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Image of From Peak to Discipline: What Has Changed in Multifamily Investing Success Story

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

Image of Southern California Gas Station Market: 2025 Review & 2026 Outlook Success Story

Southern California Gas Station Market: 2025 Review & 2026 Outlook

2025 At A Glance In 2025, gas station properties across Southern California continued to attract strong investor interest. Despite tighter lending conditions and elevated borrowing costs, transaction activity remained active across the region, with more than 100 reported sales across major counties.   Investors are increasingly viewing gas stations not only as operating businesses but as long-term real estate assets located on highly visible corner sites with consistent consumer demand. Limited development opportunities and strong traffic patterns continue to support the value of well-located properties. Tax Strategy and Real Estate Fundamentals One factor supporting investor demand is the continued use of cost segregation and bonus depreciation, which can provide meaningful tax advantages for certain investors. While bonus depreciation has begun phasing down from previous levels, these strategies still play a role in how some buyers evaluate returns.   At the same time, gas station development in Southern California remains difficult due to zoning restrictions, environmental review requirements, and limited available sites. As a result, many existing stations benefit from high barriers to entry and limited competitive supply.   Sale-leaseback transactions have also become more common as operators look to unlock capital tied up in real estate while continuing to operate their locations. The Regional Footprint Southern California remains one of the most densely populated fuel markets in the country. High commuter volumes and limited land availability contribute to sustained demand for strategically located sites.   Estimated station counts across the region include: Los Angeles County: ~2,700 stations San Diego County: ~900 stations Orange County: ~820 stations San Bernardino County: ~850 stations Riverside County: ~720 stations Why Investors Continue Targeting Gas Stations Several factors continue to attract capital to the sector: Tax advantages: Cost segregation and accelerated depreciation can improve after-tax returns for certain investors. Long-term lease structures: Many properties operate under triple-net leases, offering stable income streams with limited landlord responsibilities. High-visibility real estate: Gas stations are often located on signalized intersections with strong traffic counts. Retail modernization: Expanded convenience stores, food service offerings, and additional amenities are increasing revenue potential at many sites. Sale-leaseback activity: Operators frequently monetize real estate while retaining operational control of their locations. 2026 Market Outlook In the current market environment, inventory remains limited and buyer interest continues to be strong across many Southern California submarkets. While underwriting standards remain disciplined, lenders are still supportive of properties with established operating histories and desirable locations.   Electric vehicle adoption continues to grow, but most investors view the transition as a long-term shift rather than an immediate disruption to the existing fuel retail model.   Overall, the market remains liquid for well-located gas station assets, although pricing continues to vary based on site quality, lease structure, and operator strength. Regional Transaction Snapshot County Transactions Top Sale Pricing Pattern Value Driver Riverside 13 $14.6M Larger newer sites achieve strongest pricing Growth corridors San Diego 16 $10M+ Premium pricing across most asset sizes Demographics & location Los Angeles 46 $8.32M Smaller sites still command strong pricing Land value San Bernardino 30 $8.2M Competitive pricing for larger sites Population growth Orange 14 $8.1M Mid-market stability around $4M–$6M Infill scarcity Regional trend: coastal and urban markets tend to trade at premiums driven by land scarcity, while inland markets often see pricing supported by larger site footprints and growth corridors. Owner Insight: Strategic Considerations Owners of gas station properties are currently operating in a market with strong buyer demand and limited new supply.   Buyers are typically looking for: High-visibility sites with strong traffic counts • Opportunities for retail expansion or redevelopment • Long-term land value in dense urban markets Owners may consider selling when: Pricing in their local submarket is near peak levels • Operational or partnership goals change • Upcoming capital expenditures could impact future returns Final Takeaway Gas station properties are increasingly evaluated as long-term real estate assets supported by location, limited supply, and consistent consumer demand.   Understanding current buyer demand and pricing trends is critical for owners considering refinancing, recapitalization, or a potential sale.

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Tarik Fattah

Associate Vice President

Image of Orange County, CA Multifamily Market Report Q1 2026 Success Story

Orange County, CA Multifamily Market Report Q1 2026

Orange County’s multifamily performance remains resilient, supported by tight vacancy and consistent renter demand. As of Q1 2026, vacancy stands at approximately 4.3%, one of the lowest among major U.S. markets, reflecting strong occupancy despite elevated housing costs. Demand has moderated, with roughly 104 units absorbed during the quarter, indicating slower leasing velocity compared to historical norms. This moderation is partially due to limited available inventory and affordability constraints that are reducing renter turnover. Rent growth remains modest, with average asking rents reaching approximately $2,800 per unit and annual growth around 1.1%. Property owners have prioritized occupancy over aggressive rent increases, particularly as new deliveries introduce competitive lease-up concessions.   Despite muted rent growth, the market continues to benefit from strong underlying demand drivers, including lifestyle appeal and proximity to employment centers. Overall, performance reflects a balanced market where stable occupancy offsets slower revenue growth.   Key Findings Orange County fundamentals remain stable, with tight vacancy and limited supply continuing to support high occupancy despite muted rent growth. Demand has softened relative to historical norms, as modest absorption and affordability constraints limit landlords’ ability to push rents. Investment activity is gradually recovering, with pricing holding firm and cap rates stabilizing amid improving capital markets sentiment.   Orange County Multifamily Supply & Demand Dynamics Source: CoStar Group, Inc.   Orange County Demographics Source: CoStar Group, Inc. Unemployment Rate: 4.4% Current Population: 3,172,330 Households: 1,104,452 Median Household Income: $119,622   Orange County’s economy continues to expand, though at a slower pace than the national average, creating a stable but subdued backdrop for multifamily demand. Employment growth has been modest in recent years, with gains only slightly above pre-pandemic levels, reflecting both labor constraints and slower business expansion. The unemployment rate remains relatively low at around 4%, indicating a tight labor market that continues to support renter demand. Key employment sectors include professional and business services, leisure and hospitality, and education and health services, all of which contribute to a diversified economic base. Major employers such as Disney and the University of California, Irvine anchor regional job stability while supporting ancillary industries. Top Orange County Employers Source: OC Business Journal Walt Disney Co. University of California, Irvine Providence Southern California   Population, Labor Force, & Income Growth Source: CoStar Group, Inc.   Orange County Multifamily Construction Development activity remains constrained by land scarcity and regulatory barriers, keeping Orange County’s pipeline relatively modest compared to other major markets. Approximately 5,000 units are under construction, with 876 units delivered in Q1 2026, contributing to gradual inventory growth. Construction is heavily concentrated in Irvine, where large-scale projects and master-planned developments continue to drive new supply. Elsewhere, limited available land restricts development activity, with future supply increasingly tied to redevelopment of retail sites. While supply is expected to rise in the near term, steady demand should absorb new deliveries, keeping vacancy relatively stable.   Units Construction Starts Source: CoStar Group, Inc.   Units Under Construction Source: CoStar Group, Inc.   Orange County Multifamily Sales Investment activity in Orange County showed moderate momentum in Q1 2026, with approximately $295 million in total sales volume, reflecting an improvement from recent lows despite remaining below prior cycle peaks. Pricing remains elevated at roughly $443,000 per unit, underscoring continued investor confidence in the market’s long-term fundamentals. Cap rates have stabilized near 4.5% following earlier expansion, while both institutional and private investors remain active due to the market’s high barriers to entry, strong occupancy, and limited supply risk. However, higher borrowing costs and muted rent growth continue to temper some investor appetite. Private buyers, particularly in coastal submarkets, are still willing to accept lower initial yields in exchange for long-term appreciation potential. Overall, sentiment is improving, with expectations for increased transaction activity as f inancing conditions normalize, reinforcing Orange County’s position as a core, long-term investment market supported by durable demand and constrained new supply.   Orange County Multifamily Sales Volume Source: CoStar Group, Inc.   By the Numbers Q1 2026 | Source: CoStar Group, Inc. Sales Volume: $295M Price Per Unit: $443K Cap Rate: 4.5% Vacancy Rate: 4.3% Rent Growth: 1.1% Asking Rent Per Unit: $2.8K Units Under Construction: 5.0K Units Delivered: 876 Units Absorbed: 104

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Mark Bridge

Executive Vice President & Senior Director

Image of New Construction Continues to Outperform the Resale Home Market Success Story

New Construction Continues to Outperform the Resale Home Market

New home sales slowed nationally in October as the market entered its typical seasonal cooldown and affordability pressures continued to limit buyer activity. Builders sold new homes at an annualized pace of just over 700,000 units during the month, down from late-summer levels. Even with that monthly slowdown, sales remained approximately 13% higher than a year earlier, underscoring how new construction continues to outperform the slower recovery in the resale market.   Real home prices increased just 1.8% on average in 2025, a pace that fell below inflation and helped prevent price growth from becoming a larger affordability obstacle. Looking ahead, market forecasts point to a potential rebound in home sales in 2026, with volumes expected to rise by roughly 7% as mortgage rates move closer to 6% and overall conditions normalize. Why New Construction Is Carrying the Market Despite modest price growth, affordability remains a central challenge. Rising non-mortgage costs have placed growing pressure on household budgets, with expenses such as insurance, utilities, and property taxes increasing by roughly 30% in 2025. Insurance premiums alone are expected to climb another 8% in 2026, once again outpacing inflation and limiting any relief created by slower home price appreciation.   In this environment, new construction has continued to play a critical role in supplying available inventory. Limited resale supply across much of the country has kept builders focused on incentives rather than higher prices. Mortgage rate buydowns and closing cost assistance have helped support absorption and sustain sales activity, even as many buyers remain cautious. Southern California Follows National Trend Southern California followed a similar trajectory in October. Across the six-county region, Los Angeles, Orange, Riverside, San Bernardino, San Diego, and Ventura, buyers completed approximately 14,600 home sales during the month, reflecting a measured and seasonally typical pace.   That volume aligns with historical norms for Southern California at this point in the year. The California Association of Realtors reported that regional home sales rose about 5.6% year-over-year in October, marking a modest improvement from last year despite persistent affordability constraints. Price growth in much of the state has been muted but relatively stable, with statewide median prices only slightly lower or flat compared to a year ago even as some Southern California counties have seen small gains; overall, pricing hasn’t collapsed but hasn’t surged either. Looking ahead, C.A.R.’s 2026 forecast anticipates modest price growth, with the California median home price projected to rise about 3.6% next year, suggesting a gradual upward trend in values alongside improving sales activity.    New construction continued to support overall activity, particularly as resale listings remained scarce. Buyers showed stronger interest in more affordable inland markets, while higher-priced coastal submarkets experienced longer marketing times. Entry-level and attached homes (i.e. Townhomes) attracted the most attention as buyers prioritized manageable monthly payments over square footage.   Looking Ahead As Southern California enters the heart of the winter season, new home sales continue to hold at a steady but subdued pace. Affordability constraints are keeping builder strategies focused on incentives and targeted product offerings as buyers wait for clearer improvement in borrowing conditions. Lower mortgage rates could still bring many sidelined shoppers back into the market, particularly first-time buyers, according to a recent BPG Inspections survey. Nearly two-thirds of first-time buyers said they would actively begin house hunting if mortgage rates fall to what they consider an affordable level. Respondents identified 4.86% as the highest manageable rate for a 30-year fixed mortgage.   First-time buyer preferences point to a strong desire for flexibility and control. About one-third (33%) said they prefer new construction, while 29% expressed interest in fixer-uppers. Another 16% favored flipped homes, and 22% remained open to other housing options.   Affordability continues to stand as the primary barrier to homeownership. More than eight in ten first-time buyers (83%) report that high housing costs have prevented them from purchasing a home, while fewer than one in ten say they prefer renting, underscoring that demand for ownership remains strong, but is constrained by pricing rather than preference.

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Stewart I. Weston

Executive Vice President

Image of Sippin’ on California’s Coffee Market Success Story

Sippin’ on California’s Coffee Market

Coffee shops have emerged as a “third place,” neither home nor work, where customers have the option to grab a drink, or use the location to relax, work, and enjoy their free time.   Recent National Coffee Association data shows that in 2025, 66% of American adults drink coffee daily, and consume an average of three cups per day. Specialty coffee consumption has reached a 14-year high, with 46% of American adults having specialty coffee in the past day, surpassing traditional coffee consumption.   As demand for premium coffee experiences intensified, national and regional operators are finding room to thrive, even in saturated markets already dominated by major chains, like California. Coffee tenants continue to expand rapidly across the state, with Southern California noting increased developments from coffee retailers. These tenants are actively seeking spaces that range from 1,000 to 4,000 square feet, attracting national brands and local operators. For shopping center landlords, securing a quality coffee tenant can increase traffic and enhance the value of their center. Demographics and location are top priorities for coffee tenants with signalized intersections, strong car counts, and pedestrian inflows being factors that improve a coffee shop’s success. Outparcels or pads remain highly desirable, offering convenience and visibility. Drive-thru locations, end caps, and even select inline spaces are increasingly in demand as operators look to capture center traffic and attract more consumers.   While shopping pads and drive-thru locations are favorable, mixed-use spaces also prove beneficial for coffee shops. The ground-floor component creates vibrant street-level activity, and the mix with office and/or multifamily guarantees demand. For coffee shop operators, securing space within a mixed-use property allows for access to residents, office workers, and everyday consumers, guaranteeing built-in customers and traffic upon opening.   National Coffee Shop Monthly Visits Source: Placer.AI, January 2019-October 2025   National Tenant Movement in SoCal Footprint sizes for coffee shops across the region vary widely depending on format. Small kiosk/drive-thru concepts note locations under 1,000 square feet, while freestanding locations can reach up to 4,000 square feet.   Starbucks, in particular, leads national coffee tenants with the most locations in California. The coffee giant has a strong focus on Southern California, with 155 locations in Los Angeles, 131 stores in San Diego, and over 100 across Orange County. In order to maintain its positive performance in the region, Starbucks has begun new initiatives across its stores, including renovating locations to align with the Back to Starbucks plan. CEO Brian Niccol launched the initiative in September 2024 to bring more customers back to stores across the country. New features of the plan include lounge seating, warmer lighting, and reintroducing ceramic mugs for in-store orders. The goal of this plan is to create a community feel within their locations. A new site with these features has already opened in Los Angeles at the intersection of Sunset and Palisades Village.   Dutch Bros has become one of the fastest-growing national coffee chains across Southern California. The tenant first began operations in 2022 when it opened a location in San Diego County. Since then, it has spread to cities like Barstow, Apple Valley, Victorville, Baldwin Park, and Palmdale. Dutch Bros is planning its move in the Los Angeles metro, with a store under construction near the University of Southern California campus. The location will be similar to its other stores featuring a walk-up window, and it is expected for completion by year-end 2025. Other new sites for Dutch Bros across Southern California include Carson and Temecula, with both shops already approved for construction.   Starbucks Dominates National Tenants Across California Source: Placer.AI   A Cup of Local Brew Regional coffee shops attract consumers seeking high-quality products, with goods like specialty beverages or artisan-roasted beans. Younger consumers, like Gen Z, often drive visits as they are willing to pay more for premium, trending goods. These locations offer a unique setting that reflects the local population, attracting consumers that seek an authentic and community-focused experience. While national operators offer a convenient visit, regional operators create competition by prioritizing quality, community, and exclusive experiences.   California is home to the greatest number of coffee shops across the country, with local tenants playing a significant role in the state’s coffee performance. Regional coffee tenants most often lease 800- to 1,500-square-foot spaces with in-line or end-cap formats, as seen with regional operator Better Buzz. The coffee chain, which started as a coffee cart in San Diego, has become a staple in Southern California. Most of its locations are found in San Diego and Orange County, reaching as north as Fullerton. Upon its success in Southern California, the company has also expanded to Nevada and Arizona, with its first out-of-state store located in Phoenix. Better Buzz has around 40 locations across the three states, and it plans to double its size in the next few years.   Regional tenants that feature Vietnamese coffee are also aiding coffee shop activity. The nation’s coffee began to grow internationally in the 1990s when it became one of the world’s largest coffee producers. Since then, it has maintained its popularity for creating a unique coffee culture for consumers in the Southern California market. Trung Nguyen Legend Café, originally from Vietnam, began U.S. operations in 2023 with its Westminster location. The company is still growing across Southern California, with Matthews™ recently securing a 2,700-square-foot space for them in Huntington Beach. The coffee shop sought this location because of the end cap, visibility, patio and large seating area, as well as the community impact.   Blk Dot Coffee has also expanded the presence of Vietnamese coffee in Southern California. The company is a family-run business with a focus on providing traditional Vietnamese coffee, as well as some food items. Its first location opened at the Orange County Google offices in 2015, and has had a strong presence across the county ever since. Locations range from areas like Irvine, Newport Coast, Fountain Valley, and Long Beach, with many of its stores placed in shopping centers to take advantage of high foot traffic levels. Tierra Mia Coffee opened its first location in 2008, and has since expanded its reach to both Los Angeles and Orange counties. Known for roasting its coffee and baking their pastries in store, as well as serving Latin specialty drinks and unique latte art, the company has now grown to 20 stores.   Roasting Robust Results The national coffee market is projected for continued growth as consumers seek coffee shops for a third place experience. The U.S. coffee market size was estimated at $47.8 billion in 2024, and is forecast to grow at a CAGR of 9.5% to 2030. By providing free Wi-Fi, coffee shops continue to attract work-from-home employees, as well as create an environment for other consumers to relax and socialize.   Further growth across the sector will be aided by consumers seeking more unique flavors and high-quality products. This movement is advantageous for local operators as they can adjust menus to provide enticing options not found at national brands. To stay competitive, national tenants are prioritizing loyalty programs and drive- thru convenience, while local tenants leverage community connection and handcrafted goods to maintain performance levels.

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Matthew Sundberg

Vice President & Associate Director

Image of Top 10 Multifamily Markets in 2026 Success Story

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.

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Mark Bridge

Executive Vice President & Senior Director

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Shopping Centers Remain a Robust Performer

Retail entered 2026 with ongoing resilience, with shopping centers leading the way for activity across the sector. Physical shopping centers have maintained their status as essential CRE assets. So far this year, shopping centers noted increased competition for limited inventory, an uptick in valuations, and a shift in investor focus toward high-performing, service-oriented assets.    Market Defined by Low Supply and Demand Although shopping centers are recording robust performance, these properties still note an ongoing struggle with a supply-demand imbalance. After an influx of capital last year, with around $4.5 billion in sales, acquisitions have outpaced available listings. In 2025, more than 1,200 centers were sold, leaving a decreased pipeline of large-scale properties on the market.    The lack of supply has pushed average pricing to around $142 per square foot, a double-digit rise over long-term averages. This growth is fueled by both lower financing costs and rental upside. Easing capital prices have made large-scale acquisitions more attractive. At the same time, landlords are capitalizing on opportunities while leases signed before 2020 expire, allowing for rent adjustments of 20% to 40% for some assets.   Anchor Strength and Record-Breaking Deals Grocery-anchored centers remain consistently sought after for their stability, noting an increase in transactions so far in 2026. One of the most notable shopping center sales so far occurred in Orange County, with Seacliff Village in Huntington Beach trading for $151 million. This fully occupied property underscores the premium investors place on anchors.    Another of the most recent notable deals occurred in the Mid-Atlantic. In Virginia Beach, Landstown Commons sold for $102 million. This deal demonstrates that national shopping centers with diverse tenant mixes remain highly resilient.   Key Sales to Track Seacliff Village: Huntington Beach, CA. Sale price: $151.0M Landstown Commons: Virginia Beach, VA. Sale price: $102.0M Bowie Town Center: Bowie, MD. Sale price: $50.0M Village of Mulberry Park: Dacula, GA. Sale price: $13.4M   Navigating the Rest of 2026 While the big-box and grocery sectors are thriving, the industry continues to track smaller tenants. Local businesses occupy around 40% of total shopping center space. While these tenants often pay higher rents, they are more vulnerable to changes in consumer spending.    Forecasts anticipate that cap rates will continue to tighten through the end of the year. In order to reach full growth potential in 2026, landlords must balance record rents with the stability of their smaller retail tenants to avoid rising costs and decreased demand.

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Daniel Gonzalez

First Vice President & Associate Director

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Orange County, CA Multifamily Market Report Q4 2025

Orange County’s multifamily market posted steady performance in Q4 2025, characterized by tight vacancy and modest rent growth. Market vacancy held at 4.1%, significantly below the national average of 8.5%, as quarterly absorption slightly outpaced deliveries, continuing a trend of supply and demand remaining largely in balance. Trailing-year absorption increased to 2,000 units, supported by a solid local economy, return-to-office momentum, and the market’s lifestyle appeal, even as overall absorption remains below long-term averages. Rent growth remained restrained at 1.5% year-over-year, with average asking rents near $2,700 per unit, as operators focused on preserving high occupancy amid expanding renter options and new deliveries offering concessions. Vacancy is especially tight among higher-quality properties, while softer performance at lower-priced assets reflects growing affordability pressures.   Overall, the combination of compressed vacancy, measured supply growth, and resilient demand underscores a stable market foundation, with rents expected to rise gradually as new supply is absorbed.   Key Findings Vacancy remains very low at 4.1% in Q4 2025 (about half the U.S. rate), supporting strong occupancy, but rent growth is limited to roughly 1.5% as operators report difficulty raising rents without losing tenants. 430 units delivered and 443 absorbed in Q4, with about 5,000 units under construction, mostly in Irvine. Absorption is steady but below historical norms, keeping vacancy stable around 4.0%–4.5%. $117M in sales, $457K per unit pricing, and 4.4% cap rates reflect continued investor confidence. Rent growth is expected to improve modestly in 2026 but remain below 3% due to slower job and population growth.   Orange County Multifamily Supply & Demand Dynamics Source: CoStar Group, Inc.   Orange County Demographics Source: CoStar Group, Inc. Unemployment Rate: 4.2% Current Population: 3,174,229 Households: 1,104,084 Median Household Income: $119,849   Orange County’s economy continues to expand at a slow but positive pace, with employment growth lagging the national average since mid-2022 as the market works through post-pandemic labor constraints. Employment is less than 1% above pre-pandemic levels—well below national gains—reflecting resident outmigration to more affordable regions and a limited local labor pool, though unemployment remains relatively tight at around 5%, below the state average. The economy is broadly diversified, led by professional and business services and leisure and hospitality, and anchored by major employers such as The Walt Disney Company and UC Irvine, alongside a strong cluster of biotech and medical device firms in Irvine that support long-term stability and innovation-driven growth.   Top Orange County Employers Source: OC Business Journal Walt Disney Co. University of California, Irvine Providence Southern California   Population, Labor Force, & Income Growth Source: CoStar Group, Inc.   Orange County Multifamily Construction Apartment construction in Orange County remained active but restrained in Q4 2025, with approximately 5,000 units under construction, representing just 1.9% of the county’s 260,000-unit inventory—well below the national average of 2.7% and far under the 6%–12% seen in the most active U.S. development markets. 430 units delivered during the quarter were fully absorbed (443 units), reinforcing that new supply is being met by demand amid a 4.1% vacancy rate. While construction starts slowed in 2025 compared with 2024, activity remains concentrated in Irvine, driven by The Irvine Company’s long-term land holdings and redevelopment projects. Land scarcity, entitlement hurdles, and community opposition continue to limit broader development across the county, keeping supply growth measured and supportive of long-term market balance.   Units Construction Starts Source: CoStar Group, Inc.   Units Under Construction Source: CoStar Group, Inc.   Orange County Multifamily Sales Sales activity in Q4 2025 reflected continued investor confidence in Orange County’s apartment market despite elevated capital costs. Quarterly transaction volume totaled $117 million, with assets trading at an average of $457,000 per unit and cap rates around 4.4%, among the lowest in the nation. Activity remains below peak levels, but pricing has proven resilient as investors are attracted to the market’s 4.1% vacancy, limited supply risk, and durable demand fundamentals. Institutional buyers and well-capitalized private investors, particularly in coastal submarkets, continue to transact, often accepting lower initial yields in exchange for long-term growth prospects, signaling expectations that values and deal velocity will improve as capital markets normalize.   Orange County Multifamily Sales Volume Source: CoStar Group, Inc.   By the Numbers Q4 2025 | Source: CoStar Group, Inc. Sales Volume: $117M Price Per Unit: $457K Cap Rate: 4.4% Vacancy Rate: 4.1% Rent Growth: 1.54% Asking Rent Per Unit: $2.7K Units Under Construction: 5.0K Units Delivered: 430 Units Absorbed: 443

Image of Q&A J. A. Charles Wright | Orange County Managing Director Success Story

Q&A J. A. Charles Wright | Orange County Managing Director

Culture, Competition, and Consistency: A Discussion with J. A. Charles Wright Q: You were part of the first wave of brokers at Matthews. What mindset or habits did you develop early on that you still rely on today as Managing Director? A: I began my career in commercial real estate as Matthews™ was entering the industry itself. Looking back, those early days in the El Segundo office were game-changing and set the tone for how I’ve approached my career over the last decade. I had incredible mentors and leaders, but there was nothing like the energy on the floor with other Associate or Senior Associate agents. Everyone was hungry and driven, pushing one another to improve every single day. Who cared more? Who worked harder? Who could deliver the greatest value to clients? It wasn’t about ego–it was about pride. We knew we were part of something special and wanted to bring out the best in one another.   That mindset has guided the way I show up in my business and as a leader. Accountability matters. I put my goals out in front of everyone because I want the agents in the Orange County office to feed off my transparency and hold me to it. It drives me to get in early, leave late, and execute the fundamentals in my daily workflow. They help push me to do that. Q: You made the shift from a top-producing multifamily broker to leading a 50+ agent office in Orange County. What led you to pursue a leadership role, and what’s been the most rewarding part of that transition? A: I wouldn’t have made this move anywhere else. Matthews™ is a company that truly understands what agents need to be successful, and leadership is fully invested in making that happen. I’m working with people I’ve known and respected for a long time, and together we’re making a real impact, not just for the agents, but for the firm as a whole. It’s been one of the most rewarding chapters of my career. Q: What’s your long-term vision for the OC office, and how are you tailoring Matthews’ hiring, growth strategies, and national platform to meet the unique demands of the Orange County market? A: Orange County offers one of the most dynamic landscapes for investment sales and leasing across all asset classes. This market offers endless opportunities for growth and success. With the amount of product and steady deal flow, both established producers and rising agents have the chance to build lasting, successful careers. Our competitors are talented and have built great brands, and we have a lot of respect for that. But that’s what fuels us, having the opportunity to go up against the best in the business and compete for market share in our own backyard. That’s what makes this market so exciting. Q: With Orange County’s multifamily and retail sectors seeing strong investor interest, where are you seeing the most traction—and which areas or asset types are surprising you right now in terms of velocity? A: Our Institutional Multifamily and Land Development team, led by Stew Weston and Rosie Cooper, continues to be an incredible value-add for their clients. They thrive on reframing the narrative, bringing a development-driven creativity that positions assets based on their potential rather than their existing condition. Their mastery of the land transaction lifecycle gives them the strategic foresight to navigate complexities, mitigate risk, and maximize value for their clients at the highest level.   On the Private Capital Multifamily front, Mark Bridge and Kyle Mirrafati are incredible agents who have been in the business for a long time. They are excellent at leading clients to results in Orange County.   Chad Kurz and Kevin Puder lead one of the best Net Lease Teams at our company and in the country. They are incredible at solving problems for private clients and producing results for institutional clients.   For Retail Leasing—drive down the streets of Orange County, and you’re likely to see Matt Sundberg’s name—an incredible agent, poised to build on the strong team he already has.   The synergy of talented agents across different product types yields better solutions for clients. Not to mention, when we have a young person who wants to be successful in this business, they have a number of different mentors to choose from. Q: From your time working in LA, what stands out to you as the biggest differences between the LA and OC CRE markets? A: Both LA and Orange County are tight-knit markets where everyone knows the key players. What sets Orange County apart is how many second and third-generation real estate professionals you find there. Many of the most talented investors and agents grew up in the business, coming from successful real estate lineages, giving the market a particularly impressive pedigree. Q: What’s one piece of advice you give new agents today that you wish someone had told you when you were starting out? A: I learned to be addicted to the process pretty early on. I was told by very credible people to trust the process. I had doubts early on because I was too focused on the results. Success will come, but it starts with staying disciplined, present, and fully focused on the process–not the outcome. Q: Are there any market signals or behaviors you’re paying close attention to as we head into the end of the year?   A: We need interest rates to remain consistent. There were some upticks earlier in the year, but rates have relatively remained consistent. We need that. Consistency gives investors confidence in their underwriting and decision-making. Predictability promotes velocity. Of course, we’d like to see rates come down; that would be great, but we don’t need them to.  Q: Reflecting on your career, what’s one pivotal deal, relationship, or decision that continues to shape your leadership style and approach to the business?   A:It’s the agents I started in the business with. We were so invested in each other’s success and genuinely cared about how we were performing. We were competitive, but there was a respect and genuine love for each other that helped us rise above petty competitiveness and made sure that we celebrated each other’s wins while still wanting to raise the bar ourselves. That was the best environment I could have ever asked for, and we’re doing a damn good job keeping that environment alive and well in our offices today.    

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J. A. Charles Wright

Managing Director

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National Housing Permits Slowdown Sets the Stage for Southern California Growth

Across the U.S., new housing construction is slowing. Rising mortgage rates and elevated inventories have created a market imbalance that’s forcing national homebuilders to scale back new projects. Nationally, the supply of new homes has reached a 9.2-month inventory, meaning there are 9 new houses for sale for every new home sold, far above the historic 6-month norm – a clear signal that many builders are hitting pause. For every new home sold, nine others sit unsold, and new permitting activity has fallen sharply. In most markets, that signals a cooling cycle.   How Southern California is Fundamentally Different Unlike many regions that overbuilt during the lowrate years, Southern California never came close to meeting its housing demand. Even as construction declines nationally, the region faces the opposite problem – a structural housing shortage that continues to deepen. While the national unsold inventory index stands at 9.2, Southern California’s reading of 3.9 highlights just how tight the region’s for-sale housing market remains compared to the rest of the country.   By all measures, Southern California is the primary metro driving the national housing shortage. At the county level, Los Angeles County faces a deficit approaching 800,000 units, the largest in the nation. Orange County and San Diego County each show shortages near 200,000 units, and along with Los Angeles County, they represent three of the five largest housing shortages in the nation.   Permitting trends further highlight how underbuilt the region remains: through the first eight months of 2025, Inland Empire single-family permits fell 17% year-over-year, while Los Angeles, Orange County, and San Diego metros held flat at historically low levels. Even with roughly 18,500 new single-family permits issued in 2025 across these counties, the f igure remains far below what’s needed to offset the nearly 1-million-unit regional housing deficit, particularly given the number of homes lost in the wildfires earlier this year.   The imbalance represents a powerful tailwind While national headlines focus on declining permits and slowing sales, the Southern California slowdown simply compounds an existing shortage – creating long-term opportunity for those positioned to deliver new housing. With limited new supply entering the pipeline, vacancy rates across the region’s rental markets are expected to compress, pushing rents and asset values higher. The combination of persistent demand, limited construction, and constrained land supply will continue to favor developers that build through the noise. In short, the national slowdown is temporary. Southern California’s shortage is structural. And for those still building, that distinction matters.

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Rosie Cooper

Executive Vice President

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New York, NY Industrial Market Report Q3 2025

With over 20 million residents and an unmatched mix of global institutions, universities, and cultural landmarks, the New York metro continues to attract both talent and investment. The financial sector, anchored by firms like JPMorgan Chase and Goldman Sachs, continues to be a global powerhouse, while the tech industry has surged with expansions from Google, Amazon, and a new wave of AI startups. Enhanced infrastructure projects are also ongoing to aid the city, including Penn Station’s expansion and the Gateway rail project.   New York Demographics Source: CoStar Group, Inc. Unemployment Rate: 4.6% Current Population: 14,854,869 Households: 5,721,523 Median Household Income: $89,938   Population, Labor, and Income Growth Source: CoStar Group, Inc.   Key Findings Availability in New York’s industrial market rose to 10.3%, surpassing both the historical average of 8.5% and the national rate of 9.7%. New York is nearing the end of its recent development cycle, with construction starts at their lowest pace in over a decade. The metro noted population losses during the pandemic, but recently bounced back with the addition of 87,000 residents in 2024.   Market Performance New York’s industrial sector is recording increased availability as demand moderates. The industrial availability rate reached 10.3%, well above its long-term average of 8.5% and higher than the national average of 9.7%. Roughly 35 million square feet of new supply has been added since early 2023, but leasing activity fell about 5% year-over-year as tenants right-sized and tariffs dampened demand.   The vacancy rate was at 7.8% in Q3 2025, with net absorption totaling –1.9 million square feet. Rent growth, once at 11% annually, has slowed to 0.0%, particularly among large logistics spaces facing higher vacancies. Despite these headwinds, strong port and airport connectivity, together with dense consumer demand, continue to underpin long-term market fundamentals.   New York Industrial Supply & Demand Dynamics Source: CoStar Group, Inc.   New York Construction Industrial construction across New York is winding down from a major development cycle. Construction starts have fallen below their long-term average for three consecutive quarters, setting up 2025 to record the lowest starts in over a decade. Roughly 8 million square feet remains in the pipeline, well below the 19.7 million peak seen recently, with just 0.9% of total inventory under construction. Most projects are concentrated in outer submarkets like Orange County and Western Route 287, where land is more available and affordable. However, leasing has also slowed for high-quality facilities, such as the 1.3 million-square-foot Bronx Logistics Center, highlighting a tenant-favored market.   SF Construction Starts Source: CoStar Group, Inc.   SF Under Construction Source: CoStar Group, Inc.   Sales New York’s industrial investment market has stabilized following two record-setting years. Sales volume reached $718 million in Q3 2025. Institutional investors have become more active since late 2024, favoring fully leased, income-producing assets amid softer fundamentals. Major trades include Terreno Realty’s $156 million purchase of Amazon-leased 280 Richards St. and Prologis’ $197 million acquisition of two occupied logistics properties. Despite higher borrowing costs and widening buyer-seller gaps, optimism is returning as interest rate stability and moderating supply signal improving transaction momentum ahead.   Sales Volume Source: CoStar Group, Inc.   For insights on Brooklyn’s  industrial sector from Matthews™ Vice President Bobby Lawrence, click here.

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Orange County, CA Multifamily Market Report Q3 2025

Orange County’s multifamily market in Q3 2025 remained exceptionally tight and stable, with vacancy holding at 4.0% amid steady absorption and limited new supply. Demand was supported by strong job growth, improving affordability, and moderating domestic outmigration, leading occupancy rates to stay well above national norms. Rent growth remained modest at 1.6% year-over-year, as operators prioritized maintaining near-full occupancy rather than pushing rents aggressively. The average asking rent reached $2.8K per unit, with leasing incentives still common for newer, high-end properties.   While overall rent gains trailed historical averages, the combination of solid employment fundamentals, measured construction activity, and consistently high occupancy positions the Orange County market for gradual rent acceleration heading into 2026.   Key Findings Despite national vacancy rising to 8.3%, Orange County’s vacancy rate held firm at 4.0%, the second lowest in the nation, supported by persistent housing demand and limited new supply. Demand in the metro has been strengthened by ongoing job growth, increased affordability, and a rebound in international immigration. While positive, absorption remains below historic averages due to a slowdown in construction starts. A lack of available land for groundbreakings and difficult approval processes has limited construction. However, deliveries are forecast to mirror the five-year high of 2,800 units in 2024 by the end of this year.   Orange County Multifamily Supply & Demand Dynamics Source: CoStar Group, Inc.   Orange County Demographics Source: CoStar Group, Inc. Unemployment Rate: 4.2% Current Population: 3,174,714 Households: 1,103,626 Median Household Income: $119,448   Orange County’s economy continues on a measured yet positive trajectory, supported by a diverse employment base and strong institutional anchors. While job growth has lagged the national average since mid-2022, rising less than 1% above pre-pandemic levels versus over 5% nationally, the region’s tight labor market and limited workforce availability have tempered recovery. Despite this, unemployment hovers around 5%, remaining below the state average and close to the national rate. Orange County’s economy benefits from a balanced mix of industries. Major employers such as The Walt Disney Company and the University of California, Irvine, along with key biotech and medical device firms like Edwards Lifesciences and Abbott, continue to anchor long-term economic resilience and innovation in the region.   Top Orange County Employers Source: OC Business Journal Walt Disney Co. University of California, Irvine Providence Southern California   Population, Labor Force, & Income Growth Source: CoStar Group, Inc.   Orange County Multifamily Construction Construction activity remained steady but measured, with about 6K units under construction, representing 2.3% of the county’s existing apartment inventory. Development continues to be heavily concentrated in Irvine, led by the Irvine Company’s large-scale projects such as the Marketplace Mall redevelopment and Pacific Place at Irvine Spectrum. Several additional projects broke ground in early 2025, including Avella II in Irvine, 10231 Slater Ave in Fountain Valley, and The Met in Santa Ana. Despite strong demand, new development remains constrained by limited land availability and stringent approval processes. As of Q3, 532 units were delivered and 577 absorbed, reflecting a market where demand continues to match supply growth. Looking ahead, redevelopment of mall properties signals a growing trend toward adaptive reuse projects as Orange County’s housing pipeline evolves.   Units Construction Starts Source: CoStar Group, Inc.   Units Under Construction Source: CoStar Group, Inc.   Orange County Multifamily Sales Investment activity remained resilient despite elevated interest rates and tighter lending conditions nationwide. Quarterly sales volume totaled approximately $159 million, with an average price per unit of $447,000 and cap rates around 4.4%, reflecting continued investor confidence in the market’s fundamentals. Buyers remain attracted to Orange County’s low vacancy, measured rent growth, and limited supply risk, which together support stable asset performance. Institutional investors and private buyers, particularly those utilizing 1031 exchanges, continued to pursue both long-term and value-add opportunities, especially in coastal areas. While asset values have moderated from pandemic-era highs, the market’s strong demand base and steady pricing trends indicate that investor sentiment remains positive.   Orange County Multifamily Sales Volume Source: CoStar Group, Inc.   By the Numbers Q3 2025 | Source: CoStar Group, Inc.  Sales Volume: $159M Price Per Unit: $447K Cap Rate: 4.4% Vacancy Rate: 4.0% Rent Growth: 1.6% Asking Rent Per Unit: $2.8K Under Construction: 6.0K units Delivered: 532 units Absorbed: 577 units

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Orange County, CA Industrial Market Report Q3 2025

Orange County’s economy continues on a modest growth path, despite lagging behind national employment trends. Employment levels across the metro are about 1% above pre-pandemic figures, compared with national gains exceeding 5%. A limited labor supply has further constrained expansion, keeping unemployment around 5%, indicating a relatively tight job market. The metro’s economic base is diverse, led by professional and business services, along with leisure and hospitality. Major employers include The Walt Disney Company and the University of California, Irvine, which drives innovation through partnerships with biotech and medical firms.   Orange County Demographics Source: CoStar Group, Inc. Unemployment Rate: 4.2% Current Population: 3,174,771 Households: 1,103,572 Median Household Income: $119,401   Population, Labor, and Income Growth Source: CoStar Group, Inc.   Key Findings Orange County’s industrial sector remains one of the tighter industrial markets across the country, supported by limited new supply and high barriers to entry. Development remains modest overall, expanding inventory by only 0.7%, as Orange County remains one of the most supply-constrained infill markets nationwide. Sales activity across Orange County totaled over $1 billion for the first three quarters of 2025, with institutional buyers and REITs accounting for the majority of deals.   Market Performance Industrial activity across Orange County has cooled since early 2023, with demand softening and vacancy rising to 6.2% in Q3 2025. While this is an increase for the metro, the rate remains below the national average of 7.5%, keeping Orange County in the lower half of the nation’s top 20 industrial markets. Availability grew to 8.5%, and leasing periods have extended to over 3.5 months, signaling reduced tenant competition.   Despite muted construction relative to other markets, new leasing exceeded 3 million square feet in mid-2025, helping balance recent deliveries. Rent levels have declined about 10% from their peak but show signs of stabilization. Long-term prospects remain strong given Orange County’s limited development pipeline and high barriers to new construction.   Orange County Industrial Supply & Demand Dynamics Source: CoStar Group, Inc.   Orange County Construction Industrial construction in Orange County remains elevated in 2025, with 2.1 million square feet underway, nearly matching 2023’s multi-decade high. Over 85% of incoming space remains available, adding pressure to vacancy as tenant demand softens. Developers continue breaking ground on entitled projects to avoid delays, though the active pipeline expands across 20 buildings. Despite limited land and strict development barriers, activity is concentrated in Irvine, Anaheim, and Santa Ana. Larger buildings over 100,000 square feet face slower leasing, prompting rent reductions, while smaller facilities under 100,000 square feet continue to lease more quickly.   SF Construction Starts Source: CoStar Group, Inc.   SF Under Construction Source: CoStar Group, Inc.   Sales Investment activity in Orange County’s industrial market was robust in 2025, with third quarter sales volume reaching about $545 million, signaling renewed investor confidence. Buyers continue targeting properties leased at below-market rents for long-term upside. Institutional investors and REITs, including Rexford, Prologis, and Ares, dominate acquisitions, collectively accounting for over a third of total volume. Cap rates for major transactions typically range from the mid-5% to 6% range, reflecting strong pricing despite a 25% drop from peak levels in 2023. Liquidity remains high due to the market’s entry barriers, while pricing continues to stabilize amid improving investment sentiment.   Sales Volume Source: CoStar Group, Inc.

Image of Orange County, CA Retail Market Report Q3 2025 Success Story

Orange County, CA Retail Market Report Q3 2025

The Orange County retail market remained tight in Q3 2025, with leasing activity supported by limited new supply and strong tenant demand. Vacancy held near a 16-year low at 3.7%, as demolitions continued to outweigh new construction. Net absorption stayed positive despite isolated store closures, driven by expanding discount and fitness tenants. Large-format leasing reemerged, with several leases exceeding 25,000 SF and notable activity from off-price retailers. Market rents rose 2% year-over-year, moderating from the 4% growth seen in 2024, yet landlords retained pricing power amid scarce vacancies. Average asking rents now sit around $39/SF triple-net, with inland and northern submarkets recording the strongest rent gains while coastal areas showed slower, steadier growth overall.   Key Findings Recorded $510 million in sales volume, signaling strong investor confidence and robust transaction momentum, as buyers pursued opportunities in a high-barrier, supply-constrained market. Market rents averaged $39.13 per square foot, up 1.9% year-over-year, driven by limited supply, strong demographics, and steady retail demand sustaining one of the nation’s priciest retail markets. Vacancy held at 3.7%, with just 298,000 square feet under construction and an average 5.4% cap rate, reflecting limited new supply and enduring strength in retail fundamentals.   Orange County Retail Supply & Demand Dynamics Source: CoStar Group, Inc.   Orange County Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.9% Current Population: 3,718,536 Households: 1,110,611 Median Household Income: $117,518   Orange County’s economy continues to grow slowly but steadily, with employment barely above pre-pandemic levels and lagging national gains. However, recent data show impressive income growth and a notable expansion of the labor force over the past 12 months, signaling renewed economic momentum. Population outflows and a limited labor supply have previously restrained job growth, though unemployment remains below the state average. Major employers such as Disney and UC Irvine anchor the region, supported by a robust biotech and medical device presence in Irvine. High housing costs and limited affordability continue to challenge both workforce retention and business expansion.   Population, Labor, & Income Growth Source: CoStar Group, Inc.   Orange County Retail Construction Construction in Orange County remains limited, with just 300,000 SF underway—only 0.2% of total inventory and among the lowest nationally. In fact, Orange County has the sixth-lowest share of inventory under construction among the nation’s 40 largest retail markets, underscoring the region’s constrained development pipeline. Demolitions have reduced supply by 1.6 million SF over the past five years as outdated department stores and malls are redeveloped, often into apartments. Notable projects include the 55,000-SF River Street Marketplace in San Juan Capistrano, featuring mostly pre-leased small retailers, and Amazon Fresh’s 53,400-SF site in Laguna Hills nearing completion. Recent completions include Tokyo Central’s 28,000-SF store in Irvine and The Square Cypress, which combines apartments, a hotel, and 31,000 SF of retail anchored by Trader Joe’s.   SF Construction Starts Source: CoStar Group, Inc.   SF Under Construction Source: CoStar Group, Inc.   Orange county Retail Sales Orange County’s retail market remains strong, marked by tight conditions, steady rent growth, and surging investment activity. Over 250 property sales totaling $1.1 billion closed through July 2025, already surpassing annual totals from the previous two years. Sales volume jumped 47% year-over-year in Q1 and more than 150% in Q2, on pace to reach a 10-year high and possibly exceed the 2015 record of $1.7 billion. Private buyers dominate roughly 70% of activity, while REITs’ share recently rose to 30% due to portfolio trades. Cap rates have increased slightly, averaging mid-4% to 6%, supported by ongoing rent growth and strong buyer confidence despite higher interest rates.   Orange County Retail Sales Volume Source: CoStar Group, Inc.   By the Numbers Source: CoStar Group, Inc. Sales Volume: $510M Price Per SF: $444 Cap Rate: 5.4% Vacancy Rate: 3.7% Rent Growth: 1.9% Asking Rent Per SF: $39.13 Under Construction: 298K SF Delivered: 45.7K SF Absorbed: 394K SF

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From Dirt to Deal: Unlocking Hidden Value

In the world of commercial real estate, the most impactful deals rarely begin with a shovel in the ground—they begin with a vision. A vision backed by deep knowledge, technical acuity, and the confidence to look at a raw parcel of land and see not what it is, but what it could become. This is the rare skillset that Rosie Cooper and Stew Weston bring to the table, reshaping the land advisory landscape in Southern California and beyond.   The Hidden Advantage: Expertise Meets Execution Rosie Cooper is not your average land broker. With degrees in civil and environmental engineering, as well as a master’s in development and construction from USC, Rosie brings a developer’s lens to every site evaluation. “I know how a developer is going to look at a project,” she says. “I understand the highest and best use, and what product type will generate the best yield for a site.” This blend of technical and market fluency allows Rosie to uncover 85–90% of a site’s challenges before it breaks ground or goes to market.   On the other side of the table is Stew Weston, a seasoned deal-maker and master relationship builder. Described by colleagues and clients alike as “The Deal Whisperer,” Stew brings three decades of experience, strategic intuition, and a network that spans every corner of the institutional multifamily world.   Together, Rosie and Stew lead with a uniquely integrated approach, one that not only identifies value but engineers it.   When you get the team & Rosie’s running point, one client said, you’re getting a civil engineer, an environmental engineer, & a real estate strategist. There’s nothing else like that in the marketplace.   Turning Challenges into Opportunity Rosie and Stew’s impact is perhaps best illustrated by their work on a complex, unentitled 11.6-acre site on Lincoln Avenue in Cypress, CA. The property had significant environmental concerns, yet they navigated these challenges with clarity and confidence, meeting with city officials, liaising with environmental regulators (SARWQB), and presenting a transparent, de-risked opportunity to the market. The result: 21 qualified offers and a bidding war that maximized the value for the seller, increasing the unsolicited offer pool from low $60M to mid $70M.   “We were able to present the environmental issue in a different way,” Rosie explained, leveraging her technical background to secure a national homebuilder willing to take on the clean-up. That’s not just selling land—that’s transforming it.   The Art & Science of Land Strategy Effective land selection is as much science as it is art. It involves a rigorous analysis of: Site size, shape, & traffic patterns Zoning & entitlement complexity Environmental conditional & infrastructure readiness Competitive positioning & demographic trends   The Matthews™ advantage lies in integrating this diligence into a broader platform. “Many of our larger competitors operate in silos,” Rosie notes. “Because Matthews™ includes retail, industrial, and office specialists, we can position a site as land, office, or even mixed-use. That allows us to clear the market more completely and drive value higher.”   Rosie’s development experience also allows the ability to creatively optimize these variables, sometimes suggesting density shifts or design changes that significantly increase a site’s yield. As one client described, “They are exceptionally thorough, creative, and strategic in who they approach and how.”   This analytical precision transforms how developers and capital partners view a deal. “Stew creates win-win outcomes with unmatched detail and diplomacy,” said another. That rare ability to bridge technical, transactional, and interpersonal dynamics creates consistent client confidence.   Client Q&A With Brian Hobbs | President & Co-Founder, Salt Development   Tell us about Salt Development We’re a boutique development firm, small in number but large in projects. We’re a multifamily developer originally founded in Southern California back in 2014. Since then, we’ve been active in the intermountain West, especially around Salt Lake City. We’ve purchased or developed land in Idaho, Utah, and California.   We do large multifamily projects that range from about 520 units down to 280 units. All of them are high-end, luxury, resort-style developments.   How did your relationship with Stew and Rosie begin? Stew and I worked together in his previous life at CBRE when we were assembling a site in Anaheim. We used him as a reference for market studies and thought processes.   Later, when it became clear that project wasn’t going to get approved by the city, we reached out to him again, not realizing he’d already joined Matthews™. That morning, when we decided I should call him, he called me first.   What was a pivotal moment in the partnership? I explained our situation—we had 76 acres, potentially 90 with options, in Orange County. Stew told me he was working with Rosie who had a deep background in land development, and they both wanted to meet.   They studied the site and came back with a presentation. At first, I was annoyed when they showed us that multifamily wasn’t going to pencil. But looking back, I tease them about it, they knew what they were doing.   Stew prepped me for the big reveal: that while the site didn’t make sense for multifamily, it was fantastic for single-family detached. That was the pivot.   Rosie and Stew helped us understand the current market, both multifamily and single-family, better than we could’ve on our own. They opened our eyes. We had originally thought we’d just get out with our costs and a small profit. Now, we’re looking at a significantly higher return.   Was there a moment you knew you’d made the right choice in working with them? Yeah. We were talking to a big bridge lender in New York about refinancing the land. They asked, ‘Who’s your broker?’ We said Matthews™. And they said, ‘you couldn’t do better.’ That gave us real peace of mind.   Stew is relentless, he pushes hard to get the best deal. Rosie? She understands how projects actually get entitled, financed, and built. That combination is rare. They’re in the weeds with you, mapping it out.   If we have additional land that we’re going to market, I absolutely am going to go to them. No question. They’re the best choice.   How has the relationship expanded since then? It’s grown into a real partnership. Stew and Rosie have supported us not only on that original Anaheim deal, but they’ve continued to advise and add value across multiple assets. One example is 4th West in Salt Lake City, one of the city’s premier core Class A apartment communities, with an unparalleled rooftop amenity deck. That was a flagship for us, and they helped reinforce its market positioning.   More recently, they’ve played a role in structuring bridge financing and raising debt and equity for a project we’re doing in Riverton, Utah. What sets them apart is that they they understand construction financing, entitlement risk, and equity placement.   They have the depth to handle everything from land entitlements to capital markets, whether it’s sourcing equity, arranging construction financing, or helping us evaluate feasibility. Rosie and Stew don’t just show up when there’s a listing, they’re in it the whole way.   Unlocking Value: Strategic Vision in Action Identifying Underutilized Assets In today’s high-priced land market, true opportunity lies in overlooked sites—vacant parcels, B-grade locations with A-level potential, or properties mispositioned by brokers unfamiliar with development intricacies. Rosie and Stew specialize in reframing these assets, often delivering 20–40% premiums over traditional valuations.   Zoning & Permitting Whether it’s obtaining substantial conformance for entitlement adjustments or navigating high-fire hazard areas, Rosie’s deep expertise allows them to reposition challenging sites for broader buyer interest.   Environmental & Regulatory Due Diligence Rosie’s ability to conduct pre-market due diligence—wetland assessments, fire zone constraints, required improvements—means developers enter negotiations with eyes wide open. This reduces retrades, shortens due diligence, and boosts closing efficiency.   Execution Built on Trust & Tenacity While Rosie applies engineering insight to unlock physical value, Stew applies strategic insight to unlock relationships. He’s not simply a broker. He’s a connector—someone who understands the subtleties of each stakeholder’s goals and tailors his approach to fit. His decades-long client relationships and deep market visibility means they often receives calls about sites that appear unworkable. Yet time and again, they find a way to make the impossible viable, whether through re-entitlement, environmental remediation, or adjusting the development mix between for-sale and for-rent product types. When challenges arise mid-deal, Stew is known for his persistence. “Stew went above and beyond,” one client shared. “Most agents would have walked away and left the heavy lifting to us. He did the opposite.”   Case Studies Mission Grove Plaza | Riverside, CA ±9.97 AC | ~236 MF Units + 60 Townhome Units Marketed during entitlements, with the seller agreeing to close upon achieving final entitlements. Stew and Rosie guided the seller through a substantial conformance process post-entitlements, resulting in a lower-density plan that generated a 60% higher land residual compared to previous multifamily-only use. The project received 13 offers and is currently in escrow.   4456 Lincoln Ave | Cypress, CA ±11.63 AC Environmental cleanup, entitlement complexity, and valuation uncertainty all loomed large. Yet, the marketing campaign yielded 151 confidentiality agreements and 21 offers.   The Bowrey | Santa Ana, CA ±14.69 AC | 1,070 Proposed Units Despite the complexity of entitlement and infrastructure planning, Stew and Rosie secured five strong offers and achieved significant value per unit. This case reinforced their ability to balance entitlement scale with both affordability and feasibility.   Conclusion The journey from raw dirt to closed deal isn’t for the faint of heart. It requires deep technical knowledge, real-world development fluency, and a sharp eye for untapped opportunity. For Rosie Cooper and Stew Weston, it’s not about putting deals together for the sake of transaction volume. It’s about unlocking value others can’t and delivering outcomes clients never imagined possible.   Key Takeaways True value in land lies in seeing beyond surface constraints. With technical insight, relentless execution, and market-savvy guidance, Rosie and Stew consistently deliver their clients not just deals—but transformation.

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Stewart I. Weston

Executive Vice President

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Riding The Net Lease Roller Coaster

  Welcome to 2025, where the net lease real estate market is shaking off a two-year hangover of rate hikes and recession fears and steadying into a cautiously upbeat groove. After riding a wave of uncertainty, the industry is showing early signs of stabilization. Capital markets are firming up, interest rates are settling down, and CRE lenders are getting back in the game.   Net lease investment volume got a serious shot of adrenaline in late 2024, largely thanks to essential retail. Cap rates, which had been climbing like a roller coaster for over two years, are now leveling out, although still higher than their pre-pandemic lows.   Tenant strategy is what’s powering demand, not just broad economic trends. Leading retailers are embracing omnichannel delivery, foodservice, and experiential concepts, while strategically downsizing and building resilience in the face of a recession.   In terms of hotspots, investors’ attention is heating up around auto service and car washes, food-focused c-stores, rural dollar stores, urgent care clinics, and high-energy experiential retail concepts.   Macroeconomic Mood Clouds Lifting, But Bring an Umbrella   The U.S. economy isn’t exactly roaring into 2025, but it’s cruising at a manageable pace. GDP growth is slowing down (Blackrock lowered it’s 2025 U.S. GDP growth expectation to 0%). But here’s the twist–CRE sentiment is rising even as the economy cools.   A whopping 88% of global real estate executives, surveyed by Deloitte, expect revenue growth in 2025, a complete u-turn from the doom-and-gloom vibes of 2023, when most were bracing for more losses. According to the Matthews™ 2025 Investor Survey, investors are planning to increase their investments starting in Q3 2025.   So, what’s fueling optimism?   • Interest Rates: The Fed tapped the brakes in late 2024, and it’s giving CRE a breather.   • Inflation: Still sticky, but expected to drift closer to target by year-end.   • Psychology Shift: From “wait and see” to “let’s do deals”, though cautiously.   CRE performance is starting to decline from GDP trends. It’s no longer just about broad economic health—it’s about picking the right spots. These are the periods that determine the winners and losers in the investment market.     Cap Rates The Climb Might Be Over Cap rates spent more than two years hiking uphill, and now they’re catching their breath. After peaking in late 2024, the first quarter of 2025 brought signs of a plateau. Here’s how it breaks down:   • Office: ~7.9%   • Retail:~6.6%   • Industrial: ~6.3%   The retail sector saw the biggest cap rate jump last year–up 73 bps–but the increases are finally tapering off. Even industrial, the market darling, isn’t immune, but its fundamentals are strong enough to keep things stable.   What’s holding back a major rebound in transactions? Financing. Borrowing costs are elevated. The bid-ask spread is narrowing, but not gone. And there’s a backlog of inventory waiting for the right buyer–or the right rate cut.   While the Fed started trimming in late 2024, rates are still around 6% for NNN financing, double what they were just a few years ago.   That’s created cautious optimism mixed with frustration. Everyone’s watching the Fed, wondering: More cuts or more waiting?   Who’s buying right now?   • Private Investors: Dominating, with an 8% quarterly gain in capital deployment. The all-cash buyers are the MVPs right now, with less dependence on debt they are in a better position to pounce on good deals.   • REITs: Came roaring back in Q4 2024 (+180% year-over-year)   • Institutional: Still shy, especially on big portfolios. The liquidity spigot hasn’t exactly returned to the market.   • Cross-Border Capital: Quietly booming international buyers doubled their market share to over 11% in 2024.   • 1031 Exchanges: Used to be a net lease staple. Now? Many HNW investors are sitting out. Why? It’s hard to make the math work when you’re trading into high-rate debt. The cash is there but it’s choosy and deals are getting done, but more selectively. Everyone’s recalibrating expectations.   Sector Spotlights: The Hits, the Misses, and the Future Industrial and Logisitics: Still the Star, Just Less Flashy   Warehouses are cooling off from the red-hot frenzy of the past few years. Net absorption is positive, vacancy rates are rising, and rent growth is slowing but remains positive.   • Small Bay Spaces (<100K): Tight and in demand   • Big-Box (>250K): Facing vacancy pressure   • Flight-to-Quality: Modern buildings with AIreadiness and automation-friendly designs are coming out on top   Industrial remains the top target for NNN investors, but the game has shifted to selectivity. It’s not about any warehouse, it’s about the right size, tenant, and market.   Shifting global supply chains because of recent tariff announcements further complicate the outlook. While the outcome of the trade disputes remains uncertain, companies have already initiated efforts to shift production to other parts of Asia, nearshore operations to Latin America, or increase investment in U.S.-based manufacturing.   Apple was the first to announce plans to bring all iPhone production to India by the end of 2026, a major shift away from Chinese manufacturing. As a prominent player, this move is expected to set a precedent, likely resulting in an increase in shipments from Mumbai to the U.S. as more companies follow suit.   Importantly, this shift would change global supply chains, moving the landing of goods from West Coast ports to East Coast ports.   Meanwhile, IBM announced an expansion to its U.S. production pipeline, a step that dramatically increases the outlook for industrial and warehouse spaces near its existing hubs.   Auto Service and Car Washes CRE’s Cool Kids Imagine a sector with high cash flow, essential services, and private equity interest. Welcome to auto services and car washes, the rockstars of the net lease world.   What’s driving the shift?   • Durable Demand: Cars get dirty and need fixing–recession or not.   • Strong Unit Economies: Car washes can pull in profit margins north of 40%, especially with monthly subscription models.   • Sale-Leaseback Galore: Operators are in growth mode, turning to sale-leasebacks as a preferred capital-raising strategy—driving a surge of NNN opportunities in the market.   Car washes are still going strong in 2025, with the market forecast looking at a jump from $33.46 billion to $35.39 billion, according to The Business Research Company. The 5.7% expected expansion is well ahead of Goldman Sachs forecast for the economy as a whole, highlighting the strength of the car wash sector this year.   Monthly subscriptions are a solid move for places like Mister Car Wash and Tommy’s Express, bringing in reliable income. Plus, paying by phone is most common in today’s market. These popular chains are set to open more locations to meet demand.   But wait there’s drama…   Zips Car Washes filed for bankruptcy in early 2025, reminding everyone that too much growth, too fast (plus expensive leases), can spell trouble.   Also in play is the gradual phase-out of bonus depreciation benefits. Investors used to gobble up car washes to turbocharge tax write-offs. But with the deduction rate dropping (from 100% to 40% by 2025), that frenzy has cooled. The new administration’s One, Big, Beautiful Bill outlines a return to full bonus depreciation, an amendment that if, passed, would ignite the market.   On the auto services side, the market is shifting as high-tech cars roll out, specifically the electric vehicles (EVs) sector, which reported a 10% increase in sales in Q1 2025. Big players like NAPA and Jiffy Lube are focused on training teams for this new era of vehicles. The U.S. auto service market is estimated at $199.38 billion in 2025 and is expected to grow, according to Mordor Intelligence. An increase in service centers specializing in advanced technologies and EVs is likely in the near future.   Still, savvy buyers are doing their due diligence, this sector offers serious upside, just avoid overleveraged operators in hyper-competitive markets.   QSR: Food Is The New Fuel The Double-Drive Thru Arms Race   Quick service restaurants (QSRs) have gone all-in on drivethrus, and it’s paying off. Everyone from Taco Bell to Wendy’s is redesigning stores around speed, efficiency, and automation. Even Chick-fil-A has employees taking your order car-side with iPads (AKA line-busting). Why? Because in the QSR business seconds matter.   QSRs are now so efficient–and traffic-driving–they’re playing the role of anchor tenants in strip centers. If a property has a modern, high-throughput QSR, it’s considered gold.   QSRs are intensely focused on drive-thru efficiency in 2025, recognizing it as a primary sales channel where speed directly impacts revenue. Major players like McDonald’s and Wendy’s are implementing double drive-thrus, while AI voice ordering is being tested at locations such as White Castle to further streamline order taking. Digital menu boards are now standard, and mobile pre-ordering is increasingly popular with chains like Starbucks, offering customers ultimate convenience.   It’s not just the old-school burger joints seeing action, a new wave of QSR concepts is growing fast and grabbing serious market share. Cava and Sweetgreen are leading the charge with build-your-own bowls packed with fresh, healthy ingredients, designed for the lunch rush crowd that wants fast and clean. Salad and Go is scaling quickly by keeping things simple, drive-thru only, limited menu, and low prices. On the drinks side, Swig is blowing up thanks to its “dirty soda” craze, with custom sodas, energy drinks, and sweet treats fueling a cult-like following (especially among Gen Z). These brands are lean, efficient, and built for today’s on-the-go consumers and they’re proving there’s a big appetite for more than just burgers and fries.   Beyond speed, QSRs are also getting smarter about their menus and how they reach customers in 2025. Plus, loyalty programs and mobile apps aren’t just for ordering anymore, they’re a big way to keep customers coming back for more deals and personalized offers. Case in point: McDonald’s is generating buzz with rumors of the long-awaited return of its cult-favorite Snack Wrap, which hasn’t been on the menu in over a decade. Even without an official announcement, fans are already fired up, proving just how powerful nostalgia and digital word-of-mouth can be in today’s QSR game. It’s all about making it easy and tempting to choose them over the competition.   Convience Stores Road Trip Destinations   Convenience stores are essential, high-frequency destinations offering gasoline and everyday items, with a proven track record of resilience across economic cycles. Many are backed by strong corporate guarantors like 7-Eleven and Circle K, strategically located on high-traffic corners with intrinsic real estate value. Investors may also benefit from favorable tax treatment, including accelerated depreciation and potential bonus depreciation.   Modern c-stores are transforming into road trip destinations, with operators like Buc-ee’s, Sheetz, and Wawa drawing travelers through clean facilities, fresh food, and branded merchandise. Bigger footprints help drive greater traffic and revenue, while brands like 7-Eleven, Casey’s, and Wawa are evolving with QSR concepts, curated food options, and delivery services to align with changing consumer demands.   C-stores remain a strong net lease investment, offering stable, passive income and consistent returns along with favorable tax strategies that help investors maximize after-tax dollars.   -Nick Hahn, Associate Vice President   Gas Station Stops To Gormet Bites Remember when convenience stores were just about gas and a Diet Coke? Not anymore.   • Foodservice now generates almost 40% of instore profit, positioning it as a key performance driver for c-stores (Source: National Association of Convenience Stores).   •Prepared food sales jumped 11% in 2024, underscoring the growing demand for fresh, made-to-order offerings and their impact on revenue growth (Source: National Association of Convenience Stores).   Chains like Wawa, Sheetz, and QuikTrip are broadening their made-to-order food, gourmet coffee, and even seating areas.   Super-regionals like Buc-ee’s and Wawa are expanding into new states, building larger, foodforward locations, and cultivating loyal fanbases. Major players are elevating their food far beyond typical gas station fare, drawing customers specifically for their diverse, made-to-order menus. They’re spending over $7.5 million per store, and it’s not for new diesel pumps. It’s for kitchens.   Net lease investors love this shift. These new format c-stores offer longer leases, operate in recessionproof categories, and generate serious foot traffic. Just remember: not all c-stores are created equal. Food-forward models are the winners. Older, fuel-reliant locations? Those may be future redevelopment sites.   And it’s clear why. Gas stations are no longer just a place to fill up—they’re turning into unexpectedly popular hangout spots. Picking up a quality bite or a great cup of coffee while there has become completely normal, fueling repeat visits. This shift marks a major change in how consumers view roadside stops.   To keep up and attract more customers, gas stations are also getting tech-savvy with tap-topay and loyalty programs. EV charging stations are becoming popular at major chains. Gas stations are transforming into all-in-one roadside stops, using EV charging wait times to drive in-store sales and broaden their appeal to all travelers.   Casual Dining Making a Comeback Casual dining has glowed up. While dine-in traffic isn’t what it used to be, the segment is thriving. With Darden’s power play in motion, the casual dining sector is evolving. Restaurants that master both offpremises convenience and on-premises experience are winning the suburban center game.   Key Highlights for 2025:   • Nearly 75% of all traffic now comes from offpremises orders (Source: National Restaurant Association).   • Consumers, especially millennials and Gen Z, increasingly crave fast and seamless pickup or delivery options, influencing how casual dining stores design their food and service models.   •There is still a strong demand for good oldfashioned dine-in.   Suburban strip centers are becoming a sweet spot. Why? They offer easy parking, high visibility, and room for dedicated pickup zones, drive-thrus, and dual-kitchen layouts.   Total foodservice sales are projected to reach $1.5 trillion in 2025, reflecting a 4.1% increase over the previous year, driven by steady growth across all segments. The full-service segment is expected to generate $533 billion. Texas Roadhouse reported same-store sales up 6.5% earlier this year, which is no small thing. Off-premises dining is still a big chunk so, things like curbside pickup, delivery menus, and ghost kitchens aren’t going anywhere.   Loyalty programs are paying off, with brands like Chili’s and Red Robin seeing more frequent visits and higher spend from members. Average checks are up 6%, helped along with rewards, combos, and those upgraded drink menus. Alcohol is a big driver for happy hours and bar scenes are bringing in a solid crowd. And menus? Definitely getting more flexible. Diners are craving variety and value—whether it’s limited-time items, customizable combos, or shareable apps, the spots that keep things fresh and fun are winning right now.   Grocery and Dollar Stores The Steady-Eddy All-Stars Necessity retail is undefeated. Grocery-anchored centers hit record occupancy levels in 2024, with national vacancy under 3.5%. Why?   • Food’s not optional.   • In-person grocery shopping is still prefreerd.   • Discount groery stores like Aldi and Grocery Outlet are booming.   Investors love the stickiness of these centers: long leases, steady traffic, and dependable cash flow. Premium pricing is justified–especially with anchors like Publix, Trader Joe’s, or Whole Foods (which is now testing out small-format urban concepts). Chains like Publix and Walmart are buying up the centers they anchor, which could shift leasing dynamics and deal flow in the years ahead. Grocery stores are still going strong in 2025, with total U.S. sales expected to hit over $1.6 trillion, up about 3.1% from last year, according to Coresight Research.   Some of that’s from inflation, sure, but people are still showing up— just shopping a little smarter. Store brands and bulk buys are getting a lot more love, and loyalty programs are getting used. Chains like Kroger, Publix, and H-E-B are doing a solid job of keeping things fresh, affordable, and easy to navigate. Plus, stores that mix local products, solid produce, and friendly layouts are winning repeat visits.   Online grocery has cooled off from the pandemic boom, but it’s not going away, it’s still pulling in around 13% of total grocery sales. Grab-and-go meals, ready-to-eat options, and private label products are on the rise, too. With more people cooking at home again, either to save cash or eat a little better, grocers are helping with recipe kits, meal deals, and displays that make sense. Bottom line: if a grocery store makes life a little easier (and cheaper), it’s getting repeat business.   Dollar Stores The King of Rural Retail Dollar General and Dollar Tree are still on a tear, especially in small towns and rural markets where they’re stepping in to fill the void left by closed grocers and drugstores.   • 39,000+ U.S. locations and counting   • Plans for throusands of remodels and new builds   • Expanding grocery offerings to become essential providers, not just bargain stops   Dollar stores are now considered “critical infrastructure” in retail deserts. For NNN investors, they offer:   • Investment-grade credit (Dollar General: BBB)   • Smaller Building Footprints   • Strong performance in underserved areas   The twist?    Family Dollar’s retrenchment means more real estate up for grabs–and a clearer runway for Dollar General to dominate.   Dollar stores are absolutely thriving in 2025, especially in small towns and rural areas. Plans for even more chains like Dollar General and Dollar Tree are not just your go-to for cheap snacks, they’re becoming essential spots for everyday groceries and household items. Dollar General is leading the way, with plans for remodels and new builds, and even ramping up its grocery offerings to keep customers coming back for more than just bargains. In fact, many of these stores are now considered critical in areas that are otherwise retail deserts.   What makes them even more attractive for investors is their smaller building footprints, making them easy to place in underserved areas, and their solid investment-grade credit. Plus, with Family Dollar scaling back, there’s a clearer path for Dollar General to expand and dominate.   Health, Wellness, and Experience Urgent Care: Retail’s Healthiest Tenant Urgent care centers are the ultimate net lease trifecta.   • Recession-resillient   • E-commerence-proof   • Traffic-driving   These operators love strip centers and pad sites. Why? Visibility, access, and proximity to where people shop and live.   They’re also the go-to solution for backfilling vacant drugstores (looking at you, Walgreens).   In 2025, urgent care centers are really taking off, with the U.S. market for urgent care expected to hit over $36 billion by the end of the year, according to Grandview Research. These places are recession-proof, immune to e-commerce, and they bring in plenty of foot traffic, making them a top choice for retail spaces. Big names like CityMD, MedExpress, and Carbon Health are expanding quickly—MedExpress continues to grow its footprint across the U.S., and Carbon Health is targeting nationwide expansion with a goal of reaching 1,500 clinics by 2025. They’re mostly setting up shops in grocery-anchored centers, where people already go for everyday shopping. With the ability to offer quick care and extended hours, urgent care centers are becoming a must-have, filling spaces left by other businesses that didn’t make the cut.   Since about 85% of Americans live within a 10-minute drive of an urgent care center, these spots are super convenient for busy folks who need a fast, affordable healthcare option. As consumers keep looking for convenience, urgent care is quickly becoming one of the biggest growth areas in retail real estate.   The urgent care sector has seen rapid expansion, fueled by private equity backing and aggressive growth from regional and national operators. These clinics offer investors access to affordable medical real estate under long-term leases with sizable tenants though, as with all net lease assets, understanding the operator is key to assessing long-term stability and risk.   -Michael Moreno Senior Vice President & Senior Director   Botique Fitness A Comback Story After a pandemic wipeout, boutique fitness is back—Pilates, HIIT, Spin, Yoga—you name it, consumers want it in their neighborhood. Why?   • Shorter, targeted workouts • A sense of community • The convience near home of their favorite coffee shop   Franchise chains like OrangeTheory, Club Pilates, and F45 are taking small strip centers bays and turning them into daily-traffic machines.   Boutique fitness is thriving in 2025, with consumers flocking to gyms that offer short, targeted workouts. The demand for these types of fitness experiences continues to rise, driven by a need for convenience, community, and efficiency. In fact, the global boutique fitness market in the U.S. is expected to reach $36.98 billion in 2025, according to Research and Markets. People love having fitness options right in their neighborhoods, often near places they already visit like coffee shops or shopping centers, making it easier to fit in a workout.   OrangeTheory has grown to more than 1,400 locations globally and continues to expand. These gyms are attracting loyal customers with flexible membership options, high-energy classes, and a strong sense of community that keeps people coming back. The pandemic was a turning point after months of isolation, people realized that working out isn’t just about fitness, it’s also a social experience. That shift is still fueling demand today. As more people look for quick, effective workouts that fit their busy schedules, boutique fitness studios are becoming an increasingly reliable tenant for retail spaces in 2025.   Experimental Retail From Pickleball to Ping Pong The “experience economy” is in full swing. Retail isn’t just about shopping—it’s about doing something.   Top formats: • Entertainment: Topgolf, Bowlero, Dave & Buster’s   • Competitive Socializing: Axe throwing, ping pong lounges, pickleball clubs   • Immersive Retail: AR-enhanced showrooms   These concepts drive traffic, soak up large vacancies, and create buzz. For landlords struggling with former big-box space or dead anchors, these tenants can be game changers.   Experiential retail is on the rise in 2025, with shoppers craving more than just a traditional shopping trip. Axe throwing, ping pong lounges, and pickleball clubs are making their mark as new social hotspots. As part of this trend, global experiential retail is projected to grow by a CAGR of 14.02%, according to UnivDatos, as brands and landlords realize the power of creating interactive, fun environments.   These types of concepts are also helping to revitalize struggling retail spaces. For landlords with large vacant areas or former big-box stores, experiential retailers can be game-changers by filling those gaps and driving consistent traffic. And it’s not just new concepts driving the shift— traditional retailers are jumping in too. Nike now offers in-store customization stations, Lululemon hosts workout classes, Dick’s Sporting Goods has rolled out its massive “House of Sport” stores complete with rock walls and turf fields, and Sephora is drawing crowds with hands-on makeup tutorials and beauty classes. Immersive retail experiences like AR-enhanced showrooms, in-store events, and themed pop-ups are turning stores into destinations, not just places to buy products.   Drugstores From Cornerstone to Question Mark Once viewed as rock-solid staples of suburban corners and high-traffic intersections, drugstores are now CRE’s most unpredictable tenants. The trio of Walgreens, CVS, and Rite Aid are all in retrenchment mode–and its reshaping retail landscapes across the county.   The Hard Reality: Widespread Closures   • Walgreens:Shuttering 1,200 locations over 3 years–25% of its entire footprint   • CVS Health: In the process of closing nearly 900 stores nationwide   • Rite Aid:Deep in Chapter 11, with over 150 stores already gone   Altogether, this could unleash over 140 million square feet of vacant retail space by year-end 2025.   What’s behind the pullback?   • Aggressive growth has led to oversaturation   • Shrinking reimbursement margins from pharmacy benefit managers (PBMs)   • Operational challenges like staffing shortages, retail crime, and burnout   • Failed diversification attempts (in-store clinics, primary care ventures)   The classic drugstore model just doesn’t carry the same weight it once did and they aren’t easy spaces to repurpose:   • Size Mismatch: 10,000-12,000 square feet is too large for many retailers   • Legacy Leases: Rents are often above market, with 15-20 years left on paper   • Layout Quirks: Drive-throughs, vault-like interiors, limited co-tenancy flexibility   • Vacancy Risk: Dark stores may continue paying rent–or stop if bankruptcy hits   That said, not all is lost. In fact, there’s a growing interest from a variety of backfill tenants:   •  Discount retailers   •  Urgent care clinics   •  Medical spas   •  QSRs   Still, backfilling success often hinges on the fundamentals of the real estate itself–not the previous tenant. If the site is high-traffic, easily accessible, and in a growing or stable trade area, then it likely has a second life waiting.

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SoCal Multifamily in Focus: Strategic Opportunities in Los Angeles & Orange County

SoCal Multifamily in Focus: Strategic Opportunities in Los Angeles & Orange County Southern California’s multifamily real estate market is entering a period of pronounced transformation and opportunity. With Los Angeles at the epicenter of technological innovation, infrastructure investment, and global attention—and Orange County maintaining its hallmark consistency and demand stability—investors are faced with two distinct but compelling value propositions.   This article explores the evolving dynamics shaping these two powerhouse markets and uncovers the key themes driving Southern California’s multifamily performance in 2025 and beyond.   95% + Occupancy Rate LA REMAINS ONE OF THE TIGHTEST APARTMENT MARKETS NATIONWIDE $5.8B in 2024 Sales LA SECOND ONLY TO NYC 3.17M Residents (+16K in 2024) A RETURN TO GROWTH IN OC AFTER 2021-23 LOSSES 0.4% Rent Growth in OC in 2024 A PAUSE AFTER PANDEMIC-ERA SURGES, BUT STILL 28% ABOVE 2019     Los Angeles A MARKET RECHARGED BY DEMAND, INNOVATION, & GLOBAL MOMENTUM Despite recent negative press, Los Angeles County remains one of the nation’s premier multifamily investment markets. While population loss during the pandemic gained attention, the narrative is more complex. Growth in nearby Riverside-San Bernardino underscores that limited housing, not waning demand, is pushing people outward. Los Angeles remains a highly desirable place to live and work.   The county boasts one of the lowest apartment vacancy rates nationwide at 5.0%. A deep pool of young workers supports long-term demand. However, factors like rent control, increased taxation, and rising insurance costs create challenges that investors must navigate.     HEADWIND: TAXATION & RENT CONTROL The ULA “Mansion Tax”, which imposes added costs on real estate transactions above $5.3 million, has reshaped investor strategies. Additional rent controls and regulations within the City of Los Angeles have further dis-incentivized investment. “ULA has made investors more cautious on exit. Some are building in a longer hold, others are discounting the exit cap or trying to stay under that threshold entirely,” said Nabil Awada, Vice President and Associate Director. “Staying below the threshold means that owners are less likely to sell at a discount unless they really need to.”   “We’re seeing increased investor focus in San Gabriel Valley–strong job base, diverse renter pool, and less restrictive rent policies. Pasadena’s early rent control push in 2022 has actually redirected attention further east,” Awada added.   While Pasadena’s 2022 rent control targets buildings constructed before February 1, 1995, newer properties remain exempt, creating opportunity. Despite these policy headwinds, Los Angeles continues to generate reliable returns, and voters have pushed back on further rent control expansion.   “Rent control is forcing us to underwrite conservatively—maybe 3% or less annually— and think harder about how we reposition units between tenants,” noted Awada. “For value-add deals, it’s all about repositioning units legally between tenants rather than relying on aggressive rent bumps.”   With the passage of AB 1482 in 2019 and the failure of Prop 33, here is where LA rent control laws stand in 2025: Properties Subject to Los Angeles Rent Stabilization Ordinance (RSO) Pre-1978 construction in the City of Los Angeles is subject to RSO Landlords can impose annual rent increases of 4%, plus an additional 1% if they pay for electricity and 1% if they pay for gas   Properties Subject to AB1482 Any properties incorporated in Los Angeles County that do not have their own protection ordinance (excluding the City of Los Angeles) Properties in the City of Los Angeles built between 1979 and 2010, with the 15-year exemption rolling forward annually Annual rent increases are capped at 5% plus the local Consumer Price Index (CPI)   Exemptions Properties built post-2005 are exempt from any rent control policies, following a rolling 15-year exemption basis Single-family homes and condos remain exempt from local rent control     HEADWIND: NATURAL DISASTERS & INSURANCE The 2025 Pacific Palisades and Eaton wildfires displaced over 150,000 residents and destroyed 16,000+ structures. In their aftermath, demand surged in submarkets like West Los Angeles, with spiking rents and vanishing vacancy.   “Investor interest has shifted toward fire-safe zones–the South Bay is gaining more attention because they weren’t affected by fires, and cities like Redondo Beach, Gardena, and Torrance have strong fundamentals,” said Awada.   South Bay CRE Sales Surge in 2025 Source: CoStar Group, In. & The MLS | YTD = Jan 1, 2025 – May 22, 2025 Market Sales Volume YTD 2024 Sales Volume YTD 2025 % Increase Redondo Beach $31.4M $58.6M 87% Gardena $30.5M $48.8M 60% Torrance $40.9M $49.6M 21%   Rebuilding could take years as new development will be slow to replace lost housing stock. The resulting supply shock has boosted rental income potential and elevated property values across affected and adjacent areas, offering near-term momentum for multifamily owners, operators, and developers.   “With insurance premiums climbing in high-risk zones, I think we’ll see interest hold steady for at least another year or two–especially while there’s room to modernize units and push rents without competing with a ton of new supply,” said Awada.   At the same time, these wildfires have underscored the growing risk profile of investing in natural disaster-prone markets like Southern California. The financial hit on insurers is expected to ripple through the broader market. Awada notes the financial impact: “Insurance premiums are rising sharply–20 to 40% increases aren’t uncommon–and that’s directly affecting underwriting.”   Investors should anticipate a sharp increase in insurance premiums, which will inflate operating expenses and weigh on underwriting. Roughly $1.3 billion in CMBS-backed commercial real estate lies within fire evacuation zones, and while lenders are unlikely to adjust strategy immediately, persistent natural disaster risk could lead to higher lending premiums or tighter financing terms—particularly if insurers begin pulling back coverage across Los Angeles County.     TAILWIND: HOUSING SHORTAGE Los Angeles’ chronic housing shortage remains a powerful driver of demand. According to Zillow, Los Angeles has the second-largest housing shortfall nationally, trailing New York City.   With single-family home prices averaging $940,000, affordable to just 2.8% of renters, the metro is creating a higher-income rental base. Housing supply remains far behind demand: 22,000 units are under construction, but the shortfall ranges from 300,000 to 500,000 units.   “Construction slowdowns and supply constraints are the dominant forces in the market,” Awada emphasized. “We’re going to see tighter occupancy, more demand for workforce housing, and likely some distress-driven sales as loans mature.”   Vacancy is expected to tighten 20 basis points each of the next two years, reaching just 4.7% by the end of 2026. Rent growth is expected to land just shy of 4% in 2025, even with the potential for increased rent control measures. With limited homeownership options and rent control impeding new supply, multifamily owners are poised to benefit from enduring tightness.   Los Angeles Housing Shortage Stalls Amid National Gains Source: Zillow Metro Area Housing Shortage Change in Housing Shortage YOY (#) Change in Housing Shortage YOY (%) % Non-Homeowner Households That Could Afford Typical Mortgage United States 4,540,773 256,847 6.0$ 15.1% New York , NY 389,924 13,548 3.6% 9.3% Los Angeles, CA 336,728 2,866 0.9% 2.8% Chicago, IL 97,379 9,946 11.4% 22.0% Dallas, TX 48,150 528 1.1% 14.5%     TAILWIND: DEMOGRAPHICS UNDERSCORE ENDURING DEMAND Los Angeles County’s nearly 10 million residents offer significant scale and strength for multifamily investors. After peaking at 2.2% during the pandemic, annual move-outs have dropped to just 0.3%.   Higher than average incomes are the most notable factor for LA renters, allowing owners to provide high-end housing options at rates far larger than the national average rent. Los Angeles renters earn $10K more than the national average, supporting rental rates that are 32% above the national average. And with the median age of 36 (versus the U.S. average of 39), the metro’s larger Gen Z and millennial population supports household formation and apartment demand.   “The demand we’re seeing from younger renters and tech workers is unlike anything I’ve seen in the last decade,” said Awada. “LA has become a lifestyle market–and these high-income renters are keeping occupancy tight even in newer Class A stock.”   With average household sizes larger than the national norm (2.8 vs. 2.5), LA’s constrained supply continues to suppress household formation, further fueling future multifamily demand.     TAILWIND: LOS ANGELES 2.0 Los Angeles is expanding beyond its entertainment roots, emerging as a tech powerhouse in AI, cloud computing, and cybersecurity. This shift has increased demand for amenity-rich, centrally-located rentals.   “As tech spreads beyond Silicon Beach, tenants are chasing convenience and transit-oriented locations,” said Awada. “Mid-market demand is growing fast in places like West Adams, Koreatown, and Inglewood–areas with upside and access.”   The average tech salary in Los Angeles now exceeds national benchmarks, supporting robust demand for both premium and mid-market multifamily assets. This job growth has played a critical role in stabilizing Class A occupancy, even amid a surge of new deliveries in 2024, and has helped fuel sustained leasing velocity throughout the metro.   “For Class A, developers are targeting walkable, amenity-rich pockets near transit and coworking spaces,” said Awada.   The upcoming Summer Olympics in 2028 and FIFA World Cup in 2026 are also catalyzing infrastructure improvements and investor interest. These global events are driving an ambitious infrastructure agenda, most notably the “Twenty-eight by ’28” plan, which will modernize transportation networks, upgrade neighborhoods, and enhance citywide connectivity.   “Investors are eyeing transit corridors and Olympic-adjacent zones for value-add plays and short-term rental potential,” said Awada.     TAILWIND: LA COUNTY APARTMENT INVENTORY OPTIONS FOR EVERY INVESTOR Los Angeles’ inventory includes the nation’s highest concentration of small apartment buildings (under 25 units), enabling easier entry for private capital. While the market includes institutional-grade properties, this diversity adds resilience and liquidity.   “Private capital is active in the Valley, South Bay, and Long Beach–looking for value-add deals where prices are soft but demand is solid,” Awada explained. “It’s institutional capital that’s turned cautious, especially post-ULA.”   Entry costs can vary anywhere between $200,000$600,000+ per unit from the San Fernando Valley all the way to Long Beach. Despite the market’s reputation as a high-cost metro, smaller and more cost-effective options mean investors from all over the country can acquire properties in Los Angeles. Deal variety like this provides options whether a syndicator with a 5-year time horizon, a private investor looking for long-term passive income, or a larger institution looking for a stable and safe return on capital.     TAILWIND: MARKET LIQUIDITY REMAINS AMONG THE HIGHEST IN THE NATION Despite the national slowdown in deal flow resulting from the rapid increase in the Federal Reserve overnight rate, Los Angeles County remains one of the most active apartment markets in the country. In 2024, nearly $5.8B changed hands for LA apartments, trailing only the New York City Metro, which includes parts of New Jersey and Connecticut. Los Angeles records four times more transactions than San Francisco and 2.5 times more than the entire Bay Area. “We’re seeing more sellers meet the market now, and buyer activity has stayed surprisingly strong considering the macro headwinds,” Awada commented.     Orange County A MARKET DEFINED BY STABILITY, AFFLUENCE, & SUPPLY CONSTRAINTS Orange County’s multifamily market continues to be one of the most resilient and desirable in the U.S., distinguished by persistently tight vacancy, a highincome tenant base, and strong investor demand. While rent growth has plateaued after a pandemicera surge, occupancy remains near historical highs, reflecting the county’s enduring appeal.   These tight conditions are driven by consistent job creation, limited housing supply, and a chronic affordability gap that keeps a growing portion of the population in rentals. Despite affordability and policy-related headwinds, the county’s fundamentals position it as a defensive, long-term play for multifamily investors.   “Orange County investors like the economic demographics, general county policies, rental market stability, and value stability,” says Mark Bridge, Executive Vice President. “Whether during the 2008 financial crisis or the COVID collections of 2020, Orange County stood the test better than its Southern California neighbors.” He adds that “Orange County rent growth has often been in the top 10 nationwide, and values have historically declined slower and rebounded faster than surrounding counties.”   As of late 2024, the apartment vacancy rate hovered around 4%, making Orange County the second-tightest rental market among the top 50 metros in the U.S.     HEADWIND: AFFORDABILITY CONSTRAINTS IMPACT CLASS A PRODUCT Affordability remains a defining pressure point in Orange County’s multifamily landscape, especially for Class A and luxury assets. Renters are increasingly cost-burdened, and the income needed to afford market-rate units continues to rise. As of Q2 2025, the average asking rent in Orange County reached $2,730 per month, a 25% increase since Q4 2019. To rent without being cost-burdened, a household must earn $54.94 per hour, 3.3 times the state’s minimum wage.   “The cost of housing in Orange County is sky-high, and is a major barrier to middle-income families,” says Mark Bridge. “That’s why Class B and C assets are in such high demand, they’re the only housing option left for much of the local workforce.”   This pricing ceiling is particularly relevant as Orange County has one of the highest shares of Class A inventory among major U.S. markets. As of Q2 2025, over 6,400 Class A units are under construction, representing 2.5% of the county’s 250,000-unit apartment base. In submarkets like Newport Beach, over 40% of its housing supply is high-quality Class A buildings.   Although this is below the national average of 3.0%, and significantly below the 6% to 12% under construction in the nation’s five most active markets, the pipeline is still substantial, especially given Orange County’s historic supply constraints.   “Orange County is an infill development location,” Bridge explains. “Most Class A development is happening on underutilized or vacant lots.” But even these infill opportunities are limited. In November 2024, for example, a proposed 500-unit development in Anaheim Hills was rejected due to density concerns and the neighborhood’s wildfire evacuation risk highlighting the difficulty of bringing large-scale supply online even in a market with sustained demand.   As these new Class A units enter lease-up phases, landlords may face slower absorption and need to offer more concessions to fill units. The affordability ceiling also limits future rent growth prospects in this segment, as more tenants seek attainable alternatives in Class B and C properties.     HEADWIND: REGULATORY PRESSURE & SUPPLY-SIDE CHALLENGES Alongside affordability, regulatory pressure and development challenges continue to weigh on multifamily investment and construction. Despite statewide efforts to promote pro-housing policies, including ADU reform and density bonuses, Orange County’s approval processes remain slow and inconsistent.   “The entitlement process is still a hurdle, land costs remain high, and despite funding increases, we’re not producing enough units–especially for low-income renters,” says Bridge. While California has boosted support for housing production and preservation, reaching $249 million in Orange County in 2025, up 50% year-over-year, those gains still fall short of addressing the County’s estimated 121,000-unit shortage for low-income renters.   The region also faces deepening challenges around the loss of affordable development pipelines. Low-Income Housing Tax Credit (LIHTC) production and preservation dropped 61% between 2023 and 2024, severely limiting progress toward affordability goals. That drop comes just as the county grapples with alarming cost burdens: 81% of extremely low-income households pay more than half of their income on housing, compared to only 3% of moderate-income households.   Meanwhile, Santa Ana remains the only city in the county with stricter rent control than California’s AB 1482, capping rent growth at 80% of CPI or 3% annually since 2021. “Santa Ana’s rent control caused a larger decrease in pricing and slowed transaction velocity,” Bridge notes. “That aside, Santa Ana values have ticked up slightly from the bottom as the market adjusts post-rate hike.”   Despite the policy headwinds, Orange County’s underlying fundamentals, tight vacancy, economic diversity, and high barriers to entry continue to attract capital. However, rising interest rates have compressed investment returns, pushing average cap rates to around 4.4% and narrowing spreads, particularly for institutional-grade assets. Deal velocity has slowed in many submarkets, but liquidity remains strong in coastal areas like Irvine and Newport Beach, where institutional interest has persisted.   Where OC rent control laws stand in 2025: In Santa Ana, rent growth is capped at 80% of CPI or 3% annually, whichever is lower.     TAILWIND: POPULATION GROWTH & DEMOGRAPHIC RESILIENCE Orange County’s population is once again trending upward, reinforcing long-term demand for multifamily housing. In 2024, the county added nearly 16,000 new residents, a 0.5% gain that marked a clear reversal from the average -0.3% annual population losses between 2021 and 2023. This growth brought the total county population to 3.17 million.   Several of the county’s largest cities drove the expansion. Irvine led with a population increase of more than 3,600, followed closely by Santa Ana (+3,500), Garden Grove (+2,200), and Anaheim (+1,700). Stanton recorded the fastest percentage growth, jumping 3.6% thanks in part to new developments like Cloud House, a 321-unit apartment community featuring Orange County’s most expansive rooftop deck.   This return to population growth has translated directly into tightening multifamily fundamentals. In Irvine, stabilized apartment vacancy stands at just 3%, well below the county average of 4.1%. Projects like the 287-unit Enzo from TX partners and the upcoming 876-unit Volar by Garden Homes are helping to meet demand, but Orange County’s housing pipeline remains too limited to shift overall market dynamics meaningfully.   Supporting this demographic momentum is Orange County’s diverse, high-wage economy, anchored by leading employers across sectors like tourism, healthcare, education, and technology. Major firms including Disney, University of Irvine, Broadcom, Edwards Lifesciences, and Providence Health ensure job stability and sustained household income growth. By the end of 2024, job growth was tracking at 1.4% annually, with unemployment under 4.5%—outpacing both state and national benchmarks.   These jobs support a median household income of approximately $116,000, yet with median home prices exceeding $1.2 million and mortgage payments nearly double the average apartment rent, home ownership remains out of reach for a large share of the population. In fact, roughly 75% of local residents cannot afford a median-priced home, making “rentership” the default housing strategy for many.   Orange County’s demographic profile adds further strength to its multifamily appeal. While the region experiences modest domestic outmigration due to its cost of living, this is offset by strong international immigration, a high birth rate, and growing numbers of young professionals and college graduates. Millennials and Gen Z are continuing to form households, and a rising number of empty nesters are downsizing into high-quality rentals. These trends are expanding the county’s renter base across both age and income segments.   Additionally, Orange County has a high educational attainment and robust professional job growth, supporting a deep pool of tenants with the financial capacity to sustain elevated rents. As Mark Bridge notes, Orange County’s stable economy and diverse demographics are foundational to its long-term investment appeal.     TAILWIND: CLASS B & C STRENGTH, CLASS A STABILIZING Orange County’s multifamily market is increasingly defined by a split between high-cost and attainable housing. Class B and C assets—largely built from the 1960s to 1980s—are outperforming due to their relative affordability. With vacancy between 2.5% and 3.0%, these units are near full occupancy and continue to record modest but steady rent growth (1% to 2%).   The Class Divide in OC Source: CoStar Group, Inc. Units Vacancy Rate Rent Class A 76,768 5.5% $3,272 Class B 86,996 3.8% $2,691 Class C 95,734 3.3% $2,104   “Class B and C properties benefit from a broader renter base seeking affordability in OC’s high cost of living,” Bridge says.   Class A buildings, particularly recent deliveries in Irvine and Anaheim, saw some softness but are showing signs of stabilization. Rents across the county rose only 0.4% in 2024—a modest increase, but one that leaves average rents nearly 28% above pre-pandemic levels.   “Everyone is looking for value-add deals in OC,” Bridge notes. “That’s the play in today’s market. Turnkey deals are tougher to move.”   Meanwhile, active development continues in key hubs. Irvine has more than 4,000 units in the pipeline. Anaheim’s $4B+ ocV!BE project will bring housing and entertainment to the Platinum Triangle. Santa Ana’s transformation is accelerating with the OC Streetcar, and major highway and infrastructure upgrades are enhancing both access and livability countywide.

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Nabil Awada

Vice President & Associate Director

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Q225 | Retail Market Report | Orange County, CA

Q2 2025 Orange County Retail Market Report   Highlights Driven by the Q4 leasing boom and early 2025 demand, Orange County’s retail sector margins are incredibly slim, at 4.1%, just 0.8% below the national average. Discount and experiential retailers are forging a demand-driven market for big-box retailers. While rents have increased by 2.9% year-over-year, following a 4% gain in 2024, rent growth has stalled throughout the sector, as demolitions have exceeded new construction over the past three years.   By the Numbers Sales Volume: $479M Cap Rate: 5.3% Market Sale Price Per SF: $446 Vacancy Rate: 4.0% Rent Growth: 2.9% Market Asking Rent Per SF: $39.08 SF Under Construction: 217K SF Absorbed: (163K) SF Delivered: (169K) | Q2 2025 | Source: CoStar Group   Demographics Unemployment: 3.9% Current Population: 3,177,806 Households:1,110,142 Median Household Income:$116,845   Market Performance The retail sector is red-hot, consistently outperforming national benchmarks. Tenant retention is strong across the corridor, with especially low turnover rates in core trade areas.   North County and inland areas lead rent growth, fueled by strong demographics, competitive pricing, and growing tenant demand. Coastal submarkets face fewer new tenants due to high space costs and complex approvals.   With 217,000 SF underway, the region focuses on long-term stability through tenant turnover and adaptive reuse. This strategy supports a landlord-driven market with strong pricing and stable occupancy. Competitive pressure will continue supporting core fundamentals   Market Asking Rent Per SF and Vacancy Rate Source: CoStar Group     Under Construction     Orange County’s construction pipeline is minimal, with just 217,000 SF, or 0.1% of total retail inventory. Current projects are small and pre-leased, including Amazon Fresh in Laguna Hills and retail at Dana Point Harbor. Additional sites include drive-thrus and single-tenant builds in Garden Grove, Costa Mesa, and Anaheim. No major speculative or big-box builds are planned, showing a cautious, demand-led strategy.   Sales The Orange County retail investment market is incredibly robust, with 250 deals closed year-to-date totaling more than $1.1 billion, outpacing the annual totals of the past two years. The majority of buyer activity is driven by private capital, but in recent quarters, REITs, particularly through portfolio acquisitions of credit-backed retail assets, have also entered the market.   Major deals included:   Terreno Realty acquired a 134,400 SF Home Depot in Santa Ana for $49.5 million at a 5.7% cap rate, secured by a long-term lease with renewal options. A 117,300 SF portion of Mercantile East in Rancho Santa Margarita sold for $47.2 million as part of a larger portfolio transaction. The 155,949 SF Fullerton MetroCenter was sold for $45.4 million, with minimal vacancy and a mix of national tenants. A single-tenant Target in Placentia, totaling 154,739 SF, changed hands for $38.2 million, securing one of the highest-profile big-box trades of the year.   Sales Volume and Market Sale Price Per SF Source: CoStar Group     12-Month Market Leaders: Top 10 Performing Submarkets      

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Q225 | Multifamily Market Report | Orange County, CA

Q2 2025 Orange County Multifamily Market Report Key Findings Despite national trends of rising vacancy, Orange County’s vacancy maintains a steady rate at 4.0%, ranking second lowest among the top 50 U.S. markets. If employment continues to expand, rent growth could climb back into the 3% range in 2025, as increasing demand helps keep vacancy rates low. 5,858 units remain under construction (as of Q2 2025), heavily concentrated in Irvine, which benefits from land holdings by the Irvine Company.   By the Numbers Sales Volume: $588M Market Sale Price Per Unit: $450K Cap Rate: 4.4% Vacancy Rate: 4.0% Rent Growth: 1.4% Average Market Asking Rent Per Unit: $2,736 Units Under Construction: 5,858 Units Delivered: 465 Units Absorbed: 633 | Q2 2025 | Source: CoStar Group   Orange County Demographics Unemployment Rate: 4.1% Current Population: 3,176,579 Households: 1,109,604 Median Household Income: $117,293   IN APRIL 2024, ANAHEIM APPROVED DISNEYLANDFORWARD, A 30-YEAR EXPANSION INITIATIVE EXPECTED TO CREATE MORE THAN 4,000 JOBS AND GENERATE $1.1 BILLION IN ECONOMIC OUTPUT DURING ITS INITIAL FOUR-YEAR CONSTRUCTION PHASE, FOLLOWED BY NEARLY 2,300 ONGOING JOBS AND $253 MILLION IN ANNUAL ECONOMIC IMPACT.   Market Performance In Q2 2025, Orange County’s multifamily market demonstrated stable performance, underpinned by strong fundamentals and restrained supply growth. The vacancy rate remained compressed at 4.0%, significantly outperforming the national average of 8.1%, as demand held firm amid ongoing job growth, improving affordability and a rebound in international immigration. Absorption kept pace with new deliveries, with 633 units absorbed versus 465 units delivered over the prior 12 months. Rent growth remained modest at 1.5% year-over-year, reflecting a market-wide focus on maintaining high occupancy, particularly within the Class A segment, where increased supply exerted downward pressure on pricing. Construction activity began to decelerate following a surge in completions in 2024, with no major new starts reported since mid-2024. Despite this, over 5,800 units remain under construction, primarily concentrated in Irvine. Overall, the market’s fundamentals point to continued resilience, with the potential for rent growth acceleration later in 2025 if employment trends remain favorable and new supply stays constrained.   Orange County Multifamily Supply & Demand Dynamics Source: CoStar Group, Inc.   Orange County Under Construction Construction activity showed clear signs of moderation, following a period of elevated development. No significant new projects have broken ground since mid-2024, reflecting growing caution amid rising construction costs, tepid recent rent growth, and higher exit cap rates. Despite this, the market still maintains a robust pipeline of roughly 5,900 units under construction, representing 2.3% of the existing inventory. Development remains heavily concentrated in Irvine, where over 4,000 units are currently underway, including large-scale projects like The Irvine Company’s Colonnade at The Marketplace and Simon Property Group’s Brea Mall Sears redevelopment. Elsewhere across the county, the pipeline is thinning, limited by land constraints and challenging entitlement processes. This more measured pace of construction is expected to help maintain low vacancies and support rent stabilization in the quarters ahead.   Construction Starts Source: CoStar Group, Inc.   Under Construction Source: CoStar Group, Inc.   Orange County Sales Activity Source: CoStar Group, Inc.   In Q2 2025, Orange County’s multifamily sales activity remained subdued but stable, reflecting broader national investment trends. Sales volume during the quarter was low, continuing the cautious pace set earlier in the year, as buyers and sellers adjusted to elevated cap rates and financing costs. Despite the slowdown, cap rates for larger institutional assets hovered in the 5% range, suggesting a pricing recalibration from previous peaks. Meanwhile, private investors, especially those pursuing 1031 exchanges, remained active in smaller transactions, accepting initial yields in the 3% to 4% range in desirable coastal locations. Though Q2 did not mark a major rebound, the quarter was seen as a potential inflection point, with improving transaction momentum hinting at increased deal flow in the second half of 2025.   Submarket Highlights North County Vacancy stands at 3.9%, closely aligning with the market average of 4.0%. Absorption is expected to stay positive in the coming quarters, though a project scheduled for completion in mid-2025 is likely to push vacancy slightly higher.   Anaheim Anaheim recorded one of the biggest multifamily deals of the past year in Orange County, with the purchase of a $144M apartment complex.   Central OC East of I-5 Vacancy in this submarket is on a downward trend, currently at 3.6%.   Tustin Vacancy has declined slightly year-over-year, now at a tight 3.0%, well below the market average of 4.0%. Limited supply growth has helped keep vacancy from rising further.   Central OC West of I-5 Rents are experiencing moderate growth as increased leasing activity drives vacancy down, with annual rent growth currently at 1.9%.   Huntington Beach/Seal Beach Although underlying fundamentals remain strong, market rents in the area have increased by 1.4% over the past year, closely aligning with the Orange County average of 1.5%.   Irvine Irvine is by far the most active submarket for apartment development in Orange County, with 3,732 units under construction.   Costa Mesa Rent levels declined from mid-2022 through the first quarter of 2023, but are now climbing as demand strengthens moving through 2025.   Newport Beach Driven by tightening and improving market conditions, local rents have risen by 4.3% over the past year, significantly outpacing the 1.5% national average.   South County South County apartments remain among the most expensive in Orange County, with rent growth over the past five years exceeding the market average. However, in 2025, landlords are increasing rents at a modest year-over-year rate of only 0.7%.

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Mark Bridge

Executive Vice President & Senior Director

Image of Q225 | Industrial Market Report | Orange County, CA Success Story

Q225 | Industrial Market Report | Orange County, CA

Q2 2025 Orange County Industrial Market Report   Highlights Vacancy increased to 5.7% in Q2 2025, up from a record low of 1.8% at the end of 2022 marking a broad-based occupancy losses and slower leasing velocity. While rents have dropped from around 10% from their 2023 peak, and landlords increasingly offering multi-month concession offerings, the Orange County industrial sector remains among one of the nation’s most expensive markets. New construction added only 0.7% to total inventory, underscoring the region’s tight development constraints. Land scarcity and high redevelopment costs keep supply growth limited, even as demand cools.   By the Numbers Sales Volume: $662M Cap Rate: 5.5% Market Sale Price Per SF: $335 Vacancy Rate: 5.7% Rent Growth: (1.5%) Market Asking Rent Per SF: $19.01 SF Under Construction: 2.4M SF Absorbed: 117K SF Delivered: (372K) | Q2 2025 | Source: CoStar Group   Demographics Unemployment: 4.1% Current Population:3,176,712 Households: 1,109,697 Median Household Income:$117,511   Market Performance A cooling demand environment and elevated availability are weighing on Orange County’s industrial performance. Overall vacancy has climbed to 5.7%, with availability—including space under construction and subleases—rising to 8.2%. Landlords are increasingly turning to concessions and rent reductions to remain competitive, especially as tenant decision-making has slowed. Leasing timelines have lengthened, and the median time on market now exceeds 3.5 months, up from just two months in 2022.   Larger facilities and mid-sized properties in lease-up are facing the most pressure, while smaller, infill assets under 100K SF remain comparatively resilient. Operating margins are tightening as landlords grapple with higher carrying costs and elevated vacancy, especially for newer spec projects. Even stabilized properties are feeling the strain, as rent erosion and increased concessions continue to chip away at effective income.   Market Asking Rent Per SF and Vacancy Rate Source: CoStar Group   Under Construction     Despite rising vacancy and slower leasing, construction remains active as developers bet on Orange County’s long-term fundamentals. Most projects are mid-sized (100K–250K SF) and clustered in North County near ports and rail. Smaller buildings under 100K SF continue to lease well. Developers like Prologis and Alere have lowered rents to spur demand, with recent listings reduced to $1.75–$2.00/SF triple-net. With over 85% of new supply still available, near-term vacancy could rise further as more projects deliver.   Sales Sales activity in Orange County’s industrial market has shown resilience but remains below peak levels. Over the past year, $1.8 billion in assets traded, consistent with 2023 but still trailing the pre-2020 average of $2.1 billion. Investors are targeting assets with below-market rents for future upside, while REITs and institutional buyers—led by Rexford—have steadily increased their market share. Roughly 50% of recent sales involve fully leased, high-credit buildings, reflecting a focus on income stability amid tighter capital markets. A standout deal includes New York Life’s $92.1 million acquisition of a 219,000-SF Brea warehouse at a 5.8% cap rate, underscoring continued demand for well-located, core product in a shifting market.   Sales Volume and Market Sale Price Per SF Source: CoStar Group       12-Month Market Leaders: Top 10 Performing Submarkets          

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SoCal Development Outlook 2025

An Evening of Vision and Partnership: SoCal Development Market Overview The fourth annual SoCal Development Market Overview brought together a mix of industry veterans, emerging leaders, and forward-thinking professionals. Hosted in collaboration with AO and Arcus Harbor, the event drew a packed crowd despite notorious San Diego traffic. The event featured appreciation for key sponsors, including VCA, Assured Partners, Fuscoe Engineering, Snyder Langston, FQF Advisors, Salas O’Brien, MJS, and Troutman Pepper, and insights into the current real estate development landscape.   The Power of Strategic Alignment The event opened with reflections on recent strategic moves, highlighting the deep corporate engagement and alignment at Matthews™. From founder Kyle Matthews to President Dave Harrington, the leadership’s personal involvement in transactions underscored a client-first philosophy. Rosie Cooper and Stew Weston introduced themselves as the hosts for the event. Their partnership focuses on land development in Southern California, and they recently joined Matthews™ towards the end of 2024.   Rosie and Stew exemplified how deep expertise translates into results. With her background in civil and environmental engineering, Rosie adds her development and construction knowledge to each project, resulting in over $5 billion of entitlement and development experience. Meanwhile, Stew brings more than 30 years of experience to the table with over $13 billion in sales, and expertise in simple or complicated deals.   Rosie and Stew’s Deal Status After Rosie and Stew introduced their team, they highlighted the status of their deals. Their current deals are active in the Inland Empire, San Diego County, Orange County, all the way to Napa. Their largest deal on the market is located in Anaheim Hills, with more than 90 acres. Most of their deals feature mixed-use opportunities and are attractive for their proximity to other retailers nearby.   2025 Developer Survey: New Metrics, New Mindsets The annual developer survey provided data-driven insight into market sentiment:   Target Returns: A majority of developers underwrite in the 6 to 6.5% range for untrended return on cost, which is a significant change from 2024. Last year, 35% of developers noted their untrended return on cost at 6%, followed by 33% at 6.5%. Additionally, 45% of developers now recorded that their untrended return for the last deal was approved at 6.5%. Last year, the majority of investors also reported their untrended return at 6.5%. Southern California Risks: Construction costs now top the list of concerns (59%), overtaking political climate (28%). Political climate recorded a significant decrease, recording 28% risk, while it was at 46% risk in 2024. Metro Preferences: San Diego and Orange County recorded the most interest at 26%, followed by the Inland Empire at 20%. The Inland Empire recorded an uptick as it was at 16% interest in 2024. Los Angeles stayed the same with interest at 17%, along with Ventura reporting the same interest of 11%. Deal Size: The targets for deal size noted significant differences from last year’s results. The target for “the bigger, the better” noted the largest jump from 7% last year to 17% this year. Preferences remain the strongest for 200-300 units at 30% this year, but this dropped from 36% in 2024. This year resulted in 100-200 units recording 24% interest, 300-400 units at 16% interest, and 50-100 units at 13% interest. Hold Periods: Over 50% of respondents now plan to hold assets long term, suggesting a shift toward cash-flow stability and refinancing, rather than quick flips. This is different from last year when 57% of respondents stated merchant build for their hold anticipation. Equity: Half of respondents are targeting 20% IRR for their equity. Production Goals: More than half of respondents increased their production goals from last year. Production Outlook: Optimism is high—75% of developers believe 2026 will see greater project delivery than 2025.   Macroeconomic Realities: Capital Markets in Flux Stew’s data-packed segment highlighted sharp interest rate fluctuations and the continued impact of economic policy on deal feasibility. While top-tier markets like Orange County represent only 4% of national supply growth, they remain highly desirable. As construction financing remains high, multifamily starts are now down 75% from their peak in 2022.  Meanwhile, multifamily completions are down 50% from their peak, setting the stage for future rent escalation due to constrained supply. By early 2026, quarterly new supply is expected to fall to less than half of current levels.   In Q1, the monthly payment premium for a newly-purchased home was 43% nationally. The monthly mortgage payment for the first quarter was $3,123, compared to $2,184 for the effective rent. This is keeping renters renting for longer and helping preserve existing occupancies.   The monthly payment premium of buying over renting exceeds 100% in many markets. Los Angeles and Orange County record one of the highest premiums. Additionally, vacancy across many of the largest markets has now more than fully recovered to below pre-pandemic trends. In Southern California, the main metros now note a vacancy rate in the 3 to 4% range.   The ongoing gap between rent and mortgage payments is supporting rental demand, particularly in high-barrier markets like Los Angeles and San Diego. Renewals are up, turnover is down, and rents are forecasted to grow modestly (3–3.5%) across Southern California—a return to more sustainable underwriting practices.   Renewals noted an uptick over time, consistently increasing since Q1 2023. Multifamily has become the leader with the greatest total share of investment across the country at 39% as of Q1 2025. Multifamily investment volume for the six gateway markets totaled $43.3 billion and accounted for 28% of total U.S. multifamily investment volume over the last four quarters.   Panel 1: Here and Now: Residential Strategy in Real Time A cross-section of developers—Greystar, Toll Brothers, National CORE, and Greenlaw—discussed their strategies: Affordable Housing Innovations: Faith-based partnerships, school districts, and health systems are becoming crucial partners in affordable projects. Regulatory Challenges: California’s “zone zero” fire hazard designations are forcing a return to duplex development in some areas. Execution Focus: Developers are emphasizing execution discipline, creative land assemblage, and cautious phasing over speculative builds. Capital Stack Caution: Many are turning to joint ventures and creative capital sources to bridge equity gaps in a high-interest environment.   Panel 2: Navigating Capital Markets in Today’s Residential Landscape Experts from Greystar, Comerica Bank, and Voya Investment Management outlined evolving lender strategies: Return of Bank Construction Lending: Banks are back, but with lower leverage (typically 60-65%) and a demand for increased equity. Bridge and Agency Loans: Demand is rising for short-term and flexible products as many developers avoid long-term commitments amid rate uncertainty. Cautious Optimism: While underwriting remains disciplined, lenders expressed cautious optimism, particularly for suburban, less dense, and “attainable” housing.   Panel 3: Hines’ Investing and Developing Across Continents Drew Huffman of Hines wrapped up the event by framing the U.S. as a globally attractive investment environment, especially for “living” assets—Hines’ umbrella term for residential, land, and mixed-use projects. With supply dwindling and demographic drivers remaining strong, Hines is positioning to be a first mover once construction economics normalize. The firm is also expanding land development capabilities in the West, exploring markets like Utah and Arizona.   A Clear Mandate: Bold, Disciplined Action Ahead As the event concluded, attendees left with a clear message: opportunity in Southern California development remains strong—but only for those who are adaptive, analytical, and aligned with the right partners. Whether through smarter design, deeper capital stacks, or creative entitlements, the next cycle belongs to the bold.

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Stewart I. Weston

Executive Vice President