back.” Regional Deep Dive: Southwest The Southwest unanchored strip center market demonstrated clear signs of stabilization in 2024 following the sharp downturn in 2023. Total transaction volume for the year reached $1.91 billion, up 12.9% year-over-year, driven by consistent individual property trades, which totaled nearly $1.77 billion. While Q4 volume declined 19.2% yearover-year–likely due to macroeconomic caution or closing delays–the full-year uptick and a 286% year-over-year surge in portfolio sales pointed to a reemerging wave of institutional interest. Early 2025 activity confirms renewed momentum, with $1.1B in transaction volume and 142 properties closed or pending as of Q2 2025. According to Grayson Duyck, Vice President and Associate Director at Matthews™, 2025 has been off to a roaring start, “we’ve been the busiest we’ve ever been, in Dallas specifically.” Pricing dynamics in 2025 are particularly strong. The average pricing rose 11.2% year-over-year to $214 per square foot. This pricing strength was accompanied by a 11.2% year-over-year increase in total square footage traded. Cap rates have decreased 20 basis points over the last year to 7%, reflecting broader repricing trends. Yet in 2025, cap rates dipped to 7% by Q2, indicating increased bidding activity for stabilized products. Duyck noted that investor psychology has shifted compared to a year ago. “People have gotten to the point where they’ve accepted market conditions and want to get deals done,” he explains. “Last year, buyers and sellers were far apart. Now, expectations have met the market.” Capital Flows and Investor Profiles The composition of capital in the Southwest continues to evolve. Institutional investors returned in force in 2024 with $84.7 million in net acquisitions but have reversed course in early 2025, registering $95.3 million in net dispositions–likely signaling profit-taking amid shifting macro conditions. REITs remained more cautious, contributing modest net acquisitions of $29.4 million in 2024 and $19.7 million in net dispositions in 2025 as they selectively reposition their portfolios. Private capital remains the most active and agile investor group, ending 2024 with a moderate $56.2 million in net outflows before returning to net buyer status in early the first half of 2025 at $110.2 million. Duyck says, Private owners are more willing to play ball. They don’t need to hit exact return metrics like institutions do. They can move faster and make decisions quicker, which gives them an edge in competitive environments. Tenant Trends and Leasing Fundamentals Southwest tenant demand remains robust, specifically in major Texas metros. Dallas, in particular, is seeing outsized activity from food and service users. “Restaurants are the most active in the market right now–especially franchise concepts and freestanding quick-service formats like Cava,” Duyck notes. “We’re also seeing a lot of boutique f itness–class-based models like pilates, yoga, barre, are outperforming the big-box gyms.” Many of these tenants are adapting to high rents by shrinking their footprints. “To combat higher costs, tenants are taking less space. They’re still doing strong business, but they’re being smarter with layouts,” Duyck adds. Strong regional brands continue to show a preference for well-located, unanchored centers–even over grocery-anchored formats in some cases. “These centers on busy streets are still pulling in great traffic,” he says. “Tenants are seeing the same performance they would in larger centers, without the institutional lease structure.” Drive-thru configurations also remain in high demand, although Duyck sees caution on the horizon. “Drive-thru space is red-hot,” he says. “But long-term, we’re going to see questions emerge around whether tenants can generate enough volume to justify the rent. It’ll be interesting to see how it plays out.” Construction, Constraints, and Regional Growth Despite strong leasing, development activity remains restrained. “Construction costs are still high, and vacancy rates are extremely low, especially in Dallas, where retail vacancy is under 4%,” Duyck explains. “Because there isn’t much new construction, rents have gone up. It’s getting very competitive.” This imbalance between supply and demand is driving renewed suburban expansion. “Collin County, Frisco, Prosper, Forney–those northern suburbs are booming,” Duyck says. “High-net-worth families are moving out of the city. Places like Kaufman County and Walsh Ranch–these thousand-acre master-planned communities–are drawing big interest.” Kaufman County has been recognized as the fastest-growing county in Texas and one of the fastest-growing counties in the nation. Austin also remains a bright spot for growth, thanks to its booming tech sector and rapid population gains. Along with Phoenix and DFW, Austin continues to be a top market for tenant absorption and new development, particularly for flexible, service-oriented retail formats that cater to growing suburban populations. Sales Strategy and Market Caution While pricing remains strong, Duyck advises that buyers need to approach new construction deals with caution. “Some of these centers have inflated NOI because of generous tenant improvement packages. The rents being paid now aren’t always replaceable,” he notes. “Exchange buyers, in particular, don’t always account for that. If you’re buying a deal, make sure the rent is sustainable in the long run.” Outlook: Normalization and Competitive Position The Southwest market appears poised for steady growth in 2025. Institutional participation may remain selective, but private capital is showing clear signs of renewed conviction. With pricing stabilizing and buyer expectations realigning, deal velocity is expected to improve–especially for well-located, Class A assets. “There’s so much growth and population expansion across the region,” Duyck concludes. “Investors have adjusted to the new normal, and we’re finally seeing that translate into real transaction volume. Everyone’s back at the table.” Regional Deep Dive: West The year 2025 is proving to be a pivotal recovery year for the Western U.S. unanchored strip center market. Total quarterly transaction volume reached $588M in Q1 2025 and $363M in Q2 2025, together the first half of the year represents close to a 40% year-over-year increase. Pricing trends further underscore renewed confidence: the average price per square foot reached $301, while cap rates compressed to 6%, marking a significant shift from the wider spreads seen in 2023. These metrics suggest growing competition for limited quality assets and optimism around income durability and long-term upside. According to Conrad Sarreal, First Vice President and Director at Matthews™, several structural and economic tailwinds are fueling the region’s momentum. West coast multi-tenant retail continues to experience aggressive bidding and cap rate compression–often 50-100 basis points tighter than similar assets elsewhere. California metros benefit from a deep pool of both private and institutional capital, particularly high-net-worth individuals and family offices. In cities like Los Angeles and San Francisco, cap rates can dip as low as 4.5% to 5.5% for prime locations. Metro Performance and Investor Focus Performance across key Western metros reinforces this recovery narrative. Los Angeles led the region with $625 million in 2024 transaction volume and posted a strong $249 million start in the first half of 2025, highlighting its central role as a gateway for both domestic and international capital. San Diego, Las Vegas, and Seattle also posted year-over-year gains in 2024 and 2025, underscoring investor interest in metros with strong demographic and economic fundamentals. Urban core strip centers in these cities continue to attract significant capital thanks to tight vacancy (96%+), rising rents, and an evolving tenant mix that reflects modern consumer preferences. “These centers are poised in dense, high-traffic areas near affluent neighborhoods and transit hubs,” Sarreal says. “West Coast multi-tenant centers increasingly feature experiential tenants–boutique fitness, craft breweries, and specialty services–now making up 1530% of new leases in 2025, especially in places like Los Angeles and Seattle.” Meanwhile, performance in San Francisco and Sacramento remained relatively muted. San Francisco has seen transaction volume fall sharply from its 2022 peak, with just $46 million recorded year-to-date, as investors remain wary of broader economic headwinds and a sluggish return-to-office trend. Urban Core Resilience and Market Fundamentals The structural strength of urban strip centers continues to set the western region apart. Development in dense urban cores remains constrained by sky-high costs and regulatory complexity. In cities like Los Angeles and San Francisco, urban retail development can cost $450$650 per square foot, while California’s CEQA regulations further slow the pipeline. As a result, new supply remained limited in 2024, adding just 0.2%0.5% of inventory in primary markets–boosting pricing power and tightening already low vacancies. “Despite population shifts, West Coast metros still benefit from high-income consumers and strong retail demand,” Sarreal notes. “With average occupancy rates between 95%-96%, tenant stability and consumer spending reinforce premium pricing.” He points to the concentration of wealth in cities such as San Francisco ($160,000 median household income), San Jose ($150,000), and Seattle ($120,000) as key drivers of tenant performance and rent growth. Capital Composition, Institutions Return, REITs Retreat Institutional investors have reemerged as key buyers, accounting for 11.9% of acquisitions in 2025 after remaining largely on the sidelines in 2023. This renewed activity signals rising confidence in the sector’s income durability and long-term upside. REITs, by contrast, have become net sellers, representing over 20% of dispositions so far this year. Private investors still dominate overall, but the buyer mix is shifting. “Secondary markets like Sacramento and Fresno are seeing growing interest from family offices and 1031 buyers,” notes Sarreal. “These investors are pursuing value-add players like lease-up or repositioning and are drawn by higher yields and lower pricing relative to urban cores.” Secondary and Tertiary Market Divergence While primary urban markets continue to anchor investment volume and pricing stability, secondary and tertiary markets are carving out their own roles. Sales Volume Source: RCA $4B Secondary markets such as Sacramento, Tacoma, and Fresno are gaining momentum with 10-12% investment growth, fueled by private capital and affordability-driven migration. Tertiary markets, including Bakersfield and Spokane, showed 7-8% growth, attracting smaller private investors willing to accept higher yield and risk exposure. Cap rate spreads illustrate the divergence: primary markets trade in the 4%-5% range, while secondary markets offer yields of 5.5%-6.5%, and tertiary markets reach 6.5%-8%. Outlook: A Repricing Moment with Strategic Opportunity Urban cores remain the benchmark for stability and institutional capital, while smart money increasingly targets secondary markets offering favorable yield spreads relative to borrowing costs. Tertiary markets remain opportunistic, but speculative bets. “Urban hubs provide long-term stability, but the real growth story may be in the secondary markets,” Sarreal concluded. “They balance risk and reward more effectively and offer a yield premium that looks increasingly attractive given where debt costs are.” As pricing stabilizes and buyer composition diversified, Western unanchored strip centers are once again positioned as a competitive asset class–both for core investors and value-driven players seeking durable income in a constrained supply environment.

Self-Storage Market Trends: Southeast Transaction Activity

From 2020 through mid-2025, the self-storage sector has experienced an evolution, one driven by pandemic-era dislocation and later tempered by economic recalibration. Initially propelled by urban flight, remote work, and heightened consumer mobility, the sector saw soaring transaction volumes, compressed cap rates, and rapid rental rate growth. But as interest rates climbed, housing activity stalled, and record amounts of new facilities were developed, fundamentals softened – and investor caution returned. Even so, regional bright spots, demographic tailwinds, and slowing supply pipelines suggest stabilization may be underway. This report explores the sector’s trajectory through this period, supported by transaction data, cap rate trends, and performance indicators that we have compiled over the years through our own deals that we’ve facilitated and from tracking the broader market. Self-Storage Industry Timeline 2020-2021: The Pandemic Surge and Accelerated Demand Demand spiked during the pandemic as migration patterns, lifestyle shifts, home remodels and temporary relocations boosted leasing. According to RCA, annual sales volume jumped from $8.4B in 2020 to nearly $24B in 2021, driven by both institutional interest and local owner-operators. Operators reported revenue strength, record fast lease-ups, and huge occupancy gains for historically stagnant locations. As revenue growth accelerated, pricing power increased, and new developments began to come online. Cap rates compressed significantly as competition for these investment opportunities intensified. 2022-2023: Peak Consolidation and Slowdown While occupancies started to slowly decline, the pace of rent growth also slowed, and rising interest rates began to weigh on transactions. By 2023, deal volume dropped approximately 40% below 2021 levels as capital markets tightened, and cap rates entered an expansion period. M&A reshaped the landscape, too. Extra Space Storage acquired Life Storage in a $12.7B acquisition and Public Storage took over Simply Self Storage. These deals accelerated institutional consolidation and reshaped rental rate pricing models in the Top 50 metros. Operators began to cut advertised rental rates to stay competitive, and rental rates began their descent, resulting in 27 straight months of national rental rate decline. 2024-2025: Housing Gridlock and Oversupply Challenges The industry begins grappling with the effects of housing market stagnation, as elevated mortgage rates and affordability constraints suppressed home sales and leasing velocity. Oversupply weighed heavily on key Sunbelt metros such as Atlanta, Orlando, Dallas, and Phoenix, where elevated deliveries of new facilities dampened both street rates and occupancy. Delinquency concerns are also emerging in more price-sensitive markets. Fast forward to today, while macro uncertainty still lingers, the sector seems to have hit a bottom point: street rates are beginning to stabilize and in some markets trend upwards, development is tapering off, and occupancy remains steady if not slowly improving again. Southeast in Focus From 2020 through 2022, the Southeast emerged as a bright spot, primarily driven by an influx of in-migration. Investor appetite remained strong, with Florida leading most states in transaction volume and rental rates. As national trends have moderated, the region has continued to attract both institutional and private investors, but pricing has had to shift in order to account for the risks that the region presents due to elevated supply levels suppressing rental rates and creating uncertainty in projections for the coming years. Notable Trends: Florida remains the regional anchor: Florida consistently outperformed across all metrics. It recorded the lowest cap rates, highest price per square foot recorded this year, and the largest average closing prices ($26.4M in Q1 2025, including a $57.35M portfolio in Broward County, FL closed by Austin McLeod). It stands out as the most liquid and competitive market in the Southeast. 2021 – H1 2022 marked the valuation peak: Cap rates compressed across every state, price per rentable square foot surged exceeding $200/SF averages in FL, GA, and VA. 2025 shows signs of selective recovery: Early quarters of 2025 suggest a rebound is underway. Cap rates have remained steady, PPSF is rising modestly, and deal sizes are increasing in strong metros. Investors are re-engaging, but with a focus on high asset quality and favorable market fundamentals. Cap Rate Review Cap rate fluctuations have been the norm over the five-year period, reflecting broader market volatility, capital cost cycles, and investor risk sentiment. Cap rates peaked and compressed multiple times as macroeconomic conditions shifted from pandemic-induced disruptions to interest rate normalization and then into a more uncertain lending environment post-2022. 2020-2021 Cap rate highs occurred early in the cycle, reaching 6.43% in Q2 2020, coinciding with COVID-era uncertainty and slower transaction velocity. States like Georgia and North Carolina posted some of their highest figures in that quarter, suggesting widespread caution and valuation risk pricing. By late 2021, the region underwent a sharp cap rate compression, driven by investor demand and favorable financing conditions, hitting a low of 3.53% in Q4 2021. Florida reached its lowest point during this time at 2.97%, indicating strong competition for high-quality assets. 2022-2023 The year 2022 was a transitional period. Though cap rates remained compressed through mid-year, slight upward movement resumed by Q4 in unison with the Fed’s four straight 75-basis point interest rate hikes. 2024-2025 In 2024, cap rates remained elevated compared to pre-2022 levels, though signs of stabilization began to emerge. Q2 2024 saw a regional uptick to 6.12%, inching up to where stabilized cap rates are considered to be in today’s market. Now, in 2025, while the majority of sales have been deals in some form of lease-up, stabilized cap rates are still landing in the low-6% range. Averages in Q1 2025 posted a five-year low for the Southeast though at 2.98%, with Florida (2.95%), Georgia (3.66%), and North Carolina (1.11%) in terms of in-place cap rates, all showing investor confidence to take on riskier opportunities. However, these deals have been trading at lower price per foot levels, indicating buyers requiring more of a reward upon stabilization. Price Per Square Foot Review Price per square foot trends in the Southeast self-storage sector paint a picture of surging investor demand from 2020 to 2022, followed by a controlled retreat and rebalancing phase through 2024. As of mid-2025, Florida remains the regional pricing leader, while markets like North Carolina and South Carolina exhibit greater cyclicality tied to local supply dynamics and deal quality. 2020-2021 Prices jumped sharply by Q2 2020, with total Southeast averages reaching $85.65/SF. The rally gained momentum in 2021, with pricing in Q4 2021 reaching $170.35/SF across the Southeast. Florida averaged over $216/SF, Georgia climbed to $149.30/ SF, and North Carolina and South Carolina crossed $140/SF, supported by aggressive rental rate growth and capital flowing from other real estate sectors into self-storage. Virginia also stood out with a regional high of $243.67/SF. 2022-2023 In Q1 2022, Southeast pricing hit a new average high of $207.17/SF, coinciding with the sector’s peak following pandemic-fueled migration trends and asset performance. Florida and Georgia continued to outperform, at $246.64/SF and $197.91/SF, respectively. Even Virginia remained elevated at $237.09/SF. However, cracks began forming by Q2 2022, as pricing cooled to $150.28/SF across the region. This deceleration aligned with the onset of aggressive Fed rate hikes, dampened buyer demand, and growing caution among lenders and REITs. South Carolina and North Carolina dipped below $130/SF, with South Carolina in particular showing signs of supply-side pricing pressure. The pricing environment in 2023 reflected wider instability. Southeast averages ranged from $177.18/SF in Q1 down to $120.10/SF in Q3, a drop consistent with slowing transactions, higher financing costs, and normalization of street rates. North Carolina was especially volatile, hitting $216.25/SF in Q1, before falling to $121.11/SF by Q3. South Carolina followed a similar arc, peaking at $188.18/SF in Q4 2022, then correcting sharply in 2023. Florida remained a pricing anchor throughout the year, never falling below $142.95/SF, and reaching $227.97/SF in Q1 2023, showcasing investor preference for core, resilient markets. 2024-2025 By 2024, prices began to stabilize regionally, albeit at a lower range than the 2021–2022 highs. Southeast-wide averages hovered between $117–$133/SF, while Florida remained buoyant at or above $141/ SF. Georgia and North Carolina stayed range-bound between $86–$148/SF, and South Carolina saw moderate recovery after prior-year softness. In Q1 2025, PPSF dipped again to $124.73/SF, driven by non-stabilized assets making up the bulk of the transaction pool. Conclusion: A Market in Motion The Southeast self-storage market has evolved through distinct cycles over the past five years, shaped by pandemic-era migration, monetary policy shifts, and changing investor appetites. From aggressive cap rate compression in 2021 to volatility-driven spikes in 2023, the market has demonstrated both strength and sensitivity. Despite cyclical adjustments, investor demand has remained focused on population growth corridors, where cap rates have consistently remained below national averages even amid rising interest rates. The Southeast will always be a hotspot for investment due to the underlying fundamentals, and leading nationwide pricing metrics. Metros that have taken on overwhelming amounts of new supply, however, will need several quarters to absorb all the new supply in lease up before pricing can meaningfully recover. Once the majority of new square footage is occupied, expect the Southeast as a whole to once again outperform most other regions across the country as the rising populations and incomes attract more and more institutional capital.

Austin McLeod

Senior Vice President & Director

9/23/25

Industrial Evolution

Top Industrial Activity in a Transforming Market The national industrial sector noted a supply increase throughout the last few years, leading to a vacancy rate of 7.1% in Q2 2025. Absorption levels have struggled to adjust to the oversupply, and potential tariffs could further impact the segment. However, new trends have begun to appear, which could aid stabilization moving forward. Data Center Boom Rising demand for AI production across the country has led to the rapid expansion of data center facilities. Due to this increase in demand, AI companies contributed to more than 50% of the growth in U.S. data centers in 2024. Some recent operators that leased data centers include Equinix, Aligned Data Centers, DataBank, and Vantage Data Centers. Now, competition is on the rise, and giants like Microsoft, Meta, and Google are expanding their data center operations nationwide. With this growth, the data center construction market is forecast to reach $112.33 billion by 2030. Doc Perrier, Vice President and Director, noted Houston as a top performer for data center additions. “With significant investments from companies like Apple and Nvidia, there’s a surge in demand for high-performance computing hardware and AI server components,” Perrier stated. Apple’s entrance into Houston includes an upcoming 250,000-square-foot facility that is set to produce in-house AI servers, aligning with the broader trend of tech-driven manufacturing. To continue Houston’s standing as a powerhouse for data centers, Perrier stated that Texas Tax Code 313 and the availability of low-cost power will aid new data center developments. Benefits to Track Data center owners will see a variety of benefits when taking on a property. According to Vice President Andrew Wiesemann, “owners benefit from stable long-term income from credit tenants, as well as high barriers of entry, due to regulatory and zoning constraints.” Owners will also find the longer leases for these facilities enticing as terms range from 3 to 10 years, creating stability with the tenant. Data centers are capital-intensive, with costs based on megawatt pricing, charging tenants based on power usage. “You need the right power, the right fiber, and the right team to get them [data centers] off the ground,” Vice President Nick Watson said, “but if you can check those boxes, they’re a rock-solid play.” From where I sit, they’re quickly becoming the backbone of our digital economy,” Nick Watson, Vice President. IOS Update The IOS segment has recorded a strong rise in additions as institutional investors have shifted focus to this property type. “New developments all over the country have begun, due to evolving tenant requirements,” Wiesemann noted. “I expect to see more portfolios being sold or recapitalized throughout this year as well.” Notable IOS acquisition activity occurred in the first half of 2025, with Texas standing out as a prominent location for IOS growth. In January, Alterra IOS acquired four properties in Dallas-Fort Worth that total 34.9 acres; then in May, it acquired two sites in Austin and San Antonio that total 8.7 acres. Texas metros are favorable locations for IOS, due to population growth and the state’s convenient central location. One ongoing trend that First Vice President and Senior Director Chris Nelson noted is the varying performance in IOS properties depending on square footage. Nelson stated that the owner-user exit isn’t as available on larger sites, meaning owners have to lease and trade as a leased investment in order to get out of the project. “The basis of many of these initial acquisitions and, in turn, the lease rates needed to make the projects make sense are objectively high, although achievable,” Nelson explained. When negotiating for an IOS property, owners must ensure they are finding an adequate price. “The IOS space still has strong demand, but for the right price,” Associate Market Leader Carter Hadley said. Moving forward, areas to watch are well-located IOS sites with high barriers to entry as these will continue to outperform, according to Vice President Jacob Friedman. Small IOS is very hot, while large IOS is a mixed bag,” Chris Nelson, FVP & Senior Director. Shifts in Demand Across the country, industrial construction has transitioned to smaller facilities under 50,000 square feet. The new focus on these properties is largely due to the oversupply of facilities over 100,000 square feet, which saw an influx in deliveries over the past couple years. Owners and tenants are now prioritizing smaller spaces as they offer many advantages. Due to the influx of larger properties, smaller industrial facilities noted less supply availability. However, tight vacancies for properties with less square footage allow for the ability to securely keep tenants on short-term leases without vacancy fears. “This allows for continued rent increases, which will match rent growth in strong areas and inflation in general,” Watson stated. Certain markets are already seeing this transition in their industrial segments. Chris Nelson noted this trend increased in Southern California, specifically for small-bay, multi-tenant facilities. “Southern California continues to remove industrial product from the market in favor of multifamily redevelopment, and the small-bay segment continues to be a main target for that,” Nelson said. “Generally, many of the business parks are in infill areas and have total scale that makes sense to be able to build a residential project of enough density to pencil.” Nelson added that as more rooftops are built in infill areas, there will be more demand for small industrial properties to house the tenants that provide goods and services to them. “Look forward to continued strong rent growth in this product segment in the years to come,” Nelson emphasized. Texas Activity In Houston, Doc Perrier noted he expects to see continued rent growth for properties under 100,000 square feet, as well as an interest in crane-served buildings. “We are seeing an increase of manufacturing tenants in the market, and due to the lack of development over the past 10 years of crane buildings, vacancy is around 2.5 percent,” Perrier said. Most of the crane-served buildings in demand are in the 20,000 to 70,000 square foot range. As such, Perrier stated that tenant requirements for manufacturing facilities surged nearly 300% in the first half of 2024 compared to 2020. “This uptick in demand is driven by companies seeking to onshore production and capitalize on Houston’s port proximity and strong infrastructure,” Perrier explained. “Houston’s industrial market is transitioning from a phase of oversupply to a more balanced state.” Demand for strategically located, mid-sized facilities remains strong,” Doc Perrier, FVP & Director. Industrial Predictions The institutionalization of the segment is one factor that will aid activity in years to come. “Institutional capital is now flowing into specialized industrial segments, such as small-bay properties, IOS, and Class B/C assets under $5 million in high-performing markets,” Watson said. “This trend is expected to persist as these niches gain broader recognition for their stability and long-term upside.” Vice President Spencer Mason also stated that as industrial construction slows down from the COVID-19 development surge, the lull will create positive effects in most major and secondary markets moving forward. “This includes stronger absorption, declining vacancy rates, increased leasing activity, and continued rent growth,” Mason expressed. Additionally, Mason added that as key unknowns, like tariff policies, begin to stabilize, the segment can expect a resurgence in activity. “Investment groups will be more willing to re-engage, and developers will be poised to break ground on new projects as market fundamentals continue to strengthen,” Mason said. Looking Ahead Investors should ensure they are aware of ongoing shifts and how they can impact investments. While there will always be changes in the sector, industrial remains ready for growth. Industrial is poised to adapt to any market and make itself a benefactor to the world,” Carter Hadley, Associate Market Leader.

Andrew Wiesemann

First Vice President & Associate Director

9/3/25

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