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Image of Journal Square’s Next Phase: What Singh Tower Signals for Urban Investment Success Story

Journal Square’s Next Phase: What Singh Tower Signals for Urban Investment

Journal Square has spent more than a decade transforming from an overlooked transit hub into one of the New York metropolitan area’s most active redevelopment districts. While the neighborhood has long benefited from direct PATH access to Manhattan and comparatively attainable housing costs, sustained public and private investment has fundamentally changed how investors view the market.   The planned development of Singh Tower represents another milestone in that evolution. The mixed-use project will introduce 209 residential units, approximately 16,000 square feet of office space, ground-floor retail, rooftop amenities, and resident-focused lifestyle spaces. Its distinctive architectural design, highlighted by rotating cantilevered balconies, will add another recognizable element to the rapidly changing Journal Square skyline. Positioned adjacent to the future Bergen Arches linear park, the project also reflects the growing relationship between private development and public infrastructure improvements throughout the neighborhood.   While Singh Tower is noteworthy on its own, the larger story is what it says about the continued maturation of Journal Square as an investment market. Journal Square Has Moved Beyond Its Emerging Market Status For many years, Journal Square was viewed as one of Northern New Jersey’s emerging investment markets. Investors recognized its strategic location, direct PATH access to Manhattan, and redevelopment potential, but many questioned whether demand would support the scale of new construction being proposed.   Today, that question has largely been answered. Journal Square has become one of Hudson County’s most active development districts, supported by thousands of planned and under-construction residential units, including major projects such as One Journal Square. Matthews’ Hudson County Rent Guide identifies Journal Square as one of the county’s leading multifamily submarkets, with rental rates that rank among the strongest in Hudson County, reflecting sustained tenant demand and continued investor interest.   Current market fundamentals reinforce that position. Journal Square’s multifamily inventory has grown to approximately 15,500 units, with 3,190 units currently under construction. Even as new supply continues to enter the market, the neighborhood absorbed approximately 2,230 units over the past 12 months, while average sale prices increased to $478,000 per unit. Together, these trends demonstrate that Journal Square has evolved from an emerging neighborhood into one of the New York metropolitan area’s established mixed-use investment markets. Residential Growth Continues to Support Commercial Real Estate Journal Square’s transformation is being fueled by one of the largest redevelopment efforts in the New York metropolitan area. While neighborhood boundaries vary, Journal Square is home to roughly 22,000 residents today, and Jersey City’s population has grown by more than 20% since 2010, with the neighborhood serving as a major focal point for that expansion. The Journal Square 2060 Redevelopment Plan continues to add thousands of new residential units through transit-oriented, high-rise development, further increasing the area’s residential density.   That population growth is creating a larger customer base for restaurants, grocery stores, healthcare providers, fitness operators, and other daily-needs retailers. Singh Tower’s combination of residential, office, and retail space reflects that same dynamic: new residents support new businesses, while an expanding mix of businesses makes the neighborhood more attractive to future residents. As additional mixed-use developments are completed, Journal Square continues to evolve beyond its traditional role as a commuter hub into a more complete, mixed-use urban neighborhood. Transit Accessibility Remains a Competitive Advantage Direct PATH service provides convenient access to both Midtown and Lower Manhattan, allowing residents to maintain strong regional connectivity while living outside New York City. As housing affordability remains a challenge throughout much of the region, neighborhoods that combine transit access with comparatively attainable housing continue to attract new residents.   Developers have increasingly concentrated investment around transportation infrastructure because reliable transit supports long-term residential demand, reduces dependence on automobiles, and encourages additional commercial activity. Journal Square’s continued growth reflects the long-term value of these characteristics. Public Investment Is Reinforcing Private Development Public infrastructure improvements often influence neighborhood growth alongside private investment. Parks, streetscape enhancements, transportation improvements, and public gathering spaces can increase pedestrian activity, improve connectivity, and create a more attractive environment for residents and businesses.   The planned Bergen Arches linear park illustrates this relationship. By transforming an underutilized rail corridor into public open space, the project has the potential to enhance the surrounding neighborhood while supporting additional investment nearby. Similar projects in other major cities have demonstrated how high-quality public amenities can complement private development and strengthen long-term property values.   As Journal Square continues to expand, investments in public infrastructure are helping create a more complete urban environment that benefits residents, businesses, and property owners alike. What It Means for Investors Journal Square’s continued evolution demonstrates that neighborhood transformation rarely occurs through a single project. Long-term growth is typically supported by the combination of transportation infrastructure, sustained residential demand, public investment, and ongoing private development.   Singh Tower represents another chapter in that progression rather than its conclusion. The project reinforces the broader trends that have reshaped Journal Square over the past decade and highlights the continued confidence developers have in the neighborhood’s long-term fundamentals.   For commercial real estate investors, the broader takeaway extends beyond a single development. Markets that combine strong transit connectivity, growing residential density, and continued public investment often experience sustained demand across multiple property sectors. Journal Square continues to demonstrate how those factors can reshape an urban district over time, creating opportunities for developers, investors, retailers, and property owners as redevelopment continues.

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David Ferber, CPA

Senior Vice President & Director

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From Peak to Discipline: What Has Changed in Multifamily Investing

The multifamily market over the past few years has not broken, but it has clearly reset.   At its peak in 2021 and early 2022, the sector was defined by abundant liquidity, aggressive pricing, and a broad expansion of the buyer pool. Capital was widely available, debt was cheap and flexible, and underwriting often leaned on continued rent growth and cap rate compression to justify pricing. Competition for assets was intense, and transactions frequently moved forward on compressed timelines as investors raced to deploy capital in a market that appeared to be accelerating.   That environment has meaningfully shifted. Higher interest rates, rising operating costs, and tighter capital markets have forced a recalibration across nearly every part of the investment process. The pace of transactions has slowed, financing structures have become more conservative, and investors are spending more time evaluating operational and financial risks before committing to acquisitions.   Today’s market is more measured, more selective, and increasingly driven by execution rather than momentum. A Buyer Pool Defined by Experience At the height of the market, access to capital and deal flow expanded rapidly. A new wave of syndicators and first-time operators entered the space, many drawn by the visibility of outsized returns and the perception that multifamily was a one-directional trade.   In many cases, those groups were willing to take on higher leverage, shorter-term debt, and more aggressive assumptions in order to win deals. Execution risk was often underestimated, and underwriting frequently left little margin for shifts in interest rates, operating costs, or leasing performance.   As liquidity has tightened and capital has become more selective, the buyer pool has shifted back toward more experienced operators and well-capitalized investors. Institutional buyers, established regional operators, and experienced groups are again dominating transaction activity. Meanwhile, many newer entrants have stepped to the sidelines or are working through assets acquired under more optimistic assumptions.   At the same time, investors who allocated capital during the peak are now placing greater emphasis on track record, discipline, and operational capability when selecting partners. The focus has shifted away from rapid growth and toward consistency and execution across market cycles.   The result is a more competitive environment, but one where bids are grounded in fundamentals. Source : Altus Group   Operations Have Moved to the Forefront If the previous cycle was driven primarily by revenue growth, the current one is defined by cost control and operational efficiency.   Operating an apartment asset today is materially more complex than it was just a few years ago. Property taxes and insurance costs have risen sharply in many markets, particularly in high-growth Sunbelt regions where reassessments and natural disaster risk have pushed expenses higher. Payroll costs have increased as operators compete for skilled maintenance and leasing staff, while construction-related inflation has raised the cost of unit turns, repairs, and capital improvements.   At the same time, rent growth has slowed significantly from the historic levels seen during the pandemic-era housing shortage. In some markets, new supply has created short-term pressure on occupancy and pricing power, requiring operators to compete more actively through concessions, marketing, and resident retention strategies. Delinquency has also become a more meaningful variable in certain tenant segments as household budgets adjust to higher living costs.   These pressures have compressed margins and exposed operational inefficiencies that may have gone unnoticed in a rising market.   In response, owners and operators are placing greater focus on expense management, process improvement, and scalability. Portfolio-level purchasing, centralized leasing models, and more data-driven asset management are becoming increasingly common. Technology is playing a larger role as well, with many groups exploring ways to integrate automation and artificial intelligence into leasing, maintenance scheduling, and back-to-office operations.   Performance today is less about how quickly rents can be pushed and more about how effectively an asset can be run. Financing Has Shifted from Aggressive to Defensive Debt strategies during the market’s peak were largely built around speed and flexibility.   Bridge loans and floating-rate structures were widely used, often paired with value-add business plans that relied on near-term rent growth to drive refinancing or sales. In a low-rate environment with strong demand for housing, that approach allowed investors to amplify returns while maintaining relatively short hold periods.   Many of those loans are now approaching maturity in a very different capital markets environment. Higher borrowing costs and lower asset valuations have created refinancing gaps for some properties, requiring additional equity contributions, loan modifications, or extensions. In certain cases, assets acquired with aggressive leverage have become difficult to refinance altogether without substantial restructuring.   That experience has driven a clear shift in how investors approach financing today. There is a renewed preference for longer-term, fixed-rate debt, often sourced through agency lenders or other stabilized financing channels. Investors are prioritizing lower leverage, stronger debt service coverage, and structures that provide flexibility across changing market conditions.   Debt is no longer viewed simply as a tool to enhance returns. It is increasingly treated as a central component of risk management. Underwriting Is Grounded in Reality Perhaps the most meaningful change is in how deals are evaluated.   Underwriting often relied heavily on forward-looking assumptions to justify pricing. Rent growth projections were frequently aggressive, expense growth was understated, and exit assumptions often depended on continued cap rate compression.   In today’s market, that approach no longer holds. Underwriting has shifted towards in-place performance and downside protection. Rent growth assumptions are more modest and frequently aligned with long-term historical averages rather than short-term spikes. Expense projections are more conservative and reflect the persistent inflationary pressures affecting property taxes, insurance, and labor.   Exit cap rates are typically modeled wider than entry, and sensitivity analyses have become a more prominent part of the investment process.   Just as important, there has been a shift in how investors think about value. Where cap rates once served as the primary lens for evaluating acquisitions, basis has taken on equal importance. Investors are increasingly focused on replacement cost, comparable sales history, and the long-term durability of an asset’s location and tenant demand.   Rather than simply asking what yield a property offers today, buyers are asking whether the entry price provides sufficient protection across a range of economic outcomes.   Where Investors Are Focusing in 2026   While underwriting standards have tightened, capital has not disappeared. Instead, it has become more targeted. Investors are increasingly concentrating on markets with durable population growth, diversified employment bases, and long-term housing demand.   Several metropolitan areas stand out as focal points for multifamily investment in 2026:   • New York, NY • San Francisco, CA • San Jose, CA • Boston, MA • Chicago, IL • Atlanta, GA • Washington, D.C. • Northern New Jersey • San Diego, CA • Orange County, CA Source: Matthews™ Research   These markets share many of the characteristics investors now prioritize: population growth, constrained housing supply, and employment drivers capable of supporting long-term renter demand. An Ever-Evolving Cycle The current multifamily environment is marked by greater discipline, yet it is far from static. Real estate markets inherently move in cycles, with investor behavior closely following shifts in liquidity and capital availability. As interest rates stabilize and transaction activity gradually increases, risk tolerance is likely to expand, drawing new participants into the market. The caution and selectivity that define today’s conditions will eventually give way to renewed competition for assets, a dynamic that has repeated across past cycles and reflects the enduring rhythms of real estate investing.   This ongoing reset does not eliminate future volatility. Instead, it provides a clearer framework for evaluating and managing risk when market conditions are less forgiving, allowing investors to make informed decisions that balance opportunity with prudence.   The multifamily sector today is defined less by rapid appreciation and more by execution and operational precision. The buyer pool is more experienced, financing is structured with stability in mind, and underwriting reflects a broader range of potential outcomes. Those best positioned in this environment are not counting on a return to peak conditions. Rather, they are the investors who can operate effectively within current constraints while remaining agile enough to respond as the cycle inevitably shifts again.

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Austin Graham

First Vice President & Associate Director

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Why Northern New Jersey’s Rental Market Isn’t Slowing Down

Many expected the large wave of new apartment deliveries across North Jersey to cool down the rental market, but the opposite is happening. A new RentCafe study, recently covered by Jersey Digs, shows that North Jersey has jumped from the 19th to the 11th most competitive rental market in the country, a sign that demand across the region remains extremely strong.   Even with thousands of new units hitting the market, renters are continuing to absorb the supply at a rapid pace. Occupancy rates remain high, lease renewals are up, and affordability continues to keep many residents in the rental market longer than expected.   One of the biggest factors driving demand is the gap between renting and owning. With mortgage rates still elevated and home prices remaining high in many parts of New Jersey, renting is still the more realistic option for many residents. Instead of moving or buying, renters are choosing to renew their leases and stay put longer.   The study highlighted several trends currently shaping the market: Occupancy rates are sitting around 94.7% Approximately 73% of renters renewed their leases New apartment deliveries increased four times year over year Markets like Jersey City, Hoboken, Newark, and Bayonne continue to see strong activity thanks to their proximity to New York City, growing development pipelines, and steady demand from commuters and local renters alike.   Last year, there were signs that the market was beginning to soften as more inventory became available. Apartments were staying on the market slightly longer, and some neighborhoods saw pricing stabilize. But that slowdown appears to have been temporary.   Demand is once again outpacing supply in many areas, keeping competition high for well-located and reasonably priced units. Renters are moving quickly when desirable apartments become available, especially in commuter-friendly locations.   What’s especially interesting is that investor activity across Hudson County continues to support the same story.   According to Matthews’ 2025 Hudson County Sales Comp Tracker, multifamily transactions have remained active across Jersey City, Hoboken, Bayonne, Union City, and West New York, with dozens of properties trading throughout the year.   The report tracked: 44 multifamily and mixed-use sales in Jersey City totaling more than $157 million in transaction volume 59 additional transactions throughout Hudson County totaling more than $154 million Continued investor demand in markets like Hoboken, Bayonne, and West New York despite rising supply and elevated interest rates  In Hoboken alone, multiple multifamily assets traded above $4 million this year, including 719 Willow Avenue for $4.58 million and 308 Madison Street for more than $5.5 million.   That level of transaction activity reinforces the broader trend: investors still see long-term value in North Jersey multifamily assets because demand fundamentals remain strong.   For property owners and multifamily investors, the market continues to show resilience. High occupancy and strong lease renewal rates are helping support property values while creating more consistent rental income across many North Jersey communities.   Looking ahead, construction starts have started slowing again, which could tighten inventory even further over the next 12 to 24 months. If demand continues at its current pace, markets throughout Hudson, Essex, and Bergen Counties could remain highly competitive for the foreseeable future.   North Jersey’s rental market continues to prove its strength, even with a significant amount of new supply entering the market, and momentum across the region doesn’t appear to be slowing anytime soon.

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David Ferber, CPA

Senior Vice President & Director

Image of Northern New Jersey Multifamily Market Report Q1 2026 Success Story

Northern New Jersey Multifamily Market Report Q1 2026

Multifamily performance in Northern New Jersey remains stable overall, though elevated supply continues to weigh on fundamentals. Demand has remained relatively strong, with solid absorption levels helping offset a portion of recent deliveries. However, new supply has consistently outpaced leasing activity, leading to a gradual rise in vacancy, particularly in newer luxury assets.   Rent growth has slowed as increased competition limits landlords’ ability to push pricing, resulting in a more competitive leasing environment. Despite this moderation, rents remain elevated compared to national levels, supported by strong income demographics and proximity to New York City. Leasing conditions are likely to remain somewhat uneven in the near term as the market continues to work through recent deliveries. Looking ahead, vacancy may rise slightly further before stabilizing as the construction pipeline begins to taper. Key Findings Multifamily fundamentals in Northern New Jersey are stabilizing as renter demand remains healthy and continues to absorb a meaningful share of new supply, although elevated deliveries are still pressuring occupancy, weighing on rent growth, and keeping overall market conditions competitive. Vacancy has trended upward amid sustained deliveries, particularly within luxury product, while rent growth has decelerated for multiple consecutive quarters. Investment activity rebounded meaningfully, with institutional capital re-entering the market and focusing on high-quality assets Northern New Jersey Supply & Demand Dynamics Source: CoStar Group, Inc.   Northern New Jersey Demographics Source: CoStar Group, Inc. Unemployment Rate: 5.8% Labor Force: 1,153,094 Median Household Income: $110,496  Labor Force & Income Growth Source: CoStar Group, Inc.     Northern New Jersey’s economy remains supported by its strategic location within the Tri-State region and strong connectivity to New York City, which continues to support housing demand. The area benefits from a diverse employment base anchored by financial services, healthcare, education, and logistics, though recent trends point to some softening in labor market conditions. Job growth has slowed and turned slightly negative in recent periods, while the unemployment rate has edged above the national average, signaling a more cautious economic backdrop. Despite these near-term headwinds, the region maintains relatively high household incomes, which help support above-average rent levels and long-term multifamily demand. Overall, Northern New Jersey’s diverse economy and proximity to major employment centers remain key drivers of renter demand.   Northern New Jersey Construction Northern New Jersey has experienced a significant wave of multifamily development over the past several years, with new deliveries materially expanding inventory and reshaping competitive conditions across the market. Construction has been concentrated largely in higher-end product, particularly in transit-oriented and urban submarkets such as Greater Newark and Lower Essex County, where developers continue to target renters seeking newer amenities and access to major employment centers. Although the pace of new starts has begun to slow, the existing pipeline remains sizable and will continue to deliver units through 2026, keeping near-term pressure on vacancy and rent growth. As a result, new supply is expected to remain a key factor in market performance over the next several quarters, even as the broader development cycle begins to ease.   Units Construction Starts Source: CoStar Group, Inc.     Units Under Construction Source: CoStar Group, Inc.     Sales Investment activity has slowed as buyers respond to weaker fundamentals, higher borrowing costs, and a more uncertain pricing environment. Sales volume totaled $579 million, with pricing averaging $305/SF and cap rates at 6.1%, reflecting a market where capital remains available but underwriting has become more disciplined. Investors continue to focus primarily on modern, well-located assets that offer stronger competitive positioning and more stable income potential. Fully leased properties remain especially attractive, though some buyers are also showing interest in newly delivered vacant product when they see a compelling long-term lease-up story. Overall sentiment remains cautious, but transaction activity could begin to improve as pricing expectations adjust and market conditions become more stable.   Northern New Jersey Multifamily Sales Volume Source: CoStar Group, Inc.     By the Numbers Q1 2026 | Source: CoStar Group, Inc. Sales Volume: $394M Price Per Unit: $390K Cap Rate: 6.86% Vacancy Rate: 3.9% Rent Growth: 1.6% Asking Rent Per Unit: $3K Units Under Construction: 15.6K Units Delivered: 508 Units Absorbed: 885  

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David Ferber, CPA

Senior Vice President & Director

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New York, NY Industrial Market Report Q1 2026

Market fundamentals remain under pressure as supply continues to outpace demand. Vacancy stands at 7.5%, while availability has climbed to 9.2%, reflecting recent deliveries and a growing amount of sublease space. Annual absorption totaled 645,000 SF, modest relative to the amount of new space added, and leasing activity remained below historical norms despite some improvement later in the year.   Demand continues to favor modern logistics buildings, though that segment has also seen the sharpest rise in availability. Smaller bay properties are holding up better due to tighter supply and faster lease-up. Asking rents average $22.64/SF, and annual rent growth has slipped to -0.9% as landlords offer more concessions in a more tenant-friendly market. Overall, conditions have shifted in tenants’ favor, and fundamentals are likely to remain soft until excess space is absorbed.   Key Findings The New York industrial market remains in a supply-driven correction, with elevated availability continuing to outpace tenant demand. Leasing activity has softened amid economic uncertainty, while tenant leverage has increased across most submarkets and asset types. Construction activity is tapering, but the existing supply wave will keep vacancy elevated and rent growth under pressure in the near term.   New York Industrial Supply & Demand Dynamics Source: CoStar Group, Inc.   New York Demographics Source: CoStar Group, Inc. Unemployment Rate: 4.8% Households: 4,842,163 Current Population: 12,361,971 Median Household Income: $91,998   New York’s economy continues to support industrial demand through its large population, dense consumer base, and global connectivity. Finance, tech, healthcare, and professional services continue to drive jobs and spending across the region. The Port of New York and New Jersey, along with JFK and Newark, remains a major advantage for distribution and logistics users. These strengths help support long-term warehouse demand, especially for infill and last-mile space. Still, tariff uncertainty and slower retail spending growth are making occupiers more cautious in the near term.   Top New York Tenants Source: CoStar Group, Inc. TWTH Express 4DS Logistics Western Carriers J. Supor & Son Population, Labor Force, & Income Growth Source: CoStar Group, Inc.   New York Industrial Construction The development pipeline is contracting after a multi-year surge in new supply. Approximately 3.1 million SF remains under construction, down significantly from prior peak levels, while deliveries totaled 170,000 SF in the latest quarter. Development has been concentrated in large-scale logistics facilities, contributing to rising vacancy in that segment. New construction starts have also slowed considerably due to higher financing costs and softer leasing conditions. Much of the remaining pipeline is in Northern New Jersey, where land availability and infrastructure continue to support large-format development. Despite the slowdown in starts, recently delivered properties are leasing more slowly than in prior years, which should keep availability elevated near term.   SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc.   New York Industrial Sales Investment activity has slowed as buyers respond to weaker fundamentals and higher borrowing costs. Sales volume totaled $579 million, with pricing at $305/SF and average cap rates at 6.1%. Investors remain selective, with the strongest interest focused on modern, well-located assets. Fully leased properties continue to attract capital, though some buyers are also pursuing vacant new product with strong long-term leasing potential. Overall sentiment remains cautious, but deal activity could improve once pricing expectations reset and market conditions stabilize.   New York Industrial Sales Volume Source: CoStar Group, Inc.   By the Numbers Q1 2026 | Source: CoStar Group, Inc. Sales Volume: $579M Price Per SF: $305 Cap Rate: 6.1% Vacancy Rate: 7.5% Rent Growth: (0.9)% Asking Rent Per SF: $22.64 SF Under Construction: 3.1M SF Delivered: 170K SF Absorbed: 645K

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Institutional Capital Returns To Multifamily

After several cautious years, institutional investors, large, professionally managed funds such as private equity groups, pension funds, and insurance companies, are decisively returning to the multifamily market. In the first quarter of 2025 alone, U.S. multifamily investment totaled $28.8 billion, with institutions representing a substantial portion of that volume. Momentum accelerated through mid-year and into the fall, with apartment sales rising 13% year-over-year in the third quarter to $43.8 billion. Together, these figures underscore a renewed confidence in multifamily fundamentals and the broader capital markets.   Evidence of this institutional re-engagement is already visible across the public REIT landscape, where capital deployment has meaningfully increased. AvalonBay Communities (AVB) has completed $618.5 million in year-to-date acquisitions, including the purchase of six Dallas–Fort Worth communities totaling 1,844 units for $431.5 million, a clear signal that major operators are once again pursuing scale in high-growth markets.   Similarly, Equity Residential (EQR) executed one of the largest multifamily trades of 2025, acquiring a stabilized Atlanta portfolio of 2,064 units for approximately $533.8 million at a 5.1% acquisition cap rate. The move marks the company’s strategic re-entry into key Sunbelt markets and aligns with its thesis that fundamentals in select growth metros are strengthening.   These transactions validate what private-market investors are beginning to experience in real time: capital is flowing back into multifamily, underwriting is recalibrating to the new rate environment, and institutional conviction is returning. Setting the Tone for the Market   Institutional capital doesn’t just participate in the market, it helps define it. These investors establish pricing benchmarks, influence underwriting standards, and restore liquidity when they re-engage. As large funds return, their activity helps narrow bid-ask spreads, reprice assets more accurately, and reignite stalled deal flow.   They also serve as early indicators of sentiment. When institutions retreat, it often precedes a broader slowdown. When they return, it signals that investors once again see an opportunity worth pursuing. For 2026, this renewed participation suggests that the worst of the correction may be behind the multifamily sector.   Institutional activity effectively sets the tone for the entire industry. Their re-entry signals that confidence is rebuilding and valuations are stabilizing. As more funds re-engage, competition for quality assets will likely increase, gradually pushing prices upward, especially in markets with strong fundamentals.   This uptick in deal flow also clarifies pricing benchmarks, improves liquidity, and encourages reinvestment in property quality. Over time, that benefits not only investors but renters as well, through better-managed, modernized communities.   From Pullback to Reentry   Between 2022 and 2024, rising interest rates and tightening credit made financing more expensive and constrained deal flow. Sellers held out for 2021-level pricing, while buyers needed discounts to offset higher borrowing costs. Economic uncertainty, slower rent growth, and rising construction expenses compounded hesitation on both sides.   Transaction volumes fell sharply as many funds shifted from acquisitions to asset management. Some firms focused on operational improvements, while others simplified their portfolios, selling top-performing properties to raise liquidity. For a time, sitting on the sidelines felt safer than overpaying in an unpredictable market.   That caution began to ease as prices reset and underwriting discipline took hold. Property values adjusted to more sustainable levels, rent growth stabilized, and buyer competition thinned, giving patient, well-capitalized investors a clear window to re-enter. Today, institutions are positioning for long-term ownership, emphasizing stability over speculation. Where Capital Is Flowing   The map of institutional investment in 2025 looks more balanced than in previous cycles.   Sunbelt and Growth Markets: Metros such as Dallas, Atlanta, Tampa, and Nashville continue to draw attention for their job and population growth. However, investors are far more selective than in past years, steering clear of submarkets facing oversupply or softening rent trends.Several of the sector’s strongest performers are signaling improving fundamentals, with UDR’s CEO noting that “third-quarter operational results… exceeded our expectations and drove our second FFOA per share guidance raise of 2025.” This growing confidence reinforces why capital continues to gravitate toward markets where performance momentum is beginning to firm.   Secondary and Midwest Markets: Secondary metros including Kansas City, Columbus, and Raleigh are gaining traction for their relative affordability and resilient fundamentals. In the Midwest, places like Indianapolis, Minneapolis, and Omaha, stable performance, limited new supply, and strong occupancy are reinforcing investor confidence.   Coastal Gateways: Some institutions are cautiously returning to traditional gateway markets such as New York, Northern New Jersey, and Boston, but mainly for core, stabilized assets where pricing has reset and cash flow is durable. What’s notable about this cycle is how targeted that re-entry has become within the gateway universe. The PwC/ULI Emerging Trends 2026 rankings place the broader NYC ecosystem among the most institutionally favored areas in the country, with Jersey City emerging as a top national market to watch (ranked #2 overall) and Northern New Jersey also landing in the leading tier of U.S. markets. For multifamily, the survey sentiment skews positive toward apartment acquisitions in North Jersey, reinforcing that institutions see the North Jersey/Jersey City corridor as a near-gateway location where renter demand, commuter connectivity, and long-term liquidity still justify fresh allocations.   Institutional Priorities Within Multifamily   Class A: Core Strength and Stability Newer, high-quality properties in prime locations remain the cornerstone of institutional portfolios. Typically built within the last five years and supported by strong employment and income demographics, these assets offer consistent cash flow and low operational risk. Institutions value these assets for their predictability and inflation resilience, often using them as portfolio anchors. For example, a newly delivered high-rise in a prime urban employment corridor, featuring rooftop amenities, coworking suites, and EV-charging stations, can maintain exceptionally high occupancy and command premium rents due to strong demographic fundamentals.   Class B: Upside Through Execution Class B assets have become strategic targets for value creation. Pricing for this segment has corrected more sharply than for newer assets, allowing institutions to drive returns through operational execution rather than market timing. The focus is on steady repositioning over several years, moderate rent growth through modernization while maintaining affordability relative to new construction.   Workforce and Affordable Housing: Durable Demand, Lasting Impact Properties serving middle-income renters continue to attract institutional attention. Undersupply in this segment and limited new construction make it one of the most resilient asset classes. These investments align with ESG priorities while offering consistent performance across cycles. Recent REIT activity in Q3 2025 underscores the trend, with several public funds increasing exposure to workforce housing due to strong occupancy and dependable rent collections.   Looking Ahead In 2026, institutions are closely tracking interest rates, rent growth, employment trends, and new construction activity. With greater stability emerging across these indicators, the year is shaping up to be the next phase of capital deployment, defined by selective acquisitions, creative financing, and disciplined, fundamentals-driven expansion.   The overarching message remains clear: institutional investors are not pursuing quick wins. They are building portfolios engineered for resilience, emphasizing stable income and long-term value creation. Their renewed engagement reinforces a lasting truth, multifamily continues to be one of the most reliable asset classes in commercial real estate. Investment strategies are being anchored in fundamentals that outlast cyclical volatility. Markets with expanding job bases, steady population inflows, and limited new supply are capturing the most attention.   Institutions are also focused on durability, assembling portfolios that perform through full cycles rather than just during upswings. This requires prioritizing cash-flow consistency, maintaining prudent leverage, and emphasizing operational excellence. The mindset for 2026 is deliberate and measured: grow steadily, manage risk thoughtfully, and avoid the excesses that characterized the last expansion.

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David Ferber, CPA

Senior Vice President & Director

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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.

Image of Mark Bridge Author

Mark Bridge

Executive Vice President & Senior Director

Image of New York, NY Retail Market Report Q4 2025 Success Story

New York, NY Retail Market Report Q4 2025

New York’s retail market continues to show resilience, with leasing activity steady and availability near historic lows despite a more volatile macro backdrop in 2025. Market momentum softened over the year, driven primarily by move-outs of large-format tenants in malls and shopping centers, as recent retailer bankruptcies translated into store closures and weighed on the big-box segment.   Urban retail remains the key driver of performance, particularly storefronts under 5,000 SF, where availability continues to tighten. Suburban markets, especially in northern New Jersey, are also seeing improving fundamentals, shifting modest leverage toward landlords. While absorption and rent growth are expected to moderate, limited new supply and low vacancy should allow New York to continue outperforming the national average despite near-term risks tied to store closures and softer consumer demand. Key Findings Vacancy remains tight at 4.2% despite negative absorption, as large-format move-outs in malls and power centers are offset by strong demand for small-format urban retail, particularly in prime Manhattan corridors. New supply is effectively constrained, with construction totaling just 0.1% of inventory, as zoning limits and residential redevelopment continue to suppress retail deliveries. Rent growth has moderated to 2.3% year-over-year, with landlords showing increased pricing discipline amid retailer bankruptcies and big-box and pharmacy closures, even as prime locations maintain pricing power. New York Retail Supply & Demand Dynamics Source: CoStar Group, Inc. New York Demographics Source: CoStar Group, Inc. Unemployment Rate: 4.6% Current Population: 14,873,898 Households: 5,733,207 Median Household Income: $90K   Despite ongoing post-pandemic adjustments, the New York metro retains structural advantages few global cities can match. Recent census data point to renewed momentum, with population growth in 2023 and 2024, outmigration falling to its lowest level since 2013, and New York City adding 87,000 residents last year. A large, diverse economy remains a core strength, with finance, technology, healthcare, education, and tourism supporting resilience and driving a regional GDP exceeding $2 trillion.   Growth in high-paying sectors, particularly finance and technology, continues to attract talent and investment, while expanding infrastructure, global connectivity, and rising tourism reinforce the metro’s long-term appeal. However, housing supply continues to lag demand, posing an ongoing affordability challenge that could constrain future growth. Population, Labor, & Income Growth Source: CoStar Group, Inc.   New York Retail Construction Unlike much of the U.S., where elevated costs have slowed development, New York’s retail construction slowdown is driven by best-use considerations. Limited sites, a policy push toward housing, and continued demolition of aging inventory, roughly 7.0 million SF over the past five years, have constrained new retail supply. Retail starts have fallen sharply from an average of 3.5 million SF annually between 2013 and 2018 to about 1.5 million SF in recent years, with less than 1.0 million SF expected in 2025. With just 930,000 SF currently under construction, largely in small, mixed-use projects, new supply is expected to have minimal impact on occupancies despite moderating demand.   SF Construction Starts Source: CoStar Group, Inc.   SF Under Construction Source: CoStar Group, Inc.   New York Retail Sales The New York retail investment market remains steady, with more than $5.0 billion in sales recorded in each of the past two years, in line with the 10-year average. While 2025 transaction volume is tracking slightly below last year’s pace, improving capital availability has helped align buyer and seller pricing expectations, with cap rate expansion appearing to stabilize. Metro-wide cap rates hover just above 6%, while in-demand New York City assets continue to trade closer to 4.5%.Rising borrowing costs have shifted investor focus toward stabilized, income-producing assets, reinforcing premium pricing for fully occupied properties, particularly in New York City. Improving retail fundamentals and low availability across the broader metro are also supporting investment activity in suburban locations, where high-occupancy centers continue to attract capital.   New York Retail Sales Volume   By the Numbers Source: CoStar Group, Inc. Sales Volume: $1.2B Price Per SF: $441 Cap Rate: 6.3% Vacancy Rate: 4.1% Rent Growth: 2.0% Asking Rent Per SF: $47.86 Under Construction: 869K SF Delivered: 277K SF Absorbed: 80K SF

Image of Northern New Jersey, NJ Multifamily Market Report Q3 2025 Success Story

Northern New Jersey, NJ Multifamily Market Report Q3 2025

Northern New Jersey’s multifamily market softened in late 2025 as vacancy edged higher, demand moderated, and new supply continued to come online. The construction pipeline remains active at roughly 8,000 units, though new starts have fallen sharply from 2022 peaks, signaling easing supply pressure ahead. Rent growth slowed to 2.0% year over year, as elevated competition in construction-heavy submarkets, especially Lower Essex County, Greater Newark, and Northeast Morris County, tempered landlords’ pricing power. Concessions have expanded across newer Class A assets, where vacancy has climbed to 10.7% and lease-up conditions remain more challenging. Investment activity has improved from recent lows but is still measured, with private buyers leading most transactions while institutions reengage selectively.   Overall, the sector is adjusting to supply-driven softness, and moderating development alongside steady longer-term demand trends supports a path toward stabilization. Key Findings Vacancy has inched up to 5.6%, as recent deliveries (5,361 units YTD) continue to outpace absorption, with the luxury Class A segment showing the most elevated rate at 10.7%. Roughly 8,000 units remain under construction, but activity is cooling as starts have dropped sharply since 2022, signaling that the post-pandemic supply boom is winding down. Rent growth has slowed to 2.0% year-over-year, with increased competition from new supply prompting landlords to moderate rent increases and offer more concessions, particularly in high-construction submarkets like Northeast Morris County. Northern New Jersey Multifamily Supply & Demand Dynamics Source: CoStar Group, Inc. Northern New Jersey Demographics Source: CoStar Group, Inc. Unemployment Rate: 5. 1% Current Population: 2,711,033 Households: 1,002,149 Median Household Income: $110,915   Northern New Jersey is home to about 2.71 million residents, with population growth running around 0.3% over the past year and sustaining a 0.6% annual pace over the last decade, reflecting steady demographic tailwinds for housing demand. 2025 | Source: CoStar Group, Inc.   Northern New Jersey’s economy remains resilient, supported by its strategic location and strong transportation connectivity. The region offers a mix of urban, suburban, and rural living, with transit-oriented communities seeing renewed growth as commuting patterns stabilize. The labor market totals about 1.3 million jobs, up 0.9% year-over-year, led by a fast growing education and health services sector. Logistics continues to be a major economic engine, driven by ecommerce demand and the region’s proximity to the Port of Newark. Amazon, FedEx, and other distributors have added significant new facilities as port investments enhance capacity. While bio-pharmaceuticals remain a longstanding pillar, the sector has contracted as firms shift research to other hubs, though Merck has reaffirmed its commitment with a new headquarters in Rahway. State efforts to streamline regulation and offer tax incentives, signal potential shifts aimed at boosting competitiveness.   Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Northern New Jersey Multifamily Construction Developers have been highly active in Northern New Jersey since 2020, adding 27,000+ units and sustaining a delivery surge that peaked near 7,000 units in 2023 and stayed above 6,000 units in 2024. The pipeline remains large at roughly 6,800–7,000 units (about 3.8%–3.9% of inventory) and is heavily luxury-weighted, Class A assets are under a quarter of stock but roughly two-thirds of units underway. Even so, 2025 should close out the post-pandemic boom, with completions expected to step down after this year’s final 5,000+ unit wave. Nearly 70% of construction is concentrated in Lower Essex County, Greater Newark, and Northeast Morris County, reinforcing the metro’s transit-oriented shift as hybrid work draws renters back toward rail-served nodes. Units Construction Starts Source: CoStar Group, Inc.   Units Under Construction Source: CoStar Group, Inc.     Northern New Jersey Multifamily Sales Multifamily investment activity in Northern New Jersey has rebounded in 2025 after two slower years, with sales volume reaching about $856 million through Q3, roughly triple last year’s pace and above the pre-pandemic average. Luxury assets have led demand, highlighted by major trades like Summit Court and Two South Willow, while smaller private-capital transactions also supported momentum. Private buyers have dominated since 2023, though improving rent expectations are beginning to draw institutional investors back into the market. Overall, sentiment is turning more positive, with market participants expecting transaction activity to continue picking up as pricing stabilizes and fundamentals improve. Northern New Jersey Multifamily Sales Volume Source: CoStar Group, Inc.   By the Numbers Q3 2025 | Source: CoStar Group, Inc. Sales Volume: $287M Price Per Unit: $262K Cap Rate: 6.1% Vacancy Rate: 5.6% Rent Growth: (2.0%) Asking Rent Per Unit: $2,253 Under Construction: 7,922 units Delivered: 1.6K units Absorbed: 1.5K units  

Image of Mamdani’s Election and Its Impact on New York City Commercial Real Estate Success Story

Mamdani’s Election and Its Impact on New York City Commercial Real Estate

The election of Zohran Mamdani as New York City’s new mayor marks a policy shift that could reshape parts of the city’s commercial real estate (CRE) landscape. His campaign centered on affordability, stronger tenant protections, and progressive taxation, an agenda met with both optimism and uncertainty among property owners, investors, and developers.   A New Policy Direction Mamdani’s most notable proposal is a citywide rent freeze for rent-stabilized apartments. The intent is to ease financial pressure on tenants, but it raises questions about operational and investment impacts on multifamily properties. Although the Rent Guidelines Board governs annual rent adjustments, the mayor’s influence over appointments and broader housing priorities could make a freeze more feasible than in the past.   This discussion comes against the backdrop of a long and complex regulatory history in New York’s multifamily sector, context explored in a Matthews analysis authored by Executive Vice President DJ Johnston, which outlines how decades of rent-regulation frameworks have shaped owner decision-making, operational flexibility, and capital planning. Those dynamics are now increasingly relevant as the new administration prepares to set its housing agenda.   For landlords, a rent freeze would likely tighten margins at a time when insurance, maintenance, and borrowing costs remain elevated. Owners of older or heavily stabilized properties could face particular strain, while some investors may pivot toward less regulated or affordable-housing-aligned strategies. Developers operating in the market-rate segment may also reassess new construction if rent-growth prospects weaken, especially given high construction and financing costs.   Broader CRE Implications While the rent freeze targets residential housing, the ripple effects could extend into other CRE sectors. Office and retail investors are already navigating subdued leasing demand and a slow recovery from pandemic-era disruptions. Heightened regulatory risk or higher taxes on corporations and high-income earners could further dampen sentiment, at least in the near term.   Still, several industry leaders note that early conversations with the incoming administration have offered measured reassurance. “As New York City’s real estate community holds its collective breath, some developers recently meeting with the future mayor have left with guarded optimism — notably from MAG Development’s MaryAnne Gilmartin and RXR’s Scott Rechler. If the city can continue to sustain the quality of life that draws & retains global talent while supporting private sector growth, investors are likely to proceed with confidence,” said Brock Emmetsberger, Executive Vice President at Matthews.   Others echo the view that New York’s core fundamentals remain intact. “I don’t believe that friction will fundamentally change the underlying strength of New York’s business and real estate markets,” said Johnston. His perspective reflects a broader belief that while policy shifts may cause short-term adjustment, the city’s global stature and diversified economy remain powerful stabilizers. Regional Spillover: Northern New Jersey One of the most closely watched dynamics following the election is the potential out-migration of residents and businesses to nearby markets, particularly northern New Jersey. Polling data suggested that a sizable share of New Yorkers had considered leaving the city if Mamdani were elected. Whether or not migration occurs at that scale, even a modest shift in sentiment could have tangible effects.   Increased residential demand across Hudson, Bergen, and Essex counties could place upward pressure on rents and home prices while making these areas more attractive to investors seeking stable returns outside the five boroughs. For office and industrial users, proximity to Manhattan combined with lower taxes and operating costs could boost leasing activity in commuter-friendly submarkets. Developers and brokers in those regions are already preparing for potential upticks in inquiries from New York-based tenants.   Balancing Risk and Opportunity The full impact of Mamdani’s agenda will depend on how quickly his policies move from proposal to implementation and how the market adjusts in response. A rent freeze may provide short-term relief for tenants but could also slow investment and property upkeep if revenue streams are capped. At the same time, new programs targeting affordable housing and public-private partnerships could present fresh opportunities for builders aligned with the administration’s priorities.   For now, most CRE professionals are adopting a wait-and-see approach, monitoring both policy signals from City Hall and early behavioral trends among residents and investors. The next several months will be critical in determining whether New York City’s new direction ushers in a more equitable housing landscape or creates new challenges for a sector already contending with cyclical and structural headwinds.

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DJ Johnston

Executive Vice President

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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.  

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CRE Trends You Won’t See in the Data

The retail landscape is in constant flux, shaped by evolving consumer behaviors, rapid technological advancements, and shifting economic tides. In this dynamic environment, staying ahead requires more than just reacting to trends—it demands a deep understanding of the market’s inner workings. At Matthews™, our market leaders are at the forefront of this transformation, navigating complex challenges and capitalizing on emerging opportunities. In this article, they share their invaluable insights, offering an inside perspective on the retail segment’s current state in their markets and the latest innovations driving the future of retail.   Dallas, Texas The Dallas retail market benefits from a rare combination of strong population growth, corporate relocations, and business-friendly policies—but what often gets overlooked is how underserved certain suburban trade areas still are. While the headlines focus on legacy corridors like Uptown or Preston Hollow, pockets in areas like Prosper, Forney, Celina, and Midlothian offer compelling returns with significantly less competition. As such, leasing momentum has begun to pick up in suburban submarkets—especially in areas with new rooftops and school developments.   The eastern end of Henderson Avenue is set for a major revitalization.    Trend Tracker: Upcoming Buildouts Acadia Realty Trust and Ignite-Rebees have broken ground on a 161,000-square-foot mixed-use development spanning a quarter-mile between Glencoe Street and McMillan Avenue. “Designed by Dallas-based GFF, the project will feature 10 architecturally distinct buildings housing 75,000 square feet of retail space, 12,000 square feet of chef-driven restaurant space, and 74,000 square feet of office space,” Gross said.   Top Retail Spot Katy Trail Ice House: It’s become a go-to for brokers, clients, & locals alike. It captures the essence of Dallas: casual, energetic, & relationship-driven. – Andrew Gross, Managing Director   Houston, Texas Houston has enjoyed a low cost of living, in large part thanks to the metro area not having traditional zoning, Market Leader Patrick Graham stated. “Voters have rejected zoning ordinances multiple times,” Graham said. “Instead of zoning, we have private deed restrictions and municipal development regulations. That has massive implications on commercial real estate investments in this market.”   “An investor should not buy or sell a commercial property without local representation to offer a guiding hand,” Graham said, “as implications from zoning can include uncertainty, risk, and planning challenges. This may be different from what an investor from a different market is accustomed to when their prior markets had strictly controlled local zoning ordinances,” Graham stated.   Yet, without zoning, the market can react more quickly to supply and demand factors, he added. “If a shopping center or multifamily complex in Houston is charging above market rents because of high demand, the market will adapt,” Graham said. The lack of zoning represents a lower barrier to entry than more restrictive markets.   Trend Tracker: Coffee Shop Moves “Payton Torres and Luke Armetta in the Houston office are representing a new concept coming to market called Black Sheep Coffee,” Graham said. “They’ll be adding locations in 2025 and 2026 throughout Houston. Any shopping center will be enhanced with Black Sheep Coffee as a tenant in an end cap with a drive-thru.” With 14 specialty coffee projects permitted through Q3 2025, Houston’s caffeine infrastructure continues outpacing national growth averages.   Favorite Retail Spots Sitting out on the patio at Mendocino Farms for lunch in Uptown Park on a pretty day is hard to beat. True Food Kitchen in BLVD Place and Local Foods on Post Oak are across the street from our office and making me convert to a healthier diet. I do, however, still enjoy a smash burger-double with fries and a cookies and cream shake from Burger Bodega on Washington.    Cleveland, Ohio Retail in Cleveland remains historically tight and recorded a 4.5% vacancy rate as of Q2 2025. There has been ongoing positive absorption for the past two quarters, with spaces being quickly leased up. Due to consistently high absorption levels, about 40% of available space is Class C, creating limitations for the already tight retail sector. According to Market Leader Matthew Wallace, the lack of space is a function of the lack of development over the last decade. The construction decline pushed the Cleveland retail sector to focus on experiential retail opportunities.   Trend Tracker: Experiential Retail Due to shifting consumer preferences, experiential retail is the name of the game. “Experiential retail has come about in response to increased online competition and a refocusing of retailers on what the customer wants,” Wallace said. “Since those retailers are successful, space has become limited.   You have to draw people in with great service, convenience, or unique value play.   As experiential retail drives demand in Cleveland, Wallace added Crocker Park as a notable property that continues to lean into consumer experiences. Located in the Westlake submarket, the open-air mall boasts experiences from tenants like Color Me Mine, Urban Air Adventure Park, and The Escape Game. With its vast opportunities for consumers, Crocker Park recorded nine million visits in the last 12 months, and an average dwell time of 68 minutes.   Retailers to Watch Dining: Local restaurants near me are where I splurge. Thyme Table, Boss Chick & Beer, & Taki’s Greek. Can’t get enough. Shopping: “Ticknors Men’s Clothiers at Beachwood Place Mall. Gotta look sharp!   Denver, Colorado Supply is historically tight in Denver with approximately 381,000 square feet under construction, down 21.8% from 2024. “This scarcity of supply has created a landlord-friendly market and led to availability rates around 4.7%, which is among the lowest in a decade,” stated Brayden Conner, Associate Market Leader.   As supply remains tight, Conner added that he expects leasing velocity in high foot traffic areas to remain high. “As we see Denver continue to grow, we are seeing tenants put more emphasis on being near areas with heavy foot traffic counts like Sloan’s Lake, Lower Highlands & RINO,” Conner said. “There is also increased demand in suburban submarkets like Parker, Lone Tree, and Thornton.”   Trend Tracker: Development Spotlight “While Denver is known for its abundance of outdoor activities, including skiing, biking, golf, and hiking, its retail trends are casting a similar picture,” Conner stated.   Conner also highlighted the ongoing movement for new developments across the metro. “Single-tenant development continues to be an arms race, with national tenants being the most aggressive on core locations,” he said. “New concepts are having to settle on locations outside the city. Regional brands like Swig, Good Times Burgers, and Mad Green continue to expand their footprints locally and are ramping up growth throughout the region.”   As people continue to move to the area and prioritize experiences, entertainment venues and interactive retail concepts are driving demand.   Standout Retail Location The Sloan’s Lake/Edgewater neighborhood, located west of downtown, is a market I would continue to keep a close eye on. Tennyson Street in that area has seen an uptick of luxury brands revitalizing the area.   San Diego, California With expenses increasing across the county, investors need to be cognizant as to how this trend can impact their tenants, according to Market Leader, Keegan Mulcahy. “Expenses have been climbing substantially over the past two to three years, and owners who have gross leases have felt the pain as it eats into their NOI,” Mulcahy said.   “However, even for owners with NNN leases, the trend still impacts their assets as tenants who are responsible for these expenses may be struggling to remain profitable.”   This activity has led to a decreased number of tenants that can afford to pay the current market rents, in conjunction with the increased expenses. “Ideally, landlords can negotiate sales reporting clauses in their leases,” Mulcahy emphasized.   For landlords, understanding their tenant’s store sales and profit margins is critical.    Trend Tracker: Latest Retail Movement “Investment sales velocity is starting to see an uptick,” Mulcahy said. “Particularly, the uptick has been seen with lower price point assets that purchasers can acquire all cash or are utilizing very low LTV, which helps deals to still pencil with today’s interest rates.”   Additionally, there are high volumes of opportunities with tenants who are backfilling vacant drugstores and bank branches. “With the amount of vacancy in both sectors, tenants and landlords are starting to get creative in ways to repurpose these buildings,” Mulcahy said.   Favorite Retail Spots One Paseo – A ±23.6 acre mixed-use site boasting Class A office space, 40+ shops, & luxury apartments. Valley Farm Market – A grocer with top-quality groceries & ready-made food.   Los Angeles, California Los Angeles retail is defying national trends. According to Market Leader Erik Vogelzang, infill locations are resilient, propped up by limited new supply and near-impossible entitlements. “This creates a supply-demand imbalance that keeps quality retail assets in demand,” Vogelzang said.   He added that a shift is occurring in the retail market. “The focus is moving away from traditional shopping toward experiential retail—restaurants, bars, coffee concepts, boutique fitness, and wellness,” Vogelzang stated.   People want to gather, not just transact.    Trend Tracker: Expansion Movement “Stormburger is one to watch. Growing fast, brand-forward, and picking smart markets with precision. They’re building real brand equity early and it’s translating into smart expansion.”   Top Retail Destinations “The Point in El Segundo hits every note. Lifestyle-driven, hyper-local, & constantly buzzing. Chapman Plaza in K-Town is another standout with heritage architecture & booming foot traffic. Culver Steps is carving out its own cool factor with creative energy, a great tenant mix, & a perfect fit for that Westside tech-meets-culture vibe.”   Abbot Kinney in Venice is still a must-hit for brand exposure, walkability, & consistent consumer draw. Downtown Manhattan Beach is a strong mix of daytime & nighttime traffic. We just placed Bread Head there in a fantastic deal. The South Bay as a whole is having a real moment.”   Phoenix, Arizona Following the low retail vacancy rate trend across the country, Associate Market Leader Milton Braasch stated that Phoenix recorded a record-low vacancy rate of 4.6% during 2024. “In a broad national market that is facing headwinds, the investment and continued population growth of the Phoenix metro can somewhat insulate the market to see continued strong performance,” Braasch said.   Braasch added that Maricopa County, which encompasses the Phoenix metro, is one of the fastest-growing counties by population growth nationally. “I am continuing to watch this trend as we move through 2025 as it will drive where our market is headed,” Braasch said. “I foresee this growth continuing in all parts of the Valley, which will continue to push our CRE market forward as a pacesetter in the United States.”   More people = more demand  More demand = economic growth Economic growth = CRE prosperity   Trend Tracker: Transaction Movement “The biggest challenge we face in the transaction market continues to be navigating the cost of debt and managing the bid-ask spread as brokers,” Braasch said. “The more realistic we can be with clients on current market conditions, the more often we can bring out deals that are priced to sell, versus pricing six months in the past with deals that do not pencil for buyers.”   Thriving Restaurant Scene “The Phoenix restaurant market is one that is always evolving. With the revitalization of Downtown Phoenix & the continued growth of Scottsdale, new restaurant concepts are always coming into the Valley & looking to expand their footprint.”   “I am a food-forward person, so my favorite thing to do is find new great restaurants. Though it is hard to keep up with trying them all since so many new concepts are popping up all the time.”   Nashville, Tennessee The ongoing population increase in Nashville led to a rise in retail demand, pushing the vacancy rate to 3.3% as of Q2 2025. This is a continuing trend for the metro as vacancy has been below 3.5% since 2022. “It feels like all of Nashville is increasing significantly,” stated Managing Director Hutt Cooke. “There has been consistent demand in Nashville for nearly a decade.”   Cooke stated that a prominent factor for Nashville is its investment community. “The largest landlords in this market did not just get lucky by being in Nashville,” he expressed. “They saw the growth and opportunity and took advantage of it.” The metro’s strong investment environment is also aided by the variety of investors coming to Nashville. “In recent years, we have had a lot of coastal capital come into the city and pay extremely high prices,” Cooke added. “Local folks have a low cost basis, keep up with market rent, and cash flow. Different business models and they both can work.”   Tenants and investors see the long-term growth of Nashville and want to be a part of it.    Trend Tracker: QSR Competition According to Cooke, investors should keep an eye out for new QSRs coming to Nashville. “QSR operators are exploding the Nashville market,” he said. “We are seeing new corporations make a big splash in Nashville to keep up with their competitors.”   New QSR tenants are taking over projects under 10,000 square feet, with tenants like Dutch Bros Coffee and Whataburger actively expanding in Nashville. Dutch Bros Coffee recently made a move in its growth plans by leasing a space in Murfreesboro that will be its 13th store in the metro.   Newcomers and Local Favorites “I am very excited about the new Italian sandwich shop, All’Antico Vinaio. They recently opened two new locations in Nashville.”   “Being located in Broadwest, I go to Halls at least once a week. It is hard to beat a Halls Chophouse Steak.”   Chicago, Illinois While investors may target areas like The Loop or Magnificent Mile, other locations are important to track for their strong performance, according to Market Leader Joshua Bluestein.   Bluestein added that performance levels are varied across Chicago. “The areas with the most increase in sales and leasing velocity are in single-tenant and high-traffic corridors, as well as Chicago suburbs,” he said. “In the suburbs, vacancy rates have dropped to a near 20-year low, mainly due to quite a bit of new development.”   Meanwhile, core areas are noting a slowdown in performance. “Leasing and sales are slowing down in Downtown Chicago, such as The Loop and River North,” Bluestein added. “Vacancy rates in The Loop are about 30% with concerns over high rent costs, staffing, and safety issues.”   The south and west sides of Chicago are showing great promise and growth, driven by strong local demand and limited e-commerce penetration.    Trend Tracker: Value and Luxury Retailers “The most active retailers in the Chicago MSA right now are value-oriented retailers like GAP and Uniqlo who are making a splash with new locations in core, high traffic areas, such as Michigan Avenue,” Bluestein said. “Premium and boutique brands, like Hotel Chocolat and Marine Layer, are also adding new locations. These higher-end brands are targeting areas like Lincoln Park for their stores.”   Areas to Monitor “Chicago is full of neighborhoods with great retail like Gold Coast and Lincoln Park. There is retail for everyone in Chicago!”   “The Gold Coast is especially popular as the area consists of high-end retailers, such as YSL, Peter Millar, among many others. The area also boasts quite a few high-end restaurants and upscale hotels, like the Waldorf Astoria.”   Northern New Jersey, New Jersey Associate Market Leader Jermaine Pugh stated that while Hudson County may be overlooked for nearby New York City, it offers a variety of retail opportunities. “Hudson County’s Gold Coast shares many of the same development fundamentals as Brooklyn, with strong rent growth, prime lots, and ideal conditions for transit-oriented, mixed-use projects,” Pugh said. “Unlike New York City, the area benefits from pro-growth local governments, streamlined approvals, and more landlord-friendly rent laws.”   Pugh added that cities like Jersey City, Hoboken, and Weehawken offer a more efficient and profitable development path without the regulatory burdens faced in New York City. Yet, Pugh said that the bid-ask gap is necessary to watch as it is occurring on most active listings. “Buyers can’t raise their offers, due to current high interest rate pressures, while sellers are reluctant to lower prices since they can’t clear their debt at reduced price points,” he emphasized. “This disconnect will likely come to a head as loans mature, forcing owners to either sell or inject additional equity to meet loan-to-value requirements.”   These tenants drive demand in mixed-use and grocery-anchored centers, especially in suburban and transit-oriented areas.    Trend Tracker: New Tenant Arrivals According to Pugh, the most active retail tenants are food and beverage operators, boutique fitness and wellness brands, and healthcare or daily-needs service providers.   Some particular tenants adding new locations in the area are CAVA and Sweetgreen as Pugh said they are targeting New Jersey suburbs with high-income demographics for their growth. CAVA is adding new locations in East Brunswick, Union, and Marlton; meanwhile, Sweetgreen is delivering properties in Morristown and Westfield, with the Westfield location recently opened.   Top Retail Destinations “The best retail spots are in Northern New Jersey’s Gold Coast. Hoboken’s Mile Square is an eclectic mix of national retailers, trendy boutiques, & authentic global cuisines.”   “A go-to spot is Downtown Montclair. This affluent suburb is known for its vibrant arts, culture, & dining scene. Its main retail strip—Bloomfield Avenue—thrives on high-end shops, boutique fitness, bookshops, indie cafés, & experiential concepts that align with the community’s creative energy.”   New York, New York As Manhattan multifamily, mixed-use, and retail-driven property values have remained relatively stagnant since Q2 2023, a once-in-a-decade opportunity is presenting itself for investors to purchase at 10-year highs for yield and 10- to 20-year lows on a price per square foot basis, depending on property location and degree of rent regulation. The market is currently experiencing the longest sustained duration of offering properties for sale in downtown Manhattan with above 6% yields since 2010-2011, as well as multifamily buildings selling for below $500 per square foot, which has also not occurred in prime downtown markets since 2010-2011.   Trend Tracker: Transaction Movement The Matthews™ New York specialists are currently marketing properties in Chelsea at pricing that is 25-30% lower than where comparable properties sold for on a price per square foot basis in 2015, showing that upside in both yield and basis is available.   The current interest rate environment will create opportunities for future recapitalization, appreciation, and outsized returns in a market that has historically had the highest barrier of entry. Transaction volume will likely remain low, while first-time Manhattan buyers continue to find attractive yields. Both pricing and volume will increase when the Federal Reserve begins a consistent campaign to target lower interest rates.   Why New York? We look for people who have spent time here, are enthusiastic about what the city offers, and recognize its uniqueness is not something you can find anywhere else. “The energy you feel in the city reverberates off the density of the buildings around you and what goes on within their walls. If a candidate’s eyes light up when they talk about the possibility of working on that as a product of their profession, then they’re probably for us,” Cory Rosenthal, Executive Managing Director & National Director, Multifamily

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Andrew Gross

Senior Managing Director

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Regional Shopping Center Report

Shopping Centers National Overview Strong demand and limited supply are keeping the U.S. shopping center market resilient in 2025, despite mounting financial headwinds facing consumers. Positive rent growth and renewed institutional investment continue to position retail as one of the most stable CRE sectors.   Supply and Demand The U.S. consumer is facing a wave of headwinds that look poised to slow retail spending in 2025. Consumer sentiment has plummeted to lows not seen since the pandemic began, and many economists are worried about a second round of inflation due to the inventory shocks associated with the new trade policy. Credit card debt maturities are rising to levels not seen since the Great Financial Crisis, and student loan payments resumed in full this Spring. All of this suggests retail could be in trouble, but the reality is that there is a shortage of highquality retail space, and the pullback in consumption is expected to slow growth rather than turn negative.   The shopping center market has been historically tight over the last three years, so much so that tenants are finding it difficult to find spaces to expand into. Investors targeting value-add plays are coming up dry, and tenants are staying in older centers longer than they would like. While store closures are never good for all retail landlords, loosening vacancy rates in 2025 is likely to spark a wave of new leases from recent retail winners.   Rent Trends Shopping centers have recorded positive rent growth for the longest consecutive stretch on record, a trend that is expected to continue in 2025. The property type has become a safe haven for CRE investors. Limited new supply and long lease terms have shielded the asset class from the large boom-and-busts felt in multifamily and industrial markets, while new and exciting trends in the experiential retail space have helped the product evolve.   Sales Trends Transaction activity is roughly in line with prepandemic figures but still sits nearly 40% below the peak level recorded in 2022. The market, however, has shown positive signs in 2025, with Q1 showing 25% more deal activity than in the first quarter of last year. Driving this surge is the return of widespread institutional activity. These investors often have access to the best information, and their willingness to acquire more space shows significant confidence in the future of retail. Retail pricing has also held up better than the other major property types, with the price per square foot of shopping centers rising 6.1% over the past 12 months.   West   Demand Drivers The West Coast remains the costliest retail market for investors to break into, a factor which is largely attributed to the region’s high-skill workers and elevated disposable income. Suburban retail centers across the West have demonstrated resilience and stronger performance compared to some urban cores, adapting to shifts in work and lifestyle patterns. Looking ahead, recent return-to-office mandates are likely to benefit urban retail corridors, particularly in Los Angeles and San Francisco.   The strength of California’s tech sector, particularly in AI and semiconductors, is anticipated to create positive spillover effects on consumer spending from its high-earning workforce. The high population growth observed over the last two decades has led to the region occupying eight of the top 10 most retail-scarce metros in the country per population.   The demand is there from investors; most people are just trying to wait out interest rates or pricing, but if we saw even a minor reduction in entry costs, transaction volume would rise rapidly. The fundamentals in the market are too strong for investors to overlook. -Matt LoPiccolo, Senior Vice President   Sales Trends Q1 2025 was the strongest on record for West Coast shopping centers since Q1 2022, when interest rates were nearly 250 basis points lower. Institutional investors have significantly ramped up activity in West Coast metros, with 90% of the deal volume in some cities attributable to these types of investors. These factors culminated in a very active start to 2025, propelling sales volume ahead of prepandemic levels. This could spark a rapid increase in activity if interests do fall in H2 2025.   The rise in confidence is not just among investors, as many lenders and banks are reporting a heightened appetite for shopping center loans in the first four months of 2025. Competition from lenders will help ease financing costs as spreads narrow in order to secure deals.   Southwest   Demand Drivers The Southwest benefits from its proximity to highcost West Coast locales, and many metros in the Southwest remain the top destination for households moving away from California. This spurred stable population growth, 50-80 basis points above the national average each year this decade. As a result, much of the current development pipeline contains neighborhood and power centers with necessity and grocery-based retailers. This is especially true for rapidly growing cities like Dallas-Fort Worth and Phoenix, which are also the cities recording the strongest rent growth in 2025.   While rising mortgage rates have slowed population migration nationally, the Southwest continues to record elevated population growth despite the headwind. This signals that we could see an even larger spike in move-ins in H2 2025 or 2026, once interest rates moderate. The strength of California’s tech sector, particularly in AI and semiconductors, is anticipated to create positive spillover effects on consumer spending from its high-earning workforce. The high population growth observed over the last two decades has led to the region occupying eight of the top 10 most retail-scarce metros in the country per population.   Restaurants are the most active in the market right now–especially franchise concepts and freestanding quick-service formats like Cava. We’re also seeing a lot of boutique fitness-class-based models like pilates, yoga, barre, are outperforming the big-box gyms. -Grayson Duyck, Vice President   Sales Trends Activity is ramping up across the five states that constitute the Southwest, so much so that April transaction volume was already 50% of the Q1 total for shopping centers. Both institutions and REITs have been net buyers here through the first four months of 2025, typically the first firms to become active at the start of a new cycle. This is an encouraging sign, as these areas recorded some of the strongest pricing growth and cap rate compression in the country during 2021 and 2022, but have also been some of the most affected by rising interest rates.   Because population growth is driving much of the need for new retail space, sales pricing for suburban shopping centers has been strongest of late, growing by nearly 4% since interest rate hikes began. Grocery-anchored centers in surrounding suburbs have been highly sought after as a result.   Southeast   Demand Drivers The Southeast U.S. economy is projected to continue expanding in 2025, driven by its significant and ongoing population boom. The Southeast grew by more than 3.7 million people from 2020 to 2024, underpinning strong consumer demand and overall economic activity. Florida’s pace of in-migration has slowed slightly in 2025, but growth in Tennessee and the Carolinas is helping the region maintain its rapid population expansion.   This population influx supports generally resilient retail sales. The area has benefited from a wave of new residents from the Northeast, who bring elevated incomes with them, supporting the need for more retail space. These factors are driving the nation-leading rent growth observed in the region. While the growth pace in the Southeast might ease slightly in 2025, the underlying economic drivers remain robust. The region’s attractiveness to new residents and businesses is expected to sustain demand for years to come.   Historically, the Southeast has imported a lot of capital from the West Coast and Northeast due to higher yields. 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. -Jeff Enck, Senior Vice President   Sales Trends The Southeast leads U.S. shopping center sales volume compared to pre-pandemic levels, driven by the region’s ongoing transformation. Remote work in 2020 prompted migration to the Southeast, attracted by business-friendly policies and an enhanced quality of life. These demographic and economic shifts will continue, strengthening the region’s diverse commercial real estate assets for sustained investor interest. From luxury malls in South Florida to strip centers in Raleigh, Charlotte, and Charleston, Southeast assets appeal to all portfolios.   Nashville leads 2025 sales trends, posting the strongest pricing growth and volume recovery among major U.S. metros. Even with higher borrowing costs, investors push Nashville property values upward faster than any other major market nationwide. From Q1 2024 to Q1 2025, Nashville’s pricing surged 5.8%, marking the steepest increase nationwide.   Mid-Atlantic   Demand Drivers Distinct economic characteristics set the Northeast apart from other U.S. regions, significantly influencing its retail real estate dynamics. The region’s tightly packed urban cores, established infrastructure, and greater land-use restrictions contribute to chronically tight retail market conditions. This scarcity means that even modest growth in consumer demand can exert sizable upward pressure on rents. This translates to strong performance metrics at well-located shopping centers that can offer a mix of essential services, experiential tenants, and convenience.   The region’s high population density and higher median household incomes create a concentrated and robust consumer base. However, higher housing and energy costs often offset gains, reducing disposable income more than in other U.S. regions.   One factor supporting Northeast urban retail is the growing number of employees returning to offices. VTS’s office demand index shows New York City as the strongest primary market for recent office use. Boston recorded the nation’s highest year-over-year office demand growth, increasing 31.7%, highlighting momentum in the region’s urban cores.     Certain markets within the region, particularly suburban urban cores near major cities, are attracting significant investor interest. Their historical resilience through various economic cycles makes them attractive as “flight to safety” investments. Notably, areas like Westchester (NY) and Fairfield (CT) Counties and Northern New Jersey. As well as the MetroWest- the outer suburbs of Boston inside the 495 Corridor. These areas 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. -Joanna Rotonde Manfro, First Vice President   Sales Trends Investors would be wise to continue tracking office use and multifamily leasing trends within the Northeast, as the region could be on the verge of a shift back into urban cores. This would benefit retail in the largest business hubs, particularly Boston and NYC. While current media sentiment is overwhelmingly negative on the region, it is crucial to remember the Northeast is one of the most highly educated and financially compensated regions in the country. Retailers will continue looking to access these markets, driving rent growth and property pricing higher at the locale’s shopping centers.   Banks have returned as the primary source of shopping center financing in the region, reiterating the positive outlook. More competition from a variety of lenders will benefit investors in multiple ways. First, competition on the lender side will reduce risk premiums and apply downward pressure on lending rates, and second, deals that were unable to secure financing in 2024 could presumably pencil if pursued today.   Midwest   Demand Drivers Midwestern real estate has long been a bastion of consistency for investors, and 2025 is no different. Each major metro is showing rent growth of 2% to 5% at shopping centers, despite the year’s rocky beginning. With multifamily leasing improving in midwestern cities, retail fundamentals appear set to remain stable regardless of national economic challenges.   Development activity also supports the region’s stability. Despite having the highest total population of all U.S. regions, developers have largely neglected the Midwest this cycle.   Only 4.1 million square feet of shopping centers are under construction, about half the Southeast’s total despite similar populations. This trend is especially clear in Midwest cities like Columbus, where companies such as Intel are driving significant job growth.   Suburban centers with strong demographics and daily-needs tenants are leading in terms of performance and liquidity. These properties typically offer ample parking, high visibility, and f lexible layouts—key attributes for medical, restaurant, and service-oriented tenants driving today’s leasing demand. New construction is limited across the board, so most investor activity is focused on stabilized or light value-add centers— properties where there’s upside through lease-up, renewals, or modest cosmetic improvements. The ability to support modern tenancy needs is key. -Patrick Forkin, Senior Vice President   Sales Trends Deal volume in the Midwest has handled the impact of rising interest rates better than most other U.S. regions. The area continues to record 10% more sales activity than 2019 levels, underscoring regional stability, liquidity, and overall safety. The Midwest remains attractive for investors, with strong liquidity and consistent per square foot pricing growth despite national challenges.   Columbus has transformed its retail market, with deal volume rising over 180% in the past year versus 2019. The city is rapidly growing and supported by a stable spending base, largely driven by Ohio State University.

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Matthew Wallace

National Director of Shopping Centers & Market Leader

Image of Multifamily Markets in 2025: Navigating Oversupply, Rebounding Demand, and Institutional Revival Success Story

Multifamily Markets in 2025: Navigating Oversupply, Rebounding Demand, and Institutional Revival

U.S. Multifamily Market Trends 2025 As U.S. multifamily market trends evolve,  a clear narrative emerges: the sector is recalibrating after an era of hypergrowth. Across the Sunbelt, Midwest, and coastal metros, rising vacancy rates, tempered rent growth, and a sharp slowdown in construction activity have created a bifurcated landscape. While many cities face supply overhangs, others are benefiting from demographic tailwinds, resilient demand, and the re-entry of institutional capital. This article breaks down the multifamily dynamics across key U.S. markets and outlines the strategic shifts shaping investment and development activity in the year ahead. Sunbelt Metros: Supply Surges Meet Growing Pains Atlanta, Nashville, and Jacksonville Atlanta has witnessed a dramatic spike in vacancy rates—rising from 5.5% in 2021 to 12.5%—due to an onslaught of new Class A supply. Rents have fallen across luxury assets, with concessions such as two months’ free rent now commonplace. Similarly, Nashville added 13,000 units in 2024—nearly double its 10-year average—leading to elevated vacancy and softened rent growth. Jacksonville, too, is facing growing pains: a 13.4% vacancy rate underscores oversupply concerns, although a construction slowdown and rebounding rent projections into 2025 offer signs of recovery. Tampa, Fort Lauderdale, and Miami Tampa leads Florida markets in construction, delivering over 10,500 units by late 2024. Though vacancies remain elevated, investor interest in premium assets like The Pointe on Westshore continues to surge. In Fort Lauderdale, affordable submarkets outperformed luxury areas, highlighting a growing affordability divide. High absorption and strong investor interest suggest resilience despite moderating fundamentals. Austin, Dallas-Fort Worth, and Houston Austin remains the most oversupplied market nationally, with a 15.3% vacancy rate despite record absorption. New construction has slowed sharply, which may help the market recover by mid-2025. Dallas-Fort Worth (DFW) and Houston echo similar dynamics: robust demand (15,200 and 20,000 units absorbed, respectively) has been overshadowed by new supply, keeping vacancy rates above 11%. Southeast and Midwest Markets: Rebalancing in Progress Louisville and Birmingham Vacancy rates climbed in both cities due to aggressive new deliveries. Louisville’s rent growth remains healthy at 3% despite a 13% vacancy rate in Southern Indiana. Birmingham‘s adaptive reuse trend—converting offices into apartments—reflects creative responses to market saturation. Rent growth has slowed to 0.5%, and investor activity remains tepid. Chicago and Cleveland Chicago presents a rare picture of stability. With a 5.3% vacancy rate and low construction activity, it has emerged as one of the most balanced multifamily markets in the U.S. Cleveland, meanwhile, is rebounding: 2024 saw record absorption and leading rent growth at 3.2%, despite a market-wide vacancy of 8.3%. Private investors are increasingly driving transactions amid institutional caution. Minneapolis A tale of two markets: suburban areas are thriving, while downtown vacancy remains high due to safety concerns and changing work patterns. Overall, the metro’s vacancy rate dropped to 7.5% in 2024, and suburban rent growth continues to support market stability. Western Markets: Pressure Mounts Despite Strong Demand Phoenix and Denver Phoenix saw 18,000 units absorbed in 2024, but the addition of 22,000 units kept vacancies at 11%. With 27,000 more units under construction, oversupply concerns loom. Denver posted record absorption but continues to battle a pipeline of 91,000+ units, keeping the metro’s vacancy rate at nearly 11%. Both markets are seeing a shift toward smaller, more affordable investment targets. Los Angeles and the San Fernando Valley Los Angeles faced a devastating wildfire crisis that destroyed 10,000+ structures, driving expected rent hikes of up to 12% in 2025. The San Fernando Valley stands out with the lowest vacancy rate in California at 3.6% and outsized investor activity totaling $2.5 billion. San Diego and Sacramento San Diego‘s housing shortage persists despite improved absorption. Rent growth is sluggish at 0.6%, with affordability concerns prompting shared housing trends. Sacramento, on the other hand, has seen improving Class A demand and a vacancy drop to 6.5%, fueled by slowed construction and rising rents. East Bay and Orange County The East Bay continues to grapple with high-end rent declines (-2%) but shows promise through slowing construction and increased investor confidence. Orange County remains resilient with a 4.2% vacancy rate and one of the most expensive, yet stable, rent markets in the country. Northeast: Resilient Giants and Transit-Oriented Expansion Brooklyn and Manhattan Brooklyn’s vacancy rate of 2.6% remains among the lowest nationally, supported by strong absorption and modest rent growth (2%). Manhattan mirrors this trend, with 7,000 units absorbed in Q2 2024 and average rents exceeding $3,200. Investors are laser-focused on premium assets in these rent-stabilized, supply-constrained markets. Northern New Jersey New Jersey is experiencing record absorption with a skew toward luxury units. However, affordability challenges persist, prompting investment in transit-oriented developments like Vermella Broad Street and The Crossings. Payroll growth and a strong job base are supporting long-term multifamily strength. Institutional Capital Reawakens in 2025 Following a two-year pause, institutional investors are reentering the multifamily space. Blackstone’s $10 billion acquisition of AIR Communities in 2024 was a signal of confidence. With interest rates declining and alternative lenders stepping in, capital is unlocking for core and core-plus deals. Markets with stable fundamentals—like Chicago, Orange County, and parts of the Sunbelt—are attracting early waves of institutional funding. Strategic Focus Areas Geographic Shift: Sunbelt cities with paused pipelines and strong absorption (Austin, Jacksonville) are back in focus. Asset Selection: Workforce housing and mid-market suburban assets are outperforming luxury units in both demand and investment return. Development Retrenchment: Construction starts have fallen nationally, creating a more favorable leasing environment and room for rent growth. Understanding the shifting dynamics in U.S. multifamily market trends 2025 is essential for developers and investors aiming to time their reentry and capitalize on tightening supply-demand conditions. Outlook: Rebalancing Today, Growth Tomorrow While U.S. multifamily market trends across the U.S. are at varying stages of recalibration, the underlying fundamentals remain strong. Population growth, job creation, and homeownership constraints continue to fuel renter demand. The retrenchment in new development is setting the stage for a more balanced 2026, with absorption expected to reduce vacancy and reignite rent growth in many metros. With institutional capital mobilizing and interest rates easing, the second half of 2025 may mark the beginning of a new multifamily investment cycle—one defined not by the breakneck speed of past years, but by discipline, differentiation, and strategic foresight.

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Q1 2025 | State of the Multifamily Market | Hudson County, NJ

Q1 2025 State of Hudson County’s Multifamily Market Trends, Challenges, and Opportunities | 2023-2025 The multifamily real estate market in Hudson County, New Jersey, has faced a dynamic landscape over the past three years. From fluctuating interest rates to evolving investor sentiment, here’s a comprehensive overview of the market’s performance from 2023 to 2025 and the opportunities that lie ahead.   Market Overview 2023: Market Adjustment Amid High Rates 5 Year UST Rates: January 3.85% | March 3.95% Buildings Sold: 13 Total Units Traded: 162 Total Volume: $34,050,000 Average Cap Rate: 5.14% | As of March 19,2025   By 2023, rising rates weighed on the market, with the 5-year UST reaching 3.95% by March. The number of buildings sold fell dramatically to just 13. Total units traded dropped significantly to 162, and transaction volume shrank to $34.05 million. Despite the downturn, the cap rate declined to 5.14%, suggesting that some deals still attracted investor interest amid higher borrowing costs.   2024: Transaction Rebound with Higher Cap Rates 5 Year UST Rates: January 3.84% | March 3.94% Buildings Sold: 33 Total Units Traded: 464 Total Volume: $92,095,090 Average Cap Rate: 6.00% | As of March 19, 2025   In 2024, the market saw a partial recovery as 33 buildings changed hands, reversing some of the prior year’s slump. Total units traded rose to 464, and total volume increased significantly to $92.1 million. The average cap rate increased to 6.00%, reflecting continued adjustments in pricing and investor expectations for higher yields in an environment of elevated interest rates.   2025: Fewer Transactions, Larger Deals 5 Year UST Rates: January 4.45% | March 4.10% Buildings Sold: 6 Total Units Traded: 403 Total Volume: $132,001,458 Average Cap Rate: 5.30% | As of March 19, 2025   As of Q1 2025, transaction volume has remained significant despite fewer deals closing. Only 6 buildings were sold, but total units traded remained strong at 403, and total transaction volume surged to $132 million. The average cap rate settled at 5.30%, showing that while pricing remains attractive, fewer sellers are willing to transact at current market conditions.   Northern New Jersey Trends in the Market The Hottest Rental Market in the Northeast Northern New Jersey continues to be a top performer in the rental market, with limited inventory driving demand. With an impressive 14 prospective renters for every vacant apartment unit and a lease renewal rate of 70.5%—far above the national average of 60.2%—the region remains a preferred destination for renters, particularly those relocating from New York City.   Development Boom The state issued more housing permits than New York in recent years, spurred by lower construction costs, tax incentives, and pro-growth policies. Payment In Lieu of Taxes (PILOT) programs have also encouraged development, resulting in a boom in luxury apartments. However, the luxury segment faces higher vacancy rates compared to the overall multifamily market.   Looking Forward: Signs of Renewed Activity While the past three years have been marked by fluctuations in sales volume and pricing, there is growing optimism driven by strong demand fundamentals and potential rate cuts on the horizon. As the market adapts to more favorable conditions, renewed interest from sellers and investors suggests a multifamily resurgence in the coming months.

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David Ferber, CPA

Senior Vice President & Director

Image of Southeast Retail | Market Overview Success Story

Southeast Retail | Market Overview

Southeast Retail Overview The Southeast’s commercial real estate markets have undergone significant transformation due to rapid population migration into the region since the onset of the pandemic. Many southeastern metro areas now require new development, with cities expanding into previously rural land. In Nashville and Charlotte, growth in the suburbs has created demand for grocery stores and basic-needs retailers. Meanwhile, increased density in cities like Atlanta and Miami has boosted the utilization of existing retail spaces. Although nationwide population migration has slowed, the South continues to lead early estimates for 2024. Two major announcements in the manufacturing sector are likely to further boost demand and production in Ohio. Intel’s $20 billion facility in Licking County is progressing, though its opening date has been pushed past 2025. When completed, the factory will occupy 2.5 million square feet of industrial space. Meanwhile, Abbott is building a $536 million production facility in Bowling Green to meet the growing demand for baby formula. Both projects will drive industrial space demand, both directly and indirectly, with demand for additional distribution space expected to rise sharply as goods begin to flow from these new facilities.   Beyond population growth, the types of jobs moving to southern cities are further driving retail demand. Higherpaying employment opportunities are fueling consumer spending in the region. Florida recorded the nation’s strongest growth in this area last year, while Georgia, the Carolinas, and Tennessee also outpaced the national average in spending growth. Strong long-term consumer expectations in the Southeast are spurring rapid retail expansion. Both local firms, such as Publix, and national retailers, like Boot Barn, are eager to enter southeastern markets but are struggling to find available retail space. This scarcity has driven rental rates higher, exacerbating retail market tightness, which is already at record levels across the Southeast.   Atlanta By the Numbers Vacancy: 3.7% Annual Net Absorption (SF): -61,000 SF Under Construction: 600,000 Rent per SF: $22.96 Annual Rent Growth: 4.0% Average Price per SF: $222 Average Cap Rate: 7.0% | Source: CoStar Group   Since 2014, Atlanta’s population growth has roughly doubled the U.S. average pace, and median household income growth has surpassed the national average since 2020. Favorable demographic trends continue to drive demand for retail space and support the market’s expansion. The metro’s fastest-growing and highest-spending neighborhoods, concentrated in the northern suburbs, are expected to capture a significant share of new retail demand. However, areas within the perimeter will also benefit from increased population density and job growth. High-paying office jobs and accompanying multifamily developments in Midtown, West Midtown, and the Eastside are boosting buying power in these premier in-town neighborhoods, where mixed-use retail is common.   Atlanta’s retail vacancy rate has remained below 4% since early 2021—90 basis points lower than the national average of 4.7%. Low vacancy is consistent across product types, with Atlanta malls reporting a vacancy rate of just 3.7%. For three consecutive years, absorption in the metro area has outpaced new completions, and with only 0.2% of inventory currently under construction, the limited supply pipeline is unlikely to reverse the market’s tightening conditions.   While Atlanta’s sales market has experienced fewer transactions since interest rates began rising in 2022 and 2023, sales metrics have remained strong. Since 2022, the average retail cap rate nationally has increased by nearly 20 basis points, yet Atlanta continues to experience cap rate compression—a testament to the city’s exceptional retail performance over the past three years. Investors are drawn to the market’s robust demographic drivers, resulting in nearly 5% price appreciation over the last 12 months. This stands out against the national trend of flat price movement during the same period.   Miami/Fort Lauderdale By the Numbers Vacancy: 3.2% Annual Net Absorption (SF): 172,000 SF Under Construction: 1,550,000 Rent per SF: $43.01 Annual Rent Growth: 2.2% Average Price per SF: $391 Average Cap Rate: 5.7% | Source: CoStar Group   South Florida’s robust population growth has created a high-performing and stable environment for retailers in the region. This rapid growth, however, presents a double-edged sword for businesses. On one hand, the influx of residents drives increased demand for a variety of retail products. On the other, limited housing options strain consumer budgets. Housing inflation in South Florida significantly outpaced the national average in 2022 and 2023, putting additional pressure on spending. While consumer spending in Miami and Fort Lauderdale remains well above pre-pandemic levels, its growth has slowed due to rising housing costs. One mitigating factor is that many new residents come from high-income states like New York and New Jersey, providing additional spending power beyond the average newcomer.   Miami and Fort Lauderdale both maintain a retail vacancy rate below 4%, but net absorption trends highlight a divergence between the two markets. In the 12 months preceding October 2024, Miami saw an additional 968,000 square feet of retail space absorbed, while Fort Lauderdale experienced negative annual net absorption. This has resulted in a disparity in vacancy rates, with Miami at 2.7% and Fort Lauderdale at 3.9%. Construction activity mirrors these trends, with over 1 million of the 1.55 million square feet under development located in the Miami metro area.   Residential and inland areas of Miami are experiencing the lowest retail vacancy rates as retailers strive to meet heightened demand in strip malls, grocery-anchored centers, and power centers. Developers, however, are focusing on new projects in areas like South Beach, North Miami, and Miami Gardens rather than in high-demand zones stretching from Hialeah to Homestead. Similarly, Southeast Broward County and Hallandale are seeing notable construction activity due to their proximity to Miami.   Investor appetite has been dampened by rising borrowing costs, but the primary factor slowing sales volume over the past two years has been a lack of listings. Sellers, buoyed by strong property performance, are reluctant to reduce prices to align with buyer expectations. With rent growth in South Florida consistently outpacing both inflation and national retail rent growth since 2021, many investors are opting to hold onto their assets rather than sell.   Average pricing varies widely across the region. Retail properties in Miami Beach and Downtown Miami/Brickell can trade for as much as $800 per square foot for high-performing assets. Meanwhile, assets in northern Broward County and inland portions of Miami-Dade County frequently transact in the $250-$350 per square foot range. Downtown and Central Fort Lauderdale represent a midpoint, offering investors a balance of heightened foot traffic without the high entry costs associated with Miami Beach.   Tampa By the Numbers Vacancy: 3.0% Annual Net Absorption (SF): 1,183,000 SF Under Construction: 318,000 Rent per SF: $26.30 Annual Rent Growth: 4.2% Average Price per SF: $267 Average Cap Rate: 6.5% | Source: CoStar Group   Tampa’s retail market has maintained a low vacancy rate since the onset of the pandemic. The city benefited from lighter COVID-19 restrictions compared to other parts of the country, which helped sustain foot traffic at retail centers and office buildings. While retail performance in Tampa held steady in 2020, it has tightened significantly in the years since. A unique feature of Tampa’s market is the tightening mall vacancy rate, driven by two high-performing malls in Westshore.   Tampa’s retail inventory is well-positioned, with the metro’s two largest submarkets—Westshore and East Tampa—recording vacancy rates even lower than the metro average. In Westshore, proximity to high-end offices, Tampa International Airport, and Raymond James Stadium keep retail shops and centers bustling year-round, compressing vacancy to a record low of 1.1%. Meanwhile, East Tampa boasts a vacancy rate of just 1.0%, also a record for the area. With no new spaces under construction in East Tampa, rent growth is expected to remain above 4% in the coming years. These two submarkets are not in direct competition for tenants; Westshore commands rental rates well above the market average, while East Tampa remains a suburban district with rents aligned with the overall metro level.   Downtown Tampa recorded a vacancy rate of 4.0% in 2024, which is below the national average but higher than the metro average. Negative net absorption during the second half of the year contributed to the slight vacancy increase. However, the Central Business District is expected to see improved fundamentals in 2025 and 2026, with only 21,000 square feet of new space set to enter the market. For comparison, approximately 52,000 square feet were delivered in Downtown Tampa in 2023 and 2024.   Defying national trends, transaction velocity in Tampa’s retail market has risen each quarter in 2024, culminating in $390 million in deal flow during Q3. While annual transaction velocity has declined in most cities, Tampa recorded a 12.4% increase in sales volume from Q3 2023 to Q3 2024. The market’s strong performance suggests that transaction activity could accelerate if borrowing costs ease in Q4 2024 and early 2025.   Nashville By the Numbers Vacancy: 3.1% Annual Net Absorption (SF): 680,000 SF Under Construction: 765,000 Rent per SF: $28.23 Annual Rent Growth: 2.7% Average Price per SF: $268 Average Cap Rate: 6.3% | Source: CoStar Group   Like other Sunbelt metros, Nashville has greatly benefited from accelerated migration trends during and after the pandemic. The city is well-positioned to sustain and expand its population growth more effectively than other Sunbelt cities, thanks to significant corporate movement that has diversified its economy. Once dominated by leisure and hospitality employment, Nashville now boasts a more balanced job market. Major employers such as Oracle, Facebook, and Amazon have bolstered the city’s workforce, creating a retail market that caters to consumers across the income spectrum.   Retail vacancy in Nashville has been further reduced by the entry of several national and West Coast brands into the market over the past few years. Companies like Dutch Bros Coffee have driven demand for freestanding buildings, while expanding grocers such as Publix and Aldi have taken larger spaces in community and neighborhood centers. Notable leases also include experiential tenants like The Picklr and various gyms and fitness centers.   The metro’s tight retail market has resulted in fierce competition for space, with new lease listings being quickly absorbed and rental rates under significant upward pressure. Retail rents in Nashville have grown faster than the national average since 2014, and the pace of rent increases continues to outstrip the U.S. average by approximately 30 basis points. Despite this, developers have been slow to respond to the constrained supply, with construction starts in 2024 reaching their lowest level in Nashville since at least 2014.   Unlike most major markets, year-to-date retail transaction volume in 2024 is in line with historical averages and is outperforming the first three quarters of last year. Prior to 2020, investors could acquire retail spaces in Nashville at entry costs well below the national average, which drove significant activity from private investors. However, since 2020, a wave of corporate relocations to the city has attracted the attention of larger funds and institutional investors, recognizing Nashville’s growing potential.   This heightened buy-side interest has fueled a sharp increase in pricing growth. At the end of 2019, per-square-foot pricing in Nashville was $16 below the national average. Today, it stands $20 above the U.S. average, reflecting the metro’s remarkable transformation and appeal to investors.   Jacksonville By the Numbers Vacancy: 4.3% Annual Net Absorption (SF): 1,179,000 SF Under Construction: 299,000 Rent per SF: $25.06 Annual Rent Growth: 5.3% Average Price per SF: $242 Average Cap Rate: 6.8% | Source: CoStar Group   Jacksonville has experienced some of the strongest GDP and population growth in the nation since the onset of COVID-19. The market has become a significant destination for relocating companies, with notable growth in both blue-collar and white-collar segments of the workforce since 2020. As Jacksonville’s multifamily and industrial markets have expanded to accommodate these population gains, the retail market has tightened considerably. Tenants, particularly those seeking spaces 20,000 square feet or larger, are finding it increasingly challenging to secure properties in the city’s most desirable submarkets.   Over the past 12 months, new construction has marginally outpaced demand, driven by exceptionally high construction activity in early 2024. However, the construction pipeline began to narrow in Q2, allowing net absorption to surpass completions from April through Q4. Strong leasing activity led to a 30-basispoint drop in vacancy from Q1 to Q3 2024, although, several speculative construction projects finalized in 4Q. This trend is expected to continue into 2025, as developers are currently working on the smallest volume of space under construction in Jacksonville since 2015.   St. Johns County has been particularly impacted by limited available space, with retailers eagerly targeting this affluent and rapidly growing suburb. Nearly 20% of all leasing activity in 2024 has occurred in St. Johns County, despite it accounting for only 13% of the metro’s total retail inventory. This high demand has pushed the vacancy rate in the submarket to just 1.7%. The tight conditions in St. Johns County is also driving demand in other southern portions of the metro.   While total trading volume has declined significantly from 2022 levels, retail properties in Jacksonville have held their value better than in most other markets. Since the rise in interest rates, average cap rates have continued to compress, and per-squarefoot pricing has steadily climbed. This resilience reflects strong market performance, with rent growth of 6.2% in Q3 2024—among the highest in the nation for a single market, regardless of property type. Retail assets are not typically sought after for rapid rent growth, but Jacksonville’s retail market continues to deliver exceptional returns for investors.   The Carolinas By the Numbers Vacancy: 2.7% Annual Net Absorption (SF): 2,212,000 SF Under Construction: 2,631,000 Rent per SF: $19.52 Annual Rent Growth: 2.0% Average Price per SF: $189 Average Cap Rate: 7.4% | Source: CoStar Group   Institutional investor perception of the Carolinas has transformed significantly over the past decade. Once dominated by private investors, the major metros of North and South Carolina have successfully attracted increased levels of out-of-state and institutional capital. This shift is largely due to the high-profile businesses relocating to the region, including Apple, Meta, and numerous pharmaceutical companies in Raleigh-Durham, as well as Robinhood and LendingTree in Charlotte. Many of these firms are drawn by the region’s prestigious academic institutions, and the retention of graduates within the Carolinas has further augmented the region’s impressive population growth.   In North Carolina, the Triangle remains the tightest retail market, with limited availability stretching from East Raleigh to Burlington. Less than 10% of new space coming to market in this area is available for lease, reflecting robust demand for high-end retail near Raleigh-Durham’s universities and business parks. Retail space in Research Triangle Park (RTP) has performed exceptionally well, even as work-from-home policies have reduced foot traffic in the submarket. RTP’s retail vacancy is just 0.7%. Residential submarkets near RTP have also outperformed, with downtown areas in Raleigh and Durham recording lower occupancy rates than the broader metro or state averages.   While Greensboro-Winston-Salem and Charlotte have slightly higher retail vacancy rates than Raleigh-Durham, these markets still report sub-4% vacancy, well below the national average. Winston-Salem, in particular, has benefited from spillover demand from Charlotte, contributing to nearly 300,000 square feet of net absorption over the past 12 months. By contrast, Charlotte and Greensboro have seen slightly negative absorption figures, primarily due to a few notable move-outs combined with a highly competitive leasing environment. Retail space in Charlotte leases significantly faster than the national average, with a turnaround time of less than six months compared to the typical eight months nationwide.   In South Carolina, coastal communities are experiencing increased interest from both retailers and investors. Hilton Head, long a hub for retail and hospitality, is seeing population growth augment its tourism-driven revenue. Retail vacancy remains low along the coast, from Hilton Head to Myrtle Beach. Rents in Charleston and Hilton Head are well above the state average and even surpass levels in Columbia, yet they continue to rise at a brisk pace of 3% annually. Inland areas like Greenville are also outperforming, with exceptionally strong leasing f igures through the first three quarters of 2024.   Sales activity in both North and South Carolina has been significantly impacted by higher borrowing costs since the Federal Reserve began raising interest rates. In North Carolina, the Triangle has experienced the sharpest decline in transaction volume among the region’s major metros, likely due to strong performance and limited property listings rather than a lack of investor interest. Despite rising capital costs, sales pricing in the Triangle recently set a record at $256 per square foot. Meanwhile, Asheville is undergoing a notable recovery in transaction velocity. Since early 2024, sales volumes in Asheville have surpassed pre-pandemic levels, suggesting that the market’s growth could be just the beginning of broader momentum for North Carolina metros during the current rate-cutting cycle.   In South Carolina, investors have increasingly focused on the strong performance trends and longterm growth drivers of the state’s coastal metros. Charleston has experienced significant population growth alongside a surge in activity at the Port of Charleston, which has generated a wealth of auxiliary employment opportunities in the metro. Consequently, entry costs in Charleston exceeded the national average for the first time on record in 2021, and the premium required to enter the market has continued to grow. The average pricing now stands at $266 per square foot, $18 above the U.S. average.   Birmingham By the Numbers Vacancy: 3.9% Annual Net Absorption (SF): -428,000 SF Under Construction: 68,000 Rent per SF: $15.41 Annual Rent Growth: 2.5% Average Price per SF: $146 Average Cap Rate: 7.4% | Source: CoStar Group   Birmingham has a stable economic base that helps insulate the metro from the effects of economic downturns. The region’s two largest employers, the state government and the University of Alabama, provide steady employment opportunities and attract workers from across the state. Although Birmingham is a relatively small market, ranking 47th in population nationally, the metro has recently recorded population growth well above the U.S. average. With these trends, Birmingham has the potential to join Jacksonville, Raleigh-Durham, and Charleston as a premier Sun Belt growth metro.   The metro faced challenges at the start of 2024 due to a series of retailer bankruptcies and closures, which contributed to negative net absoption. While average vacancy and rent trends have softened this year, the impact has been largely concentrated in the southern suburbs, particularly in areas such as Fairfield, Bessemer, Homewood, and Hoover. Despite these setbacks, leasing activity across the metro has remained stable, suggesting that retail fundamentals are poised to recover once vacant spaces left by closures are reoccupied.   For investors, Birmingham offers an opportunity to enter the rapidly growing Sun Belt region without incurring the high entry costs seen in larger metros. The city’s urban characteristics provide a level of property performance stability, while also offering elevated yields comparable to more rural areas of Florida, Georgia, and the Carolinas. The 8.0% average cap rate for retail transactions in 2024 is roughly 100–200 basis points higher than what is observed in the region’s other urban centers.

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3Q24 | State of the Market | Hudson County, New Jersey

State of the Market | Hudson County, New Jersey Trends, Challenges, and Opportunities | 2022-2024 The multifamily real estate market in Hudson County, New Jersey, has faced a dynamic landscape over the past three years. From fluctuating interest rates to evolving investor sentiment, here’s a comprehensive overview of the market’s performance from 2022 to 2024 and the opportunities that lie ahead. Market Overview Year 5-Year UST (Jan) 5-Year UST (Dec) Buildings Sold % Drop from 2022 Total Units Total Volume Average Cap Rate 2022 1.20% 3.76% 116 N/A 2,143 $537,073,012 5.59% 2023 3.85% 4.00% 90 22% 1,376 $330,879,573 5.79% 2024 3.84% 4.11% 73 37% 949 $205,079,090 5.80% 2022: A Strong Start with Rising Rates 5-Year UST Rates: January: 1.20% | December: 3.76% Buildings Sold: 116 Total Units Traded: 2,143 Total Volume: $537,073,012 Average Cap Rate: 5.59% The multifamily market in 2022 was resilient, despite rising interest rates. The five-year U.S. Treasury yield began at 1.20% in January and climbed sharply to 3.76% by year-end. Despite these rate hikes, the market achieved strong sales volume, with 116 buildings sold. This translated into 2,143 units and over $537 million in transaction volume. A stable cap rate of 5.59% highlighted strong investor interest, even as borrowing costs increased. 2023: Market Adjustment Amid Higher Rates 5-Year UST Rates: January: 3.85% | December: 4.00% Buildings Sold: 90 Total Units Traded: 1,376 Total Volume: $330,879,573 Average Cap Rate: 5.79% By 2023, rising rates weighed on the market, with the five-year UST climbing to 4.00% by year-end. The number of buildings sold fell to 90, a 22% decline compared to 2022. Total units traded dropped to 1,376, and transaction volume decreased to $330.9 million. A slightly higher cap rate of 5.79% mirrored cautious investor sentiment as participants adjusted to elevated borrowing costs. 2024: Continued Softening With Signs of Optimism 5-Year UST Rates: January: 3.84% | December: 4.11% Buildings Sold: 73 Total Units Traded: 949 Total Volume: $205,079,090 Average Cap Rate: 5.80% In 2024, the market continued to soften as the five-year UST inched higher to 4.11% by December. Transaction activity declined further, with 73 buildings sold, marking a 37% drop from 2022. Total units traded fell to 949, and transaction volume decreased to $205.1 million. The cap rate rose slightly to 5.80%, reflecting ongoing market adjustments and investor recalibration. Northern New Jersey Trends in the Market The Hottest Rental Market in the Northeast Northern New Jersey has emerged as a top performer in the rental market, with limited inventory driving demand. With an impressive 14 prospective renters for every vacant apartment unit and a lease renewal rate of 70.5%—far above the national average of 60.2%—the region has become a preferred destination for renters, particularly those relocating from New York City.   Development Boom The state issued more housing permits than New York in recent years, spurred by lower construction costs, tax incentives, and pro-growth policies. Payment In Lieu of Taxes (PILOT) programs have also encouraged development, resulting in a boom in luxury apartments. However, the luxury segment faces higher vacancy rates compared to the overall multifamily market.   Looking Forward: Signs of Renewed Activity While the past three years have been marked by declining sales and volumes, there is growing optimism driven by strong demand fundamentals and potential rate cuts on the horizon. As the market adapts to more favorable conditions, renewed interest from sellers and investors suggests a multifamily resurgence in the coming months.

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David Ferber, CPA

Senior Vice President & Director

Image of 3Q24 | Retail Market Report | Central Florida Success Story

3Q24 | Retail Market Report | Central Florida

Central Florida Retail Market Report Market Overview Central Florida’s economy is strong, with an annual job growth rate in 2023 that ranks second among the top 50 metros in the United States, trailing only Austin, and retail trade and real estate have driven GDP growth. The region’s population also increased by 2.1% over that time, exceeding previous forecasts of 1.6% growth. This increase contributed to a 3.7% increase in consumer expenditure. The forecast additionally calls for consistent demand to keep vacancy rates around 4.0% over the next several years, significantly below the U.S. average.   Tampa Market Overview Tampa’s retail market has Florida’s lowest availability rate. Since mid-2021, the market has maintained an availability rate of less than 5%, which averages abut 3.5% as of the fourth quarter of 2024. The construction pipeline has reached a near-decade low, with 320,000 SF under development. The limited amount of available space, along with little to no pipeline, has had an influence on the market’s leasing activity and subsequent absorption. Rent growth is expected to reduce in the coming quarters. However, owners who signed five- or ten-year leases will see significant rent increases if their current tenant does not renew. Furthermore, they should anticipate that those vacancies will be filled very quickly, as the median months to leas has been less than six months for more than a year.   Tampa By the Numbers Vacancy Rate: 3.0% Rent Growth: 4.4% Absorption in SF: 1.2M Deliveries in SF: 1.3M Sales Volume: $1.2B | Last 12 Months | Source: CoStar Group   Market Performance Tampa’s retail market has had a strong run of positive absorption in recent years, with 1.2 million SF recorded over the previous 12-month period. However, the market’s availability rate has been below 4% for more than two years, limiting retail leasing activity. As a result, the majority of the market’s move-ins have been for new development, with multiple Publix retail malls and car dealerships delivering year-to-date. Retail asking rents in the Tampa market increased 4.4% year over year in the fourth quarter of 2024. While down from a record 8.5% in 2022, current rent growth is still substantially higher than the ten-year average of 5.4%. Additionally, the Tampa market is surpassing the rest of the country, with rental rates increasing by 2.1%. Tampa also ranks among the top markets in the country for five- and ten-year rent growth, with rises of 35.6% and 68.9%. Over the last few years, new retail construction has mostly consisted of build-to-suits and new automobile dealerships. Around 1.2 million square feet has been completed in the last year. Tampa will likely remain a key market for retail investors. Availability has reached an all-time low over the last two years, and the building pipeline is already 80% pre-leased. Tampa’s consumer base continues to grow, allowing landlords to hike asking rents. However, asset prices are expected to decrease in 2025 due to a slowdown in consumer spending. Even at the expected low of $230/SF, prices are likely to remain significantly higher than pre-pandemic levels.   Orlando Market Overview Orlando’s fast-expanding population and growing economy have fueled a steady retail demand in the region. However, in recent months, the pace of demand has slowed down as vacancy has tightened and quality blocks of retail space have seen increasingly short supply. The region remains a target for expanding retailers, but anchor space opportunities are decreasing as 2.3 million SF of retail space was absorbed in 2023. The lack of speculative construction contributes to the market’s limited supply. Only 1.0 million SF of new retail space has been finished in the last year. However, the majority of the 1.1 million SF of new retail space under development has already been leased. The majority of new retail projects are currently delivering in Osceola County, where the need for retail has increased with the rapid population expansion.   Orlando By the Numbers Vacancy Rate: 3.4% Rent Growth: 4.4% Absorption in SF: 674K Deliveries in SF: 1.1M Sales Volume: $969M | Last 12 Months | Source: CoStar Group   Market Performance While demand briefly fell into negative territory in the third quarter, the fourth quarter is likely to be the greatest for retail demand in 2024. Approximately 400,000 SF of absorption is anticipated in Q4. Rent growth has been robust over the last year, backed by strong consumer spending. The market is currently tied with Atlanta and Northern New Jersey for the strongest year-over-year rent rise in the United States. Asking retail rents are up 4.4% over the previous 12 months to an average of $30.00/SF. This greatly exceeds the 2.1% growth in the National Index during the same time span. Retail assets on important corridors with strong anchor tenants and food traffic remain on investors’ radars. The possibility of additional interest rate cuts in the following months will most certainly help to boost investment activity in 2025. Rising operating costs may, however, make certain deals more difficult to execute if the acceleration in rent growth settles to levels more in line with the US average.   Sarasota Market Overview Sarasota’s retail availability rate has been at or around 4% for more than two years, with an average of 3.3% as of the fourth quarter 2024. A shortage of available retail space, particularly in the last 12 to 18 months, has slowed market absorption. Over the last 12 months, the market has absorbed 310,000 SF. This is a modest increase from the previous year’s absorption of approximately 340,000 SF. The building pipeline has increased over the last year, with 500,000 SF under development as of the fourth quarter of 2024. The majority of the pipeline is pre-leased, with only 10% still available for lease. A lack of new retail space entering the market is projected to limit the market’s lease activity and absorption over the next several years.   Sarasota By the Numbers Vacancy Rate: 3.8% Rent Growth: 3.9% Absorption in SF: 314K Deliveries in SF: 374K Sales Volume: $325M | Last 12 Months | Source: CoStar Group   Market Performance The limited amount of available space in Sarasota’s retail market is reducing leasing volume and, as a result, absorption. For more than a year, the market has maintained an availability rate of 4% or below. Availability now stands at 3.3% in the fourth quarter of 2024. Sarasota’s rent growth has reduced over the last year but remains higher than the national average. Rent growth has climbed 3.9% year-over-year, compared to a 2.1% growth rate in the U.S. Malls, power centers, and neighborhood centers are leading the region in asking rent increase, all increasing by more than 4% year on year. It is forecasted that asking rent growth will slow in the next quarters, but maintain around 2.5% until the end of the year. Over the last 12 months, about 350,000 SF have been delivered, with an additional 500,000 SF under construction. While the majority of trades in Sarasota are minor, one large transaction occurred this year. Benderson Development Company, a local development and investment firm, paid $30.5 million for Glengary Shoppes. The three-building deal was 97% filled, with anchor tenants including Best Buy, Barnes & Noble, and Regions Bank.

Image of 3Q24 | Multifamily Market Report | Northern New Jersey Success Story

3Q24 | Multifamily Market Report | Northern New Jersey

Northern New Jersey Multifamily Market Report Hudson County, NJ By the Numbers Vacancy Rate: 5.2% Rent Growth: 2.1% Sales Volume: $615M Transactions: 131 Q3 2024 | Past 12-Months | 6-Units and Greater | Source: CoStar Group

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David Ferber, CPA

Senior Vice President & Director

Image of State of the Market | Hudson County, New Jersey Success Story

State of the Market | Hudson County, New Jersey

State of the Market | Hudson County, New Jersey Trends, Challenges, and Opportunities | 2022-2024 The multifamily real estate market has navigated a dynamic and challenging environment over the past three years. From interest rate fluctuations to shifting market demands, here’s an in-depth look at how the sector has evolved in Hudson County, New Jersey from 2022 to 2024, and what lies ahead for investors. Year 5-Year UST (Jan) 5-Year UST (June) Buildings Sold   Drop from 2022 Total Units   Total Volume   Cap Rate 2022 1.20% 3.30% 61 N/A 1,511 $427.58M 5% 2023 3.85% 4.00% 45 26% 674 $185.5M 5.5% 2024 3.84% 4.40% 34 44% 473 $114.56M 6.15% 2022: A Strong Start with Increasing Rates 5-Year UST Rates: January: 1.20% | June: 3.30% Buildings Sold: 61 Total Units Traded: 1,511 Total Volume: $427,578,900 Average Cap Rate: 5%   In 2022, the multifamily real estate market remained robust despite a rising interest rate environment. The 5-year U.S. Treasury yield (UST) increased from 1.20% in January to 3.30% by mid-year.  This rapid rise in rates  did not deter investors. In fact, the market saw the highest sales volume over the three-year period. A total of 61 multifamily buildings were sold, translating to over 1,500 units and nearly $428 million in transaction volume. The average capitalization (cap) rate stood at a stable 5%, indicating a robust investor appetite even as borrowing costs increased. 2023: Market Adjustment Amid Continued Rate Increases 5-Year UST Rates: January: 3.85% | June: 4.00% Buildings Sold: 45 Total Units Traded: 674 Total Volume: $185,460,095 Average Cap Rate: 5.5%   The trend of higher interest rates continued in 2023, with the 5-year UST climbing from 3.85% in January to 4.00% by June. This increase coincided with a drop in sales, with only 45 buildings changing hands—a 26% decrease from 2022. The total number of units traded fell significantly to 674, and transaction volume dropped to $185.5 million, less than half of the previous year’s figure. The cap rate increased to 5.5%, mirroring the cautious investor sentiment amidst a higher cost of capital.   2024: Continued Softening, But Renewed Optimism on the Horizon 5-Year UST Rates: January: 3.84% | June: 4.40% Buildings Sold: 34 Total Units Traded: 473 Total Volume: $114,566,500 Average Cap Rate: 6.15%   Entering 2024, the multifamily market experienced further softening as the 5-year UST continued to rise, beginning at 3.84% in January and rising to 4.40% by June. This continued to put pressure on transaction activity with only  34 buildings  sold during this period—a substantial 44% decrease from 2022. The total units traded dropped to 473, and the total transaction volume further declined to $114.6 million. The cap rate climbed to 6.15%, reflecting the market’s adjustment to the higher interest rate environment.     Northern New Jersey Trends in the Market The Hottest Rental Market in the Northeast During this period, Northern New Jersey emerged as a top performer in the rental market. With an impressive 14 prospective renters for every vacant apartment unit due to limited market inventory, demand remains exceptionally high. The state has seen a notable 70.5% lease renewal rate, surpassing the national average of 60.2%. The influx of New Yorkers seeking housing in New Jersey underscores the state’s appeal. Jersey City stands out with some of the highest rents among the nation’s largest cities. The median rent on the Jersey City Waterfront surged to $3,940 with a moderate annual growth rate of 3.6% following a period of rapid increases. New Jersey’s Development Boom New Jersey’s housing development has seen unprecedented growth. Last year, the state issued more housing permits than New York for the first time in decades. Favorable factors such as lower construction costs, tax incentives, and pro-growth policies have fueled this boom. The expiration of NYC tax breaks and the appeal of Payment In Lieu of Taxes (PILOT) programs, which replace property taxes with more predictable payments, have further bolstered development activity in New Jersey. Northern New Jersey in particular has experienced a significant influx of luxury apartments, which now make up a large portion of new developments. Despite the overall multifamily vacancy rate of 4.6%, the luxury segment faces a higher vacancy rate of nearly 9%. This shift towards high-end units has intensified competition in regions like Essex and Union counties, which have the lowest median household incomes in the area. These counties will see their inventory of upscale units more than double compared to pre-2020 levels, creating a competitive environment for high-earning renters.   Looking Forward: Signs of Renewed Activity in Hudson County While the past three years have been marked by declining sales and volumes, there is a growing sense of optimism as the market moves forward with impressive demand fundamentals. Real estate professionals have identified parts of the metropolitan area as top investment prospects for 2024, driven by strong rent growth and emerging opportunities. With discussions of potential rate cuts on the horizon, there appears to be a ripple effect throughout the market. Sellers and investors alike are showing signs of renewed interest, positioning themselves to take advantage of more favorable conditions. This reinvigorated activity suggests that the multifamily market could see a resurgence in the coming months, as participants anticipate a more accommodating interest rate environment.  

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David Ferber, CPA

Senior Vice President & Director

Image of Multifamily Property Sales Report | Essex County, NJ Success Story

Multifamily Property Sales Report | Essex County, NJ

Essex County Multifamily Property Sales Report Criteria for this Sales Report Includes:  • 6+ Units • Excludes Mixed-Use Properties • Middle Market Properties ($800,000-$30,000,000) The average sale price has been a very important measure for many investors as it is the true piece of information that is used when it comes to sales comparisons. With the exception of Newark, there has been a trend of declining average sale values over the past three years. This lift for Newark this year is caused by a few reasons. One is that because there are currently only four transactions within Newark in 2024, if one is sold at a high price, it is going to adjust this average significantly. This trend is expected to continue, due to brand-new developments finishing up, as well as the expected interest rate cuts.   For the purpose of this report, data highlighted is from four cities: Newark, Irvington, East Orange, and Montclair. These cities have the highest transaction amounts and sales volume. Additionally, neighboring markets are much wealthier and hold higher valued properties, which will skew results to a higher than average sale price.   Throughout the past three years, there has been a considerable drop in the sale price within Essex County as a whole. On the “Average Sale Price” graph, there is a slight discrepancy with this trend as Newark is the only town to note an increasing average sale price within the past year. Newark has shown very high demand over recent quarters, due to anticipated interest rate cuts, prime location to NYC, and new developments and higher-quality living becoming available.   Over this three-year period, the highest average sale price in Essex County was in 2021 when it reached $4,130,140 per property. Since 2021, the average sale price within most of Essex County dropped roughly 44%, with average sales going for just over $2.3 million. With Newark containing most of the transactions, it carries the average of Essex County to where it is now.   So, what is the true cause? Ever since rates have been rising since COVID-19, that has led to the cost of capital becoming increasingly expensive. Thus, there are less investors in the market willing and able to buy properties, decreasing the demand within multifamily investments.   The average price per unit over the past three years has been increasing, with an exception in 2023 where the average price per unit dropped roughly 12%. One metric that must be considered are bulk and portfolio sales. This is important because in those types of transactions, the price per unit is usually brought down, due to a lot of units within the sale. Additionally, sellers’ motivations and building quality play big roles in the price per unit. If a seller needs cash fast, they will accept a lower price for time efficiency. If the building is uninhabitable, sellers will typically discount the building in some form. On the bright side, since the drop in 2023, there has been a roughly 27% increase in the price per unit thus far into 2024 in Essex County.   Towns included in the “Other” category include the following: Nutley, Caldwell, West Orange, Cedar Grove, Livingston, Roseland, Short Hills, Verona, Millburn, South Orange, and Fairfield. One thing to point out with this category is that its average price per unit is substantially higher than all other townships, with Montclair being roughly $40,000 less at No. 2. These townships are much wealthier communities with a much higher median household income, in comparison to those like Newark and Irvington. Additionally, education and safety plays a big role within the price per unit, which favors those townships heavily. With that, these townships still possess the location and accessibility factor that makes Northern New Jersey a high demand market.   As shown in the bar graph below, Newark and East Orange are dominant when it comes to sales volume in Essex County within the past three years. Combined, they have totaled just under $650 million in sales, which is about 62.58% of total sales volume within Essex County since summer 2021. While these two towns are facing some high demand, there is a notable drop-off after East Orange. It is between Irvington and the “Other” category, with sales volumes around $152 million. This is a drop-off of roughly $126 million, showing how prominent the Newark and East Orange markets currently are. With the addition of new developments and renovated sites, an improvement in living conditions, and anticipated rate cuts, sales volume across Essex County is expected to rebound from this drought.   Total sales volume per year has faced some serious obstacles as interest rates over this period continued to rise. This caused many investors to hold back from purchasing any new properties, due to the high cost of capital and higher risk structure. Demand plummeted, going from $508.7 million in sales in 2021 to $71.5 million this year—a drop of about 85.94%. While market activity has been very slow over the past few quarters, an increase in activity is expected in not only Essex County, but nationally with rate cuts anticipated by year-end.   The graph shown below depicts the relationship between sales volume and the number of transactions on a yearly basis within Essex County. Both sales volume and the number of transactions have faced steep losses since 2022, which demonstrates the current climate of the multifamily market in Essex County. The number of transactions have dropped just over 80% since its height in 2022. The decrease, again, is almost all due to the rise in inflation and increased cost of capital.   In the pie chart below, it is notable to see how much weight each township holds over the past three years. As mentioned earlier, Newark dominates the multifamily market in Essex County as 40% of transactions over the past three years came from there. Additionally, we see that Irvington and East Orange are next up at 20% and 18%. In the previous page, East Orange had a much higher sales volume than Irvington. This goes to show that Irvington’s sales go for much lower than those in other townships in Essex County over this three-year period.   Note: The “Other” section has a considerable percentage compared to other towns. It is necessary to consider that it includes the transactions between 10 different townships, which are much smaller in terms of size, population, and supply.   Summary of Essex County Multifamily Property Sales Towns with the Most Transactions in 2024 Newark: 8 East Orange: 5 Irvington: 4 1-Year Averages Number of Units Sale Price Price Per Unit Number of Floors Cap Rate 26.23 $3,656,099 $162,025 4.10 5.48   3-Year Averages Number of Units Sale Price Price Per Unit Number of Floors Cap Rate 30.11 $3,968,052 $152,393 3.52 6.00