Market Intel

Denver, CO Industrial Market Report Q1 2026

Focused Metrics 5K-200K SF | Industrial & Flex Properties Key Findings Capital Reengages as Transaction Volume Sharply Rebounds: Denver’s industrial market opened 2026 with a sharp rebound in transaction activity, as sales volume surged to $348.0M, up from $185.6M in Q1 2025, an approximately 88% year-over-year increase. This jump signals renewed conviction from both institutional and private capital, particularly in stabilized and upgraded vintage assets. Larger portfolio and institutional trades, such as Montbello Industrial Park and newly delivered product in Castle Rock, demonstrate that capital is not just returning but scaling back into the market. For investors, this indicates improving liquidity and narrowing bid-ask spreads. For owner/users sales, it suggests increasing competition ahead, as more inventory hits the market going into Q2. Rising Vacancy and Slower Leasing Reflect Market Rebalance: Vacancy increased from 8.1% to 9.1% year-over-year, reflecting continued supply-side pressure as recent deliveries outpace absorption. While this suggests the market is still absorbing excess inventory amid broader macroeconomic uncertainty, leasing dynamics offer additional insight into underlying trends. Months to lease increased from 5.3 months to 6.6 months and asking rents slightly declined from $11.65 PPSF to $11.41 PPSF. This combination signals a market where availability has expanded, giving tenants more leverage and extending decision timelines. While demand remains present, it is being expressed more selectively and at a slower pace. For landlords, this reinforces the need for competitive positioning through concessions, pricing, and building functionality. For tenants, the current environment presents one of the more favorable negotiating windows seen in recent years. An Active, But More Disciplined, Development Pipeline: Construction starts rose significantly to 774,867 SF, up from 454,995 SF this time last year, signaling renewed, yet selective, developer activity. At the same time, total space under construction declined slightly (1.65M SF to 1.57M SF), indicating deliveries are beginning to catch up with the pipeline. This points to a market transitioning out of its peak supply wave and into a more balanced phase. Importantly, much of the recent development has been concentrated in larger-format product, controversially demand remains strongest in smaller and mid-size assets. For investors, this moderation reduces long-term oversupply risk. For users, it suggests that while new product is delivering, functional space in core locations will remain competitive. Denver Industrial Sales Activity The Denver metro experienced a substantial rebound in sales activity to start the year, with volume increasing approximately 88% year-over-year. Notably, Q1 2026 also represents the highest first-quarter sales volume recorded since 2022, just before the interest rate hike began, reinforcing the significance of this recovery and signaling a meaningful return of capital to the market. This surge reflects improved pricing clarity and renewed engagement from both institutional and private buyers, particularly in larger transactions. The top five transactions, including the $47M Montbello Industrial Park portfolio, accounted for nearly half of total quarterly volume, highlighting a continued concentration of capital in scaled opportunities. The return of deal flow at this level suggests the market has moved beyond much of the pricing dislocation that defined early 2025, with buyers and sellers increasingly aligned on valuation expectations and willing to transact at current pricing levels. Sales Volume 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Pricing increased modestly by 3.2% year-over-year, demonstrating continued resilience despite broader capital markets volatility. This recent stability reinforces that well-located, functional industrial/flex assets continue to command premium valuations, particularly those offering the features most sought after by today’s tenants—including adequate power capacity, usable yard space, strong clear heights, and well-balanced office buildouts. This trend is especially evident among newer or recently renovated properties, as well as institutional-quality product. However, with more listings coming live in the Denver MSA than in previous years, increased supply is beginning to influence pricing dynamics heading into Q2, as more motivated sellers adjust expectations to meet the realities of today’s market. Sales Price Per SF 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Average time on market increased to 7.2 months, a significant 26% increase from this time last year, reflecting a more deliberate transaction environment. As new listings come to market, buyers and lenders have remained selective, with more upfront diligence, contributing to longer marketing periods. More notably, the current level represents a sharp reversal from the compressed marketing periods seen in the 2021–2022 cycle, where heightened liquidity and competition drove historically low exposure times. Average time on market has since trended upward in recent years and now reflect the longest average transaction timelines in over a decade. While sales volume has rebounded, extended timelines suggest underwriting discipline remains elevated. Given recent economic and geopolitical uncertainty, buyers and lenders are taking a more measured approach to diligence and pricing. Months on Market 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Denver Industrial Vacancy & Rents Vacancy climbed 100 basis points year-over-year from 8.1% to 9.1%, reflecting new supply deliveries and cautious tenant decision-making amid global economic headwinds. Looking beyond the year-over-year comparison, vacancy has been on a steady upward trajectory since its cyclical lows in 2021–2022. The current level places the market firmly in a post-peak absorption phase, where new deliveries have outpaced leasing velocity, especially for unit sizes over 50,000 SF. Beyond supply-side pressure, rising geopolitical uncertainty has added another layer of caution to tenant decision-making. Factors such as tariffs, trade tensions, and instability in the Middle East have increased risk aversion among occupiers, often leading them to delay expansions or relocations. Instead, many are opting to extend existing leases rather than committing to new space, in turn, contributing to slower absorption and sustained upward pressure on vacancy. Although vacancy remains elevated compared to recent cyclical lows, the rate of increase is beginning to slow, indicating the market may be stabilizing and gradually moving toward equilibrium rather than further imbalance. Leasing activity remains active; however, tenants are increasingly deliberate, taking more time evaluating multiple options and prioritizing flexibility in lease structures. As a result, vacancy trends should be monitored closely through 2026 as a leading indicator of when supply and demand fully rebalance. Vacancy Rate 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Rents softened by roughly 2% year-over-year, reflecting more competitive leasing conditions as elevated vacancy and increased availability have shifted greater leverage to tenants. This pullback follows a period of sustained rent growth that peaked between 2022 and 2023, when strong demand and limited availability pushed asking rents to cyclical highs. Since then, the market has shifted into a normalization phase, with recent declines reflecting a measured correction rather than a structural downturn, as rents remain elevated compared to pre-covid levels. This gradual softening indicates that landlords are increasingly prioritizing occupancy and tenant retention over continued rent growth, particularly in submarkets with higher availability. In response, many are renewing existing tenants, offering more competitive concessions, and investing in older assets to better compete with newer deliveries. Asking Rent Per SF 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Leasing timelines have surged to 6.6 months, up 24% year-over-year and nearly double where they stood in early 2024. This reflects a clear shift in market dynamics, with tenants taking more time to evaluate options as rising vacancy and softer asking rents enhance their negotiating position. Ongoing geopolitical and economic instability has reinforced this more cautious approach. Occupiers are placing greater emphasis on flexibility, cost efficiency, and building quality, leading to longer and more deliberate deal processes. While leasing activity remains active, the market has become increasingly tenant-driven, with more selective users pushing for stronger concessions and higher-quality space. Months to Lease 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Denver Industrial Construction Construction starts have increased meaningfully year-over-year, pointing to a pickup in activity, but one that remains measured and disciplined. Rather than returning to broad speculative development, the pipeline has shifted toward more targeted projects. New starts are increasingly focused on pre-leased assets, build-to-suit opportunities, and select submarkets with proven absorption. Developers are approaching capital deployment more cautiously, prioritizing deals with clearer leasing visibility and defined exit strategies. At the same time, many middle-market groups are turning to pre-engineered metal buildings (PEMB) to shorten construction timelines and better control costs. This evolution suggests that while development activity is gaining momentum, it is doing so in a more intentional and demand-driven way, helping reduce the likelihood of another wave of speculative oversupply. SF Construction Starts 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Current activity marks a clear departure from the 2021–2023 development peak, transitioning into a more controlled and steady level of supply. Over the past 18 months, the volume of space under construction has stabilized as developers prioritize capital preservation and adopt more disciplined pre-development criteria. This has resulted in a greater emphasis on leasing velocity while navigating elevated financing, material, and labor costs. This stabilization in construction volume reflects a broader shift toward a more measured, supply-conscious approach, reducing the risk of imbalance by favoring targeted, demand-driven projects over large-scale speculative development. SF Under Construction 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc.

Spencer Mason

Vice President

5/11/26

Denver, CO Retail Market Report Q1 2026

Denver’s retail market remains tight in early 2026, supported by low availability, limited construction, and steady consumer demand, though momentum has softened. Net absorption, while improving in the second half of 2025, remains negative at about -200K SF annually due to earlier big-box closures and retailer bankruptcies. Availability holds at 4.8%, below historical averages, as minimal new supply offsets vacancies. Leasing activity is strongest in suburban, convenience-oriented centers, particularly grocery-anchored and quick-service retail, while urban mixed-use nodes continue to attract tenants. Investment activity has shifted toward smaller, single-tenant deals, with cap rates rising into the mid-6% range. While fundamentals remain stable, slowing population and job growth may weigh on demand in the near term. Key Findings Denver’s retail market remains tight in Q1 2026, with vacancy at 4.4% and limited new construction, though negative net absorption reflects lingering impacts from recent big-box closures and bankruptcies. Construction activity continues to decline, with just 646K SF underway and minimal new starts, as high costs and financing challenges keep development subdued and reinforce long-term supply constraints. Investment activity totaled $362 million in Q1, driven primarily by private buyers targeting smaller net-leased assets, while rising cap rates and pricing gaps continue to limit larger transactions. Denver Retail Supply & Demand Dynamics Source: CoStar Group, Inc. Denver Demographics Source: CoStar Group, Inc. Unemployment Rate: 4.0% Current Population: 3,087,340 Households: 1,286,840 Median Household Income: $111,856 Denver’s economy in Q1 2026 reflects a transition from the rapid expansion of the prior decade to a more moderate growth phase. Denver remains a critical economic hub for the Rocky Mountain region, supported by its central location and connectivity through Denver International Airport, one of North America’s busiest airports and a major contributor to regional output. The metro continues to benefit from a highly educated workforce, with nearly half of residents holding a bachelor’s degree or higher, and a diversified industry base spanning technology, aerospace, financial services, and energy. However, elevated costs of living and doing business have tempered momentum, contributing to slower population growth and a relative decline in national job and GDP rankings. Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Denver Retail Construction Denver’s retail construction pipeline remains constrained in Q1 2026, reinforcing some of the tightest supply conditions seen in over a decade. Only 645,779 square feet is currently under construction, representing just 0.6% of total inventory and continuing a downward trend from recent quarters. Elevated construction costs, tighter lending standards, and prolonged permitting timelines continue to limit new development, while the long-term impact of e-commerce has kept developer sentiment cautious. Development activity is largely concentrated in small, freestanding build-to-suit projects, particularly for quick-service restaurants and convenience-oriented retail in suburban growth corridors. With that, ongoing retail demolition tied to multifamily redevelopment is further constraining supply, suggesting limited relief coming for tenants seeking new space. SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc. Denver Retail Sales Denver’s retail investment market remained active in Q1 2026, with quarterly sales volume totaling $362 million, generally in line with recent quarterly averages. Over the past year, total transaction volume reached approximately $1.4 billion, signaling a steady recovery following the post-2021 slowdown. Investment activity continues to be driven primarily by private buyers, who accounted for roughly 60% of transactions, with a strong preference for single-tenant net-leased assets under $5 million. These investors, often leveraging all-cash or 1031 exchange strategies, remain less sensitive to higher borrowing costs. Cap rates have trended upward since 2022 and now average in the mid-6% range, though pricing varies widely. Larger, value-add deals remain limited, as pricing gaps and elevated financing costs continue to constrain activity. Denver Retail Sales Volume Source: CoStar Group, Inc. By the Numbers Q1 2026 | Source: CoStar Group, Inc. Sales Volume: $362M Price Per SF: $272 Cap Rate: 6.7% Vacancy Rate: 4.4% Rent Growth: 3.0% Asking Rent Per SF: $27.57 SF Under Construction: 646K SF Delivered: 41K SF Absorbed: (207K)

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

Colorado Springs Industrial 2025 Year End Summary

Key Findings Buyer Demand Is Back — Sales Volume Surged More Than 50%: 2025 marked a clear re-acceleration in buyer demand across the Colorado Springs industrial and flex market. Sales volume jumped 50.8% year-over-year, rising from $114.5 million in 2024 to $172.6 million in 2025, with momentum building steadily through the year and closing with a very strong second and fourth quarter. Buyers that remained on the sidelines in 2023 and 2024 are now actively re-entering the market. Rents Are Rising While Vacancy Remains Tight — A Landlord-Favorable Setup: Colorado Springs continues to rank among the most balanced industrial markets on the Front Range. Vacancy held steady at just 5.2% while asking rents increased 6.7% year-over-year, reaching record highs in Q4, underscoring the market’s ability to support rent growth without signs of stress. As macroeconomic conditions have begun to stabilize and interest rate expectations have become clearer, tenants that delayed expansion or relocation decisions in prior years have started to move forward. Development Is Disciplined — No Oversupply Risk on the Horizon: Colorado Springs has avoided the oversupply challenges seen in several Front Range markets by maintaining a disciplined development environment. While under-construction inventory dipped marginally in 2025, construction has remained elevated over the past five years, driven largely by pre-leased and build-to-suit activity as of late. This approach has helped align new supply with tenant demand and preserve market balance heading into 2026. Focused Metrics 5K-200K SF | Industrial & Flex Properties Colorado Springs Industrial Sales Activity Sales activity in the Colorado Springs industrial and flex market showed meaningful acceleration in 2025, driven by renewed buyer confidence and improved market clarity. Total annual sales volume reached $172.6 million, up from $114.5 million in 2024, representing a significant 50.8% year-over-year increase. While Q1 activity was essentially f lat year-over-year, sales volume increased sharply in Q2 and remained elevated throughout the balance of the year with a strong Q4 close. This improvement reflects greater confidence among investors and owner-users as pricing expectations stabilized, interest rate volatility moderated, and long-term fundamentals in Colorado Springs—such as sustained population growth, a strong defense presence, and limited industrial land availability—continued to support demand. As uncertainty eased, buyers that delayed acquisitions in prior years re-entered the market, driving higher transaction activity and positioning Colorado Springs for continued sales momentum heading into 2026. Colorado Springs Industrial Sales Volume 5K-200K SF | Industrial & Flex | Source: CoStar Group, Inc. Sale pricing in 2025 reflected a recalibration phase rather than a true correction. The quarterly average sale price finished the year at $148 per SF, up from $134 per SF in 2024, representing a 10.4% year-over-year increase. While pricing softened modestly through mid-year, Q4 rebounded strongly at $169 per SF, signaling renewed competition for well-located, functional product. Pricing behavior in 2025 reflected an ongoing adjustment process rather than a steady upward trajectory. Sale prices fluctuated quarter to quarter as buyers and sellers responded to shifting market conditions, variations in deal composition, and asset-specific fundamentals. The rebound in Q4 demonstrates that well-located, functional industrial product continues to attract competitive pricing, even as the broader market works through pricing alignment. This suggests that Colorado Springs continues to benefit from strong user demand and limited availability of high-quality inventory in the 5,000–200,000 SF range. Sales Price Per SF 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Time on market trended higher in 2025, averaging 6.6 months, up from 5.5 months in 2024, reflecting a 20% year-over-year increase. As market conditions strengthened, sellers became less pressured to transact quickly and were more willing to test pricing, while buyers navigated more rigorous underwriting and diligence upfront along with growing inventory of available opportunities. This dynamic led to longer exposure periods, even as demand remained healthy and overall deal activity accelerated. Despite a significant increase in the annual average compared to 2024, the trend showed a clear downward trajectory as the year progressed, suggesting months on market will continue to stabilize in 2026. Months on Market 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Colorado Springs Industrial Vacancy & Rents Vacancy in the Colorado Springs industrial and flex market for buildings between 5,000-200,000 SF remained well-controlled in 2025, averaging 5.2%, unchanged from 2024. While vacancy ticked up slightly in the second half of the year, levels remained comfortably below historical measures and several hundred basis points below many peer Front Range markets such as Denver that had an average vacancy rate of 8.6% in 2025. Smaller-bay units under 20,000 square feet continued to outperform the broader market, with vacancy averaging just 3.7% for the year, underscoring sustained demand and limited new supply. This stability reflects a balanced supply pipeline and steady absorption from local users, defense contractors, and advanced manufacturing tenants. The consistency in vacancy also suggests that recent construction has been well-absorbed and that speculative development remains disciplined. Colorado Springs Industrial Vacancy Rate 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Asking rents continued their upward trajectory in 2025, finishing the year with a quarterly average of $11.73 per SF, up from $10.99 per SF in 2024, representing a 6.7% year-over-year increase. Rents climbed steadily throughout the year, peaking in Q4 at $12.34 per SF, a new record high. Despite broader economic headwinds, rent growth highlights the strength of tenant demand for modern industrial and flex space and the limited availability of high-quality inventory. The ability for landlords to push rents in a stable vacancy environment reinforces the market’s long-term fundamentals. Asking Rent Per SF 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Leasing velocity improved modestly in 2025, with average time to lease declining to 4.8 months, compared to 5.0 months in 2024. After a slower summer leasing season, Q4 rebounded sharply with the fastest quarterly leasing average of the past two years at just 3.4 months. This improvement reflects growing urgency and confidence as companies resumed growth strategies that had been delayed by macroeconomic uncertainty in prior quarters. The strong year-end leasing pace suggests healthy absorption momentum entering 2026. Months to Lease 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Colorado Springs Industrial Construction Development activity remained strong in 2025, with total construction starts reaching 494,462 SF, nearly matching 2024’s pipeline. The majority of activity occurred in Q2 with 234,322 SF breaking ground, followed by a stronger Q4 with over 252,000 SF in new construction starts. Importantly, the bulk of these construction starts were concentrated in larger, big-box industrial projects, as development economics continue to favor scale. While financing costs have moderated from their 2023–2024 peaks as capital markets loosened, borrowing rates remain elevated relative to pre-pandemic norms. Combined with higher land, labor, and material costs, this has made it difficult for developers to pencil speculative industrial and flex buildings under 20,000 SF, further constraining new supply in the small-bay segment. SF Construction Starts 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Projects under construction averaged 462,005 SF per quarter in 2025, down slightly from 517,381 SF in 2024. While the pipeline expanded late in the year, overall construction levels remain disciplined and well-aligned with tenant demand. The controlled pace of new supply, combined with stable vacancy and rising rents, suggests that Colorado Springs remains one of the more balanced and resilient industrial markets along the Front Range. Developers appear focused on measured growth rather than speculative expansion, reinforcing the market’s long-term stability. SF Under Construction 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. 2025 Buyer & Seller Composition 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Sales by Buyer Origin 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc.

Spencer Mason

Vice President

2/9/26

Denver, CO Industrial 2025 Year End Summary

Key Findings Transaction Activity Rebounds Strongly: Total sales volume reached $1.48 billion in 2025, up 7.6% from 2024, with Q4 marking the strongest quarterly performance in three years. While Q1 reflected a slow start, pent-up demand and improved pricing clarity fueled accelerated activity throughout the year, signaling a return of transactional momentum and increased market confidence heading into 2026. Vacancy Remains Elevated, Small-Bay Units Outperform: Average vacancy climbed to 8.63% in 2025, a decade high, driven by COVID-era oversupply and cautious tenant leasing. Smaller-bay units under 20,000 square feet continued to outperform, maintaining near 5% vacancy, over 300 basis points below the broader market, highlighting strong and resilient demand for this segment. Development Activity Remains Cautious Despite More Starts: New construction starts rose 74.9% year-over-year, but total under-construction inventory fell 40% compared to 2024. Elevated construction costs and limited speculative development have concentrated new projects in pre-leased or build-to-suit opportunities, suggesting that future development will remain deliberate, well-capitalized, and demand-driven. Focused Metrics 5K-200K SF | Industrial & Flex Properties Denver Industrial Sales Activity Q4 2025 marked the strongest quarterly sales volume over the past three years within the private sector, underscoring a decisive close to the year and reinforcing the return of transactional momentum in Denver’s industrial market. While Q1 reflected a muted start amid lingering uncertainty, activity accelerated meaningfully as the year progressed. For example, Q2 delivered a sharp 79.3% year-over-year increase, representing the most pronounced quarterly rebound of the year and signaling the release of pent-up demand. This acceleration was driven by improving pricing clarity and a growing willingness among sellers to adjust expectations, allowing existing on-market inventory to transact. Total annual sales volume reached $1.48 billion in 2025, up from $1.38 billion in 2024, reflecting a 7.6% increase year over year. Looking ahead, the strong finish to 2025 has materially improved sentiment entering 2026. Market participants are increasingly optimistic, with greater confidence that values have stabilized and downside risk has moderated. As a result, landlords who have been on the sidelines waiting for stability are electing to bring assets to market, buyer pools are deepening, and softened pricing continues to support liquidity. These conditions collectively point toward a more active and constructive transaction environment in the coming year. Denver Industrial Sales Volume 5K-200K SF | Industrial & Flex | Source: CoStar Group, Inc. Pricing trends in 2025 underscore a clear shift from the volatility seen in 2024 to a more stable market environment, with quarterly price-per-square-foot movements remaining within a much tighter range than in the prior year. With that said, each quarter recorded year-over-year pricing declines, with the most significant adjustment occurring in Q3, when average pricing fell 23.6% from the same period in 2024, marking the pricing trough for the year. Quarterly movement in 2025 was notably restrained. Prices declined modestly from Q1 to Q3 before rebounding in Q4, suggesting that buyer resistance likely emerged once pricing reached a perceived floor. This Q4 stabilization coincided with the strongest sales volume of the year, underscoring a correlation between pricing certainty and transaction velocity. The consistent pricing in 2025 indicates that the market is transitioning from repricing to normalization, allowing capital to deploy with greater confidence. Sales Price Per SF 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Months on market continued to lengthen in 2025, averaging 6.38 months, reflecting a significant 26.3% increase from 2024. Marketing timelines peaked in the fourth quarter at 7.60 months, an 18.8% increase from Q3, and a new decade high. This extended exposure period highlights a more cautious buyer environment, as purchasers apply more conservative underwriting standards and exhibit heightened risk aversion amid ongoing economic and capital market uncertainty. Deals are getting done, as evident with increased sales volume, but only after rigorous underwriting and further diligence upfront. Months on Market 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Denver Industrial Vacancy & Rents Vacancy in 2025 climbed steadily to an average rate of 8.63%, a notable 18.5% increase over last year. While the 9.00% recorded in Q4 2025 represents a modest 1.1% quarterly rise, it establishes now as the highest quarterly vacancy level seen in the past decade. This elevated level reflects a combination of oversupply stemming from the COVID-era development cycle and sustained caution in tenant leasing decisions. While vacancy is expected to moderate in 2026, it is likely to remain elevated relative to historical norms. Smaller-bay unit sizes under 20,000 square feet however continue to significantly outperform, with vacancy near 5% for 2025—over 300 basis points below the broader market—supported by a limited supply pipeline and a diversified tenant base. These factors reinforce the resilience of small-bay industrial properties as one of the most stable and in-demand segments of the market. Denver Industrial Vacancy Rate 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Average asking rents softened modestly in 2025, declining 3.4% from the prior year to $11.53 per square foot. Despite this annual decrease, rents remained relatively stable quarter-over-quarter, with minimal fluctuation throughout the year, an indication that owners largely resisted aggressive rate reductions even as vacancy continued to rise. While overall absorption has been tempered by lingering oversupply and fewer tenant relocation or expansion plans, landlords have focused on maintaining headline rents and have relied more on concessions to keep spaces occupied. Extended rent abatement periods, larger tenant improvement allowances, and flexible deal structures have become common tools to attract tenants, suggesting that occupancy—rather than rent growth—will be the primary driver in gradually bringing vacancy back toward normalized levels. Tenant reactions to rising labor and operating costs will be important indicators to watch for in 2026 as well. Asking Rent Per SF 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Leasing timelines lengthened meaningfully in 2025, with average months to lease increasing to 5.45 months on average for the year, a dramatic 28.8% increase from 2024. As vacancy remains elevated, tenants benefit from a wider range of available options, allowing for greater selectivity and prolonged negotiations. From Q2 to Q4 2025, months to lease rose sharply, increasing 18% over just three quarters. This environment continues to pressure owners to differentiate their assets through competitive pricing, enhanced concessions, and increased broker incentives. With tenants holding more leverage in a market with ample availability, lease negotiations are increasingly driven by tenant priorities, requiring owners to offer creative concessions to minimize turnover and maintain occupancy. Months to Lease 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Denver Industrial Construction New construction starts in 2025 totaled 365,157 square feet, marking a 74.9% increase over 2024. The year began strong, with Q1 leading the gains, while activity slowed in Q4, consistent with trends from the prior year. Despite the notable year-over-year growth, overall starts remained well below historical levels observed over the past decade, reflecting a still-cautious development environment. SF Construction Starts 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Even with an increase in new construction starts in 2025, overall square footage under construction declined by 40% compared to 2024, averaging only 1.45 million square feet per quarter for the year. Elevated construction costs—driven by labor constraints, material pricing, and financing, along with tempered tenant demand—have continued to limit speculative development, with most new starts focused on pre-leased or build-to-suit projects. This disciplined approach reflects careful capital deployment by developers. Given the ongoing imbalance between supply and demand and persistently high construction costs, the development pipeline is expected to remain moderate, with future projects increasingly intentional, well-capitalized, and driven by confirmed tenant demand. SF Under Construction 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. 2025 Buyer & Seller Composition 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Sales by Buyer Origin 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc.

Spencer Mason

Vice President

2/9/26

Denver, CO Retail Market Report Q4 2025

Leasing activity in Denver’s retail market strengthened in Q4 2025 as tenant demand shifted toward smaller, convenience-oriented formats and newer space in growth corridors. General retail and strip centers led leasing momentum, reflected in the lowest vacancy rates at 2.2% and 5.4%, respectively, as tenants prioritized flexible layouts and visibility. Neighborhood and power centers also remained healthy, supported by grocery anchors and daily-needs retailers. Rent growth persisted across most formats, though gains moderated as higher operating costs tempered landlord leverage. Malls remained bifurcated, posting the highest vacancy at 6.4% but commanding the market’s highest asking rents at $37.42/SF. Overall, limited new supply and low availability continued to support rents, particularly for well-located suburban assets, while leasing conditions for older, less adaptable space remained more challenging. Key Findings Retail sales totaled $435 million with cap rates averaging 6.7%, driven by small, single-tenant net-leased deals, while larger, value-add transactions remained limited amid higher financing costs. Average asking rents reached $27.08/SF, up 2.4% annually. Suburban, convenience-oriented retail continues to outperform, while downtown storefronts face elevated vacancy. Demolitions for multifamily redevelopment and scarcity of new space continue to reinforce tight vacancy at 4.2% and 331K SF absorbed. Denver Retail Supply & Demand Dynamics Source: CoStar Group, Inc. Denver Demographics Source: CoStar Group, Inc. Unemployment Rate: 4.8% Current Population: 3,079,085 Households: 1,289,802 Median Household Income: $108,516 Denver remains a key economic hub for the Rocky Mountain region, supported by a diversified employment base spanning technology, aerospace, advanced manufacturing, financial services, and energy. The metro is home to approximately 3.08 million residents across nearly 1.29 million households, providing a deep and stable consumer base for retail activity. Household spending power is elevated, with a median household income of $108,516, well above the national average, supporting demand for both necessity-based and experiential retail. While population growth has moderated from the rapid pace of the 2010s, Denver continues to attract a younger, highly educated workforce, supporting long-term household formation and income growth. Slower near-term growth presents headwinds, but strong income levels, a diversified economy, and favorable demographics underpin Denver’s long-term retail fundamentals. Population, Labor, & Income Growth Source: CoStar Group, Inc. Denver Retail Construction Retail construction in Denver remains exceptionally limited, reinforcing tight market conditions. Only 680,000 SF, or 0.4% of inventory, is currently under development, well below the pre-pandemic annual average of 1.2 million SF. Less than 10% of space under construction is available for lease, signaling minimal near-term supply growth. New projects are largely small, freestanding, convenience-oriented properties in high-growth suburban areas, catering to quick-service restaurants and pad sites, while large-format retail is increasingly rare. Ongoing retail demolitions, often tied to multifamily redevelopment, have further reduced inventory. Elevated construction costs, tighter financing, and permitting delays are expected to keep development constrained, maintaining limited supply pressure. SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc. Denver Retail Sales Denver’s retail investment market totaled $1.3 billion in the past year, slightly below the 10-year average of $1.4 billion, reflecting steady recovery after record volatility in 2022. High interest rates have shifted activity toward small private investors, who dominated roughly 65% of transactions and typically target single-tenant, net-leased deals under $5 million. Cap rates in this tier average mid-5% but vary widely based on tenant credit, lease term, and property quality. Larger deals remain limited, focusing on value-add opportunities with higher cap rates. Price expectations and elevated debt costs are expected to keep deal flow moderate, particularly for institutional-scale assets. Denver Retail Sales Volume Source: CoStar Group, Inc. By the Numbers Source: CoStar Group, Inc. Sales Volume: $435M Price Per SF: $270 Cap Rate: 6.7% Vacancy Rate: 4.2% Rent Growth: 2.4% Asking Rent Per SF: $27.08 Under Construction: 679K SF Delivered: 21.5K SF Absorbed: 331K SF

The Rising Tide of Hotel Delinquency

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

Mabelle Perez

Vice President

12/12/25

Denver, CO Multifamily Market Report Q3 2025

Denver’s multifamily market is absorbing the final stages of an unprecedented supply surge, keeping vacancy elevated at 11.7% despite stronger demand. The market recorded 8,900 units of annual absorption, well above pre-pandemic norms, but this momentum continues to lag the 13,000 new units delivered, fueling widespread concessions and heightened renter mobility. Luxury product accounts for most new supply and demand, while middle-market properties face softening absorption as renters move up the quality spectrum. Rents are down 3.8% year-over-year, with the sharpest declines in construction-heavy submarkets. Although 12,000 units remain underway, construction starts have fallen sharply, signaling supply relief ahead and positioning the market for improving occupancy and rent performance beginning in late 2025. Key Findings Vacancy sits at 11.7% as deliveries outpace demand, with 12,867 units still underway. Meaningful relief is expected beginning in late 2025 as construction starts have plummeted. Absorption reached 1,700 units, boosted by aggressive concessions across all asset classes. Renters continue to chase incentives, resulting in -3.8% annual rent growth and broad softness in middle-tier product. Sales volume reached $835M with private buyers dominating activity. Pricing averages $310K per unit, and cap rates have expanded to 5.3% as higher borrowing costs restrain transaction velocity. Denver Multifamily Supply & Demand Dynamics Source: CoStar Group, Inc. Denver Demographics Source: CoStar Group, Inc. Unemployment Rate: 4.8% Current Population: 3,076,128 Households: 1,287,584 Median Household Income: $108,047 Denver’s economy remains diverse and talent-rich, but growth has cooled from its peak. Population gains have slowed to 0.8% as higher living costs curb migration, though the market still benefits from a young, highly educated workforce. Multifamily remains the largest real estate sector, with development shifting toward suburban areas due to new affordability requirements in the city. Industrial activity is anchored by the airport but increasingly dispersed, while retail expands at a slower pace. Office faces the strongest challenges as return-to-office lags and leasing softens. Despite near-term headwinds, Denver’s industry mix and skilled labor pool support its long-term outlook. Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Denver Multifamily Construction Denver’s multifamily pipeline remains a defining market factor in Q3 2025, though activity has cooled significantly from its peak. About 12,000 units are still underway, down sharply from the 2023 high of nearly 32,000, as financing challenges, rising costs, permitting delays, and new affordability requirements curb new starts. Developers continue to focus on RiNo and transit-oriented corridors, but a wave of deliveries, 16,000 units over the past year, has intensified competition and driven widespread concessions. With construction starts at decade lows, supply pressure is expected to ease in 2025, though a large backlog of shovel-ready sites could accelerate building once conditions improve. Units Construction Starts Source: CoStar Group, Inc. Units Under Construction Source: CoStar Group, Inc. Denver Multifamily Sales Denver’s multifamily investment market showed steadier footing in Q3 2025 after two years of volatility, with quarterly volume holding near $900 million, still about 30% below pre-pandemic norms. Institutional buyers have reemerged, particularly in suburban value-add opportunities, while Downtown has lost momentum amid elevated vacancies. Cap rates have expanded roughly 50–70 basis points from 2021–22 lows, ranging from the mid-4% to low-5% for large assets and averaging in the high-5% range for smaller Class B deals. The buyer pool remains dominated by private investors pursuing lower-priced properties. While activity is expected to remain muted near term, slowing construction could bolster rent growth and draw more capital ahead. Denver Multifamily Sales Volume Source: CoStar Group, Inc. By the Numbers Q3 2025 | Source: CoStar Group, Inc. Sales Volume: $835M Price Per Unit: $310K Cap Rate: 5.3% Vacancy Rate: 11.7% Rent Growth: (3.8%) Asking Rent Per Unit: $1,816 Under Construction: 12,867 units Delivered: 3.2K units Absorbed: 1.7K units

Denver, CO Industrial Market Report Q3 2025

Key Findings Denver Industrial Market Demonstrates Strength Despite Volatility: Although quarterly sales volume totals have remained somewhat volatile, Q3 2025 posted the strongest third-quarter performance since Q3 2022, shortly after the interest rate hike cycle began. Historically, third quarters tend to be among the slowest periods of the year; however, this uptick compared to recent years indicates renewed confidence among buyers looking to deploy capital back into the Denver industrial market. Average sale price per square foot has eased from the recent peak earlier this year but still remains comfortably above pre-COVID benchmarks. Despite headwinds from both local and broader economic conditions, the Denver industrial sector continues to outperform most other asset classes, demonstrating notable resilience and sustained investor interest. Extended Time on Market Reflects Shifting Dynamics in Sales and Leasing: Time on market for both sales and leasing has continued to rise quarter-over-quarter. On the sales side, extended listing periods are largely driven by unrealistic pricing expectations and ongoing challenges in securing financing, which remain key obstacles for many investors. Leasing activity has also slowed, with longer downtime between deals as more tenants opt to renew existing leases rather than pursue larger or additional spaces amid economic uncertainty. In response, landlords have become increasingly creative with concessions— offering incentives such as higher tenant improvement allowances, longer rent abatement periods, and other flexible terms to attract and retain tenants. Asking Rents Taper as Vacancy Reaches Decade High: Asking rents have cooled from their recent peak in Q2 2024 as vacancy rates continue climbing, now reaching a decade high of 8.9%. Although new construction has slowed significantly, many companies remain hesitant to relocate or expand unless absolutely necessary amid unpredictable market conditions. Elevated debt levels, persistent trade tensions from tariffs, and recent federal government shutdowns have all contributed to a more cautious business environment. As a result, companies are adopting increasingly conservative expansion strategies until greater clarity emerges across both the micro and macroeconomic landscapes. Denver Metro Demographics Source: CoStar Group, Inc. Households: 1,286,778 Current Population: 3,074,957 Median Household Income: $107, 841 Denver International Airport ranks as the third-busiest airport in North America, generating over $47B annually. Source: CoStar Group, Inc. Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Focused Metrics 5K-200K SF | Industrial & Flex Properties Denver Industrial Sales Activity Denver’s industrial sales volume reached $274.8 million in Q3 2025, marking a 1.1% year-over-year increase yet a 42.0% decrease from Q2 2025. The slowdown in sales volume highlights a cautious investment environment, as buyers navigate persistently high borrowing costs and ongoing macroeconomic uncertainty, ranging from elevated debt levels and trade tensions to recent government shutdowns. Although this represents a notable decline from the previous quarter, market sentiment remains cautiously optimistic. Volume is expected to rebound in the coming quarters, supported by early signs of stabilization driven by recent rate cuts and the prospect of additional easing anticipated in 2026. Sale price per square foot averaged $153 in Q3 2025, representing a 9.5% decrease from the same period last year, however a modest 0.7% increase quarter-over-quarter from Q2 2025. Despite quarterly fluctuations, average pricing remains consistently above pre-COVID historical levels. This indicates that while broader macroeconomic factors have exerted some pressure on pricing, deal composition continues to play a significant role in driving quarterly variations. Average months on market rose to 6.4 in Q3 2025, up 10.3% from the prior quarter and 28.0% above levels recorded a year ago. Sales transactions continue to take longer to close from increased buyer scrutiny amid ongoing market volatility and unrealistic seller pricing expectations. The extended timelines highlight a more deliberate pace of deal-making as participants navigate shifting economic conditions. Denver Industrial Sales Volume & Price Per SF 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Focused Metrics 5K-200K SF | Industrial & Flex Properties Denver Industrial Vacancy & Rents Denver’s industrial vacancy reached 8.9% in Q3 2025, up 4.7% quarter-over-quarter and 21.9% year-over-year, marking the highest level in the past decade. The increase reflects a shift towards more disciplined business growth strategies, as ongoing trade disputes, tariffs, and recent federal government shutdowns have added additional uncertainties to the economic landscape. Companies are opting to renew leases more frequently as they carefully evaluate the risks and costs associated with relocation. This trend reflects a broader focus on stability and adaptability, with many organizations preferring to delay major real estate decisions until market conditions become clearer. With that said, smaller unit sizes continue to outperform. Units between 5,000 – 20,000 SF for example recorded vacancy rates of 5.1%, 370 basis points lower than the general average. Vacancy Rate Source: CoStar Group, Inc. Asking rents averaged $11.49 per square foot in Q3 2025, reflecting a moderate 0.4% increase from the prior quarter but a 2.5% decline year-over-year. Rents have eased steadily since peaking in Q2 2024, as vacancies have risen from tempered tenant demand and a wave of new supply from the past decade. This increase has prompted landlords to employ more creative concession strategies to gain new interest and sustain occupancy levels. These include higher tenant improvement allowances, longer rent abatement periods, and enhanced incentives for tenant representation brokers. Asking Rent Per SF Source: CoStar Group, Inc. Months to lease rose to 5.7 in Q3 2025, a 21.3% increase from the prior quarter and 26.7% higher than a year ago. The longer timelines reflect a softening in tenant urgency to commit to new industrial or flex space, as market unknowns and prolonged trade disruptions have encouraged many to renew existing leases rather than expand or relocate. With availability on the rise, tenants have gained greater leverage in site selection and lease negotiations, contributing to more deliberate decision-making across the market. Focused Metrics 5K-200K SF | Industrial & Flex Properties Denver Industrial Construction Construction activity in Denver’s industrial market substantially eased through Q3 2025, continuing the city’s trend toward smaller-scale, demand-driven development. Projects under construction totaled 1.33 million square feet, marking a 40.5% year-over-year and 7.3% quarter-over-quarter decline, as developers remain cautious amid softer tenant demand and elevated construction financing/material costs. Despite the broader slowdown, new construction starts climbed to 534,523 square feet for the quarter, marking a 70.3% increase from Q2 and a 202.5% jump year-over-year. This growth is driven primarily by a shift in demand toward build-to-suit and preleased projects rather than speculative developments. Additionally, new construction is increasingly being demised into smaller units to better align with market demand—10 of the 17 projects currently underway are under 200,000 square feet. This trend highlights Denver’s resilient base of small and mid-sized businesses, as smaller unit sizes appeal to a broader and more active tenant pool. SF Under Construction Source: CoStar Group, Inc. SF Construction Starts Source: CoStar Group, Inc.

Spencer Mason

Vice President

11/20/25

Colorado Springs, CO Industrial Market Report Q3 2025

Key Findings Leasing Velocity Slows as Tenants Take Longer to Commit: Leasing activity has noticeably slowed, with average months to lease rising to 6.6 in Q3 2025, the highest level in two years. This compares to 5.1 months in Q3 2024 and 5.5 months in Q2 2025, reflecting less appetite for companies to relocate or expand due to a more cautious approach amid economic uncertainty and increased competition among landlords to secure commitments. Rents Reach New Heights Amid Slower Leasing Activity: Average asking rents rose to $12.02/SF in Q3 2025, marking a new record and up from $11.15/SF from the same period last year. This growth comes despite vacancy rates increasing and slowing leasing activity, indicating that landlords remain confident in the market’s long-term fundamentals. A limited pipeline of new construction has also helped keep additional supply in check relative to continued healthy demand. Market Still Attracting Local Capital: Local investors and owner-users accounted for four of the five significant industrial sales in Q3 2025, reflecting sustained local confidence in the sector. This strong local activity contrasts with national buyers, who are taking a more selective approach amid tighter capital conditions. The trend suggests that while national capital remains active, local stakeholders continue to see value and opportunity in the market, helping to sustain transaction activity and support pricing stability. Colorado Springs Demographics Source: CoStar Group, Inc. Households: 318,213 Current Population: 783,067 Median Household Income: $95,666 Information Technology (IT) company, ITS, LLC, has expanded to Colorado Springs, creating 500 new aerospace and defense jobs. July 2025 | Source: Colorado Governor’s Office Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Focused Metrics 5K-200K SF | Industrial & Flex Properties Colorado Springs Industrial Sales Activity The Colorado Springs industrial market recorded $31.51 million in total sales volume during Q3 2025, for properties in the 5K-200K SF range. This marks a 14.9% year-over-year increase from $27.43 million in Q3 2024 but a notable 56.3% decline from the $72.16 million posted in Q2 2025. Despite the quarter-over-quarter slowdown, the yearover-year gain underscores a healthier long-term trajectory for the market. This modest growth has likely been supported by emerging expectations of greater market stability heading into year-end and in 2026. Average sale price settled at $120 per square foot in Q3, down 5.5% from the prior quarter and 7.7% below levels recorded a year ago. The $180 per square foot average spike seen in Q1 2025 illustrates how standout properties can still drive pricing well above the norm. This volatility puts an emphasis on the continued influence of deal composition on quarterly pricing trends, rather than a simple reflection of market conditions. Average time on market improved to 6.2 months in Q3 2025, down 15.1% from Q2 but still 31.9% higher than the same period a year ago. This extended listing duration suggests a more selective and deliberate buyer pool, indicative of a market recalibrating rather than waning demand. However, the recent quarter’s faster turnover points to improving transaction velocity as pricing expectations between buyers and sellers continue to realign, signaling a potential acceleration in market activity. Q3 2025 reflected a period of realignment in Colorado Springs’ industrial sales landscape, defined by selective dealmaking, moderated pricing, and early signs of renewed market confidence. Colorado Springs Industrial Sales Volume & Price Per SF 5K-200K SF | Industrial & Flex Properties | Source: CoStar Group, Inc. Focused Metrics 5K-200K SF | Industrial & Flex Properties Colorado Springs Industrial Vacancy & Rents Colorado Springs’ industrial vacancy ticked up to 5.1% in Q3 2025, marking a 15.9% quarter-over-quarter increase from 4.4% in Q2 but a 3.8% year-over-year decline from 5.3% in Q3 2024. This modest rise signals a temporary cooling period as many businesses continue to delay expansion, or relocation plans amid broader economic uncertainty. Vacancy in Colorado Springs is well below both Denver and nationwide averages. The market’s low construction pipeline and consistent population growth are two of the main drivers behind its lower vacancies. While urgency has softened, underlying tenant demand remains intact, suggesting that the current uptick in vacancy is more reflective of cautious sentiment than structural weakness. Once macroeconomic conditions stabilize, the market appears well-positioned for a measured rebound. Vacancy Rate Source: CoStar Group, Inc. Average asking rents climbed to $12.02 per square foot in Q3 2025, up 4.3% quarter-over-quarter and 8.0% year-over-year, marking a new record high and underscoring the sector’s resilient fundamentals. Landlords have maintained confidence despite lengthier lease-up times, as limited availability of high-quality space and a restrained construction pipeline continue to support pricing strength. The steady rise in rents, even as vacancy edges higher, highlights sustained occupier interest and disciplined development activity that keeps supply pressures in check. Asking Rent Per SF Source: CoStar Group, Inc. Time-to-lease extended to 6.6 months in Q3 2025, increasing 20.0% from Q2 and 29.4% year-over-year. Although this represents a clear slowdown from previous quarters, current leasing durations remain within historical terms. The longer timelines reflect more deliberate decision-making rather than waning demand, as tenants weigh moving costs carefully in an evolving economic climate. Focused Metrics 5K-200K SF | Industrial & Flex Properties Colorado Springs Industrial Construction Construction activity in Colorado Springs’ industrial market slowed notably through Q3 2025, extending the region’s ongoing pattern of restrained development. Projects under construction totaled 381,613 square feet, reflecting a 21.3% year-over-year and 16.9% quarter-over-quarter decline, as developers continue to adopt a measured approach amid shifting market dynamics. Construction starts dropped significantly to a mere 7,250 square feet, down 91.5% from the same quarter last year and 96.6% from Q2, signaling a near standstill in new project initiations. Recent activity indicates a halt in new developments compared to prior quarters, as developers remain cautious, carefully evaluating market conditions before proceeding with new projects. Developers are increasingly focusing on build-to-suit and pre-leased projects, moving away from speculative builds that were more common in previous cycles. SF Under Construction Source: CoStar Group, Inc. SF Construction Starts Source: CoStar Group, Inc.

Spencer Mason

Vice President

11/7/25

Denver, CO Retail Market Report Q3 2025

Denver’s retail market remained resilient in Q3 2025, supported by strong tenant demand and minimal new supply. Average asking rents reached a record $27.00 per square foot, rising 3.1% year-over-year, with neighborhood and strip centers posting the strongest gains. Leasing conditions were tight, with availability near 4.8%, well below the long-term average. Demand was led by quick-service restaurants, fitness users, and experiential retailers, particularly in commuter corridors and mixed-use developments. However, larger power centers and downtown spaces continued to face leasing challenges. Despite modest rent growth relative to historically low vacancy, Denver’s retail sector remains stable, driven by healthy consumer spending, an evolving tenant base, and limited new construction that continues to balance market fundamentals. Key Findings Retail investment volume reached $1.3 billion over the past year, with a 6.6% average cap rate, as private buyers dominated single-tenant transactions under $5 million. Retail fundamentals remain solid, with vacancy at 4.4% and steady rent growth supported by healthy consumer demand and active leasing from national and experiential tenants. Roughly 600,000 square feet of new projects are underway, primarily single-tenant and mixed-use sites, signaling selective expansion aligned with evolving retailer strategies. Denver Retail Supply & Demand Dynamics Source: CoStar Group, Inc. Denver Demographics Source: CoStar Group, Inc. Unemployment Rate: 4.8% Current Population: 3.07M Households: 1,286,632 Median Household Income: $107,804 Denver, Colorado’s largest metro with 3.07 million residents, remains a key economic hub supported by its central location and Denver International Airport, which drives over $47 billion annually. While its diverse economy and highly educated workforce underpin long-term strength, growth has slowed due to high costs and weaker migration. Population gains have eased to 0.8% annually, and office demand remains soft amid slow return-to-office trends. Multifamily leads development, while industrial expansion continues near the airport. Despite near-term challenges, Denver’s talent base and diversified industries position it for steady long-term stability. Population, Labor, & Income Growth Source: CoStar Group, Inc. Denver Retail Construction About 600,000 square feet of retail space is under construction in Denver, accounting for just 0.4% of total inventory. Developers have shifted away from large retail projects toward smaller build-to-suits and mixed-use ground-floor spaces, with national tenants like Raising Cane’s and Dutch Bros Coffee leading expansion. Over the past decade, retail inventory grew 4.6% while industrial surged 22%, reflecting e-commerce’s influence. Meanwhile, over 2.2 million square feet of retail has been demolished, offsetting new supply. Population growth and strong retail sales highlight a market focused on efficiency and redevelopment, with projects increasingly incorporating multifamily elements to adapt to evolving consumer and urban trends. SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc. Denver Retail Sales Retail investment in Denver totaled $1.3 billion over the past year, slightly below the 10-year average, as activity stabilized following sharp declines in 2022. In today’s high interest rate environment, smaller private investors dominate, targeting single-tenant, net-leased assets under $5 million, often using all-cash or 1031 exchanges. Roughly 65% of deals involved private buyers, with cap rates averaging in the mid-5% range but varying by tenant credit and lease term. Larger transactions were limited, focused on value-add opportunities like the $20.4 million sale of Summer Valley Shopping Center. Looking ahead, pricing gaps and elevated borrowing costs are expected to temper deal flow and valuations. Denver Retail Sales Volume Source: CoStar Group, Inc. By the Numbers Source: CoStar Group, Inc. Sales Volume: $1.3B Price Per SF: $275 Cap Rate: 6.6% Vacancy Rate: 4.4% Rent Growth: 3.5% Asking Rent Per SF: $27.14 Under Construction: 611K SF Delivered: 137K SF Absorbed: 85.7K SF

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.

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

Q225 | Industrial Market Report | Denver, CO

Q225 Denver Industrial Market Report Market Overview By the Numbers All Properties | Q2 2025 | Industrial + Flex Properties | Source: CoStar Group, Inc. Sales Volume: $589,897,680 Number of Properties Sold: 119 (Up by 36 from Q1 2025) Average Sale Price Per SF: $160 Vacancy Rate: 8.50% Rent Growth: -0.3% Rent Per SF: $11.47 Under Construction (SF): 5,473,157 Construction Starts (SF): 609,678 Net Absorption (SF): -1,041,179 Key Highlights 5,000-200,000 SF | Industrial + Flex Properties 1. Massive Spike in Sales Volume In Q2 2025, the Denver market experienced a massive spike in sales volume, reaching $452.2 million—an impressive 73.63% increase year-over-year and 144.20% increase quarter-over-quarter. This surge reﬂects signiﬁcant market momentum, driven by strategic pricing adjustments and sellers becoming more responsive to current market conditions. As sellers met buyer expectations, transaction volume grew substantially compared to Q1’s modest $185.2 million, marking a strong upward trend in overall market activity. 2. Rent Growth Bottoming Out Asking rents have remained relatively steady, with a slight year-over-year decrease of 4.12% and a marginal decline from $12.48/SF in Q1 to $12.32/SF in Q2—still above the ﬁve-year average of $11.88. Rent growth has eﬀectively stalled, dipping to -0.3% in Q2 compared to 0.4% in Q1, well below the ﬁve-year average of 4.4%. This suggests that Denver may approach the bottom of the rent cycle. That being said, there’s growing optimism that rental growth could strengthen in the second half of the year as the construction pipeline continues to taper. 3. Vacancy Starting to Plateau Vacancy rates have continued to rise year-over-year, increasing by 20% and reaching 8.4% in Q2 2025—well above the ﬁve-year average of 6.40%. However, the pace of increase has slowed compared to previous quarters, suggesting that vacancy may be approaching a plateau. With Q1 at 8.0% and only a modest uptick in Q2, the market appears to be stabilizing. Looking ahead, vacancy is forecasted to level oﬀ in the second half of the year as supply and demand continue to rebalance. Focused Metrics | 5,000-200,000 SF | Industrial & Flex Properties Transaction Volume | 2025 vs 2024 Source: CoStar Group, Inc. Q2 2025 Q2 2024 Sales Volume $452,230,680 $260,462,577 Sales Price Per SF $156 $168 Sales Volume & Sales Price Per SF Source: CoStar Group, Inc. Sales Activity Although the metro recorded a slowdown in sales to start the year, transactions signiﬁcantly picked up in the second quarter with a total $452 million in deal volume. A ﬁve-property portfolio accounted for the highest trade this quarter at $153 million. The ﬁve properties are part of the Mile High Business Center in the Cent E I-70/Montbello submarket. In total, the transaction was made up of 1.2 million square feet, with a sale price of $129.67 per square foot. It was sold by Clarion Partners to Principal Real Estate Investors. Private capital and institutional buyers aided transaction volume throughout the past year, accounting for 51% and 24% of sales, respectively. In the second quarter, private capital recorded a total $90 million in sales volume. The majority of investments from the private sector were for properties under 50,000 square feet, which follows the national trend of investors seeking smaller properties. Sales prices averaged at $156 per square foot this quarter, down from prior peaks. A contributing factor to this decrease is the bid-ask spread between buyers and sellers, which continues to narrow. Moving forward, the gap is expected to narrow throughout the rest of the year as sellers continue to adopt more realistic pricing expectations that are aligned with today’s environment. The stabilization in pricing suggests that the underlying asset fundamentals in Denver’s industrial market are strong. Smaller properties under 50,000 square feet will continue dominating sales activity and leasing. In the second quarter, these facilities recorded a vacancy rate of 4.3%, compared to 8.5% for the broader market. The outlook for Denver’s industrial investment market suggests a gradual uptick in sales throughout the rest of 2025. The current hurdle of diﬀering buyer and seller price expectations is likely to continue decreasing as expectations of rate cuts remain optimistic and the bid-ask spread tightens. This trend could potentially lead to more transactions in the second half of the year. The bulk of this activity is projected to continue coming from private capital and owner-users, particularly for spaces between 5,000 and 200,000 square feet, a size range that continues to entice buyer interest in today’s environment. Vacancy, Rents, and Construction in Denver Vacancy Rate: 8.4% Average Asking Rents: $12.32/SF Asking Rent Growth: -0.3% Under Construction (SF): 1,358,068 Construction Starts (SF): 241,054 Denver’s vacancy rate recorded a consistent uptick over the past three years. At the end of Q2 2025, vacancy reached 8.4%, which is well above the 10-year average of 5.6%. The elevated level is largely the result of the 2021-2023 development surge, when a wave of new supply far outpaced tenant demand and pushed availability to a decade high. While completions have since slowed and absorption has inched closer to equilibrium, the market is still working through the excess space. Larger logistics facilities above 100,000 square feet continue to drive the bulk of vacancy. Meanwhile, properties under 50,000 square feet remain tight and competitive as the majority of newly-signed leases are focused on smaller facilities. Industrial rents in Denver have softened over the past year, declining by 0.3% annually compared to the 6.8% average annual growth recorded in the ﬁve years leading up the pandemic. Average market rents stand at $12.32 per square foot, although that ﬁgure varies by property type and location. For example, Central Denver notes rents ranging from $12 to $14 per square foot on average. Meanwhile, properties near Denver International Airport have been as low as the $6-7 per square foot range, dependent on the product and location. Rent growth is likely to remain muted through 2025, with the expectation for this metric to rebound in 2026 as market fundamentals continue to improve. Vacancy Rate Source: CoStar Group, Inc. Asking Rent per SF Source: CoStar Group, Inc. Asking Rent Growth (YOY) Source: CoStar Group, Inc. Construction activity has slowed sharply, falling to its lowest level since 2017, with just 1.8 million square feet underway in the 5,000 to 200,000 square foot range. There are many contributing factors, including the already high vacancy rate, but zoning challenges, increased regulations, and ﬁnancing diﬃculties have also played a role in declining construction across the metro. Speculative big-box developments have decreased, leaving new groundbreakings concentrated in build-to-suit or pre-leased facilities. Smaller, often owner-ﬁnanced developments, are also becoming more common as developers continue to adapt with demand and today’s realities. Under Construction (SF) Source: CoStar Group, Inc. Construction Starts (SF) Source: CoStar Group, Inc.

Spencer Mason

Vice President

8/26/25

Your 2025 National Self-Storage Update

H1 2025 National Self-Storage Report The U.S. self-storage sector in mid-2025 finds itself in a tentative but notable transition. After two years of rate compression, demand volatility, and aggressive discounting, the market is beginning to stabilize, with some regional markets outperforming expectations. Despite macroeconomic headwinds, including high interest rates and suppressed housing turnover, street rates are flattening, development pipelines are easing, and occupancy is hovering above pre-pandemic levels. Key Themes National advertised rents are flat year-over-year but showing positive sequential growth. Midwest markets, particularly Chicago and Minneapolis, are outperforming. Lease-up supply is cooling nationally, but oversupplied Sunbelt metros still face pressure. Boat & RV storage is showing signs of a mild rebound with rent growth and a slowdown in new deliveries. Investment volume has slowed, particularly for portfolio sales, but individual asset sales remain active. Rent and Occupancy Trends According to Yardi Matrix and RentCafe, the national average street rate for self-storage reached $16.90/SF in June 2025 (a 0.1% decrease YOY, but a 0.7% increase month-over-month, indicating a shift toward stabilization. Climate-Controlled (CC) Units: +0.4 YOY Non-Climate-Controlled (NCC) Units: -0.4% YOY REIT Rents: +1.3% YOY in June (up 0.7% from May) Occupancy is down slightly from pandemic highs but remains stable. Delinquency concerns are rising, particularly in more price-sensitive markets. Market Performance Chicago (+2.9% YOY) and Minneapolis (+1.3% YOY) continue to outperform, benefiting from limited new supply and steady housing market support. Minneapolis saw its trailing three-year lease-up supply drop from 20.3% (2022) to just 4.1% in June 2025. Weak Spots: Charlotte, Denver, and Tampa Face Pressure Charlotte: Rates down -1.4% YOY amid heavy new supply (15.3% Inventory added over 3 years) Denver: Despite lower new supply, demand has waned due to housing affordability issues. Tampa: Monthly rent dropped -0.3% in June, short-term demand from prior hurricane activity is fading. Top 10 Markets by MOM Rent Growth | June 2025 Source: Yardi Matrix, data as of July 8, 2025 Consumer Behavior & Operational Strategy From Storable’s 2025 Industry Pulse Report: “Storage Near Me” hits 5-Year Low Occupancy is soft, but above pre-2020 levels Delinquencies are rising Rates down from pandemic highs ($120 vs $80) Construction & Development Outlook Nationwide, 53.4 million NRSF of storage space is under construction, 2.7% of existing stock, a decline from previous months. However, the development focus is returning to the Sunbelt, with 17 of the top 30 metros above the national average. Notable Activity: San Antonio: +0.8% MOM increase in construction Las Vegas: Highest share under construction at 6.6% (down from 7.2% due to completions). Frisco, TX & Fayetteville, NC: Overbuilding has led to steep rent declines (-17.4% YOY in Fayetteville) Top 10 Markets Under Construction Supply by Percent of Existing Inventory Source: Yardi Matrix, Data as of July 8, 2025 Sales Volume & Investment Market Per CoStar and RCA, the self-storage investment market has cooled in 2025 amid economic uncertainty and persistently high interest rates. In Q2 2025, the sector recorded $751.8 million in sales volume across 400 transactions, down from $1.27 billion in Q1 and marking the lowest quarterly total in over a year. The average cap rate increased to 7.4%, while the average price per square foot fell to $109.31, reflecting investor caution and softening fundamentals. Q2 2025 By the Numbers: Sales Volume: $751.8M Average Cap Rate: 7.4% Price Per SF: $109.31 Boat & RV Storage Despite falling from 2021’s boom, the RV and boat storage sector is stabilizing in 2025. As of Q2, the market continues to rebalance, with rent recovery outpacing that of traditional self-storage particularly in Western and Midwestern markets. Notably, pricing has rebounded after a 024 correction, with 2025 sales averaging $505,000 per acre, up from $308,000 last year, signaling renewed investor interest in select high-performing locations. However, transaction volume remains subdued, and overbuilt suburban nodes, especially in Texas and Florida, continue to weigh on long-term rate performance. Rent Growth: +1.1% YOY in March, led by small-unit types (10X20 to 10X30: +1.3%. Chicago: Top-performing market with +4.2% YOY parking rent growth. Construction Activity: 58 projects under construction, down 64 in late 2024. Trailing 36-Month Supply: Declined to 15.8% in March, easing competitive pressures. Boat & RV Storage | National Average Annualized Street Rates (Per SF for Main Unit Types) Source: Yardi Matrix, Data as of April 10, 2025

Q225 | Industrial Market Report | Northern Colorado

Q225 Northern Colorado Industrial Market Report Market Overview By the Numbers All Properties | Q2 2025 | Industrial + Flex Properties | Source: CoStar Group, Inc. Sales Volume: $166,042,375 Number of Properties Sold: 67 Average Sale Price Per SF: $165 Vacancy Rate: 7.8% Rent Growth: 1.2% Rent Per SF: $13.45 Under Construction (SF): 393,704 Construction Starts (SF): 10,004 Net Absorption (SF): -233,101 Significant Sales Key Highlights 5,000-200,000 SF | Industrial + Flex Properties 1. Massive Spike in Sales Volume In Q2 2025, Northern Colorado saw a significant surge in sales volume, hitting $159.2 million—a 60.6% increase compared to the same period last year, and a remarkable 125.8% rise from the previous quarter. This growth highlights strong market momentum, fueled by sellers adjusting pricing expectations more realistically and responding better to current market conditions. As sellers aligned more closely with buyer expectations, transactions volume nearly doubled from Q1’s $70.5 million, signaling a robust upward trend in market activity. 2. Record High Vacancy Beginning to Stabilize Vacancy rates have risen year-over-year by 16.2%, reaching 8.6% in Q2 2025—a ten year peak. However, the rate of increase has slowed to previous quarters, indicating that vacancy levels may be nearing a plateau. With Q1 2025 at 8.5% and only a slight increase in Q2 2025, the market shows signs of stabilization. Moving forward, vacancy is expected to level off in the latter half of the year and may even begin to decline as supply and demand continue to rebalance. 3. Rent Growth Slowing Down Northern Colorado posted a rent growth of 1.1%—a notable decline from 3.7% this time last year, and down significantly from its peak of 6.5% in 2022. Despite the slowdown, the region still recorded positive growth for the quarter, outperforming the Denver metro area to the south, which has begun to see negative rent growth. Rent growth in Northern Colorado is expected to continue tapering off throughout the remainder of the year, with a rebound anticipated after it bottoms out toward year-end. Focused Metrics | 5,000-200,000 SF | Industrial & Flex Properties Transaction Volume | 2025 vs 2024 Source: CoStar Group, Inc. Q2 2025 Q2 2024 Sales Volume $159,167,375 $99,135,800 Sales Price Per SF $162 $150 Sales Volume & Sales Price Per SF Source: CoStar Group, Inc. Sales Activity The Northern Colorado industrial market experienced a sharp acceleration in transactional activity in Q2 2025, marking one of its strongest quarters in recent years. Sales volume reached $159.17 million, representing a 60.6% increase year-over-year from $99.14 million in Q2 2024 and an impressive 125.8% jump from the $70.50 million posted in Q1 2025. This surge positions the quarter as the second-highest in total sales since 2022, suggesting that investor sentiment is shifting, with buyers displaying increased willingness to deploy capital and sellers willing to play ball. This heightened momentum is being fueled by a growing pool of active participants across both private and institutional capital sources. These figures also point to a market where confidence is returning in tandem with a more favorable alignment between buyer expectations and seller pricing strategies. As demand firms, competitive bidding on select assets is becoming more common, further supporting transaction velocity. On the pricing front, the average sales price per square foot in Q2 2025 landed at $162/SF, an 8.0% increase from $150/SF a year earlier. While this marks an improvement from 2024 levels, it also represents a modest 3.6% decline from the $168/SF recorded in Q1 2025. This quarterly dip is less a sign of softening fundamentals and more reflective of natural variability in the composition of traded assets. In fact, pricing has become notably more consistent over recent quarters, suggesting sellers are increasingly calibrating their expectations to align with current market conditions. This adjustment has likely been instrumental in unlocking deals that might otherwise have stalled in negotiation. Altogether, the combination of substantial gains in sales volume, pricing stability, and expanding buyer activity paints a picture of a market on the upswing. With fundamentals stabilizing and liquidity improving, Northern Colorado’s industrial sector appears well-positioned to sustain its momentum into the second half of 2025. This is particularly true if macroeconomic conditions remain favorable to investment, and demand continues to track upward. Vacancy, Rents, and Construction Vacancy Rate: 8.6% Average Asking Rents: $13.86/SF Under Construction (SF): 385,204 Construction Starts (SF): 28,050 Northern Colorado’s industrial vacancy edged up to 8.6% in Q2 2025, rising 120 basis points year-over-year from 7.4% in Q2 2024, and a modest 10 basis points from the 8.5% recorded in Q1 2025. This 16.2% annual increase places vacancy at its highest point in the past decade. A key factor in this increased rate is the marked shift in tenant behavior, underscoring a period of adjustment between occupier demand and available supply. Contributing factors to the current vacancy dynamics include: Companies/tenants are more reluctant to relocate amid ongoing market uncertainties, leading to an increase in lease renewals over new moves. Tenants have gained greater leverage in choosing their space while landlords have shifted their focus toward maintaining occupancy rather than aggressively pursuing higher rents. On the rental side, market asking rent growth decelerated sharply to 1.1% in Q2 2025, down from 3.7% a year earlier and 2.5% in the prior quarter—a 70.27% drop year-over-year and a 56.0% decline quarter-over-quarter. This slowdown reflects the greater leverage tenants currently hold in negotiations, as elevated vacancy gives them more choice and bargaining power. Average asking rents held relatively steady at $13.86/SF—up 0.6% year-over-year but down 1.3% quarter-over-quarter —signaling greater stability than the national average. This trends also hints that, despite softer growth, the market is gradually rebalancing toward healthier fundamentals. Vacancy Rate Source: CoStar Group, Inc. Asking Rent Per SF Source: CoStar Group, Inc. Asking Rent Growth (YOY) Source: CoStar Group, Inc. The Northern Colorado industrial construction pipeline continues to contract in Q2 2025. 385,204 square feet were under construction for properties between 5,000 and 200,000 SF—down 23.42% year-over-year from 502,987 square feet in Q2 2024 and down 9.5% from the 425,450 square feet recorded last quarter. This marks the latest step in a steady quarterly decline, as the pipeline of new developments narrows in the wake of muted demand and heightened market caution. New construction starts were minimal, totaling just 10,004 square feet in Q2 2025 for properties between 5,000 and 200,000 SF, a 64.3% decrease from the 28,050 square feet launched in the same quarter last year. While this represents a modest rebound from zero starts in Q1 2025, activity remains far below historical norms. Developers are holding back on speculative projects as a result of persistently high vacancy rates, elevated financing costs, and ongoing pressure from material pricing. While the few speculative projects in the pipeline are down significantly, demand for pre-leased or build-to-suit projects is higher. The combination of a shrinking pipeline and limited new starts points to a more disciplined development environment, one in which only the most viable, strategically located projects are moving forward. In the near term, this measured approach is likely to keep future supply additions in check, allowing the market additional time to absorb existing vacancies before the next meaningful wave of deliveries. Under Construction (SF) Source: CoStar Group, Inc. Construction Starts (SF) Source: CoStar Group, Inc. Submarket Overview 5,000-200,000 SF | Industrial & Flex Properties

Spencer Mason

Vice President

8/25/25

Q225 | Retail Market Report | Denver, CO

Q2 2025 Denver Retail Market Report Highlights With the availability rate at just 4.8%, one of the lowest rates in the past decade, demand is healthy as supply remains limited. In this cycle, QSRs and local operators are leading tenant activity, accounting for the majority of recent move-ins. Retail rents aren’t keeping pace with the strong move-in activity, especially for landlords working with local tenants who face tighter budgets and less pricing flexibility By the Numbers Sales Volume: $221M Cap Rate: 6.6% Market Sale Price Per SF: $271 Vacancy Rate: 4.3% Rent Growth: 2.6% Market Asking Rent Per SF: $26.53 SF Under Construction: 546K SF Absorbed: (81.5K) SF Delivered: (384K) | Q2 2025 | Source: CoStar Group Demographics Unemployment: 4.4% Current Population: 3,072,491 Households: 1,276,199 Median Household Income: $106,400 Market Performance Anchored by fundamentals such as sustained tenant and consumer demand, a tight supply pipeline, and evolving tenant preferences, the retail market continues to emulate efficiency throughout Q2. Big-box retailers are moving out, creating room for an experimental period. However, spaces with larger footprints are more complex to backfill. Leasing activity is peaking, specifically in strip and neighborhood centers. However, absorption trends signal landlords hold leverage backed by sought-after locations, particularly in prime suburban submarkets. The outskirts of the Denver metro are drawing increased attention from national retailers competing aggressively for pad sites, often outbidding local operators with tighter margins. This dynamic is at the forefront of retail modernization, as newer, freestanding formats become more desirable and tenants move away from aging, second-generation spaces. Denver’s retail sector is operating at near-full capacity, supported by minimal new development and robust pre-leasing activity. As existing space becomes increasingly scarce, future leasing gains may slow, not because of weaker demand but due to a lack of available inventory. Market Asking Rent Per SF and Vacancy Rate Source: CoStar Group Under Construction As the e-commerce landscape evolves, investor sentiment is shifting in tandem, prompting developers to proceed with caution and redirect their focus toward industrial and multifamily project. A large share of the 0.3% of total inventory currently under construction consists of small, freestanding build-to-suits and ground-floor retail in mixed-use projects, often pre-leased to national QSR tenants like Raising Cane’s and Dutch Bros. Projects like the former LowDown Brewery site and Belcaro Shopping Center reflect a broader shift, with new retail development increasingly focused on repositioning aging assets rather than expanding overall inventory. Sales Retail investment in Denver totaled $1.2 billion over the past year, just below the 10-year average. Roughly $221 million of that volume occurred in Q2, reflecting a slower pace of deal flow amid continued caution in the debt markets. Activity was led by private buyers pursuing STNL deals under $5 million, often using all-cash or 1031 exchanges. Larger trades were limited and skewed toward value-add opportunities, typically at higher cap rates to account for added risk. Major deals include: Sonic Drive-In in Commerce City sold for $2.53M ($1,524/SF) at a 6.0% cap, due to short lease, older build. Summer Valley Shopping Center in Aurora sold for $20.4M at a 7.25% cap, 99% leased, Hawkeye INVSCO financed $13M. New Dutch Bros in Broomfield sold for $2.98M ($3,922/SF) at 5.2% cap, secured by 15-year absolute NNN lease. Sales Volume and Market Sale Price Per SF Source: CoStar Group 12-Month Market Leaders: Top 10 Performing Submarkets

Q225 | Multifamily Market Report | Denver, CO

Q2 2025 Denver Multifamily Market Report Highlights Forecasts expect Denver multifamily’s supply and demand to record a balanced level at the end of the year, but occupancies and rents aren’t projected to show improvement until mid-2026. Concession usage increased across the market, with around 41% of properties in the Denver market oﬀering a form of incentive in March. This ranges from a month of free rent to 12 weeks of free rent on a one-year lease. Denver’s multifamily sales have begun to stabilize, averaging approximately $900 million per quarter over the last four quarters. 2Q25 sales volume was only $489M, which is signiﬁcantly below historical averages. Denver Demographics Unemployment Rate: 4.4% Households: 1,275,963 Current Population: 3,072,154 Median Household Income: $106,878 Denver Multifamily Market Performance Denver’s multifamily sector recorded one of the highest vacancy rates nationally at 11.4% at the end of the second quarter. The uptick is attributed to an increased delivery pipeline as new supply has outpaced demand for the past few years. Now, landlords are oﬀering concessions at a higher volume to drive renter demand and aid leasing eﬀorts. The increase in supply had a negative impact on rents. Throughout the past year, market rents dropped by 3.0%, which placed Denver in the bottom half of major markets across the country. Rents in the Class A segment recorded the largest decrease in 2024, dropping to around $1,800 per unit. Prospective residents have been drawn to Class A properties as owners have increased concessions to increase occupancy. There has been a trickle down eﬀect on Class B and C properties as they compete with the concessions being oﬀered at the newly- constructed properties. As such, occupancies and rents at Class B and C properties have also suﬀered. By the Numbers Sales Volume: $489M Cap Rate: 5.2% Market Sale Price Per Unit: $313K Vacancy Rate: 11.4% Rent Growth: -3.2% Market Asking Rent Per Unit: $1,858 Units Under Construction: 13,028 Units Delivered: 3,511 Units Absorbed: 3,668 | Q2 2025 | Source: CoStar Group, Inc. Denver Supply and Demand Dynamics Source: CoStar Group, Inc. Under Construction Source: CoStar Group, Inc. Although 16,000 units were delivered in the past year, the construction pipeline has slowed down considerably. There are several factors that will impact the construction of new units over the next three to ﬁve years. Market fundamentals have made obtaining ﬁnancing for new developments very diﬃcult, entitlement timelines have become a signiﬁcant obstacle, and the inclusion of various aﬀordable housing policies will all contribute to a slowdown of new development. About 9,000 units are scheduled for delivery this year, which is about half the additions in 2024. The reduction in deliveries will provide supply-side relief over the next year and assist with market fundamentals. Sales Investment activity in Denver has predominantly moved to the suburbs for properties with value-add potential. One of the highest transactions recently occurred in the Greenwood Village suburb for a 420-unit apartment complex that sold for $117 million. The buyer pool has also shifted, with private investors making up about 70% of sales in the past year. Institutional buyers have largely been sidelined as they search for large, core assets that meet their investment objectives. Market Sale Price Per Unit & Cap Rate Source: CoStar Group, Inc. Submarket Highlights Source: CoStar Group, Inc. Submarket Vacancy Market Asking Rent Growth Market Asking Rent per Unit Downtown Denver 11.70% -2.90% $1,964 Aurora 13.30% -5.40% $1,688 Broomfield County 14.90% -1.50% $2,049 Englewood/Littleton 9.90% -1.50% $1,724 South Douglas County 8.70% -0.20% $2,061

Q125 | Industrial Market Report | Denver, CO

Q1 2025 Denver Industrial Market Report Key Highlights 1. Sales Volume Slows, But Pricing Remains Steady Sales activity in the Denver metro area experienced a noticeable slowdown in Q1 2025, with a 27.08% decrease in transaction volume compared to Q1 2024. That said, Q4 2024 recorded the highest quarterly sales volume since Q2 2022, reaching just over $477 million, signaling renewed investor confidence going into 2025. Despite this decline in activity, pricing has remained resilient. The average sales price per square foot (PPSF) currently stands at $175, consistent with the five-year average of $172. This stability suggests that while fewer deals are being made, asset values are holding strong. 2. New Construction Wave The market is witnessing a sharp uptick in new development activity. In Q1 2025, new construction starts increased by 173% compared to the same quarter last year, signaling a renewed wave of development across the region. This surge follows the delivery of over 780,000 SF of new space in Q4 2024, which has opened the door for additional projects and investments to enter the pipeline. 3. Vacancy Still on the Rise Vacancy rates have steadily increased each quarter since Q1 2024, reflecting a period of softening demand. However, projections for the second half of the year suggest a stabilization in vacancy, driven by expectations of positive net absorption and renewed rent growth. This potential shift indicates a more balanced market environment may emerge as we move through the latter half of 2025. By the Numbers Sales Volume: $432,804,696 Number of Properties Sold: 83 Average Sales Price Per SF: $174 Vacancy Rate: 8.00% Rent Growth: 0.4% Rent Per SF: $11.74 Under Construction (SF): 5,080,964 Construction Starts (SF): 1,368,695 Net Absorption (SF): 461,153 All Properties | Source: CoStar Group Focused Metrics 5,000-200,000 SF | Industrial & Flex Properties Transaction Volume | YoY Change Q1 2025 Q1 2024 Sales Volume $178,147,196 $244,304,634 Sales PPSF $175 $162 Source: CoStar Group Following a historic surge in late 2024, Denver’s industrial sales market entered 2025 with a more tempered pace. Transaction volume fell to approximately $178 million in the first quarter, marking a 27% decline year-over-year. After the exceptional fourth quarter in 2024—which posted the highest volume since mid-2022—the market appeared to take a collective breath as elevated financing costs and cautious underwriting slowed deal activity. Despite this pullback, the resilience shown late last year hints at underlying investor confidence, particularly for smaller, infill assets that continue to attract steady interest. While the number of transactions moderated, property values have shown surprising stability. The average price per square foot climbed to $175, up 8% from Q1 2024 and closely aligned with the five-year market average. This firmness in pricing suggests that asset fundamentals remain intact, especially for well-located small and mid-bay industrial properties where tenant demand has been less volatile. Looking ahead, Denver’s industrial investment market is poised for a more gradual rebound over the course of 2025. Although the gap between buyer and seller expectations remains a hurdle, improving sentiment around interest rates and narrowing bid-ask spread could unlock more deal flow later this year. Private buyers and ownerusers are expected to continue dominating activity, especially in the 5,000 to 200,000 SF range where tenant demand remains healthy. The rapid rise in debt costs and a wide bid-ask spread contributed to the slowdown in 2024 compared to the highgrowth periods of 2021-2022, but buyer and lender sentiment is expected to be more optimistic in 2025. Notable transactions in 2024 included the sale of DIA Logistics Park, a 625,000-SF property that sold for $96.3 million at $154/SF, and Building 1 at 9940 Havana Street, which traded for $72.2 million at a record $258/SF. These significant deals highlight a bifurcation in the market, with investor interest concentrated on high-quality assets despite the overall decline in activity. Denver’s industrial market in 2025 is expected to see a more balanced investment environment as pricing adjustments and increased availability create opportunities for buyers. Although the average price per square foot has increased from a low of $164.77 in 2023, the increase reflects a stabilization more than anything, as 2024 experienced volatility. The stabilization reflects a narrowing bid-ask gap as sellers adopt more realistic strategies amid growing buyer leverage. This trend, combined with the anticipated effects of rate cuts and improving lender sentiment, sets the stage for increased sales volume as market pricing aligns with expectations. Vacancy, Rents, and Construction 5,000-200,000 SF | Source: CoStar Group Vacancy Rate: 8.0% Average Asking Rents: $11.59/SF Asking Rent Growth: 0.4% Under Construction (SF): 1,685,989 Construction Starts (SF): 568,695 Denver’s industrial rental market continues to show signs of deceleration as the sector adjusts to elevated vacancy rates and the lingering effects of the recent construction boom. As of Q1 2025, average asking rents across the metro stood at $11.59/SF, reflecting a slight 3.17% decrease YOY. This decline marks a significant shift from the more robust rent growth patterns seen pre-pandemic, with annual growth slowing dramatically to 0.4%–a 91% drop from the five-year average of 4.5%. The oversupply of space, particularly in larger distribution properties, is weighing on rent performance in the near term. However, with a tightening pipeline of new deliveries and strong demand for small-bay and flex spaces, a gradual rebound in rent growth is anticipated to take hold in late 2025 and beyond. Vacancy rates, meanwhile, continue to climb, reaching 8.0% in Q1 2025—up from 6.9% a year earlier and notably higher than Denver’s historical averages. This marks the fifth consecutive quarter of vacancy increases, largely driven by the glut of space delivered during the construction surge from 2021 to 2023. Despite this softness, market fundamentals are showing early signs of stabilization. Net absorption remained negative at the start of the year (-303,095 SF), but projections point to a return to positive absorption in the second half of 2025, which could help balance the current supply-demand mismatch. Smaller spaces, particularly those under 50,000 SF, are expected to outperform, supporting localized tightening even as the broader market works through its supply overhang. After a multi-year period of aggressive development, new construction activity has cooled significantly. Just 1.69 million SF remained under construction at the end of Q1 2025, a 41.7% decline compared to the same time last year and the lowest level recorded since 2017. However, new starts surged during the quarter, jumping 173% YOY, signaling selective confidence among developers despite tighter lending conditions. Much of the new activity is concentrated in smaller, build-to-suit projects that face fewer financing hurdles and align better with prevailing tenant demand trends. Speculative big-box developments have largely paused, especially near Denver International Airport where oversupply is most present. The pivot toward smaller footprints is expected to support a healthier balance between supply and demand moving forward into 2026.

Spencer Mason

Vice President

6/4/25

Q1 2025 Multifamily REIT Earnings Report

Q1 2025 Multifamily REIT Updates In Q1 2025, multifamily REITs reflected a tone of cautious optimism amid a mixed performance backdrop. While many REITs continued to report solid fundamentals and high occupancy, others faced pressure from softening rent growth and elevated operating expenses. The sector remains in a transitional phase as interest rate expectations and macroeconomic indicators shift, prompting REITs to refine their portfolios and capitalize selectively on transaction opportunities. Capital Markets In Q1 2025, multifamily REITs approached capital markets with caution. Though not as active as in prior quarters, companies strategically raised capital to strengthen balance sheets and support selective acquisitions. The broader REIT sector saw improved access to debt and equity markets compared to late 2023, fueled by expectations of potential Federal Reserve rate cuts later in the year. Despite higher borrowing costs year-over-year, companies like Equity Residential (EQR) and UDR maintained strong credit positions, enabling them to execute strategic capital deployment without materially increasing leverage. Investor expectations of easing interest rates by mid-to-late 2025 helped support REIT valuations and underpinned a more stable funding environment. Transaction Activity Transaction volume remained modest across the sector, with REITs largely favoring selective dispositions and strategic acquisitions in high-growth markets. The most notable transaction came from Equity Residential, which acquired three properties totaling 795 units in Atlanta and Denver for $274 million at a 5.2% cap rate. Simultaneously, EQR disposed of seven properties totaling 1,629 units for $610 million, reflecting a disciplined capital recycling strategy. UDR Inc. announced the planned sale of two properties for $211.5 million as part of its portfolio optimization efforts. Other major REITs, including AvalonBay Communities (AVB) and Essex Property Trust (ESS), remained largely on the sidelines, preserving liquidity and monitoring market pricing for more compelling entry points. Overall, transaction activity in Q1 2025 was characterized by selectivity, with REITs focusing on maintaining geographic concentration and upgrading portfolio quality. Operational Performance and Rent Growth Operationally, most REITs reported moderate improvements in same-store Net Operating Income (NOI) and revenue growth. Equity Residential posted a 3.0% increase in same-store revenue and a 3.1% NOI gain, supported by stable occupancy at 96.1% and modest 1.0% blended lease rate growth. Camden Property Trust (CPT) achieved a 1.2% NOI increase and reported occupancy of 95.3%, an improvement over the previous quarter. UDR posted a 2.1% increase in NOI and a 2.5% revenue gain, but experienced a slight 0.6% decline in blended lease rates, highlighting some pricing pressure in certain markets. The Sunbelt and select suburban submarkets continued to outperform in terms of rent resilience and tenant retention. REITs noted increased operating expenses, particularly insurance and payroll, which partially offset revenue gains. As such, NOI margin preservation became a key management focus across the board. Multifamily REITS | Market Sentiment Market sentiment among multifamily REITs in Q1 2025 was cautiously optimistic. Companies acknowledged macro headwinds, including elevated costs, the potential for new supply in select markets, and tighter consumer budgets, but were encouraged by several tailwinds. These included improving job growth, particularly in the tech and professional services sectors, and declining inflation, which was trending around 2.5–3.0% annually. Investors also showed increased confidence. Surveys indicated that over 60% of multifamily investors are planning a moderate portfolio expansion in 2025, with expectations for rent growth in the 1–3% range. Many REITs expect stronger leasing activity and occupancy in the second half of the year, particularly if the interest rate environment becomes more accommodative. The multifamily REIT sector displayed resilience amid continued macroeconomic uncertainty. While operational fundamentals remained generally sound—with stable occupancy and moderate rent growth—REITs navigated headwinds such as cost inflation and tempered leasing spreads in certain regions. Capital recycling strategies and selective acquisitions drove portfolio upgrades and aided transaction activity. Looking ahead, analysts and REIT managers remain cautiously optimistic. Stabilizing interest rates, favorable job growth, and steady housing demand are expected to support sector performance, though REITs will continue to closely manage costs and maintain balance sheet flexibility in anticipation of evolving market conditions.

Self-Storage In a Middle-Market

The Self-Storage Industry Amid Overbuilding and Economic Shifts The self-storage industry, long recognized as a profitable and recession-resistant investment, is navigating a transformative period marked by oversupply and economic uncertainty. Since 2018, steady demand has propelled the sector, with an estimated 14.5 million U.S. households leveraging self-storage solutions, according to the Self Storage Association. Once dominated by private investors, the industry has evolved into an attractive asset class for private equity groups and institutional investors. This evolution has fueled rapid expansion, with 276.9 million square feet of new storage space added in the past five years, including a record-breaking 98.2 million square feet in 2023 alone. However, this surge has led to oversupply challenges, positioning the sector in a “middle market” grappling with reduced housing mobility and slowing demand. A Pandemic-Fueled Surge The pandemic initially drove unprecedented demand for self-storage, as shifting migration patterns and work-from-home trends prompted record-high occupancy and rents. Developers responded aggressively, with construction spending peaking at $6.9 billion in 2023, a 24% increase over the prior year. Over the past three years, self-storage inventory grew by 8.9%, with 2.9% added in the trailing 12 months, according to Yardi Matrix. Between 2019 and 2021, the average construction spending on self-storage facilities was $4.4 billion. The Oversupply Dilemma As the sector expands, oversupply concerns have become increasingly prominent. Developers, once eager to capitalize on future housing developments, have been met with supply-chain disruptions and rising interest rates. This has left many newly-built storage facilities without sufficient customers to fill their units. The number of abandoned storage developments rose by 104.2%, while deferred projects increased by 44.5%. Despite these setbacks, the construction pipeline remains robust, with 3.2% of existing inventory under development as of November 2024. Markets such as Las Vegas, Tampa, Phoenix, and Charlotte continue to see growth in construction, despite already experiencing heavy supply delivery in recent years. Urban markets like Las Vegas and Atlanta delivered over 10% of their inventory in a three-year period. The South remains the most popular destination, capturing 40% of movers, while younger demographics aged 25-44 emerge as the most mobile segment, motivated by cost of living, job opportunities, and family needs. Regulatory Pushback: A Tug-of-War with Development In response to rapid buildout, municipalities across North America, particularly in secondary and tertiary markets, have increasingly imposed restrictions or bans on new self-storage projects, often citing concerns about land use, negative stereotypes, and the desire to attract higher-revenue businesses. For instance, Denver has banned self-storage within a quarter mile of any light-rail train station, New York City banned self-storage development in its 20 industrial business zones (IBZs), requiring special permits for approval, and markets like Miami and Providence, RI have enacted measures to limit self-storage in mixed-use or residential areas. Some cities, such as Brentwood, CA, have discussed banning self-storage entirely. A significant factor behind this backlash is the perceived economic contribution of self-storage facilities. Unlike retail or hospitality businesses, storage developments generate limited sales tax revenue and create fewer permanent jobs, leading some cities to demand mixed use developments that combine storage with more attractive commercial or residential components. Impact on Rental Rates & Occupancy Oversupply has also placed pressure on rental rates and occupancy, an additional stress on new facilities facing lease-up challenges. In Q3 2024, average revenue growth for major self-storage REITs turned negative at -1%, driven by a 60bps decline in occupancy and a 1.1% drop in realized units. Markets with heavy supply, such as Atlanta, Orlando, and Phoenix, reported some of the worst revenue performances. Conversely, markets like Washington D.C., Chicago, and San Francisco, which have experienced limited supply growth and improved migration trends post-pandemic, fared better. Improvement in Advertised Rates While occupancy struggles, advertised rates have shown year-over-year improvement. Nationally, rates declined 2.4% year-over-year in November 2024, a smaller drop from the 3.1% recorded in October. Non-climate-controlled (NCC) units posted a 2.1% decline, while climate controlled (CC) units experienced a 2.7% drop, both better than Q3 averages and the previous month. Washington D.C. emerged as the first metro to report positive year-over-year advertised rent growth (around 1%) for all unit types, aided by reduced new supply and increased demand. Markets with the largest lease-up inventories, such as Las Vegas and Atlanta, are among the worst performers in rate growth. Interestingly, despite leading in new supply deliveries, Las Vegas has outperformed some other oversupplied metros. Its same-store advertised rates for main unit types decreased 4.4% year-over-year, which, while a decline, reflects resilience compared to steeper drops elsewhere. On a month-over-month basis, advertised rates are declining as the industry enters its slower winter season. Rates fell by 0.3% in November, a smaller decrease compared to the 1.1% month-over-month drop in November 2023. Tampa stood out as the only metro with a month-over-month increase, buoyed by disaster related demand. Orlando, despite facing the second most deliveries over the past year (5.5% of stock) saw an improvement in year-over-year rates with declines lessening by 1.8%. As of November 2024, 61.5 million net rentable square feet of self-storage space remains under construction across the U.S., adding pressure to occupancy and rental growth in oversaturated markets. However, construction activity is expected to taper in 2025 and beyond, potentially helping to rebalance supply and demand. Year-over-year improvements in advertised rates are anticipated to persist as operators benefit from easier comparisons to the aggressive rate drops seen in late 2023. Additionally, secondary markets with lower supply growth and robust demand fundamentals, such as Washington D.C., offer more stable performance prospects amidst these challenges. Competitive Evolution in Market Rents The self-storage industry has moved from a market dominated by mom-and-pop operators to one increasingly influenced by larger institutional players. Historically, smaller operators—which prioritize tenant retention with stable rates, personalized service, and basic facilities—often lack advanced technology or polished aesthetics. However, the entry of larger owners with streamlined operations, upgraded facilities, and aggressive marketing budgets has intensified competition, elevating the overall standard of the industry. These larger operators have introduced dynamic pricing models, adjusting rates weekly or even daily based on availability, to maximize returns. While this approach prioritizes revenue over occupancy, independent operators, who still own about 65% of facilities, often maintain near-full occupancy by keeping rates below market averages. This affordability continues to attract renters and retain existing customers. For both independent and institutional players, navigating the current market demands a sharp focus on cost efficiency, the strategic application of dynamic pricing, and the exploration of underserved markets. The self-storage industry’s ability to adapt to these evolving dynamics will be critical in shaping its future success. 2025 Market Outlook Despite recent dips in rental rates, mobility is poised to drive a rebound in self-storage demand in 2025. A survey conducted in late 2024 revealed that 37% of Americans are planning or considering a move within the next 6-12 months—a significant increase from earlier years. With the Federal Reserve signaling potential rate reductions, the same survey noted that 13% of respondents would be more likely to move if borrowing costs decline. If rate cuts materialize and the surge in relocations commences, pent-up demand for housing and storage solutions could counterbalance market concerns about oversupply and softening rental rates.

Jake Payne

First Vice President

4/25/25