Research & Market Insights

Q1 2026 Multifamily REIT Earnings Report

Macroeconomic & Market Backdrop The U.S. multifamily housing market entered the second quarter of 2026 in a transitional phase following one of the largest apartment supply waves in decades. Elevated deliveries across high-growth Sun Belt markets continued to pressure new-lease pricing and same-store NOI for operators concentrated in Texas, Florida, Arizona, Georgia, and the broader Southeast, while coastal markets with limited new development posted stronger rent growth, higher retention, and better operating leverage. Consumer demand for rental housing remained fundamentally resilient throughout the first quarter, supported by elevated mortgage rates, persistent for-sale affordability challenges, stable household formation, and continued renter preference for flexibility in major employment centers. Occupancy across the public multifamily REIT universe generally remained in the mid-95% to 96% range, reflecting healthy underlying demand even as concessions remained necessary in markets absorbing new deliveries. The divergence between coastal and Sun Belt markets became more pronounced during the period. Equity Residential, AvalonBay, and Essex benefited from exposure to New York, San Francisco, Northern California, Southern California, Seattle, and other high-barrier coastal markets where new supply remains limited. In contrast, Mid-America, Camden, and portions of UDR continued to work through elevated deliveries across the Southeast, Southwest, Texas, Denver, and select expansion markets. Capital markets conditions remained manageable for the group. Balance sheets were conservatively positioned, leverage ratios stayed within investment-grade parameters, liquidity was ample, and management teams used disposition proceeds, unsecured debt issuance, and cash flow to fund development, share repurchases, and selective capital recycling. National Multifamily Fundamentals Apartment fundamentals remained stable but uneven in Q1 2026. Physical occupancy generally held between 95% and 97% across the covered REITs, with coastal operators and markets benefiting from constrained development pipelines and strong renewal demand. New-lease growth remained negative for most Sun Belt-heavy portfolios, although the sequential direction improved meaningfully from late 2025. Rent growth remained moderated relative to the post-pandemic period. Renewal pricing was positive across the companies that disclosed detailed lease metrics, while new-lease spreads remained negative in oversupplied regions. This produced blended lease rates that were positive for EQR and ESS, slightly negative for MAA and CPT, and improving sequentially for several Sun Belt operators. Management commentary across the sector consistently emphasized that the construction cycle is decelerating. Higher financing costs, tighter lending standards, and lower development starts are expected to materially reduce new deliveries over the next several years. As a result, many operators are increasingly focused on the timing of the supply-demand inflection expected to emerge later in 2026 and into 2027. Capital allocation remained highly active. EQR, AVB, UDR, ESS, CPT, and MAA collectively executed dispositions, share repurchases, development funding, land acquisitions, and selective debt issuance while preserving liquidity and maintaining conservative leverage profiles. Multifamily REIT Performance First quarter 2026 results reinforced the operational split between supply-constrained coastal portfolios and Sun Belt portfolios still absorbing new deliveries. Essex produced the strongest same-property operating result in the group, with same-property NOI growth of 4.1% on only 0.2% expense growth. Equity Residential also performed well, with San Francisco and New York driving outsized market NOI growth and blended lease spreads improving sequentially into peak leasing season. AvalonBay delivered a steady quarter, with Core FFO of $2.83 per share flat year over year and ahead of the February outlook midpoint. The beat was driven primarily by operating expense timing, while the company continued to execute capital recycling through dispositions, development starts, and share repurchases under a newly authorized $1.0 billion buyback program. UDR delivered FFOA growth of 2% year over year but posted modest same-store NOI contraction as occupancy softened and expenses rose. The company was one of the more active capital recyclers in the quarter, selling four communities for $362 million and repurchasing approximately $100 million of common stock, with additional buybacks after quarter-end. Sun Belt-focused Camden and Mid-America continued to face supply-related pressure in new-lease pricing and same-store NOI. However, both companies highlighted improving sequential blended lease-rate trends, resilient demand, and strong retention. MAA reported the fifth consecutive quarter of year-over-year blended rent improvement, while Camden posted a 20-basis-point sequential improvement in blended lease rates. Risks, Outlook & Synthesis The primary near-term risk remains elevated apartment supply in Sun Belt and expansion markets. Although deliveries appear to be moving toward a peak, rent growth and same-store NOI may remain pressured until absorption fully normalizes. Operators with high exposure to the Southeast, Texas, Florida, Phoenix, and Denver remain more exposed to concessions and negative new-lease spreads. Macroeconomic risks also remain relevant. A slowing labor market, deterioration in consumer confidence, or prolonged interest-rate volatility could pressure household formation, renter demand, and capital markets activity. Expense growth remains another key variable, particularly insurance, utilities, labor, maintenance, and real estate taxes. Despite these risks, the broader outlook remains constructive. Most companies maintained full-year Core FFO guidance, balance sheets were conservatively positioned, and liquidity remained strong. Declining construction starts and sustained for-sale housing affordability challenges should support renter demand and improve pricing power as 2026 progresses. Overall, the public multifamily REIT sector entered the remainder of 2026 with durable occupancy, disciplined balance sheets, active capital allocation programs, and increasing visibility toward a more favorable supply-demand backdrop. Coastal and West Coast portfolios appear best positioned in the near term, while Sun Belt-focused operators may benefit from a more pronounced recovery once new supply decelerates. Cross-Sector Themes Supply-demand inflection underway in Sun Belt: MAA, CPT, and UDR each highlighted improving sequential indicators even as new supply remains a drag on current results. Coastal and West Coast strength: EQR and ESS benefited from constrained supply and strong demand in San Francisco, New York, Northern California, and other high-barrier markets. Record-low turnover: EQR, MAA, and UDR cited historically strong retention, supporting occupancy and limiting re-leasing costs. Capital recycling and buybacks: The group remained active in dispositions and share repurchases, reflecting management confidence in intrinsic value and balance sheet flexibility. Expense management divergence: ESS and MAA delivered strong cost control, while UDR and AVB faced higher expense growth, with AVB noting that some costs are expected to land later in 2026. Balance sheet discipline: All covered REITs maintained leverage within sector-appropriate bands and showed no meaningful credit stress.

Q&A Milton Braasch II | Phoenix Market Leader

The Power of Staying the Course Q: It took you exactly one year from your first day to closing your first deal and ringing the bell. Looking back, what was the most important lesson you learned during that first year that you now teach to new agents? A: Trust the process and keep going. Your mind will play tricks on you; it will convince you that giving up is the rational choice when things get hard. Learning to recognize that voice and not listen to it is half the battle. The agents who make it aren’t always the ones who had the easiest start; they’re the ones who stayed the course when every instinct told them not to. Q: You earned both the Pacesetter Award (2022) and Rookie of the Year (2023). What were the specific daily non-negotiables in your routine that you believe separated you from the pack that you now look for in other agents? A: Being intentional about the commitments I set for myself and actually hitting them is what I believe separated me and what I see separating agents early on in their careers. Everyone sets goals, early mornings, call targets, and weekly numbers, but very few people consistently follow through. It sounds great to say you are going to be in at 5:30 a.m. or make 500 calls every week. But when the rubber meets the road, most people fall short, and it is rarely because of outside circumstances. The truth is, it got hard, and they chose comfort over growth. That’s the real separator. The agents who stand out early aren’t always doing something different; they’re just doing what they said they would. Q: You’re known for a hands-on, people-first approach. What is the most common mental block you see in early-career agents, and how do you help them coach themselves through it? A: Almost every agent battles the fear of the “what if” early on in their career. It’s the hesitation before the next call because you don’t know if you’ll get hung up on, or the anxiety before a meeting because the other person might not show. That uncertainty can become paralyzing. The shift I try to encourage is flipping that same “what if” into optimism. What if they do pick up? What if this is the meeting that changes everything? Same question, completely different energy, and it changes your approach overnight. Q: When you transitioned into leadership, how did you translate the success of your brokerage career into scaling a blueprint for agents stepping into their careers? A: Honestly, I didn’t have to reinvent the wheel. At Matthews™, we already offer a proven, pressure-tested path to success in brokerage through our training and mentorship programs. Pair that with a relentless work ethic, and it is simple to follow. I bought into the blueprint, lived it, saw the benefits, and now I outline that same path for new brokers. Q: What does a strong brokerage culture look like in the Phoenix office, day to day? A: Culture thrives when everyone is here for the same reason. We all want to build successful, long-lasting careers, but what makes Phoenix so special is the genuine friendships our agents have for one another. That combination is lethal in this industry and matters more than people think. When you’re grinding through a hard stretch, the camaraderie makes it easier and more fun to push through because the people around you can pick you up, and you do the same for them. When you pair that shared commitment to success with a tight-knit group of people who actually care about each other, it creates a competitive energy that’s hard to manufacture. We didn’t have to force it; it just became who we are. Q: As you look to expand the firm’s footprint in the Southwest, what is the biggest opportunity you see in the Phoenix market over the next 12-24 months? A: A lot of brokers in Phoenix have taken their foot off the gas over the past couple of years, and that’s an opening we intend to take full advantage of. When the market slows, many competitors pull back, wait for conditions to improve, or stop creating momentum altogether. We’re the agents who keep our foot down and move the market. The result? In the next year or two, we’re positioned to take significant market share from the agents who have kindly created that opening for us. Q: Brokerage is rarely a straight line. What advice do you give agents when they start to doubt themselves during a slow period? A: It’s simple, yet effective. Control what you can control. Set hard but achievable weekly commitments and show up to them every week, without exception. We don’t control when someone decides to sell a building, but we control how present and relevant we are when that moment comes. Q: How do you define an agent’s success beyond just closing deals? A: How seriously an agent takes their business is a big tell of success. Closings are an outcome, you can’t always control when they happen. But you can control the attention to detail, the time committed, the early mornings, the late nights, the call goals hit, and the meeting goals hit. An agent who performs those activities at a high level consistently, the closings will come. Q: How do you encourage agents in your office to leverage technology and data to sharpen their advisory approach? A: Matthews™ is well ahead of the curve on technology. Both leadership and agents recognize the separation that will arise between companies and agents leveraging tech and those that aren’t. The market has shown us that it is not really an option; it’s a requirement to adapt to the times. The agents who treat it that way will have a significant advantage over those who are still deciding whether to take it seriously. Q: Looking ahead, what opportunities do you see for investors and brokers in the Phoenix market? A: Phoenix is the fifth-largest city in the United States, and people are still flocking to the Valley of the Sun. Population growth is the single most important long-term stat we track; it’s the domino that stimulates growth across the entire economy, especially in commercial real estate. All of these people need somewhere to eat, sleep, shop, get medical care, and build businesses. That demand doesn’t slow down. We are very bullish on the Phoenix commercial real estate market for years to come, and frankly, it’s not surprising given the fundamentals.

Milton Braasch II

Market Leader

6/9/26

Phoenix, AZ Industrial Market Report Q1 2026

Industrial fundamentals in Phoenix are stabilizing, though elevated vacancy continues to weigh on performance. A surge of deliveries since 2023 pushed vacancy to 11.5% in Q1 2026, though the pace of increase has flattened as completions slow and demand remains steady. The imbalance has been most pronounced in large-format logistics properties, where speculative development has driven higher availability. Demand remains positive but has moderated, with approximately 20.0 million square feet absorbed over the past 12 months. Recent quarterly absorption turned slightly negative as new supply continues to lease up. Leasing is concentrated in modern logistics space, while rent growth has slowed to 3.3%, with infill and small-bay assets outperforming larger formats. Key Findings Industrial conditions are stabilizing, though vacancy remains elevated at 11.5% following more than 91 million square feet of deliveries over the past three years. Net absorption totaled 20.0 million square feet over the past 12 months, with recent demand softening as new bulk space continues to lease up. Sales volume reached approximately $1.1 billion in Q1 2026, with pricing near $188 per square foot, signaling continued investor demand despite softer fundamentals. Phoenix Industrial Supply & Demand Dynamics Source: CoStar Group, Inc. Phoenix Demographics Source: CoStar Group, Inc. Unemployment Rate: 4.0% Current Population: 5,280,492 Households: 2,012,856 Median Household Income: $92,514 Phoenix continues to benefit from strong population growth, favorable demographics, and a pro-business environment that support its position as a leading Southwest industrial market. In-migration, particularly from California, remains a key driver, supported by lower costs and business-friendly policies, alongside continued inflows from the Midwest. Economic momentum is anchored by large-scale industrial and advanced manufacturing investment, led by TSMC’s expanding semiconductor campus and a growing ecosystem of suppliers, data centers, and advanced manufacturing users that reinforce Phoenix’s role in national supply chains. Top Phoenix Leases Source: CoStar Group, Inc. Amazon Scotts Miracle-Gro Walmart CEVA Logistics Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Phoenix Industrial Construction Construction activity remains a key force shaping Phoenix’s industrial market as the metro works through the back end of a historic supply wave. Over the past three years, more than 91 million square feet has delivered, an unprecedented expansion that pushed vacancy higher and created a sizable inventory overhang. The pace of completions slowed in 2025, with about 21.5 million square feet delivered, helping moderate some supply pressure. However, roughly 21.4 million square feet remains under construction, keeping Phoenix among the largest industrial pipelines in the country. Development has been concentrated in large logistics facilities, particularly in the West Valley and around Phoenix-Mesa Gateway Airport. While deliveries have slowed, construction levels have flattened over the past year, suggesting supply-side pressure may persist in the near term. SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc. Phoenix Industrial Sales Industrial sales remain active across Phoenix. Approximately $5.1 billion in assets traded in 2025, nearly tripling the metro’s average annual total from 2015 to 2019 and rising about 11% year over year. The market has become increasingly institutional as a historic wave of development delivered a new generation of modern logistics facilities and elevated Phoenix’s role in national supply chains. Investor demand remains strongest for newly built, stabilized logistics assets pricing in the mid- to high-5% cap rate range, while infill small- and mid-bay properties have also attracted capital due to their rent growth potential and insulation from new supply. Phoenix Industrial Sales Volume Source: CoStar Group, Inc. By the Numbers Q1 2026 | Source: CoStar Group, Inc. Sales Volume: $1.1B Price Per SF: $187 Cap Rate: 6.6% Vacancy Rate: 11.4% Rent Growth: 4.2% Asking Rent Per SF: $13.02 SF Under Construction: 21.4M SF Delivered: 1.7M SF Absorbed: 6.2M

National Self-Storage Market Update: Current Performance, 2025 Trends, and H1 2026 Outlook

The U.S. self-storage sector in early 2026 is in a clear stabilization phase, following two years of supply-driven pressure. Advertised/street rates nationally stand at $16.27 per square foot annualized (blended main unit types). This rate is down 0.2% year-over-year according to the February 2026 Yardi Matrix National Report, reflecting data through end-January. Occupancy remains bifurcated, as REIT portfolios average rates from 84% to roughly 93%, while private/CMBS assets lag at ~82% on average according to TractIQ’s Q3 Occupancy Report. REIT Portfolios Occupancy Trends NSA: 84.0% (end of Q4) CubeSmart: 88.6% SmartStop: 92.3% PSA: 91.0% Extra Space: 92.5% Supply headwinds are persistent yet moderating, with 2.5% of existing inventory under construction nationally, down 0.1% month-over-month. Demand Drivers & Demographic Trends Demand fundamentals have cooled materially. According to recent Census data, U.S. population growth slowed to just 0.5%, accounting for roughly 1.2 million people, from July 2024 to July 2025, reflecting the weakest pace since the pandemic. State-to-state migration hit a 12-year low of about 550,000 people, with Florida’s net inflows down 93% from 2022 peaks, and Texas, Georgia, and Arizona each off more than 50%. This migration reset explains the reasoning behind Sunbelt rents experiencing sharp negative rates, while Midwest and Northeast metros posted modest gains. Sunbelt vs Midwest & Northeast Year-Over-Year Rents Source: Yardi Matrix | As of Q4 2025 National home sales also remain subdued, with only 4.06 million existing homes sold in the last two years, in comparison to at least 5.3 million homes sold per year between 2016 and 2022. 2025: Year in Review Supply dynamics dominated 2025 performance. Early quarters showed continued deterioration from record-high deliveries in 2023 and 2024. However, Q4 delivered clear sequential improvement across the REIT cohort. Same-store revenue growth improved marginally: NSA posted -0.7% in Q4 (in comparison to -2.6% in Q3), CubeSmart -0.1%, SmartStop 0.4%, PSA -0.2%, and Extra Space 0.4%. Realized rents reflected the pressure with the national average settling at $16.27 per square foot. Institutional operators continue to command a significant pricing premium, with Public Storage reporting realized rents of $22.53 per square foot nationally, although exposure to weaker Sunbelt markets moderated overall portfolio performance. Private operators have experienced more pronounced operational challenges. Storable’s report focusing on the South indicates realized rental rates ranging between $12.80 and $13.50 per square foot, alongside more aggressive promotional activity including 1 to 1.5 months half-off concessions. Balance-sheet strength remained a bright spot across the sector in 2025. REIT leverage stayed conservative, averaging 4.2–4.8x net debt to EBITDA, with Public Storage at 4.2x and CubeSmart at 4.8x, while both maintained substantial liquidity positions ($2.4B at PSA and $1.2B at CubeSmart). SmartStop also benefited from geographic diversification, with its 49-store Canadian portfolio providing stability and consistent NOI growth. Overall, 2025 marked the sector’s trough as operating fundamentals began to stabilize. Occupancy gaps narrowed sequentially (NSA closed another 70 basis points in Q4), move-ins turned net positive in most markets, and advanced revenue management tools, including AI-driven pricing at CubeSmart and Public Storage, started to gain traction. H1 2026: Gradual Recovery with Regional Divergence The next six months point to continued stabilization and modest upside, supported by easing supply and early 2026 momentum signals. According to Yardi’s Q1 2026 Supply Forecast, national completions are expected to further decline, with the pace of new deliveries slowing most noticeably in previously overbuilt Sunbelt markets such as Atlanta, Tampa, Phoenix, and Orlando. The Radius+ 2026 Forecast reinforces this view, describing the current environment as a market “reset,” with moderating supply conditions expected to help stabilize rents and potentially return growth to positive territory by mid-year. REIT guidance reflects cautious optimism, with most operators expecting modest improvement as supply pressures ease. CubeSmart projects same-store revenue growth of 0.5% to 2.0% (midpoint +1.25%) and FFO of $2.52–$2.60 per share. National Storage Affiliates (NSA) guides Core FFO of $2.13–$2.25 per share, with the midpoint slightly lower due to refinancing and insurance pressures, while still projecting same-store revenue growth of roughly +0.9% at the midpoint. Public Storage (PSA) issued the most conservative outlook, guiding same-store revenue between -2.2% and 0.0%, citing lingering softness across certain Sunbelt markets, though management highlighted potential upside from its “PS 4.0” digital and AI-driven initiatives. SmartStop provided the strongest growth outlook, targeting 1% to 2.5% revenue and NOI growth alongside 5% to 8% FFO growth, supported by its expanding managed platform, now 221 third-party stores, as well as continued tailwinds from its Canadian portfolio. Rental activity trends should inflect positively in H1. Early improving move-in rates at Extra Space and NSA are starting to emerge, and national street rates are forecast to flatten or turn slightly positive by Q2 as concessions ease. Storable Pulse for the South shows discounts and move-in specials slowly decreasing. Transaction velocity in 2026 is also expected to exceed 2025 levels as the acquisition and disposition environment becomes more favorable and buyers gain greater clarity around rental rates and near-term operating performance.

Austin McLeod

Senior Vice President & Director

4/2/26

Multifamily Supply Paradox: When Oversupply Meets Undersupply

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

David Treadwell

First Vice President

3/17/26

The Rise of Small-Bay Industrial

The industrial sector has seen a significant change following the post-pandemic surge, which resulted in an oversupply of large-scale distribution centers that are 200,000 square feet or greater. Developers responded to the e-commerce boom and low interest rates, and added a record-breaking 1.8 billion square feet of industrial supply across the U.S. since 2020. The new additions outpaced demand as the pandemic slowed down, which led to climbing vacancy rates in the big-box segment. As the market struggled to absorb this massive influx of large product, developers and investors shifted their focus on small- to mid-sized industrial properties, specifically those ranging from 5,000 to 50,000 square feet. This smaller-scale, or “small-bay,” product remains incredibly tight, with a national vacancy rate near historical lows around 3% to 4%, demonstrating its resilience and importance to last-mile logistics, small businesses, and trade-focused users. The shift highlights a key trend in the evolving industrial sector. While large warehouse development slows, with a vacancy rate around 6%, the demand for smaller, flexible facilities is driving a building boom that reflects the diversity of activity across industrial. National Small-Bay Trends A variety of tenants are seeking properties between 5,000 to 50,000 square feet. The demand represents a move away from traditional heavy manufacturing toward specialized, knowledge-based services and high-tech operators. This user base includes local trade businesses—such as plumbers, electricians, and HVAC contractors—and small distributors focused on last-mile logistics who seek infill locations closer to their residential customer base. Additionally, these small- to mid-sized spaces are essential for the growth of modern tech firms. Startups in robotics, drone technology, and specialized R&D require flexible, functional space for prototyping, light assembly, and system testing without the massive footprint of a traditional factory. This newer user base often prefers shorter lease terms than the 10- to 15-year commitments of large distribution centers, allowing for the agility to scale operations quickly with buildouts as their technology matures. Across the country, the Sunbelt states, as well as markets with high population growth and limited supply, are experiencing the most acute demand and lowest availability. While urban centers like Los Angeles and New York’s outer boroughs remain tight, high-growth metros across the country, including Phoenix’s East Valley, Houston, Atlanta, and Central Florida, are seeing particularly low vacancy rates for this product type. The national availability for industrial spaces under 50,000 square feet is very tight at roughly 3.4%, which is well below big-box levels. Competition and Constrained Supply The structural scarcity and increased demand for industrial spaces under 50,000 square feet are hindered by construction costs. While overall industrial construction prices have stabilized from their pandemic peaks, the cost per square foot for smaller, multi-tenant industrial projects is higher than for large big-box distribution centers. Small industrial properties recorded an average sales price of $142 per square foot, increasing by 17% over the previous year. In contrast, large industrial projects averaged around $75 per square foot, a lower level that dropped by 4.2% in one year. This disparity is driven by factors like more extensive site work, complex utility infrastructure, a greater number of individual tenant build-outs, and increased costs for specialized labor. The expense of small-bay construction, coupled with high land costs in infill locations, creates significant barriers to entry for developers, limiting new supply and pushing a variety of highly-qualified tenants into further competition for the existing, limited inventory. San Francisco: Top Metro for Smaller Footprints The San Francisco Bay Area is a prime example of the high demand and scarcity driving the small-bay industrial market’s outperformance. The Bay Area is a prominent metro for its land limitations and consistent demand from high-value, specialized companies. These factors create an environment where the price per square foot and rental rates for the sub-50,000-square-foot segment have demonstrated greater stability and often faster growth than large-scale facilities, which have seen more volatility due to oversupply in other national markets. The essential need for local logistics, high-tech R&D support, and vital trade services means tenants are willing to pay a premium to secure space close to the metro’s talent and consumer base. Next-generation tenants are increasingly fueling this demand. While traditional logistics remain active, the region has seen an influx of AI and robotics firms securing smaller footprints for computer power and flex lab setups, often displacing traditional tenants. One example is the metro’s Peninsula submarket. Here, land is the most limited because it is home to several R&D, life sciences, and specialized tech operators, and the area often outpaces Silicon Valley in conversion activity. These users require older industrial stock that can be repurposed to meet high electrical power and specialized utility needs. Meanwhile, the Oakland/East Bay submarket provides a lower-cost option. Fueled by activity at the Port of Oakland and last-mile distribution requirements, small-bay facilities here are essential for fabrication, local logistics, and distribution that serve other locations across the metro. Further south, San Jose/Silicon Valley is seeing increased demand driven by advanced R&D and manufacturing support services, with data center growth also adding to these expansions. While new additions here are consuming significant industrial land for large, power-intensive facilities, the demand also creates a large domain of support and technical services that rely on flexible, smaller industrial spaces. Price per SF Rises Since Pandemic Metrowide, But Has Since Stabilized *up to 50,000 SF | Source: CoStar Group, Inc. A Foundation for the Future Economy The small-bay segment demonstrates the essential, high demand backbone of modern industrial. Unlike the large-format sector, which grappled with post-pandemic oversupply, the small-bay market is characterized by essential demand outpacing scarce supply. With a variety of tenants, from specialized R&D firms and high-tech startups to local contractors and last-mile logistics providers, their operations require proximity to urban centers. While new, Class A small-bay facilities command premium rents, the competition is increasingly driving smaller businesses to seek more affordable Class B and C industrial properties. This flight to quality underscores a core structural issue—the limited supply of small-bay facilities. Developers are beginning to explore solutions, like multi-story industrial construction in land-constrained urban markets. While this model is effective for maximizing floor space on a small footprint, its high construction cost means it can only deliver high-end, Class A product, which does not meet demand. The gap between this new, high-cost supply and the consistent need for affordable flex and Class B/C space suggests that the small-bay segment will remain the most increasingly sought-after industrial asset for the foreseeable future.

Belall Ahmed

Senior Associate

3/12/26

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.

Matthew Sundberg

Vice President & Associate Director

3/11/26

Tenant Radar: 10 Retailers Driving National Growth

Despite a wave of store closures at the beginning of 2025, retail recorded an absorption comeback in the second half of the year. The median timeframe to lease fell to under seven months, a historic low, with high-quality locations leasing in less than five months. Leasing volume throughout 2025 was dominated by smaller-format and in-line spaces, followed by properties over 25,000 square feet. This report highlights top tenants to watch through 2026. These tenants vary from small-format to large-format properties, and have demonstrated the ability to grow despite economic headwinds and maintain stability in order to best serve consumers. U.S. Retail Bounced Back in H2 2025 Source: CoStar Group, Inc. | 2020-Q4 2025 QTD Tracking QSR Developments Dutch Bros Originally from Oregon, Dutch Bros began operations in 1992. The popular coffee chain has since branched out to several states, including Florida, Georgia, Louisiana, South Carolina, Ohio, and Indiana. Now, Dutch Bros is growing in the Midwest and East Coast, expanding operations in Virginia, Missouri, and Illinois. Since 2019, Dutch Bros visits are up nearly 300%, partly due to its smaller starting footprint. The brand benefits from a broader rise of grab-and-go dining and short visits, which dominates U.S. food service behavior. The small-format, drive-thru focused model also matches consumer preferences for speed and convenience. This format aligns the most with Gen Z, which drives the majority of visits at Dutch Bros locations. Dutch Bros’ expansion goals include doubling its footprint by 2029, which would lead it to record 2,029 locations by that year—one of the most aggressive growth plans in the coffee sector. The chain also projects reaching $2.6 billion in revenue and $197.4 million in earnings by 2028. This plan would require 21.8% yearly revenue growth and a $140.2 million increase in earnings from the current $57.2 million. In order to achieve this momentum, Dutch Bros plans on growing its food offerings, focusing on mobile ordering, and launching consumer packaged goods to increase its appeal. Dutch Bros Records 270% Growth in Monthly Visits From 2019-2025 Source: Placer.ai | January 2019-October 2025 Raising Cane’s The popular fried chicken chain exceeded its goal of opening 100 stores in 2024 and opened 118 restaurants instead. Its top-performing locations have been Dallas-Fort Worth, Orlando, and Atlanta, with suburban strip centers and drive-thru sites recording the most traffic. High visits per revenue contribute to above-average restaurant profitability relative to many other fast casual and QSR concepts. Raising Cane’s recorded visits grew from about 189.5 million in 2019 to 490.3 million in 2024, almost double the foot traffic in five years. The chain also stands out from other competitors as a majority of locations are company-owned. When current leadership joined, about 25% of locations were franchised. Today, only about 3% are franchised, a rare structure in the QSR sector. As Raising Cane’s grows, its long-term goals include having over 1,600 restaurants across the U.S. New additions will be focused on New Jersey, Connecticut, Delaware, Ohio, Florida, Washington, D.C., and New York. To meet its goals, Raising Cane’s is prioritizing building restaurants in high-traffic areas, as well as developing more drive-thru sites. Other moves include growing its presence in stadiums, airports, and near college campuses. One example is its addition in Seattle’s University District, which is slated to open in early 2026 and will also be one of the chain’s first locations in Washington. Raising Cane’s Dominates Visits Within National Chicken QSRs Source: Placer.ai | YTD, January 2025 to November 2025 CAVA Since opening as a full-service Mediterranean restaurant in 2006, CAVA has become a QSR chain with 439 locations across 29 states. Its growth has been focused on adding sites in suburban markets, and increasing its drive-thru lanes and digital ordering to boost foot traffic. With this movement, CAVA is on track to reach its goal of at least 1,000 locations by 2032. CAVA acquired Zoës Kitchen in 2018 for $300 million to aid its growth plans. Conversions for the acquired locations began in 2020, and more than 250 sites were transformed. Other growth methods include the investment in AI-assisted prep and kitchen display systems to improve guests’ experiences and increase visits. CAVA has also added new menu options to grow consumer appeal, like the addition of grilled steak and chicken shawarma. With CAVA focusing its growth on suburban markets, its visitor demographics set the tenant up for success in its expansions. Since 2019, CAVA noted the median household income for its visitors decreased from around $120K to $95K in 2025. The decline demonstrates how the chain is increasingly targeting middle-income families in the suburbs. Additionally, CAVA’s focus on suburban areas has aided its operations to prioritize speed and convenience. The addition of drive-thrus in its suburban stores dropped its dwell time to 28 minutes in Q3 2025. This new dwell time is significant as it demonstrates CAVA’s ability to serve its customers that dine in, together with those that get their order to go. CAVA’s Dwell Time Reflects Efficiency and Suburban Prioritization Source: Placer.ai McDonald’s While the U.S. houses more than 13,000 McDonald’s locations, the chain plans to open 900 new restaurants by 2027. Its new additions will be focused on suburban and exurban areas that record population growth. The chain first announced its strategy for growth in 2020, with its focus on the three D’s: digital, delivery, and drive-thru. The digital growth method includes the implementation of the “MyMcDonald’s” mobile app. Customers will have the option to join a loyalty program and order food for pickup via MyMcDonald’s. The app will also aid the delivery segment of the chain’s growth plans as users can order food to their homes, and the company’s partnership with Uber Eats and DoorDash will create additional delivery options. With about 95% of its U.S. locations featuring a drive-thru, McDonald’s has begun testing new ways to make the ordering process more convenient at these sites. Enhancements to its drive-thru restaurants include a pickup lane for online orders. As pickup orders are separate from the regular lane, these formats reduce confusion and shorten wait times. The commitment to upgrading the physical format increases the value of the real estate by improving site efficiency, transaction capacity, and overall revenue potential per location. McDonald’s Annual Revenue Performance Source: Stock Analysis Grocers Aid Shopping Center Performance Sprouts In order to achieve its long-term goal of opening 1,400 locations nationwide, Sprouts recently grew its headquarters in Phoenix to aid its expansion efforts and also began adding stores across the metro. Apart from growing in its home state, Sprouts is targeting the Midwest and Northeast for expansions. New additions in both regions will be added in 2026 and 2027. As part of its expansion plan, Sprouts has focused on opening stores within 250 miles of a distribution center to create efficient supply chains. Locations near distribution centers lead to a quicker delivery, ensuring that the produce and goods are fresh for arrival at the store. In order to attract more customers, Sprouts is prioritizing new stores in areas with a high population density. The grocer also launched Sprouts Rewards in summer 2025—a loyalty program to maintain and expand its consumer base. The long-term goal of opening 1,400 stores creates substantial demand for new retail space, driving up property values and securing long-term leases for landlords in high population density areas where Sprouts is prioritizing its sites. Its real estate strategy of clustering new stores within 250 miles of a distribution center makes these specific locations more desirable and valuable to developers and investors. This focus on supply chain efficiency minimizes operational risks for the tenant, ensuring the store remains consistently profitable, which translates to stable rental income and a high-quality anchor tenant that increases foot traffic and value for surrounding retail properties. Aldi The discount grocer increasingly developed new locations across the country in recent years, due to its customer appeal for lower-priced goods and its acquisition methods. Aldi’s major acquisitions occurred in 2023 when it bought Southeastern Grocers, which included Winn-Dixie and Harveys Supermarket stores. All of the acquired locations are expected to be fully transformed to the Aldi brand by 2027. Together with the acquired stores, Aldi plans on opening more than 800 locations nationally by 2028. Its primary areas for growth are the Southeast, Northeast, and West Coast. Aldi has begun remodeling and updating its existing stores to improve customers’ experiences and reach its expansion goal. Updates across the grocer include expanding the product assortment, with a significant increase in fresh food options to meet evolving consumer demand. Between 2019 and 2024, while overall grocery foot traffic increased by 11%, Aldi’s surged by more than 51%, demonstrating rapid acceleration in consumer adoption. Through November 2025, its U.S. stores attracted 865 million visits, making it one of the most visited grocers nationally, despite only having around 2% of U.S. grocery market share. With double-digit growth in foot traffic, Aldi is a powerful anchor for shopping centers. For investors, its long-term NNN leases and corporate-owned models offer a stable, low management, and reliable income stream. Aldi Leads Discount Grocer Visits Source: Placer.ai | YTD, January 2025 to November 2025 Discount Chains Thrive on Consumer Demand Five Below Consumers have increased their visits to Five Below for its variety of lower-priced products, including toys, apparel, snacks, accessories, and more. As visits have risen, Five Below has shifted its long-term goal to opening 3,500 stores by 2030. The retailer is focusing its efforts on entering new markets like the Pacific Northwest, with eight locations across Washington and one in Oregon. To increase its product options, the retailer has implemented the “Five Beyond” concept across its stores. This method includes selling products priced between $5 and $10, including tech goods, clothing, and home decor. Five Below has also begun investing in building distribution centers across the country to aid its growth, with one of the newest facilities located in Buckeye, Arizona. With the high cost of goods, Five Below is set to benefit from consumers searching for lower-priced items. With customers attracted to Five Below for its value-driven and expansive product assortment, the tenant will continue to enhance the overall value and desirability of its respective shopping center. Five Below Sets Bold Goal: 3,500 Stores by 2030 Dollar General With more than 20,000 stores nationwide, Dollar General is one of the top-performing discount stores. About 20% of its total locations have been developed since 2020, with the chain adding around 900 stores each year. However, Dollar General decelerated growth in 2024, but rose again in 2025 with the addition of about 500 stores. Looking ahead, the chain plans on opening 575 stores in 2026. Part of Dollar General’s successful expansions can be attributed to its Project Elevate initiative. The movement involves remodeling around 2,250 existing locations to enhance merchandise and the store’s location, as well as fully remodeling about 2,000 sites. Dollar General has allocated over $1 billion in order to support its growth. Another new refinement method is same-day delivery. Dollar General is testing out this service across 75 locations and plans to expand it to thousands of its stores if results prove to be successful. Expansions have resulted in significant rent increases. Across new stores, rents rose by 15.05% in 2024, due to the remodeling initiative, persistent inflation, and the price to build. Dollar General stores on the West Coast recorded the greatest jump in rents, with rent averages of $190,125 in 2025. However, new stores will boost investor appeal by including 15-year NNN leases with 5% escalations every five years. Remodeling of 2,250 Stores Outpaces Dollar Tree’s Remodel of 2,000 Locations 7-Eleven’s New Look 7-Eleven is transforming its locations to become more modern, increasing consumer appeal. The remodeled sites will feature a larger product assortment and expanded food and beverage options, including in-store restaurants and seating areas, with the goal of enhancing customers’ experiences and boosting sales. With this movement in mind, 7-Eleven aims to open around 1,300 stores in North America by 2030, adding 200 locations per year. Another part of the goal will be the debut of 500 new food-focused stores opening between 2025 and 2027. These locations are dubbed “New Standard” stores, and will include features like increased fuel offerings and convenient digital payment methods for goods. New Standard stores will also feature a 7-Eleven branded QSR, like Laredo Taco, as well as freshly made grab-and-go offerings like breaded chicken salads and smoked turkey sandwiches, along with 7-Eleven’s famed egg sandwiches. The newly-opened stores with this format have already proved their success. In August, Seven & i Holdings Co. President and CEO Stephen Dacus said these new locations were bringing in 45% higher sales per store than the retailer’s traditional stores. As the revamped format continues to attract more customers, 7-Eleven will vacate around 1,000 of its stores built before 2000 in order to prioritize the growth of New Standard locations. An additional part of 7-Eleven’s growth plan is extending its reach to serve truck drivers across the country. Its first truck stops began operating in 2021, and current sites include over 392 Speedway locations and select 7-Eleven stores across 26 states, with plans to grow to over 500 locations. These properties will cater to logistics companies by offering fuel card programs like its Mastercard that will provide discounts for businesses to track fuel expenses, together with amenities for truck drivers. Revamped Models Feature Long-Term Leases with High Value The Expansion of Take 5 Oil Change Take 5 Oil Change has steadily risen in franchise ranking, climbing from No. 42 in 2022 to No. 27 in 2025 on Entrepreneur’s fastest-growing franchises list. The Louisiana-based firm has attracted consumers for its promise to fulfill a convenient drive-thru, five-minute oil change, which has led to more than 1,200 locations nationwide under its parent company, Driven Brands. Take 5’s growth began with its purchase of Fast Track Oil Change Centers in 2019, acquiring 27 stores. Now, Driven Brands has stated its goal is to double the number of Take 5 locations by early 2029. A significant portion of recent additions are developed by franchisees who have signed agreements for hundreds of new stores. Throughout 2025, several notable trends shaped the tenant’s performance and market positioning. Franchise brands reported a 2.3% decline in revenue, driven by a reduction in the weighted average royalty rate, while acquisition activity around Take 5 Oil Change sites remained strong. This activity was largely fueled by bonus depreciation, which continued to attract investors seeking accelerated first-year tax advantages. Pricing for these assets has held steady, with corporate-guaranteed leases trading around a 5.92% cap rate since early 2024 and franchisee-backed stores trading 30 to 35 basis points wider. Operationally, the tenant’s adjusted EBITDA margin fell by 85 basis points in Q3 2025 compared to the prior year, reflecting increased store-level expenses and the impact of ongoing growth initiatives. For investors navigating the automotive net lease sector, Take 5 offers a rare mix of stability, scalability, and upside. In a market that rewards clarity and fundamentals, few brands are moving as fast as Take 5. Its growth and proven model speak for themselves, and with strong credit, solid residual value, and market liquidity, these assets continue to stand out as prime investment opportunities. Take 5 Financial Overview Source: GuruFocus | Q3 2025 Revenue: $535.7M, up 6.6% YOY Free Cash Flow: $51.9M Same-Store Sales Growth: 3% overall. 19th consecutive quarter of growth Net New Stores: 167 over the last 12 months, including 39 additions in Q3 2025 Resilience and Progress: Retail’s Next Chapter The performance of these 10 national retailers underscores the resilience and strategic growth defining the retail sector. Despite a challenging start to 2025, the market rebounded strongly, demonstrating that consumer demand remains robust for convenience, value, and experience. From the aggressive drive-thru and digital-focused expansion of QSR chains, to the targeted new market focus of grocers like Sprouts and Aldi, a clear pattern emerges: the tenants driving national growth are those prioritizing adaptability, efficiency, and customers’ experiences. For investors, developers, and landlords, monitoring the footprints of these companies will be essential to capitalizing on the sector’s continued upward trajectory.

Daniel Gonzalez

First Vice President & Associate Director

3/6/26

What the Saks Bankruptcy Means for Retail

One of the biggest headlines for retail this year is Saks Global filing for Chapter 11 bankruptcy. The announcement not only notes the tenant’s struggle, but it is also a signal of the pressures currently impacting the luxury and discretionary sectors. Vacancies in the High-End Tier The fall of Saks Global, which recently absorbed Neiman Marcus, has sent shockwaves through the industry. The company is aggressively restructuring, closing nearly its entire off-price business, including Saks Off 5th and Last Call, and closing flagship full-line stores in markets like Boston and Phoenix. For the retail sector, this creates a vendor crisis. High-end brands that once relied on Saks and Neiman’s now have fewer door options. While some are migrating to Nordstrom or Bloomingdale’s, the luxury mall ecosystem is feeling the impacts. High-end landlords cannot easily replace a Saks with a standard retail tenant without fundamentally changing the mall’s prestige and tenant mix. The Impacts on Discretionary Brands Saks isn’t the only tenant that is in a vulnerable position so far this year. Several well-known tenants are currently noting a difficult financial situation. J. Crew Despite exiting a previous bankruptcy in 2020, the clothing retailer is struggling again. Analysts point to a failure to balance pricing with assortment in a market where consumers demand high value for their spending. Guitar Center and QVC Both tenants are recording difficulties with unsustainable capital structures. For QVC, the challenge is a race to transition from traditional TV shopping to digital and streaming platforms before their debt maturities come due. Drivers of Distress Several economic factors have pushed the retail sector toward a breaking point in 2026. The most important player is the consumer. While spending showed resilience through 2025, shoppers are hitting a wall as the weight of high housing costs and years of inflation erodes their purchasing power. This has made shoppers far less tolerant of price increases, leaving retailers with little room to protect their margins. Together with this consumer exhaustion is the refinancing wall that many distressed companies are now hitting. Retailers that failed to restructure their debt during the more favorable windows of 2025 are finding the 2026 credit market exceptionally cold, leaving at-risk entities with dwindling cash reserves to fund daily operations. This financial strain is further hindered by a shifting employment landscape. Analysts warn that the historical safety net of a strong job market is thinning, and as the labor market begins to soften, the last remaining pillar of support for discretionary spending is starting to give way. The Saks effect proves that even the most prestigious names aren’t immune to a financially stretched consumer and an unforgiving debt market. Moving further into the year, the retailers that survive will be those who can provide a reason to buy that outweighs the economic stress of the modern shopper.

Daniel Gonzalez

First Vice President & Associate Director

2/27/26

Waste Management Phoenix Open 2026: Impact on CRE

What is the Waste Management Phoenix Open? The Waste Management Phoenix Open is one of the most iconic events on the PGA Tour, held annually at TPC Scottsdale in Scottsdale, Arizona. The tournament is known for its fan-centric atmosphere, particularly at the famous 16th hole stadium, and draws some of the largest crowds in professional golf. The 2026 tournament is projected to host 500,000 attendees and generate an estimated $222.6 million in event spending. Beyond its status as a premier golf tournament, the Open has become a major economic engine for the Phoenix metro area, attracting visitors from across the country, supporting local businesses, and generating substantial activity across CRE property types. Visitor Spending and Economic Impact Out-of-state visitors accounted for approximately 114,000 attendees in 2025 and contribute significantly to net-new spending in the region. Historical data from the 2022 Arizona State University economic impact study found that the event generated nearly $454 million in total economic activity, including $276.8 million in state GDP contribution and supporting 4,290 jobs. The scale of this impact highlights how concentrated, short-duration events can drive outsized economic effects when supported by established infrastructure. Of that total, roughly $55.4 million was direct spending on event operations, including tents, equipment, food and beverage, signage, parking, security, and hotel accommodations for PGA Tour participants, media, and staff. In 2022, $220 million in indirect and induced economic activity amplified the effect of direct spending, demonstrating how the event reverberates through the Phoenix-area economy. Hospitality and Short-Term Rental Impact Hotels and short-term rental properties, including Airbnb, see some of the most immediate effects of the tournament. Scottsdale and nearby Phoenix experience near-full occupancy and elevated rates, especially for luxury and full-service hotels. These predictable spikes make the hospitality sector particularly attractive to investors who can capitalize on annual, high-demand periods. Based on previous data, it is estimated that $80–90 million in lodging revenue is generated during tournament week, with additional spending at local restaurants, bars, and retail outlets, amplifying the effect. This concentration of demand also contributes to incremental sales tax revenues, historically estimated at $17.6 million in 2022, distributed among Scottsdale, Maricopa County, and the State of Arizona. Operational Build-Out and CRE Demand In addition to visitor-driven spending, the operational footprint of the Open generates temporary demand for office, industrial, and logistics space, as the TPC Scottsdale build-out begins in October of the prior year and continues through tournament week. The event supports approximately 4,300 jobs, including construction, staging, logistics, and operations crews responsible for temporary structures, media installations, security infrastructure, and event facilities. Retailers and restaurants in Scottsdale’s entertainment corridors also benefit from the concentrated foot traffic, creating predictable short-term boosts in revenue that make the area attractive for commercial investment and seasonal leasing strategies. Key Takeaways Hospitality Demand: Hotels and short-term rentals near TPC Scottsdale will see near-full occupancy, with out-of-state visitors driving $80–90M in lodging revenue. Retail & Restaurant Boosts: Visitor spending fuels temporary spikes in local restaurants and retail, contributing to an overall $222M in direct event spending. Operational Demand: Tournament staging and media operations create short-term office, industrial, and logistics leasing opportunities. Predictable Annual Impact: Economic impact totals around $450M, demonstrating a predictable, consistent ripple effect across the Phoenix-area CRE ecosystem.

Phoenix, AZ Industrial Market Report Q4 2025

Industrial activity across Phoenix is beginning to stabilize, though elevated vacancy continues to weigh on near-term performance. A surge of supply delivered since early 2023 pushed vacancy to cyclical highs, but the pace of increase has recently ﬂattened as slowing completions align more closely with steady tenant demand. Vacancy reached 12.4% in Q4 2025, reﬂecting the outsized volume of large-format buildings across the metro. Despite softer conditions, demand remains positive with 4.4 million square feet absorbed in Q4 2025, driven by logistics, retail-oriented occupiers, and advanced manufacturing users. Rent growth has moderated amid heightened competition, favoring inﬁll and small-bay properties, while large-box assets face greater pressure. As construction slows, vacancy is expected to decline through 2026, aiding rent recovery. Key Findings Industrial performance is beginning to stabilize as tenant demand merges with slower deliveries; yet, vacancy remains high at 12.4% due to the increase in supply over the past three years. Nearly 90% of recent construction has targeted buildings larger than 100,000 SF, pushing vacancy in this segment to roughly 16% and creating ongoing pressure on rents. Phoenix recorded approximately 18.9 million SF of net absorption and $5.4 billion in industrial sales over the past 12 months, highlighting its importance in logistics and supply chains. Phoenix Industrial Supply & Demand Dynamics Source: CoStar Group, Inc. Phoenix Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.7% Current Population: 5,265,820 Households: 2,013,457 Median Household Income: $91,327 The metro is aided by population growth, favorable demographics, and a pro-business environment that continue to position the metro as one of the top Southwest markets. Migration from California has been a key driver, fueled by lower housing costs and business-friendly policies, alongside continued inﬂows from the Midwest seeking climate advantages and employment opportunities. Overall economic momentum remains strong, led by large-scale industrial and advanced manufacturing investment. TSMC’s expanding semiconductor campus, along with related packaging, R&D, and supplier projects, has reinforced Phoenix’s role in national supply chains. Top Phoenix Leases Source: CoStar Group, Inc. BroadRange Logistics Schneider Electric Metso Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Phoenix Industrial Construction Construction activity remains a crucial force in Phoenix’s industrial market, with one of the most aggressive development pipelines in the country continuing to pressure fundamentals. Over the past three years, nearly 87 million square feet has delivered, driving vacancy higher and slowing rent growth. An additional 17.7 million square feet is under construction, keeping near-term supply-side risk elevated. Development has been heavily concentrated in large-box facilities, particularly in submarkets like the West Valley and the Phoenix-Mesa Gateway Airport area. While deliveries have recently slowed, a renewed uptick in construction starts suggests supply will remain a headwind in the near term. SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc. Phoenix Industrial Sales Industrial sales remain robust across Phoenix. Approximately $5.4 billion in assets traded over the past 12 months, with momentum accelerating as year-to-date volume outpaced the prior year by roughly 40%, including more than $1.0 billion in Q4 2025 sales. The metro has evolved into a more institutional market, supported by modernized inventory and Phoenix’s growing role in national supply chains. Investor demand remains strongest for newly-built, stabilized logistics facilities pricing in the mid- to high-5% cap rate range, while inﬁll small- and mid-bay assets have also attracted capital due to their rent growth potential. Phoenix Industrial Sales Volume Source: CoStar Group, Inc. By the Numbers Q4 2025 | Source: CoStar Group, Inc. Sales Volume: $1B Price Per SF: $187 Cap Rate: 6.6% Vacancy Rate: 12.4% Rent Growth: 4.2% Asking Rent Per SF: $12.99 SF Under Construction: 17.7M SF Delivered: 5.7M SF Absorbed: 4.4M

Phoenix, AZ Multifamily Market Report Q3 2025

Phoenix’s multifamily market faced rent and vacancy pressures in Q3 2025, as the metro navigates a historic wave of construction keeping supply ahead of demand. The Valley recorded 4.6K units of absorption throughout the quarter with 17,000 absorbed over the past year, providing evidence that renter demand remains robust and well-supported by strong demographics, despite overwhelming supply. This imbalance, however, has fueled further rent declines, with average asking rents falling 2.8% year-over-year to $1,600 per unit, extending a two-year stretch of negative rent growth. As construction begins to moderate, the market appears to be approaching an inflection point. The combination of steady demand and slowing supply could potentially initiate a tightening in vacancies and gradual recovery in rent performance through 2026. Key Findings Absorption over the past year was more than double the pre-pandemic average. However, this picture of resilient demand in the metro is being overshadowed by a multi-decade high wave of construction, keeping vacancies elevated and rent growth negative. Phoenix’s share of under construction units, representing 4.9% of existing inventory, ranks the metro as the nation’s sixth most aggressively built apartment market. Despite vacancy and rent growth pressures, pricing resilience signals investor confidence in Phoenix’s long-term demand fundamentals, specifically the metro’s strong absorption and population growth. Phoenix Multifamily Supply & Demand Dynamics Source: CoStar Group, Inc. Phoenix Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.7% Current Population: 5,262,290 Households: 2,000,676 Median Household Income: $90,033 Phoenix named one of the top 10 best U.S. cities for corporate headquarters January 2025 | Source: Visit Phoenix Phoenix anchors the Southwestern U.S. as a high-growth economic hub characterized by strong population gains, business-friendly policies, and strategic access to California and Mexico. Maricopa County, home to 90% of the metro’s residents, consistently ranks among the nation’s fastest-growing areas, driving sustained housing demand. Industrial expansion continues to reshape the regional economy, led by TSMC’s $100 billion semiconductor investment and major logistics developments. Supporting this growth, Arizona State University (ASU), the nation’s largest public university, supplies a robust talent pipeline through its four campuses, including 56,600 students in Tempe, strengthening the region’s labor force and innovation ecosystem. Together, these dynamics underpin Phoenix’s expanding economic base and its strong fundamentals for multifamily housing demand. Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Phoenix Multifamily Construction Construction activity in Phoenix’s multifamily market remained elevated in Q3 2025, with 6.5K units delivered during the quarter and 22.1K units still under construction, equating to roughly 5% of existing inventory. Although this marks a 40% decline from the mid-2023 peak, the metro remains one of the nation’s most aggressively built apartment markets. The ongoing supply surge continues to outpace absorption, with 4.6K units absorbed and 6.5K units delivered in Q3 2025. Development remains concentrated in Downtown Phoenix and the fast-growing West Valley, where luxury high-rises and build-to-rent projects dominate new supply. A slowdown in new starts, however, signals a near-term easing of supply pressure, setting the stage for gradual market stabilization by 2026. Units Construction Starts Source: CoStar Group, Inc. Units Under Construction Source: CoStar Group, Inc. Phoenix Multifamily Sales Investment activity in Phoenix’s multifamily market gained moderate traction in Q3 2025, with $1.4 billion in assets trading hands as investors selectively re-entered the market, with deals largely concentrated in newly delivered assets. Pricing averaged $269,000 per unit, and cap rates held steady around 4.8%, with premier Class A properties in sought-after submarkets like North Scottsdale and Eastmark trading near or slightly below that threshold. Although overall transaction volume remains below pre-pandemic norms, the uptick in Q3 signals renewed confidence in Phoenix’s long-term fundamentals and the expectation that current pricing levels present attractive entry points for investors. Phoenix Multifamily Sales Volume Source: CoStar Group, Inc. By the Numbers Source: CoStar Group, Inc. Sales Volume: $1.4B Price Per Unit: $269K Cap Rate: 4.9% Vacancy Rate: 12.4% Rent Growth: (2.8%) Asking Rent Per Unit: $1.6K Under Construction: 22.1K units Delivered: 6.5K units Absorbed: 4.6K units

Building Culture and Growth: A Conversation with Duerk Brewer

On a recent episode of the AZ Big Podcast, hosts Michael Gossie and Amy Lindsey sat down with Duerk Brewer, Chief Operating Officer at Matthews™, to discuss how the company became the fastest-growing CRE brokerage in the country and what lessons from athletics can teach about business success. From the Mail Room to the C-Suite Brewer’s story is one of grit and perseverance. He began his career in 1999 in the mail room of Hendricks & Partners, a well-known Arizona real estate firm. What was meant to be a summer job turned into a 13-year journey that saw Brewer rise through the ranks to become a partner before the firm was acquired by Berkadia, a Berkshire Hathaway and Jefferies-backed company. “It was supposed to be temporary,” Brewer recalled. “But within weeks, I realized commercial real estate was a true meritocracy. Your success depends entirely on your effort and results.” That same entrepreneurial spirit is what drew Brewer to Matthews™, where he helped scale the firm from a startup to a national powerhouse with more than 30 offices and 1,000 agents across the U.S. The Matthews™ Difference: Technology, Culture, and Support Brewer attributes Matthews™’ rapid rise to three core pillars: technology, culture, and support. Founded in the digital age, Matthews™ was able to bypass legacy systems that hinder many long-established competitors. “We were built for today’s market,” Brewer explained. “Everything from data aggregation to client engagement is optimized for speed, transparency, and insight.” However, technology alone isn’t enough. “You can have the best tech and tools,” Brewer said, “but without the right culture, it won’t matter.” Founder and CEO Kyle Matthews prioritized creating an environment that attracts driven, entrepreneurial professionals. “That culture has a magnetic effect,” Brewer noted. “It’s what allows us to recruit, train, and retain top talent.” Support is the third leg of the stool. Matthews™ invests heavily in training, mentorship, and operational infrastructure to help agents focus on what really matters—building relationships and closing deals. “Our philosophy is to jumpstart careers by providing early and ongoing support,” Brewer said. Embracing AI and the Future of CRE Brewer sees artificial intelligence as the next major frontier in CRE. Matthews™ already integrates AI into underwriting, data extraction, and lead generation processes. “We underwrote over 20,000 buildings last year,” Brewer shared. “With AI, we can leverage that data faster and smarter than ever before.” By operating on a single shared CRM system, the company empowers agents nationwide with real-time insights into markets, clients, and opportunities. “That’s where AI becomes a game-changer,” Brewer said. “The next three years are going to completely transform how deals are sourced and executed.” Arizona’s CRE Landscape: Adapting Through Change Despite slower transaction velocity in recent years, Brewer is bullish on Arizona’s CRE market. Matthews™ opened its Phoenix office in May 2020, amid a pandemic and social unrest, and turned it into one of the company’s top-performing offices. “The market rewards those who keep investing and innovating,” Brewer said. “Even in muted conditions, opportunities exist. It’s about being proactive, not reactive.” He credits Phoenix’s strong fundamentals—population growth, economic diversification, and inbound migration—for driving long-term demand across the multifamily, retail, and industrial sectors. Brewer also pointed to TSMC’s $165 billion semiconductor investment as a major catalyst for industrial expansion and housing development. Lessons from the Track: Coaching and Leadership Outside the office, Brewer wears another hat as a high school cross country coach. Named Arizona’s Coach of the Year for girl’s cross country in 2024, he finds deep parallels between athletics and business. “Success in both comes down to discipline and consistency,” he said. “You have to get comfortable being uncomfortable.” Whether mentoring agents or student athletes, Brewer emphasizes servant leadership by empowering others to succeed through accountability, preparation, and mindset. “When people know you genuinely care about their growth,” he said, “they’ll go the extra mile—sometimes literally.” Looking Ahead Brewer predicts a rebound in CRE activity as interest rates begin to decline in late 2025. “Lower rates will bring sidelined investors and capital providers back into the market,” he said. “We’re preparing now to support clients through that resurgence.” As for his home base in Queen Creek, Brewer sees continued expansion fueled by family-friendly demographics and rising household incomes. “It’s incredible to watch this community evolve,” he said. “We’re not just seeing growth—we’re seeing transformation.”

Duerk Brewer

Chief Operating Officer

10/23/25

Phoenix, AZ Industrial Market Report Q3 2025

The Phoenix metro is aided by robust population growth, its strategic location, and industrial expansion. Major corporate expansions, such as Dutch Bros’ new headquarters in Tempe, highlight ongoing conﬁdence in the metro’s workforce. Industrial activity is growing, led by Taiwan Semiconductor Manufacturing Company’s $100 billion campus expansion. The metro continues to attract high-tech industries and plays a vital role in national supply chains, aided by proximity to California ports, major interstates, and the U.S.-Mexico border. Phoenix Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.7% Current Population: 5,262,479 Households: 2,000,754 Median Household Income: $90,040 Population, Labor, and Income Growth Source: CoStar Group, Inc. Key Findings Phoenix’s industrial market is beginning to stabilize after years of rapid expansion, with 14.3 million square feet absorbed over the past 12 months. Construction activity remains high with 23.1 million square feet underway. Most new developments are focused in the West Valley and Mesa Gateway submarkets. Investors are targeting newly-built logistics centers with stable yields in the mid- to high-5% range, signaling Phoenix’s continued transformation into an institutional-grade logistics hub. Market Performance The Phoenix industrial market is showing early signs of stabilization after a period of elevated vacancy driven by rapid construction. Vacancy was at 12.4% during Q3 2025, reﬂecting the lasting impact of the record supply wave that began in 2023. However, absorption remains positive, with 5.6 million square feet absorbed in Q3 2025 as logistics, retail, and advanced manufacturing tenants continue to expand. While rent growth has decreased to 4.7% annually from double-digit peaks in 2022, steady demand for modern distribution and manufacturing space, especially in smaller bay and inﬁll properties, supports market resilience. Moderating deliveries and persistent tenant interest are expected to gradually rebalance conditions by 2026, paving the way for renewed rent growth and tightening vacancies. Phoenix Industrial Supply & Demand Dynamics Source: CoStar Group, Inc. Phoenix Construction Phoenix’s industrial sector continues to note the impact of one of the most aggressive construction cycles in the U.S. Over the past three years, 92.1 million square feet of new industrial space has been delivered, which is more than the metro’s total output from 2007 to 2019. This record pace has elevated vacancies and slowed rent growth. 23.1 million square feet remain under construction as of the third quarter, half of which is speculative. Large-format facilities across the West Valley and the Phoenix-Mesa Gateway Airport area drive developments, where available land aids expansion. Around 17.5 million square feet has delivered within a ﬁve-mile radius of the airport since the start of 2023, and another 5 million square feet is underway. SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc. Sales Sales momentum remains highly active, with $1.6 billion in sales volume recorded in Q3 2025 and $5.6 billion traded over the past year. Despite lagging the record highs of 2021, transaction activity continues to accelerate, up 40% year-over-year through the ﬁrst three quarters of 2025. A surge of new, institutional-quality assets has transformed Phoenix into a premier logistics investment hub, attracting private equity and institutional buyers. Cap rates for stabilized assets now range in the mid- to high-5% range, reﬂecting improved yield stability. While elevated vacancies present challenges, strong buyer appetite for inﬁll, small-bay properties with rent growth potential underscores Phoenix’s long-term investment appeal. Sales Volume Source: CoStar Group, Inc.

Phoenix, AZ Retail Market Report Q3 2025

In Q3 2025, Phoenix’s retail market maintained solid fundamentals, with leasing activity supported by strong demographics and steady tenant demand. Availability edged up to 4.9% as bankruptcies from chains like 99 Cents Only and Joann freed big-box space, though much of it was quickly backfilled by off-price retailers, grocers, fitness operators, and experiential tenants. Smaller blocks under 5,000 SF remained the most competitive, particularly for quick-service restaurants, beverage shops, and wellness providers. On the rent side, annual growth slowed to 4.4%, down from above 7% in 2024, but still well above national levels. Landlords of high-quality centers retained pricing power, with multiple offers per space common and annual escalations standard. Looking forward, rent growth is expected to moderate further. Key Findings Phoenix retail remains strong, with vacancy holding at 4.7% as closures by national chains freed up space that was quickly absorbed by off-price, grocery, and experiential retailers. Construction activity is rising, with 2.4M SF underway, mostly preleased in high-growth suburbs like Buckeye and Queen Creek, limiting oversupply risk despite continued demand for new space. Sales volume surpassed $600M in Q3, led by grocery-anchored centers and single-tenant deals, reflecting confidence in Phoenix’s long-term demographic and consumption growth. Phoenix Retail Supply & Demand Dynamics Source: CoStar Group, Inc. Phoenix Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.7% Current Population: 5,260,019 Households: 1,999,742 Median Household Income: $89,948 Phoenix economy remained one of the nation’s fastest-growing, supported by strong in-migration, steady job creation, and a diverse business base. Population gains continued to fuel housing and consumer demand, while sectors such as technology, advanced manufacturing, and healthcare expanded their footprint in the region. Although construction activity has moderated compared to peak levels, Phoenix’s affordability relative to coastal markets and its pro-business climate kept both corporate relocations and investment interest elevated, reinforcing the metro’s role as a key growth hub in the Southwest. Population, Labor, & Income Growth Source: CoStar Group, Inc. Phoenix Retail Construction In Q3 2025, Phoenix’s retail construction pipeline remained modest, helping preserve tight market conditions. Builders delivered just 1.3 million SF in the past year, a sharp slowdown from the 2006–2008 peak of over 10 million SF annually. Currently, 2.4 million SF is underway, with less than one-third available, as most projects are preleased to anchors and shop tenants. Speculative big-box space is rare, and redevelopment of obsolete stock, including PV, Fiesta, and Metrocenter malls, is reducing availability further. Growth is concentrated on the metro’s periphery, especially Buckeye, Queen Creek, and Goodyear, where population gains support new centers like Verrado Marketplace and Buckeye Commons. SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc. Phoenix Retail Sales In Q3 2025, Phoenix retail investment activity accelerated, with $2.2 billion in sales over the past year, up from $1.7 billion in 2023. Transaction volume in early 2025 was more than 25% higher than the same period in 2024, showing renewed investor confidence. Cap rates for non-grocery anchored centers generally ranged 7%–8%, while grocery-anchored assets traded tighter, around the 6% band. Private investors remained active at the $1–$5 million level, frequently acquiring single-tenant triple-net assets like a Black Rock Coffee sold at a 5.7% cap. Looking ahead, maturing CMBS loans may bring more properties to market, though widespread distress remains unlikely. Phoenix Retail Sales Volume Source: CoStar Group, Inc. By the Numbers Source: CoStar Group, Inc. Sales Volume: $641M Price Per SF: $267 Cap Rate: 6.9% Vacancy Rate: 4.7% Rent Growth: 4.5% Asking Rent Per SF: $26.35 Under Construction: 2.4M SF Delivered: 441K SF Absorbed: 48.2K SF

2026 Hospitality Outlook

The post-pandemic recovery for U.S. hospitality is over. Moving into 2026, the hotel sector faces mounting financial and operational headwinds that are reshaping valuations, investment appetite, and overall market sentiment. Supply Overhang and Market Pressure There are around 117,000 hotels in the U.S., and with rate cuts prompting sales, estimates suggest that 5% of inventory could hit the market. That equates to nearly 5,850 new listings, a wave of supply that could further pressure values as buyers gain options. However, this does not account for the looming wall of maturing CMBS debt, which will bring additional forced sales. While transaction activity is already subdued, it is now constrained by the bid-ask spread. Owners face rising capital costs, brand-mandated Property Improvement Plans (PIPs), and refinancing hurdles, while buyers demand discounts to justify risk. Trophy assets still draw capital, but most deals are slowed, or stopped, by feasibility gaps. As such, the hotel sector recorded transaction volume over $5 billion at the end of Q2 2025, which is a drop from the $6 billion noted in the same quarter of 2024. Most deals this quarter were driven by the luxury tier. A standout deal for this timeframe occurred in Phoenix, with a 950-room luxury property transacting for $755 million as part of a two-property portfolio. The portfolio totaled $865 million and was purchased by Ryman Hospitality Properties. Macroeconomic Strain The labor market has decreased with 911,000 fewer jobs through the first half of 2025. Meanwhile, consumer credit card debt has surged to $1.21 trillion, with a $27 billion quarterly jump and a $16 billion spike in July 2025 alone. This highlights depleted household cash reserves, particularly among low- and middle-income households, which drive midscale and economy hotel demand. Consumer spending growth slowed to 3.7% in 2025, down from 5.7% in 2024, with signs pointing to weaker momentum ahead. Deloitte projects a 1.7% GDP contraction in 2026, effectively placing the U.S. on recession watch. For the hotel segment, this means fewer bookings, shorter stays, and lower spend per guest. Hotel Growth Cycle Stalls RevPAR grew only 0.4% through July 2025, the slowest pace since 2010. ADR edged up 1.1%, but real growth slowed as inflation eroded margins. Occupancy declined 0.7%, marking five consecutive months of weekday softness. The drops in performance can be attributed to weekday occupancy falling, as well as a slowdown in international visitors. Segment performance diverges sharply across the country. Economy hotels led the segment by recording a 5.2% RevPAR increase in July, followed by luxury hotels with 3% RevPAR growth. The increase in stays at economy hotels can be attributed to visitors seeking budget-friendly options, while group and corporate travelers aid the luxury tier. Debt and Distress: The Refinancing Wall The sector faces a $48 billion CMBS maturity wave in 2025–2026. Roughly $23 billion was refinanced during 2020–2022 at 3% to 4.5% rates, but borrowers now confront 6.25% to 7% debt costs, a 40% jump. Cash flow is being squeezed, and 39% of hotels with low DSCRs are already struggling. As of August 2025, hotel delinquency hit 7.29%, and debt yields are compressing, forcing sales. Together with escalating PIP compliance costs, many owners are being pushed to sell. Rising Defaults and Shifting Capital Stress is not confined to hotels. FHA serious delinquencies rose to 10.62%, with 15%–25% spikes in Florida and Georgia due to higher taxes and insurance. This signals deep consumer stress and reduces demand for owner/user hotel deals. Meanwhile, institutional players are quietly pivoting. Notably, groups like Peachtree, Vision HG, Spark GHC, ViaNova, and JDH are increasing exposure to multifamily, citing more stable 5%–10% annual rent escalations. Development Pipeline is Slower than Before The active construction pipeline has dropped to 136,000 rooms, the lowest in five years. Elevated borrowing costs—with SOFR 650–750 basis points on construction loans—are prohibitive for most developers. There are 58,000 rooms under construction for the 25 largest hotel markets, which accounts for 38% of the national total. Metros like Nashville, Miami, Phoenix, and Dallas are standouts with the greatest potential for supply growth. Additionally, most rooms in the development pipeline are in the limited service segment, accounting for about 70% of rooms under construction. This tier has taken over as it boasts lower operating and construction costs. Travelers have also begun to stay at these hotels more often due to their lower pricing, as well as their convenient locations in many metros. A Reset Year Ahead Moving forward, hospitality is expected to see a new change. Below are some of the main expectations for the sector. Transaction volume will rise, but it will most likely be driven by distressed sales as over-levered owners sell. The luxury and economy segments will continue to note the most activity, with corporate travelers aiding high-end demand and visitors on a budget seeking economy stays. International travel is expected to decrease, with inbound arrivals forecast to decrease by 9% at year-end. Liquidity, optionality, and disciplined underwriting will aid the top performers moving forward. For opportunistic investors, distressed hotel sales may offer compelling entry points; meanwhile, owners without dry powder may feel the pressure to sell.

Mitchell Glasson

First Vice President

10/1/25

No Anchor, No Problem: Unanchored Strip Center Report

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

Self-Storage Market Trends: Southeast Transaction Activity

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

Austin McLeod

Senior Vice President & Director

9/23/25

CRE Trends You Won’t See in the Data

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

Andrew Gross

Senior Managing Director

9/19/25

7-Eleven and Circle K Merger Fallout

The termination of merger negotiations between Alimentation Couche-Tard, the Canadian operator of Circle K, and Japan’s Seven & i Holdings, the parent company of 7-Eleven, represents one of the most significant developments in the global convenience retail sector in 2025. The proposed acquisition, valued at approximately $46–47 billion, would have created a combined network exceeding 100,000 stores worldwide, reshaping market concentration in North America and abroad. For CRE stakeholders, the collapse eliminates near-term disruption from consolidation, but also signals heightened volatility in corporate strategy. Why the Merger Fell Through At the heart of the breakdown was a lack of alignment between the two companies. Couche-Tard publicly stated that Seven & i withheld key information and failed to engage in meaningful discussions around integration, prompting the Canadian operator to walk away. Seven & i countered that it had acted in good faith but ultimately decided to pursue its own independent growth strategy. This divergence illustrates that even highly capitalized, multinational tenants are subject to abrupt strategic pivots. Regulatory hurdles further complicated the potential merger. Internal analyses identified more than 2,000 overlapping U.S. store locations that would have required divestiture to gain antitrust approval. Industry mapping data suggests the overlap may have been higher, with approximately 3,300 7-Eleven stores located within a five-minute drive of a Circle K. Markets such as Southern California, South Florida, Chicago, Atlanta, and Phoenix represented the greatest concentration of redundancy. If the transaction had proceeded, widespread asset sales, lease terminations, and operator transitions would have likely followed, impacting valuations and cap rates in multiple metros. Outcomes of the Fallout With merger negotiations now terminated, Seven & i Holdings and Alimentation Couche-Tard are pursuing divergent strategic paths. For Seven & i, which derives approximately half of its operating profit from North America, the priority is strengthening its U.S. operations as a standalone business. Analysts report that the company is actively exploring a U.S. initial public offering (IPO) of 7-Eleven’s domestic operations, a move designed to raise capital to support ambitious expansion plans, including the construction of 1,300 new stores over the next five years. In addition to funding growth, an IPO would provide investors and landlords with enhanced transparency into 7-Eleven’s North American financial performance, while supporting shareholder-focused initiatives like share buybacks. For Couche-Tard, the fallout offers an opportunity to recalibrate its growth strategy. Rather than pursuing large-scale global consolidation, the Canadian operator will likely emphasize smaller, targeted acquisitions in markets with fewer regulatory hurdles. Notably, owners of brands and store networks acquired by Circle K can expect a significant credit boost, as these acquisitions are typically financed with favorable terms and integrated into Circle K’s established operational and loyalty systems. This approach allows Couche-Tard to expand selectively while mitigating regulatory and financial risk. Expansion vs. Contraction: 7-Eleven’s Shifting Footprint Despite ambitious expansion announcements, 7-Eleven’s North American store count has been contracting in recent years. In October 2024, the company disclosed plans to shutter 444 underperforming stores, and in each of the past three fiscal years, closures have exceeded new openings. The company reported a net loss of 46 stores in FY2023, 45 in FY2024, and 159 in FY2025. Current projections indicate 125 planned openings against 345 closures in the coming fiscal year. The last period of meaningful net growth occurred in 2022, coinciding with the acquisition of nearly 4,000 Speedway locations. This reflects a shift in strategy: moving away from smaller, underperforming sites toward larger-format stores with enhanced foodservice offerings. Stores equipped with proprietary QSR brands—such as Laredo Taco Company, Raise the Roost, and Speedy Eats—deliver incremental attachment sales of $0.81 for every $1 spent in the restaurant component, according to CEO Stephen Dacus. With approximately 1,100 QSR-enabled stores currently in operation, 7-Eleven plans to nearly double that number to over 2,000 by 2030. Implications for CRE Owners From a CRE perspective, these strategies carry direct implications. Seven & i’s expansion and IPO activity signal both capital infusion and accelerated store rollout, potentially increasing lease demand in high-growth markets. Meanwhile, Circle K’s smaller acquisitions may create opportunities for property owners of acquired brands, as integration into Circle K’s network often brings enhanced creditworthiness and stronger tenant stability. Both companies’ focus on capital allocation, operational efficiency, and measured expansion underscores the importance for landlords to monitor corporate strategy, financial disclosures, and market announcements closely. At the same time, 7-Eleven’s ongoing closures highlight the need for landlords to evaluate individual store performance and competitive proximity. Locations with weaker sales volumes or declining foot traffic are more vulnerable to consolidation, particularly in markets where multiple 7-Eleven sites operate within close range. For owners, these are early indicators that a lease could be at risk. Conversely, well-positioned properties with strong traffic counts and room for larger-format conversions stand to benefit from the retailer’s pivot toward more profitable formats. Ultimately, while the failed merger removed one large-scale consolidation scenario, transformation in the convenience store sector continues to reshape lease dynamics, tenant credit profiles, and property valuations across North America. For CRE owners, active engagement and careful monitoring of corporate strategy, local store performance, and the overall macroeconomic environment remain essential to protecting and maximizing asset value. Top-Visited 7-Eleven Locations Nationwide Source: Placer.ai | Year to Date 7-Eleven Nationwide Metrics Source: Placer.ai | Year to Date Visits: 1.1B Average Visits/Location: 128.8K Locations Showing Visits: 8,637 Average Monthly Visits/Location: 15.3K Top-Visited Circle K Locations Nationwide Source: Placer.ai | Year to Date Circle K Nationwide Metrics Source: Placer.ai | Year to Date Visits: 1.5B Average Visits/Location: 230.2K Locations Showing Visits: 6,442 Average Monthly Visits/Location: 27.3K

Anthony Karimian

Associate

9/18/25

Hotel Labor Costs Rise

How Growing Labor Pricing Impacts Hotels Rising labor costs have emerged as a primary challenge for the U.S. hotel industry, putting pressure on profit margins. While top-line performance has been strong, the persistent increase in employee compensation, coupled with other operational expenses, has made it harder for hotels to translate revenue growth into equivalent bottom-line improvements. This trend is a complex issue driven by a variety of economic, social, and market-specific factors. Macroeconomic Landscape Impacts Labor Costs The American Hotel and Lodging Association estimated that hotels paid a record $123 billion in wages, salaries, and other compensation in 2024, which is a 20% increase from 2019. This substantial growth in labor costs is rooted in several key components. One large factor is ongoing labor shortages as the hospitality sector continues to face staffing challenges. Around two-thirds of hotels across the country reported persistent labor decreases at the end of 2024, with many being understaffed. The decline is a result of the pandemic when many employees left the sector, and it has been compounded by a high turnover rate. Hotel managers and owners are now increasing wages in order to attract employees back. Elevated inflation across the country has also impacted the hotel industry. With the rising cost of living, hotel employees and their unions have pushed for wage increases to maintain their purchasing power. This resulted in several strikes across the country by hotel workers last year, which led to significant pay raises across the sector. An additional contributor to increased costs is the resurgence of group and corporate travel. Although it has boosted revenue, it has also required the need for more employees. Full service hotels have seen a greater increase in the labor cost per available room, compared to limited-service hotels, as they require more employees to support on-site dining and catering. Impact on Hotel Profitability While U.S. hotel profits have grown in recent years, the increase has been limited by rising labor costs and other inflationary pressures. For example, hotel profits rose in 2024, but labor costs also grew by 11.2% year-over-year. This has led to a decline in gross operating profit, leading to difficulties for hoteliers to match the same level of profitability from before the pandemic. The increasing use of overtime and contract labor, which often comes at a higher cost than regular staff, is another factor contributing to the rise in labor costs. This is a common strategy for hotels trying to manage staffing shortages without over hiring full-time employees, but it comes with its own financial penalties. Main Markets Noting Increased Labor Costs The impact of rising labor costs is varied across the country. Certain metros and top-tier markets are experiencing more significant increases, due to a combination of high costs of living, strong union presence, and intense competition for talent. Specifically, markets in the Sunbelt recorded some of the highest increases in labor costs. San Diego and Phoenix were at the top for noting the greatest upticks, with both metros noting a rise of 33% in labor costs from 2019 to 2024. Los Angeles and Miami were also some among the largest increases, recording a jump of 29%. Upticks will most likely continue to occur in Los Angeles as the city’s legislation passed a law that will raise hotel employees’ minimum wage to $30 an hour by July 2028. While the return of demand has provided a revenue buffer, the rising movement of wages, benefits, and operational expenses are persistent headwinds. The trend is especially ongoing in major metros where labor competition is occurring, unions are strong, and the cost of living is high. For hoteliers, managing these costs will be critical for maintaining profitability and ensuring the long-term financial health of their properties.

Mitchell Glasson

First Vice President

9/18/25

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