Market Intel

Los Angeles Tri-Cities Retail Market Report Q2 2026

Burbank | Glendale | Pasadena Los Angeles’ retail market remains on relatively stable footing, supported by its large consumer base, diverse economy, and limited new development. In Q2, metro vacancy stood at 5.8%, while asking rents averaged $37.01 per square foot, despite declining 0.5% year-over-year. Development activity remains limited, with approximately 528,000 square feet under construction, helping to constrain new supply and support existing retail fundamentals. Market conditions vary across the region, with Burbank maintaining particularly tight conditions, including a 2.8% vacancy rate and asking rents of $41.63 per square foot. Glendale also remains relatively well occupied, with 5.3% vacancy and asking rents of $39.78 per square foot, while Pasadena carries a somewhat higher 7.0% vacancy rate but continues to command premium rents of $40.97 per square foot. Investment pricing across all three submarkets remains above the broader Los Angeles average, reflecting the desirability of established retail locations within these communities. Although rent growth has softened and the investment environment remains more selective, limited new construction and relatively healthy occupancy continue to support retail fundamentals across the market. Los Angeles By the Numbers Q2 2026 | Source: CoStar Group, Inc. Sales Volume: $1B Price Per SF: $403 Cap Rate: 6.0% Vacancy Rate: 5.8% Rent Growth: -0.5% Asking Rent Per SF: $37.01 SF Under Construction: 528K SF Delivered: 51.8K SF Absorbed: 455K Market Overview Burbank’s elevated retail rents continue to distinguish the market, though recent demand has softened and vacancy has moved higher. Tight availability and minimal new development in Glendale continue to support some of the strongest occupancy fundamentals among the three submarkets. Pasadena retail posts stable occupancy, limited new supply, and strong asset pricing continue to support the market despite modest near-term leasing softness. Supply & Demand Dynamics Source: CoStar Group, Inc. Los Angeles Population Growth Source: Oxford Economics Los Angeles is supported by one of the most diverse and dynamic metropolitan economies in the country, with major employment concentrations spanning entertainment and media, trade and logistics, technology, healthcare, professional services, aerospace, and tourism. The region benefits from its position as a global gateway for international commerce, a deep and highly skilled labor pool, and a large consumer base. While the metro remains exposed to shifts in consumer spending, housing affordability, and broader economic cycles, its scale, industry diversity, and global connectivity provide a strong foundation for long-term economic resilience and continued commercial activity. Burbank Retail Asking Rents Hold Above $41/SF Demand Burbank’s retail market softened during the second quarter of 2026, with vacancy reaching 7.0% and net absorption totaling negative 18,800 square feet. Vacancy has generally moved higher from the tighter levels recorded earlier in the decade, reflecting some moderation in tenant demand. Asking rents remain elevated at $41.63 per square foot, although annual rent growth declined 0.6%. Rent growth has slowed considerably following several years of steady gains, suggesting that landlords have faced greater resistance to additional rent increases as market conditions normalize. Rent Per SF vs Rent Growth Source: CoStar Group, Inc. Supply Retail development remains highly constrained in Burbank, with no space under construction, starts, or deliveries during the quarter. Limited development has been a consistent feature of the market, with new supply arriving only intermittently in recent years. Approximately 12,300 square feet was delivered in 2025, following no completions in either 2023 or 2024. The absence of a development pipeline should help limit additional supply-side pressure and allow leasing activity within existing inventory to remain the primary driver of occupancy. Completions vs Vacancy Rate Source: CoStar Group, Inc. Investing Burbank’s retail investment market remained relatively quiet in Q2 2026, generating $11.8 million in sales volume. Average cap rates were approximately 5.9%, reflecting a notable expansion from the low-5% range prevalent earlier in the decade. Despite a more selective transaction environment, an average sale price of $430 per square foot indicates that Burbank retail properties continue to command meaningful valuations. PPSF vs Cap Rate Source: CoStar Group, Inc. Investment Highlights Volume $11.8M in Q2 retail sales volume Limited transaction volume points to a more selective investment environment Pricing 5.9% average cap rate, with yields having expanded from the low-5% range earlier in the decade $430/SF average sale price, demonstrating continued pricing strength Glendale Retail Vacancy Remains Tight at 2.8% Demand Glendale’s retail market remained relatively tight in the second quarter of 2026, with vacancy at just 2.8% despite negative 12,300 square feet of net absorption during the period. Vacancy has remained near the 3% level for much of the past several years, indicating relatively limited availability across the submarket. Asking rents averaged $39.78 per square foot, although annual rent growth declined 1.0%. The moderation follows several years of rent appreciation, with asking rents increasing from approximately $36 per square foot in 2019 to around $40 per square foot today. While near-term leasing conditions have softened, low vacancy continues to provide support for overall market fundamentals. Rent Per SF vs Rent Growth Source: CoStar Group, Inc. Supply Retail development remains highly constrained in Glendale, with no space under construction, no construction starts, and no new deliveries during Q2. New supply has historically been limited and uneven, with approximately 17,800 square feet delivered in 2025 following no completions in 2024 and only 3,000 square feet in 2023. Muted construction should help preserve the market’s tight availability and limit the risk of significant supply-driven vacancy increases in the near term. Completions vs Vacancy Rate Source: CoStar Group, Inc. Investing Glendale recorded $16.7 million in retail sales volume during Q2 2026, as investment activity continued within a more selective transaction environment. Average cap rates stood at 5.9%, continuing a steady upward trend from the low-5% range seen earlier in the decade as investment yields have repriced. Retail assets traded at an average of approximately $412 per square foot, reflecting continued investor demand despite higher required returns and more disciplined acquisition activity. PPSF vs Cap Rate Source: CoStar Group, Inc. Investment Highlights Volume $16.7M in Q2 retail sales volume Limited new supply and sub-3% vacancy continue to support the investment profiles of well-located retail properties Pricing 5.9% average cap rate, with yields trending upward from the low-5% range earlier in the decade $412/SF average sale price, reflecting sustained valuations Pasadena Retail Pricing Reaches $437/SF Demand Pasadena’s retail market entered the second half of 2026 with relatively balanced occupancy, as vacancy registered 5.3% despite 17,000 square feet of negative net absorption during the quarter. Asking rents averaged $40.97 per square foot, while annual rent growth declined 0.6%. Although near-term rent momentum has turned slightly negative, Pasadena has retained much of the pricing gained over the past several years, with average rents rising from roughly $37 per square foot in 2019 to approximately $41 today. Rent Per SF vs Rent Growth Source: CoStar Group, Inc. Supply Pasadena’s development pipeline remains inactive, with no retail space under construction, no construction starts, and no deliveries during Q2. This marks a sharp contrast with the sizable wave of new inventory earlier in the decade, when more than 200,000 square feet was completed in 2021 and approximately 85,600 square feet followed in 2022. Since then, development has slowed substantially, with only about 2,600 square feet delivered in 2023 and no completions in either 2024 or 2025. Completions vs Vacancy Rate Source: CoStar Group, Inc. Investing Pasadena generated $17.1 million in retail sales volume during Q2 2026, with transaction pricing averaging $437 per square foot. Investment yields averaged 5.9%, continuing the upward movement in cap rates that has emerged over the past several years. Cap rates were near 5.2% in 2021 and 2022 before rising steadily through 2024, 2025, and 2026, illustrating the adjustment in investor return requirements as market conditions have evolved. PPSF vs Cap Rate Source: CoStar Group, Inc. Investment Highlights Volume $17.1M in Q2 retail sales volume, No active development pipeline, reducing near-term supply risk and supporting the positioning of existing retail assets Pricing 5.9% average cap rate, as required yields have moved higher from approximately 5.2% earlier in the decade $437/SF average sale price, highlighting the premium pricing achieved by Pasadena retail properties

Charlotte, NC Multifamily Market Report Q226

Charlotte’s Construction Pipeline Remains Among the Nation’s Largest Demand Eﬀective rent fell to $1,539 in Q2, down 1.24% YoY, undoing the modest 0.44% gain from a year ago and continuing a two-year stretch that’s swung between small gains and losses without ever settling into a trend. Vacancy rose to 5.58% YoY (up 38bps) but improved from 6.18% in Q1 as 3,530 units of net absorption outpaced a slower delivery pace. Occupied stock grew 3.8% to 246,770 units, so demand itself isn’t the problem. Charlotte simply has more supply left to clear before pricing power returns. Supply Charlotte delivered 16,926 units in 2024, its peak year this cycle, and has been paring back ever since. Q2 completions of 2,070 units were down 49.8% YoY, and the TTM total has fallen 43.1% to 10,475. The remaining pipeline is still sizable with 18,128 units under construction, 6.94% of inventory, higher than markets like Los Angeles or Columbus at this point in their own cycles. That leftover supply is the main reason rent growth has stayed choppy even as absorption holds up. Investment Market Deal activity in Charlotte has cooled. The TTM volume is down 34.8% to $2.5B, and Q2’s $411.7M was down 36.0% YoY, a long way from the $3.4B single-quarter record set in Q4 2021. Pricing, by contrast, has barely moved, Cap rates have held a tight 5.26%-5.33% range for nearly two years, and price per unit is up just 1.2% to $214,841, still about 8.1% below its 2022 peak. Volume $2.5B TTM volume (-35% YoY) Q2 2026: $412M Series peak $7.3B (2022) Pricing Q2 Cap rate 5.33% Caps expanding 2 quarters running Q2 Price per unit $215k

Los Angeles, CA Multifamily Market Report Q2 2026

Los Angeles is doing something almost no other major apartment market is doing right now: it is building more. Multifamily completions in the metro rose 11.8% year-over-year in the second quarter of 2026, and the trailing 12-month total climbed 17.6% to 9,105 units, putting Los Angeles on pace for its largest calendar-year delivery total since record-keeping began in 2000. Even with that supply wave, vacancy held below 5% at 4.52%, effective rent grew 0.80% year-over-year to $2,887, and occupied stock reached 1.12 million units, the largest apartment base in the country. For a market absorbing this much new product, holding the line on vacancy and keeping rent growth positive is a quieter kind of resilience than a dramatic turnaround story. Key Findings Los Angeles is building through a cycle where most markets have stopped: Trailing 12-month completions rose 17.6% to 9,105 units, with 2026 tracking as the metro’s biggest delivery year since 2000. Demand is keeping pace with near-record supply: Net absorption reached 2,837 units in Q2 2026, cooler than last year but enough to hold vacancy at 4.52%, up just 38 basis points year-over-year. Rent growth stayed positive and is forecast to accelerate: Effective rent rose 0.80% to $2,887, with year-end 2026 forecasts calling for $2,904 and 1.7% growth. Investment activity surged: More than $9.3B traded over the trailing 12 months, up 35.2% year-over-year, including $2.56B in Q2 2026 alone (+39.3% YoY). Buyers are underwriting higher-for-longer: Cap rates have risen for six consecutive quarters to 5.37% while price per unit slipped to $308,551, roughly 13.9% below the 2022 peak. Market Overview Los Angeles entered the second half of 2026 with the largest occupied apartment base in the United States at 1.12 million units. Vacancy rose to 4.52%, up 38 basis points from a year earlier, as net absorption of 2,837 units cooled from last year’s pace but still tracked a market delivering more product, not less. Forecasts call for vacancy to tighten modestly to 4.4% by year-end as the current construction pipeline is absorbed. For comparison with the metro’s prior quarter, see the Los Angeles Multifamily Market Report Q1 2026. Los Angeles Multifamily Rents Effective rent in Los Angeles reached $2,887 in Q2 2026, up 0.80% year-over-year. Forecasts call for rent to reach $2,904 by the end of 2026, with annual rent growth accelerating to 1.7%. Rent Growth by Submarket Rent growth was concentrated in the metro’s more affordable, supply-constrained submarkets. South Central led all Los Angeles submarkets at +5.5% year-over-year, followed by Southeast Los Angeles at +3.7% and Long Beach at +2.7%. Higher-supply and higher-price submarkets lagged: Burbank/Glendale/Pasadena (-1.5%), Woodland Hills (-1.3%), and San Gabriel Valley (-1.2%) all posted year-over-year declines. Los Angeles Multifamily Vacancy Vacancy Rate Vacancy in Los Angeles measured 4.52% in Q2 2026, an increase of 38 basis points year-over-year, and is forecast to end 2026 at 4.4%. Holding vacancy under 5% while delivering more than 9,000 units over 12 months is the clearest signal of underlying demand strength in the metro. East Los Angeles posted the tightest vacancy in the metro at 3.2%, followed by South Bay at 3.5% and San Gabriel Valley and Long Beach at 3.9% each. Downtown Los Angeles (5.8%) and South Central (5.6%) carried the highest vacancy, reflecting concentrated recent deliveries. Los Angeles Multifamily Construction Units Delivered and Under Construction Q2 2026 completions rose 11.8% year-over-year to 1,695 units, and trailing 12-month completions climbed 17.6% to 9,105 units. Multiple industry trackers expect 2026 completions to be the largest calendar-year total in Los Angeles since record-keeping began in 2000. Completions are forecast to moderate to roughly 7,280 units by year-end 2026 on a trailing basis. Construction by Submarket Measured as a share of existing inventory, South Bay leads Los Angeles construction activity at 3.9% of inventory under construction, followed by Palms/Mar Vista at 3.3% and Long Beach at 3.0%. Woodland Hills (2.6%), Mid-Wilshire (2.6%), and Downtown Los Angeles (2.5%) round out the most active submarkets. San Gabriel Valley has effectively no new supply underway at 0.0% of inventory. Los Angeles Multifamily Investment Market Sales Volume and Pricing Investors are responding to the supply story rather than shying away from it. More than $9.3B in Los Angeles multifamily assets traded over the trailing 12 months, up 35.2% year-over-year, with Q2 2026 volume of $2.56B up 39.3% from the same quarter last year. For context, the series peak was $13.0B in 2022. Cap rates have risen for six straight quarters to 5.37%, while price per unit has drifted down over the same stretch to $308,551, about 13.9% below the 2022 peak. That combination of rising transaction volume against a still-repricing market suggests buyers are underwriting a higher-for-longer rate environment rather than betting on compressed yields. For a view of the metro’s other property types, read the Los Angeles Retail Market Report Q2 2026. By the Numbers Q2 2026 | Sources: Matthews™, RealPage, BLS Vacancy Rate: 4.5% (forecast EOY 4.4%) Average Effective Rent: $2,887 (forecast EOY $2,904) Rent Growth: +0.8% YoY (forecast EOY +1.7%) Net Absorption: 2,837 units Completions (TTM): 9,105 units (forecast EOY 7,280) Q2 2026 Completions: 1,695 units (+11.8% YoY) Occupied Stock: 1.12 million units Sales Volume (TTM): $9.3B (+35.2% YoY) Q2 2026 Sales Volume: $2.56B (+39.3% YoY) Average Cap Rate: 5.37% Price Per Unit: $308,551 Frequently Asked Questions What is the multifamily vacancy rate in Los Angeles? The Los Angeles multifamily vacancy rate was 4.52% in Q2 2026, up 38 basis points year-over-year, and is forecast to end 2026 at 4.4%. What is the average apartment rent in Los Angeles? Average effective apartment rent in Los Angeles was $2,887 in Q2 2026, up 0.80% year-over-year, with a year-end 2026 forecast of $2,904. How much new apartment construction is happening in Los Angeles? Los Angeles delivered 1,695 apartment units in Q2 2026 and 9,105 units over the trailing 12 months, a 17.6% year-over-year increase. 2026 is on pace to be the largest calendar-year delivery total in Los Angeles since 2000. What are Los Angeles multifamily cap rates in 2026? The average Los Angeles multifamily cap rate was 5.37% in Q2 2026, the sixth consecutive quarterly increase, with an average price per unit of $308,551. Which Los Angeles submarkets have the strongest rent growth? South Central led Los Angeles submarkets with +5.5% year-over-year rent growth in Q2 2026, followed by Southeast Los Angeles (+3.7%) and Long Beach (+2.7%). To discuss Los Angeles multifamily investment opportunities, connect with Erik Vogelzang, Market Leader – Los Angeles.

Los Angeles, CA Retail Market Report Q2 2026

Vacancy Climbs to a 10-Year High of 5.83% as Investment Surges 40% Los Angeles retail real estate hit a turning point in the second quarter of 2026: vacancy rose to 5.83%, the highest level in more than a decade, as negative net absorption and a wave of tenant closures pushed mid-sized spaces back onto the market. At the same time, investor demand strengthened sharply, with retail sales volume climbing more than 40% year-over-year to $4.9 billion. Los Angeles Retail Market at a Glance (Q2 2026) Vacancy rate: 5.83% (highest in more than 10 years) Asking rent per square foot: $36.90 (rent growth -0.8% year-over-year) Retail sales volume: $4.9 billion trailing 12 months, up more than 40% year-over-year Price per square foot: $403 Cap rate: 5.96% Under construction: 600,000 square feet Delivered this quarter: 118,000 square feet Net absorption: 454,000 square feet Construction starts: 122,000 square feet Why Is Los Angeles Retail Vacancy Rising? Vacancy climbed as several national retailers reduced their footprints over three consecutive years of negative net absorption. Still, the pace of store closures has begun to slow, and grocery, discount, and fitness operators are increasingly backfilling vacant space, a sign that demand is starting to stabilize. Asking rents declined 1.2% year-over-year, though Los Angeles rents remain among the highest in the nation. Limited New Supply Keeps Fundamentals in Check New retail construction remains exceptionally limited across Los Angeles, with the development pipeline equal to just 0.1% of existing inventory. Most current activity is tied to redevelopment of older properties rather than new ground-up construction, which is helping prevent a sharper rise in vacancy despite softer leasing conditions. Investment Activity Surges Despite Softer Leasing Investor confidence in Los Angeles retail remains strong. Total sales volume rose more than 40% year-over-year to $4.9 billion, driven by continued demand for grocery-anchored centers and high-quality, supply-constrained assets, particularly toward the metro’s outskirts. Looking ahead, the 2028 Summer Olympics, the FIFA World Cup, and continued rebuilding following the 2025 wildfires are expected to provide meaningful economic stimulus. Los Angeles Retail Performance by Submarket Submarket Vacancy Rate Asking Rent (PSF) Rent Growth Under Construction Q2 Sales Volume Cap Rate Price PSF Central 6.3% $39.98 -1.6% 172K SF $497M 5.9% $342 Tri-Cities 4.6% $40.26 -1.0% 16K SF $45M 5.9% $425 San Fernando Valley 5.9% $36.02 -0.2% 7K SF $173M 5.6% $408 South Bay 6.5% $33.94 -0.9% 211K SF $155M 6.1% $410 Central Los Angeles Retail Leasing activity strengthened in Q2 2026, with 273,071 SF of positive net absorption, a rebound from negative absorption in Q1. Only 25,052 SF delivered this quarter kept vacancy at 6.3%, down from 6.5% in Q1. Trailing 12-month sales volume reached $4.9 billion; notable Q2 sales included FIGat7th ($68.5M) and 400 Foothill Road ($49M). Tri-Cities Retail (Burbank, Pasadena, Glendale) Demand moderated with 48,156 SF of negative net absorption, though occupancy remains healthy at 95.4%. Asking rents rose to $40.26/SF. No new deliveries and just 16,899 SF under construction kept vacancy stable at 4.6%, the lowest of any Los Angeles submarket. San Fernando Valley Retail Negative net absorption improved to 35,359 SF from 136,936 SF in Q1, suggesting demand is stabilizing. Asking rents rose to $34.02/SF. Development remains minimal, nudging vacancy up slightly to 5.9%. South Bay Retail Negative net absorption narrowed to 45,337 SF from 61,717 SF in Q1, with occupancy holding at 93.5%. Asking rents increased to $33.94/SF, and supply stayed constrained, keeping vacancy essentially flat at 6.5%. Frequently Asked Questions What is the retail vacancy rate in Los Angeles in Q2 2026? Los Angeles retail vacancy climbed to 5.83% in Q2 2026, the highest level in more than 10 years. Is retail investment activity increasing in Los Angeles? Yes. Retail sales volume rose more than 40% year-over-year to $4.9 billion, driven by demand for grocery-anchored centers and high-quality assets. Which Los Angeles submarket has the lowest retail vacancy? Tri-Cities (Burbank, Pasadena, Glendale) has the lowest retail vacancy at 4.6%. Why is new retail construction so limited in Los Angeles? The development pipeline equals just 0.1% of existing inventory, with most activity focused on redevelopment rather than new ground-up construction. What’s driving future retail demand in Los Angeles? The 2028 Summer Olympics, the FIFA World Cup, and continued rebuilding following the 2025 wildfires are expected to provide meaningful economic stimulus. Source: CoStar Group, Inc.; Federal Reserve Bank of St. Louis (FRED). Data compiled by Matthews™. For additional context, see our latest Los Angeles, CA Industrial Market Report Q2 2026 and our prior Los Angeles, CA Retail Market Report Q3 2025 for a cross-asset view of the metro.

Glendale, CA Multifamily Market Report H1 2026

The Glendale multifamily market in the first half of 2026 remains stable, with $92.6 million in sales volume across 35 transactions and an average cap rate of 5.5%. Limited new construction and a 4.4% vacancy rate have helped balance softer leasing activity, while average asking rents reached $2,397 per unit with modest annual growth. Investor demand is steady, supported by strong long-term fundamentals and a constrained development pipeline, even as rent growth slows and concessions become more common in luxury properties. Highlights Limited new supply has helped offset softer leasing activity and preserve balanced market fundamentals. Throughout H1 2026, Glendale recorded 35 multifamily transactions of 5+ units, highlighting resilient buyer demand, despite elevated borrowing costs. Investor interest is supported by the market’s strong, long-term fundamentals, constrained development pipeline, and favorable position within the broader Los Angeles market. Los Angeles Demographics Source: Oxford Economics Unemployment Rate: 4.2% Current Population: 309,692 Household: 117,825 Median Household Income: $69,929 Job Growth in Los Angeles Source: Oxford Economics Glendale Multifamily Rents, Vacancy, & Construction Rents Average asking rents reached $2,397 per unit, representing 0.8% annual growth through the first half of 2026. Rent appreciation has continued to normalize as affordability pressures and increased availability have tempered landlords’ pricing power. Concessions have become more common among larger luxury communities, reflecting increased competition for renters. However, the broader market continues to benefit from healthy underlying demand, allowing most owners to maintain stable rent levels despite a slower growth environment. Market Asking Rent Per Unit Source: CoStar Group, Inc. Vacancy Vacancy measured 4.4% at mid-year 2026 as the market recorded 53 units of negative absorption during the first half of the year. Leasing conditions have become more balanced following the rapid demand experienced between 2021 and 2023. Much of the vacancy remains concentrated within newer institutional-quality communities. Many Class A properties have responded by offering modest concessions to maintain occupancy, while privately owned Class B and Class C assets continue to experience relatively stable occupancy and consistent renter demand. Vacancy Rate Source: CoStar Group, Inc. Construction Development activity remains limited, with 108 units currently under construction and no new deliveries recorded during the first half of 2026. The lack of new completions has helped prevent additional supply pressure despite softer leasing conditions. Glendale’s constrained development pipeline continues to support long-term market fundamentals. At the same time, the city’s relatively streamlined entitlement process continues to attract selective development that aligns with future housing demand. Units Under Construction Source: CoStar Group, Inc. Glendale Multifamily Sales Investment activity remained healthy during the first half of 2026, totaling $92.6 million in sales volume. Assets traded at an average 5.5% cap rate and $299,500 per unit. Despite elevated borrowing costs, investor demand for well-located apartment assets remains resilient. Buyers continue pursuing opportunities where pricing and market fundamentals align. Newer properties continue to command pricing premiums because of their modern amenities, lower anticipated capital expenditures, and greater operational flexibility. Meanwhile, older assets remain attractive value-add investments for buyers seeking renovation potential and long-term appreciation. Overall, pricing appears to be stabilizing as buyers and sellers become increasingly aligned on market expectations. Sales Volume & Price Per SF Source: CoStar Group, Inc. By the Numbers H1 2026 | Source: CoStar Group, Inc. Sales Volume: $92.6M Cap Rate: 5.5% Price Per Unit: $299.5K Vacancy Rate: 4.4% Rent Growth: 0.8% Asking Rent Per Unit: $2,397 Units Under Construction: 108 Units Delivered: – Units Absorbed: -53

Johnathan Perez Magana

Associate

7/29/26

Q1 2026 Shopping Center REIT Earnings Report

Macroeconomic & Market Backdrop The U.S. retail real estate market entered 2026 on a more nuanced footing than the powerful close to 2025. Fundamentals stayed broadly balanced through a seasonally weak first quarter, but demand softened at the margin and the earnings here reflect that split: excellent company-level performance set against a choppier macro tape. Spending remained carried by higher-income households, whose equity and home-price gains provide a deeper cushion, even as lower-income consumers leaned further on borrowing and creditcard and personal loan delinquencies stayed elevated. This K-shaped consumer economy continues to favor necessity based, value-oriented, and service driven formats, a direct tailwind for the grocery-anchored, open-air, and net lease strategies in this coverage universe. The new wrinkle is geopolitics: escalating Middle East hostilities have lifted energy prices and inflation (March PCE 3.5%, core 3.2%), prompting the Fed to hold steady in 2026 after three late-2025 cuts, with some risk the next move is higher. Job growth slowed sharply (just 116,000 jobs added in all of 2025, the smallest non-recession total since 2003), unemployment held at 4.3%, and 2026 GDP forecasts were trimmed to roughly 2.2%. National Retail Fundamentals The structural backdrop remains as favorable as it has been in years, even with first-quarter seasonal noise. CoStar reports national vacancy of 4.4% and availability holding at ~4.8% within 20 bps of the late-2023 all-time low and well below the 5.3% long-term average. Net absorption turned negative (~4 million SF, the third contraction in five quarters) on a seasonal move-out spike to ~103 million SF, amplified by batch and momand-pop closures. But the softening was seasonal, not structural: move-ins topped 90 million SF, leasing exceeded 54 million SF (the strongest since early 2024), and time-to-lease held near cyclical lows. Supply remains the most powerful tailwind. Under construction volume sits in the low-60-million-SF range, a multi-decade low, as elevated costs confine new activity to pre-leased pads and build-to-suit; roughly 40% of available space is two-star or below and less than a quarter of inventory is 21st-century, leaving quality space genuinely scarce. That scarcity shows directly in the spreads landlords reported: 41.8% new / record 21.3% renewal (27.0% blended) at Brixmor, a record 37.9% inline new-lease spread at Phillips Edison, 50% GAAP new-lease spreads at Acadia, and a 24.3% straight-lined spread near a record at Regency. Asking-rent growth moderated to ~2% (average just under $26.00/SF), though net effective rents are outpacing asking on lower TI packages and five- and ten-year reset spreads remain near multi-decade highs. Sun Belt metros post 3%-5% gains and a band of Midwestern markets has emerged as an outperformer, while coastal Los Angeles and San Francisco run flat to negative. Transaction markets keep recovering: Q1 sales volume rose 31% year-over-year the strongest opening quarter on record ex-2022 with cap rates broadly stable and a slight downward bias. CoStar’s Net Lease report (latest edition Q1 2026) showed the median net lease cap rate ticking down 10 bps to 6.3%, its first decline in over two years, against a 4.3% ten-year Treasury; QSR is tightest (~5.8%) and dollar stores widest (~7.2%). Open-Air & Shopping Center REIT Performance Operating metrics across the open-air group remain extraordinary, and several REITs raised full-year guidance despite the choppier macro. Regency Centers (REG) posted 4.4% same-property NOI growth (8.4% total NOI) and $1.20 Nareit FFO per share, reaffirming $4.83-$4.87 for the year and total NOI growth above 6%; its sector-leading development platform carries ~$635 million in process at a ~9% blended yield, and February’s $450 million 4.50% notes priced at the lowest credit spread in company history, with leverage at 5.2x and the pipeline self-funded. Brixmor (BRX) grew same-property NOI 6.4% and raised full-year FFO to $2.34-$2.37 and NOI growth to 4.75%-5.50%; leased occupancy reached 95.1%, blended spreads hit 27.0% on record 21.3% renewals, and the signed-but-not-commenced pipeline grew to $66.7 million ABR at a record $24/SF. New CEO Brian Finnegan cited the strongest tenant credit in company history and traffic up 3.5%. Kimco (KIM), the largest name at ~100 million SF, grew FFO 4.5% to $0.46 and raised guidance to $1.81-$1.84 even as Q1 same-property NOI growth of 1.7% marked the expected 2026 low point (prior-year bankruptcies, notably American Signature); 96.3% occupancy sits near a record, a 410-bps leased-to-economic spread embeds $77 million of future ABR, and 5.2x leverage is its best on record. Phillips Edison (PECO) again showed the resilience of grocery-anchored ‘everyday retail,’ with 3.5% same-center NOI growth, $0.69 Core FFO per share (up 6.2%, guidance raised to $2.72-$2.78), sector-leading 97.1% occupancy, and a record 37.9% inline new-lease spread; CEO Jeff Edison framed the model as ‘more alpha with less beta,’ with ~74% of rents necessity-based. Federal Realty (FRT) stood apart on its coastal mixed-use platform 10.6% per-share growth in both Nareit and Core FFO to $1.88, comparable POI up 4.7%, and a raised $7.46-$7.55 outlook (6.3% growth) while extending the industry’s longest dividend-growth record to 58 years and signing a Q1-record 649,078 SF at 13% cash / 23% straight-line spreads; a Q4 FFO step-up is locked in as signed leases commence in October. Acadia (AKR) validated its street-retail strategy with 5.9% REIT Portfolio same-property NOI growth (street/ urban +7.0%) and $0.30 FFO As Adjusted per share (up 11%), completing over $600 million of investments year-to-date with no equity issued, entering Worth Avenue and Newbury Street, and signing new leases at 50% GAAP spreads. Net Lease & Capital-Recycling REIT Performance The net lease group is equally constructive, differentiated by scale, credit, and external-growth pace. Agree Realty (ADC) delivered $1.14 AFFO per share (up 7.9%, its best quarterly growth since Q2 2022) and reaffirmed $4.54-$4.58, investing ~$424 million across 100 properties at a 7.1% cap rate. Its largest quarterly volume since 2022 at 99.7% occupancy, with a fortress balance sheet at 3.2x pro forma leverage and ~65.4% of ABR from investment-grade tenants; CEO Joey Agree called the company ‘never better positioned,’ and pharmacy exposure is down to 3.5% of ABR from over 40% historically. NETSTREIT (NTST) is the higher-growth story: AFFO rose 6.3% to $0.34, full-year net investment guidance was raised to $550-$650 million (from $350-$450 million), and Q1 brought $239 million of investments at a 7.5% blended yield. Occupancy was 99.9% and returned to 100% in April after a former Big Lots was backfilled with a TJ Maxx at a 20%-plus rent increase; with 3.2x adjusted leverage and 58.3% of ABR from investment-grade or investment-grade-profile tenants, it retains substantial dry powder in a market it calls ‘extremely fragmented and rife with opportunities. Realty Income (O) operates at a different scale. $1.13 AFFO per share (up 6.6%), guidance raised to $4.41-$4.44, and 2026 investment volume lifted to $9.5 billion (from $8.0 billion) on $2.8 billion invested in Q1 at a 7.1% yield, nearly balanced U.S./ Europe. The bigger story is strategic: a $1.0 billion Apollo private-capital JV and a $1.7 billion Core Plus Fund cornerstone raise mark a shift toward a multichannel institutional model; same-store rent grew 0.8% (theater drag) and the company logged its 114th straight quarterly dividend increase. Kite Realty (KRG) ran a capital-allocation playbook: 3.6% same-property NOI growth and affirmed $2.06$2.12 Core FFO, but the story was upsizing its buyback to $600 million and repurchasing ~6.0 million shares for $152.3 million in Q1 (part of $400 million across 2025-2026) at an FFO yield wider than the cap rates on assets sold. Arbitraging a persistent public-private valuation gap, with a possible special dividend if planned 1031 Acquisitions fall short. Site Centers (SITC) remains in wind-down after the late-2024 Curbline spin-off, holding no earnings call or guidance; net income was $0.02 per share and Operating FFO a $(0.04) loss as the portfolio shrank to 16 centers. It sold ~$85.6 million of assets year-to-date plus a $20.8 million JV interest, ended with $193.5 million of cash and no consolidated debt, and now centers its value on resolving the DTP joint venture (20%-owned, 10 assets, 93.7% leased, $380.6 million mortgage maturing January 2029). Risks, Outlook, & Synthesis The first quarter sharpened several risks. Net absorption turned negative (the third contraction in five quarters) and CoStar expects uneven near-term fundamentals as retailers navigate normalized sales and higher costs, with sensitivity to renewed closures, mid-tier refinancing strain, and rising small-tenant closures. The macro overlay is less benign than at year-end: the Middle East conflict has lifted energy prices and inflation, the Fed has paused with some risk of a higher path, job growth has slowed, and 2026 GDP forecasts are down to ~2.2%. Conditions that disproportionately strain the lower-income consumer behind value formats. At the REIT level, the common headwind is refinancing legacy low coupon 20202022 debt, which is suppressing FFO growth at Kimco, Federal Realty, and Realty Income even amid excellent operations. Federal Realty refinanced $400 million of 1.25% notes this quarter, and idiosyncratic items like the American Signature bankruptcy briefly weighed on Kimco’s occupancy. The synthesis is one of durable structural strength overlaid with sharper tactical caution than a quarter ago. Supply near multi-decade lows, persistent demolitions, and scarce quality space should sustain landlord pricing power well into the decade, and demand keeps shifting toward the service, necessity, and value formats. Balance sheets are in excellent shape with Agree and NETSTREIT near 3.2x adjusted leverage, Kimco at its best level on record (5.2x), high investment-grade tenant concentrations, and minimal near-term maturities. Signed-not-open pipelines across Kimco ($77M), Brixmor ($66.7M), Regency ($42M), Kite ($36M), Federal Realty (~$36M through 2027), and Acadia ($10.5M) represent hundreds of millions of future rent that will mechanically convert over coming quarters and much of the group raised full-year guidance despite the softer macro. With transaction volume up 31% year-over-year, cap rates stable to slightly lower, and net lease cap rates declining for the first time in over two years, the sector remains as well positioned as at nearly any point post-financial-crisis, even if Q1 2026 was a more bifurcated, seasonally softer chapter than the blowout close to 2025.

Los Angeles, CA Industrial Market Report Q2 2026

The Los Angeles industrial market moved further into recovery in the second quarter of 2026, with vacancy easing to 6.5% as record-setting leasing activity outpaced new construction. Anchored by the Port of Los Angeles and Long Beach, the nation’s largest port complex, Los Angeles remains one of the most important industrial markets in the country even as population declines, softer import volumes, and elevated interest rates continue to weigh on near-term demand. Key Findings: Los Angeles Industrial Market Q2 2026 Vacancy remains elevated despite improving leasing fundamentals. Vacancy reached 6.5% as new supply and uneven demand pressured occupancy. Leasing activity hit a record high, with net absorption returning positive following a weak first quarter of 2026. Rents are still declining, but the pace of correction is slowing. Average asking rents fell 4.5% year over year and are down more than 20% from their peak. Landlords continue to offer concessions to attract tenants. Capital is returning to the market as financing conditions improve. Institutional investors and REITs remain active buyers. Limited future construction and expectations for declining vacancy in 2027 are supporting renewed investor confidence. Los Angeles Industrial Market By the Numbers Source: CoStar Group, Inc. Sales Volume: $1.3 billion Asking Rent Per SF: $16.90 Vacancy Rate: 6.50% Rent Growth: -4.50% year over year Average Cap Rate: 5.80% Average Price Per SF: $308 Under Construction: 3.1 million SF Delivered: 263,000 SF Net Absorption: 1.1 million SF Los Angeles County remains one of the nation’s largest and most diversified economies, supported by global trade, entertainment, aerospace, technology, manufacturing, and tourism. While the region has experienced a population decline over the last five years and ongoing affordability challenges, its deep labor pool, world-class universities, and concentration of major employers continue to support long-term economic fundamentals. Industrial Demand Rebounds As New Supply Slows Demand improved across the Los Angeles industrial market during the second quarter, although the recovery remains uneven. Nearly 950 new leases were signed, with leasing volume surpassing 12 million square feet, the highest quarterly total on record. Tenant move-ins exceeded move-outs, resulting in 1.1 million square feet of positive net absorption after more than 3 million square feet of negative absorption in the first quarter. Limited deliveries of just 263,000 square feet helped push vacancy down to 6.5%. Although population declines, softer import volumes, and elevated interest rates continue to weigh on demand, active leasing, declining sublease availability, and a constrained construction pipeline suggest the market is steadily moving toward a more balanced supply-demand environment. Absorption, Deliveries, and Vacancy. Source: CoStar Group, Inc. Los Angeles Industrial Rent Trends As tenants gained greater negotiating leverage, average asking rents declined to $16.90 per square foot, down 4.5% year over year. Rent declines have been most pronounced in port-oriented submarkets such as Long Beach and Carson, while the San Fernando Valley, San Gabriel Valley, and City of Industry have seen more modest pricing adjustments due to limited modern inventory. Although rents remain below recent peaks, the pace of decline has slowed, suggesting pricing is beginning to stabilize as leasing fundamentals improve. Asking Rents Per SF & Rent Growth. Source: CoStar Group, Inc. Construction Activity Slows Across Los Angeles Industrial Submarkets Los Angeles’ development pipeline has contracted significantly from recent highs as developers respond to softer tenant demand and elevated vacancy. Approximately 3.1 million square feet remains under construction, with roughly 40% of the pipeline preleased, reflecting a more cautious approach to new development. Construction activity is concentrated in submarkets with limited modern inventory, including Long Beach, the City of Industry, Santa Fe Springs/La Mirada, Santa Clarita Valley, and Antelope Valley. Most projects range between 100,000 and 250,000 square feet, helping limit future supply growth and support long-term market fundamentals. Construction Starts. Source: CoStar Group, Inc. Los Angeles Industrial Investment Sales Investment activity remains healthy despite ongoing pricing adjustments across the Los Angeles industrial market. Sales volume exceeded $1.3 billion in the second quarter as financing conditions improved and bid-ask spreads narrowed. Average pricing for institutional warehouse transactions remained near $325 per square foot, while the broader market averaged $308 per square foot. Cap rates have expanded into the mid-5% to 6% range, reflecting higher borrowing costs and softer rent growth, though institutional investors and REITs continue to account for roughly 30% of acquisition activity. Looking ahead, constrained supply, improving occupancy fundamentals, and Los Angeles’ high barriers to entry are expected to support values over the long term, though elevated vacancy and slower trade activity remain near-term risks. Investment Volume. Source: CoStar Group, Inc. Performance by Los Angeles Industrial Submarket Source: CoStar Group, Inc. Metric Central/Mid-Cities South Bay/Westside San Fernando Valley Los Angeles County Vacancy 6.4% 7.4% 5.9% 6.5% Asking Rent (SF) $15.75 $18.40 $19.60 $16.90 Rent Growth -4.6% -4.5% -4.4% -4.5% Deliveries (SF) 70K 88K -24K 263K Starts (SF) 160K 180K 0 342K Under Construction (SF) 877K 791K 794K 3.1M Absorption (SF) -173K 627K -586K 1.1M Transaction Volume ($) $557M $235M $228M $1.3B Average Cap Rate 5.6% 6.0% 5.4% 5.8% Average Price Per SF $297 $329 $345 $308 The San Fernando Valley continues to post the strongest occupancy fundamentals with the region’s lowest vacancy rate (5.9%) and highest average asking rents ($19.60/SF), reflecting its limited supply of modern industrial product. Central/Mid-Cities remains the market’s largest investment hub, generating $557 million in sales volume during the quarter. The South Bay/Westside remains the region’s primary port-oriented industrial hub and posted positive absorption during the quarter despite carrying the market’s highest vacancy rate.

Van Nuys Multifamily Sales Activity Update

The Van Nuys multifamily market has remained resilient through the first half of 2026, continuing to attract strong investor interest. Despite elevated interest rates and ongoing economic uncertainty, buyers have actively pursued well-located apartment assets that offer rental upside, operational efficiencies, and long-term redevelopment potential. Since the beginning of the year, Van Nuys has recorded approximately $94 million in multifamily sales across 11 transactions, demonstrating that capital continues to target quality apartment investments throughout the submarket. This steady transaction activity reflects investors’ confidence in Van Nuys’ long-term fundamentals and rental housing demand. Value-add and mid-sized apartment properties have driven much of the market’s sales velocity. Buyers continue to compete aggressively for assets with below-market rents, ADU opportunities, and operational improvement potential. Transactions this year have ranged from smaller eight-unit properties to institutional-scale apartment communities, with average pricing reaching approximately $185,000 per unit across surveyed sales. Workforce housing assets have generally traded between $120,000 and $210,000 per unit, while renovated and larger-scale properties have achieved stronger pricing. Several premium transactions significantly exceeded these benchmarks, underscoring investors’ willingness to pay a premium for desirable locations, renovated interiors, upgraded building systems, and long-term repositioning opportunities. Even amid tighter lending conditions, well-maintained properties continue to attract multiple offers and meaningful buyer interest. Market cap rates have averaged approximately 5.6%, while GRMs have generally ranged between 10 and 12, depending on asset quality, location, and rental upside. Larger assets continue to attract institutional capital, highlighted by the recent $69 million sale of the 390-unit apartment community at 15454 Sherman Way in Van Nuys. At the same time, private investors remain active buyers of 6- to 20-unit apartment buildings throughout the neighborhood. This sustained demand reflects the broader view that Van Nuys remains one of Los Angeles’ most stable and supply-constrained rental housing markets. Another notable trend this year is the premium buyers are placing on properties with completed capital improvements. Assets featuring upgraded electrical systems, completed soft-story retrofits, new roofing, renovated common areas, and improved unit interiors have consistently outperformed competing listings in both pricing and time on market. As construction costs remain elevated and entitlement timelines continue to lengthen across Los Angeles, investors increasingly favor properties that minimize future capital expenditures while still providing operational upside and immediate cash flow. For multifamily owners throughout Van Nuys, current market conditions present an attractive opportunity to evaluate a potential sale. While cap rates have expanded from the historically compressed levels of prior years, buyer demand remains healthy, inventory remains limited, and well-positioned assets continue to achieve strong valuations. Many investors are actively seeking acquisition opportunities ahead of potential interest rate reductions and increased competition. Owners considering a sale over the next several years may benefit from exploring current market pricing while capital remains available and investor demand for quality Van Nuys multifamily assets continues to hold firm.

Daniel Withers

Executive Vice President & Senior Director

6/30/26

The Revitalization of Urban Retail

Urban retail is entering a period of reinvention. Across major metropolitan markets, spaces that once struggled with vacancy or declining foot traffic are finding new life through creative repositioning and adaptive reuse. Shifts in consumer behavior, the growth of e-commerce, and evolving lifestyle preferences have reshaped how people interact with retail environments, particularly in dense urban cores. For many properties, these changes initially presented challenges. Traditional retail formats built for an earlier era of shopping have had to compete with shifting demand and changing tenant requirements. Yet those same pressures are now driving a wave of innovation. Owners, developers, and city leaders are increasingly reimagining underperforming retail assets, transforming them into dynamic spaces that better reflect how people live, work, and gather today. In many cities, this transformation represents urban retail’s “second act”, one defined not by traditional storefronts alone, but by mixed-use formats, experiential tenants, and community-oriented environments. The State of Urban Retail Urban retail markets today reflect a complex yet improving landscape. While some legacy retail corridors continue to work through elevated vacancy or outdated layouts, many are stabilizing as landlords adopt more flexible leasing strategies and rethink how space is utilized. Several structural shifts have contributed to this reset. The growth of online shopping has reduced reliance on traditional brick-and-mortar retail for routine purchases. At the same time, urban populations, particularly younger demographics, are demonstrating a renewed preference for physical retail in specific contexts. According to information from RetailDive, nearly three-quarters of Gen Z consumers shop in-store at least once a week, and a majority view in-person shopping as an experience rather than a purely transactional activity. This shift is especially pronounced in categories such as beauty and luxury, where Gen Z shoppers show a strong preference for in-person purchasing, valuing immediacy, product interaction, and the overall shopping environment. At the same time, urban consumers are increasingly seeking experiences, dining, wellness, and social environments that cannot be replicated digitally. As a result, the role of physical retail is evolving. Rather than serving primarily as a transactional environment, urban retail is increasingly functioning as a place for engagement and community interaction. This shift is prompting landlords and developers to rethink how retail space can better align with modern consumer expectations, emphasizing experience, convenience, and seamless integration with digital behaviors. Repositioning and Adaptive Reuse Strategies Two strategies central to urban retail’s evolution have emerged: repositioning and adaptive reuse. Repositioning typically involves updating an existing retail property to better align with current demand. This may include renovating storefronts, modernizing layouts, curating new tenant mixes, or incorporating amenities that attract experiential retailers and service-oriented tenants. Adaptive reuse, by contrast, often entails a more fundamental transformation, repurposing retail space into an entirely different use or integrating it into a broader mixed-use environment. Common strategies include: Mixed-use integration: Retail spaces are increasingly being combined with residential, office, hospitality, or entertainment uses, creating built-in customer bases and activating properties throughout the day. This approach creates consistent foot traffic and extends activity beyond traditional retail hours. Experiential and service-oriented tenants: Fitness studios, specialty food concepts, medical and wellness services, and entertainment venues are helping redefine how retail environments function. The result is a shift from transactional retail to destination-based experiences that increase dwell time and repeat visits. Flexible and short-term concepts: Pop-up shops, temporary activations, and short-term leases allow landlords to test new concepts while keeping spaces active and engaging. Reduces leasing risk while enabling rapid adaptation to changing consumer preferences. Together, these approaches allow urban retail properties to evolve alongside consumer demand rather than compete directly with online alternatives. Market Leaders and Hotspots Several major urban markets are demonstrating how repositioning strategies can successfully revitalize retail districts. Cities such as New York City, Chicago, Los Angeles, and Miami have seen renewed activity in formerly underutilized retail corridors as developers introduce mixed-use concepts and experiential tenants. Successful markets often share several characteristics. Population density and strong residential growth provide a reliable customer base, while access to public transit and walkability support consistent foot traffic. Municipal support, including zoning flexibility, redevelopment incentives, and public-private partnerships, can also play an important role in accelerating revitalization efforts. Developer innovation is equally important. Projects that thoughtfully combine retail with residential, hospitality, or entertainment uses are demonstrating how urban retail can function as part of a broader ecosystem rather than as a standalone asset class. Key Considerations for Execution While the opportunity for repositioning is significant, executing these strategies in urban environments requires careful planning and alignment across multiple stakeholders. Financial feasibility remains a key consideration, particularly in markets where construction costs, entitlement timelines, and land values remain high. Developers must balance the capital required for redevelopment with realistic projections for tenant demand and long-term revenue. Regulatory processes can also shape project timelines. Zoning approvals, permitting requirements, and historic preservation considerations often require coordination with local governments and community stakeholders. Equally critical is tenant curation. Successful repositioning efforts typically focus on building a complementary tenant mix that encourages repeat visits and sustained engagement. Retailers, restaurants, wellness providers, and entertainment venues can work together to create an ecosystem that keeps properties active throughout the day and evening. Increasingly, developers are also measuring success through broader indicators such as foot traffic, community engagement, and placemaking impact, metrics that reflect retail’s evolving role in the urban environment. Navigating the Upside and the Unknowns As with any transformation, repositioning urban retail assets requires thoughtful execution. Projects that succeed are typically those that approach redevelopment with a clear understanding of local demand and long-term market dynamics. Capital investment must be carefully aligned with achievable outcomes, particularly in complex urban projects where construction and entitlement costs can be significant. Similarly, tenant strategies must reflect the needs and preferences of the surrounding community to ensure sustained engagement. The growing body of successful repositioning projects across major markets is providing valuable lessons for future developments. As developers gain experience with mixed-use strategies, experiential retail, and flexible leasing models, the industry is now better equipped to navigate potential challenges and unlock the full potential of these assets. Urban Retail’s Second Act Urban retail is entering a new phase defined by flexibility, experience, and deeper integration with surrounding uses. Traditional retail formats are giving way to more adaptive concepts. Emerging Retail Models Micro-retail enabling local entrepreneurship Experiential destinations blending retail, dining, and entertainment Mixed-use environments integrating retail with living and working These models reflect a broader shift toward spaces that prioritize engagement, convenience, and a sense of place. Technology and data analytics will also play a growing role in helping landlords understand customer behavior, optimize tenant mixes, and activate spaces more effectively. Urban retail’s transformation is still unfolding, but the direction is increasingly clear. Across many cities, properties once considered underperforming are being reimagined through creative redevelopment and strategic reuse. Rather than signaling the decline of urban retail, these changes are revealing its ability to adapt. By embracing mixed uses, experiential concepts, and community-oriented design, developers and investors are helping urban retail enter a new chapter, one that reflects how people live, shop, and gather today. For developers, investors, and city leaders alike, the opportunity lies not simply in filling vacant storefronts, but in rethinking what urban retail can become in its next act.

Los Angeles, CA Multifamily Market Report Q1 2026

Los Angeles’ multifamily performance in Q1 2026 reflects continued softness, with vacancy reaching 5.6% as new supply outpaced demand. Approximately 1,100 units were absorbed during the quarter, trailing the roughly 2,300 units delivered, which contributed to a net increase in available inventory. Asking rents averaged about $2,300 per unit, but rent growth remained flat at 0%, highlighting limited pricing power and the need for concessions to maintain occupancy. Market conditions remain bifurcated, with higher-end properties experiencing the greatest pressure due to elevated supply levels, while mid-tier assets demonstrate relatively more stability. Affordability challenges and shifting renter preferences continue to dampen demand, resulting in a market that is stabilizing but still operating below peak performance levels. Key Findings New deliveries have outpaced demand, resulting in modest absorption and continued leasing pressure, particularly among Class A product. Multifamily fundamentals in Los Angeles remained soft in Q1 2026, with flat rent growth and elevated vacancy reflecting ongoing supply-demand imbalance. Investment activity has stabilized at lower pricing levels, with cap rates holding steady as investors adjust to a higher interest rate environment. Los Angeles Multifamily Supply & Demand Dynamics Source: CoStar Group, Inc. Los Angeles Demographics Source: CoStar Group, Inc. Unemployment Rate: 5.8% Households: 3,475,543 Current Population: 9,677,403 Median Household Income: $94,934 The Los Angeles economy entered 2026 with mixed momentum, as modest job growth and structural challenges continued to weigh on housing demand. Employment trends have been relatively flat overall, with gains in sectors such as education, healthcare, and hospitality offset by softness in professional services, trade, and other cyclical industries. Despite these pressures, the region benefits from a diverse economic base anchored by entertainment, trade, tourism, and higher education, though some of these sectors are experiencing volatility due to labor disputes, global competition, and trade fluctuations. While upcoming global events and tourism activity may provide incremental support, overall economic conditions remain subdued, contributing to cautious renter behavior and slower multifamily demand growth. Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Major Upcoming Events Hosted in LA Source: CoStar Group, Inc. 2026: FIFA World Cup, NBA All-Star Weekend 2027: Super Bowl LXI 2028: Olympics & Paralympic Games Los Angeles Multifamily Construction Construction activity remains elevated yet gradually moderating as development conditions become more restrictive. Approximately 19,400 units are currently under construction, representing a sizable pipeline that will continue to impact market balance in the near term. Deliveries totaled about 2,300 units in Q1 2026, adding to existing supply pressures, particularly in the luxury segment where most new development is concentrated. However, construction starts have slowed in response to higher financing costs and tighter capital availability, which should reduce future supply volumes over time. Regulatory changes aimed at easing development constraints may support longer-term activity, but near-term impacts are limited. Units Construction Starts Source: CoStar Group, Inc. Units Under Construction Source: CoStar Group, Inc. Los Angeles Multifamily Sales Investment activity remained subdued yet stable, with $2.0B in quarterly sales volume, pricing at $355K per unit, and cap rates holding at 5.0%. Transaction volume over the past 12 months totaled $7.9B, reflecting a modest year-over-year decline as soft fundamentals, elevated vacancy, flat rent growth, and the ongoing impact of Measure ULA continue to restrain deal flow. While overall activity remains well below pre-pandemic and 2021–2022 peaks, institutional investors have become more active, accounting for a growing share of transactions and signaling increased interest in repriced assets. Market sentiment suggests pricing has bottomed, with cap rate expansion largely complete; however, a meaningful recovery in values is expected to be gradual, with prior peak pricing levels unlikely to return until 2029 or later. Sales Volume Source: CoStar Group, Inc. By the Numbers Q1 2026 | Source: CoStar Group, Inc. Sales Volume: $1.4B Price Per Unit: $350K Cap Rate: 5.1% Vacancy Rate: 5.6% Rent Growth: 0% Asking Rent Per Unit: $2.3K Units Under Construction: 19.4K Units Delivered: 2.3K Units Absorbed: 1.1K

Southern California Gas Station Market: 2025 Review & 2026 Outlook

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

Tarik Fattah

Associate Vice President

4/28/26

California Self-Storage Market Report 2026

California’s self-storage market is navigating a period of tempered performance as advertised rates face downward pressure from shifting migration patterns and persistent supply in select metros. While the state has historically benefited from high-density living and smaller than average housing units, recent data reveals a cooling trend, with year-over-year rate growth for main unit types turning negative in major hubs like San Diego, San Francisco, and Los Angeles. Despite this broader pullback, certain markets show signs of stabilization. For instance, San Jose maintained a flat 0.0% month-over-month rate change in January 2026, supported by one of the lowest new supply pipelines in the country at just 1.0% of existing inventory. Nationally, climate-controlled units continue to outperform non-climate-controlled counterparts, a trend mirrored in California where the performance gap is helping to absorb newer deliveries. Los Angeles The Los Angeles market is characterized by constrained supply and a significant pullback in sales activity following major portfolio deals in previous years. As of January 2026, the under construction pipeline stands at 2.6% of existing inventory, a slight decrease from the 2.8% recorded in December 2025. While the market recorded a minor 0.4% year-over-year decline in advertised rates, it remains one of the highestpriced regions in the country with an average street rate of $27.18. The lack of buildable space in coastal urban areas continues to drive long-term fundamentals. Rental Rates Source: Yardi Matrix, Real Capital Analytics 10 x 10 Average Street Rate $27.22 Month-Over-Month Change -0.10% Year-Over-Year Change -0.40% Under Construction by Percentage of Inventory 2.80% 12-Month Sales Volume $485M Los Angeles Sales Volume Source: Real Capital Analytics Inland Empire Emerging as a leader for population growth in Southern California, the Inland Empire benefits from more favorable housing supply-demand dynamics compared to neighboring Los Angeles. The market remains relatively stable, posting a marginal 0.2% year-over-year rent decrease and a small 0.1% month-over-month rate increase in January 2026. With an under construction pipeline representing only 1.7% of inventory, the metro maintains a healthy balance between new deliveries and household formation. Rental Rates Source: Yardi Matrix, Real Capital Analytics 10 x 10 Average Street Rate $17.28 Month-Over-Month Change 0.10% Year-Over-Year Change -0.20% Under Construction by Percentage of Inventory 1.70% 12-Month Sales Volume $146M Inland Empire Sales Volume Source: Riverside & San Bernadino | Real Capital Analytics San Diego San Diego’s self-storage demand is bolstered by household formation that has historically outpaced the state average. The market is currently navigating a 1.3% year-over-year decline in advertised rates as it absorbs existing inventory. However, the new supply pipeline remains disciplined, with projects under construction accounting for only 1.6% of stock. A high concentration of Millennials and Gen Z in the metro suggests that future family creation will continue to act as a primary catalyst for storage utilization. Rental Rates Source: Yardi Matrix, Real Capital Analytics 10 x 10 Average Street Rate $23.52 Month-Over-Month Change 0.00% Year-Over-Year Change -1.30% Under Construction by Percentage of Inventory 1.60% 12-Month Sales Volume $67M San Diego Sales Volume Bay Area The Bay Area continues to see some of the tightest self-storage space-per-person ratios in the state. High retail sales per capita and exceptionally small average apartment sizes necessitate the use of off-site storage for consumer goods. In January 2026, the market showed stability with 0.0% month-over-month change in street rates, even as it faced a 0.7% year-over-year decline. Development remains highly restricted, with only 1.0% of existing inventory currently under construction. Rental Rates Source: Yardi Matrix, Real Capital Analytics 10 x 10 Average Street Rate $26.03 Month-Over-Month Change 0.00% Year-Over-Year Change -0.70% Under Construction by Percentage of Inventory 1.00% 12-Month Sales Volume $403M Bay Area Sales Volume

Shane Avera

Vice President

4/7/26

The Return of Risk-Based Multifamily Valuations

Higher interest rates. Rent caps that limit increases. Rising insurance premiums. These forces aren’t just background noise in today’s multifamily market—they suggest that markets are once again factoring risk back into pricing. Valuations now hinge on the volatility of a property’s underlying cost structure and its flexibility to grow revenue. Before COVID, pricing followed a predictable hierarchy, as cheap f inancing and aggressive rent growth pushed values higher. In turn, cap rate spreads compressed, reducing price dispersion across quality tiers. Today, that pricing logic has eroded into a renewed focus on risk-based pricing and wider dispersion amongst asset classes and location fundamentals. Cap rates have held firm amid higher expenses, regulatory limits, and more disciplined rent-growth assumptions. CoStar Group Inc.’s forecast projects modest movement with cap rates stabilizing at 6% through 2026, signaling that the valuation reset is being priced into fundamentals rather than a quick return to cheap debt. Cap rates remain tiered by asset quality, with Class A and B assets clustering in the low-to-mid 5% range while Class C properties often price around 6%. Uniform multifamily pricing is over—dispersion is back. What’s Driving the Reset? The recalibration of valuations between 2023 and 2026 centralizes on the disruption of NOI. Insurance instability, above-yield borrowing costs, and stringent rent control each distinctly strain income performance, widening the bandwidth of operating outcomes investors must price, and pushing cap rate dispersion across asset quality and markets. Insurance Shock and NOI Margin Compression Insurance costs have become a defining variable. Premiums rose about 28% year-over-year as of early 2024, according to Yardi Matrix’s national multifamily expense data, which showed a cumulative increase of 129% since 2018. Premiums remain structurally elevated relative to pre-pandemic levels, with projections tapering to 3-6% through 2026. Above-Yield Debt Keeps Pricing Conservative Wider borrowing spreads have translated into more conservative pricing, often requiring greater yield cushion and/or price adjustment, and cap rates have been slow to compress as investors prioritize cash-flow certainty over rate-cut expectations. Even with continued rate cuts expected by late 2026, pricing remains anchored to property-level risk and NOI sustainability under higher borrowing costs. As a result, negative-leverage deals should continue to fade throughout 2026, with investors demanding durable yield. Myth: Value-add pricing will normalize once rates fall. Reality: The value-add spread is being driven less by rates and more by execution uncertainty, including higher all-in improvement costs and less reliable rentpremium capture. Pricing Impact: Investors are assigning a larger risk premium to transitional business plans, keeping value-add yields wider and basis expectations tighter. Rent-Controlled vs. Market-Rate Rents and Revenue Rigidity Rent regulation introduces a structural mismatch between rising operating costs and capped revenue growth. Hard rent ceilings prevent owners from adjusting income to keep pace with inflation, tax increases, or insurance expenses, creating a predictable drag on scalable cash flow. Concurrently, rent-controlled properties typically trade at liquidity and pricing discounts, reflecting the regulatory risk embedded in their operating profiles. Even modest rent resets allow owners to absorb cost pressures better, giving these properties a measurable pricing premium in today’s environment. The divide between regulated and unregulated income streams has become one of the most persistent valuation gaps between 2023 and 2026. Revenue flexibility has become a central factor in valuation. Market-rate assets can adjust rents to absorb higher taxes, insurance, and operating costs, preserving NOI stability and attracting tighter yields. Rent-controlled properties, by contrast, face capped income growth while expenses continue to climb, creating a structural drag on long-term performance. Trepp Research shows that multifamily property values declined roughly 30% in New York City following HSTPA and that rent-controlled assets in Los Angeles and the San Francisco Bay Area trade at discounts to unrestricted peers, with Bay Area tenants staying up to 20% longer—slowing rent resets and revenue growth. Investors price these constraints with wider yields, lower liquidity, and deeper discounts. In 2026, investors continue to price this constraint through wider yields, lower liquidity, and deeper discounts. National Valuation Snapshot: Rent-Regulated vs. Market-Rate Source: CoStar Group, Inc. | Q4 2025 Rent-Regulated Cap Rate: 6.4% Sale Price / Unit: $171,927 Positioning: Trades at wider yields and discounted pricing due to regulated rent growth U.S. Market-Rate Cap Rate: 6.1% Sale Price / Unit: $233,197 Positioning: Higher pricing supported by rent-reset flexibility and deeper liquidity Rent-regulated multifamily trades at a 30 bps higher cap rate, which translates into 26% lower pricing per unit. The higher required yield compensates for restricted rent growth and limited rent reset flexibility, which constrain NOI upside and make it harder to absorb rising operating costs. Pricing Dispersion by Fundamentals Uniform pricing spreads have come and gone, and the market has returned to a tiered pricing structure. Investors are particularly meticulous, assigning substantial differences between asset quality, revenue flexibility, and geographic resilience. Class A vs. Class C Pricing differences between Class A and Class C assets are contingent on the stability of the property type. Class A properties tend to show more predictable NOI, lower operating expense volatility, and modern building systems that reduce unexpected capital needs. That stability supports tighter pricing and more consistent liquidity. At the opposite end of the spectrum, Class C assets are often characterized by aging infrastructure, longer repair cycles, elevated insurance exposure, and higher turnover rates, all of which introduce greater execution risk and greater performance variability. Investors now incorporate a broader risk premium in pricing. In 2026, investors continue to price this constraint through wider yields, lower liquidity, and deeper discounts. Myth: Class A and Class C spreads will tighten back to pandemic levels. Reality: Risk differentiation was temporarily muted between 2022 and 2024, when debt was cheap and aggressive growth assumptions compressed spreads across quality tiers. As that anomaly fades and the hierarchy of asset classes returns, RCA reports that the spread between Class A and Class C now ranges from 150 to 200 basis points, restoring a risk hierarchy more in line with historical norms. Pricing Impact: Spreads are likely to remain wider as long as operating costs and revenue outcomes remain volatile, particularly in Class C, where aging systems, insurance sensitivity, turnover, and capital expenditures introduce greater variability. National Multifamily Fundamentals By Class Class A Vacancy Rate: 11.1% Asking Rent: $2,165 Effective Rent: $2,131 Absorption Units: 48,024 Price Per Unit: $327,541 Cap Rate: 5.5% Class B Vacancy Rate: 8.1% Asking Rent: $1,611 Effective Rent: $1,595 Absorption Units: 7,114 Price Per Unit: $194,253 Cap Rate: 6.2% Class C Vacancy Rate: 6.1% Asking Rent: $1,360 Effective Rent: $1,351 Absorption Units: (7,432) Price Per Unit: $179,022 Cap Rate: 6.6% Suburban vs. Urban Markets Geographic fundamentals have also reasserted themselves in pricing. Suburban assets generally benefit from stronger household formation, steadier occupancy, and reduced concession pressure, supporting more defensible income profiles and steadier valuations. Urban assets face different dynamics, including slower rent growth, higher concession packages, elevated turnover, and increased competition from new supply in many core metros. These headwinds support wider yields and more conservative underwriting. The suburban-urban spread reflects investors’ focus on relative risk and transaction depth. CoStar data shows suburban cap rates modestly above urban levels, indicating investors may still require additional yield for suburban assets even when operating performance is more stable. Myth: Stabilized assets are insulated from volatility. Reality: Even Class A properties can see NOI pressure when rent growth stalls and operating costs move higher, limiting nearterm upside versus value-add execution. Pricing Impact: Investors increasingly underwrite wider going-in yield cushions for stabilized deals when expense uncertainty rises, widening dispersion versus assets with clearer NOI growth pathways. The widening gap between asking and effective rents, particularly as quality declines, underscores how concessions and price sensitivity are shaping real revenue outcomes, with weaker absorption in Class C reinforcing downside risk in lower-quality stock. Houston, The Livewire in Multifamily Valuation This Gulf Coast growth market illustrates how quickly multifamily pricing can separate when operating costs rise and supply accelerates, making it one of the most telling barometers for today’s valuation environment. Insurance Shock Premiums up 30-70% since 2022 (Source: FannieMae) Older assets are seeing 15-20% Operating Expenses vs. 8% national avg (Source: FannieMae) Class C assets absorb the steepest surcharges due to aging systems and elevated claims history New Supply Wave ~45,000 units projected to deliver from 2024-2026 (Source: CoStar Group, Inc.) Urban cores face the most extended lease-up timelines Concessions up 8–12% YoY across Class A in 2024-2025 (Source: FannieMae) Rent Fundamentals Effective rents flat to negative in several submarkets Renewal spreads compressing Rising vacancy in new deliveries Spread Behavior Apartment Loan Store Class A-Class C differential: 175-225 bps Suburban assets trade 50-100 bps tighter than urban Class C discounts deepest due to OpEx + CapEx exposure Investor Takeaways: Wide dispersion in NOI trajectories, Wider pricing cushions required, and Suburban stability priced at a premium Even with near-term pressure from supply and insurance-driven operating expenses, Houston’s long-term growth outlook remains intact. Population and job gains continue to expand the renter base, supporting demand as the current delivery wave works through lease-up. The New Multifamily Pricing Rulebook 1. Location Is About Variability, Not Glamour Suburban assets win because occupancy and concessions fluctuate less, not because they’re “hot” Urban assets face wider valuation ranges due to supply, turnover, and concession cycles 2. Cap Rate Floors Are Now Risk-Tiered Class A: stability benchmark Class B: execute and churn risk premium Class C: greater OpEx variability, CapEx burden, and turnover risk result in the widest cap rate levels 3. Stability Premiums Will Dominate Cap rate compression will be slow and uneven, as pricing is driven by operational risk, rather than macro relief The Class A/C spread remains structurally wide as aging stock absorbs higher insurance, CapEx, and turnover risk Pricing the Durable Multifamily pricing has shifted toward what can actually be defended at the property level. In an environment defined by cost pressure and uneven demand, valuations reward assets that keep income steady and expenses predictable, and penalize those with wider operating variance. Reading the market now requires focusing less on broad narratives and more on the mechanics that determine whether NOI holds or erodes. Looking ahead, the reset is likely to remain selective and spread-driven. Properties with flexible revenue, resilient systems, and stable tenant behavior will continue to command a clear pricing premium, while assets with heavier operating drift should face persistent valuation pressure and wider yields. Success in this cycle comes from aligning strategy with what is durable, measurable, and repeatable as the market continues to reprice risk.

Daniel Withers

Executive Vice President & Senior Director

3/19/26

New Construction Continues to Outperform the Resale Home Market

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

Stewart I. Weston

Executive Vice President

3/13/26

The Rise of Small-Bay Industrial

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

Belall Ahmed

Senior Associate

3/12/26

Sippin’ on California’s Coffee Market

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

Matthew Sundberg

Vice President & Associate Director

3/11/26

Inland South Bay, CA Multifamily Market Report 2025

The Inland South Bay, Gardena, Hawthorne, Lawndale, and Inglewood, continues to demonstrate resilient rental demand despite broader market volatility. These submarkets collectively contain over 3,000 multifamily properties with five or more units, making them one of the most active workforce housing corridors in Los Angeles County. Our latest report analyzes recent transaction data, investor behavior, and emerging risks and opportunities shaping the South Bay multifamily market. Key Trends Shaping the South Bay Multifamily Market Return of Private Capital Institutional capital has largely retrenched, while high-net-worth investors and family offices have re-emerged as the dominant buyer group in the South Bay multifamily market. The 2026 Loan Maturity Wave A significant volume of loans originated during the 2020–2021 low-rate cycle will mature in 2026, creating important refinance and disposition decisions for owners. Regulatory & Compliance Changes New regulations affecting rent increases, inspections, and operational requirements will continue to influence ownership strategies in the coming years. Why This Matters for South Bay Owners Recent market shifts are creating new strategic considerations for multifamily owners, including: Refinance vs. disposition decisions Changing cap rate expectations Evolving buyer demand Long-term operational strategies Strategic Questions South Bay Owners Are Evaluating in 2026 As the market transitions into the next phase of the cycle, many multifamily owners in the Inland South Bay are evaluating several key strategic questions: Should I refinance or consider selling ahead of the 2026 loan maturity wave? How have rising cap rates impacted the current value of my property? Is there an opportunity to reposition equity through a 1031 exchange? How will new regulatory requirements impact long-term operating strategy? Understanding how your property compares to current market benchmarks can provide valuable clarity when evaluating these decisions.

San Diego, CA Retail Development Report Q4 2025

The current leasing landscape across San Diego has become increasingly fragmented, characterized by intense competition for high-quality spaces even as older, mid-sized assets in legacy centers face persistent challenges. While big-box closures have pushed absorption into negative territory, vacancy rates have only edged slightly higher and remain historically stable, keeping overall market conditions near long-term averages. Meanwhile, rent growth has begun to moderate in response to rising availability; however, the combination of limited new construction and the ongoing trend of retail-to-residential redevelopment is effectively preventing a more pronounced softening of the market. San Diego Market Demographics Source: CoStar Group, Inc. Unemployment Rate: 4.7% Current Population: 3,314,677 Households: 1,195,666 Median Household Income: $113,294 San Diego Market Performance The San Diego retail sector ended 2025 with softening fundamentals as store closures outpaced absorption over the year. Vacancy rose to 4.5%, up 50 basis points year-over-year. The vacancy uptick has been concentrated in older power centers, neighborhood centers, and malls where closures have added to available inventory. Strip centers and general retail properties have remained stable, aided by smaller tenants and local demand. Despite the challenges, overall vacancy remains close to the long-term market average of 4.4%. Rent growth has moderated to 1.0% annually as landlords adjust to a more competitive leasing environment. Looking ahead, stable consumer demand and constrained supply are expected to support the backﬁlling of vacant space, keeping fundamentals within a balanced range through the near term. La Jolla Market Activity The overall La Jolla area posted stable performance with vacancy at 4.0% at the end of Q4 2025, a small uptick following around 2,000 square feet absorbed. Vacancy remains below its ﬁve- and 10-year averages, and is forecast to hold steady through 2026. Availability is similarly tight at 4.8%, with roughly 100,000 square feet on the market and no space under construction. Asking rents average $58 per square foot, reﬂecting 2.1% annual growth, outperforming the broader San Diego market despite moderating from historical trends. Development Overview La Jolla began 2026 with 10 more retail vacancies than Paciﬁc Beach and Ocean Beach combined. Village Streetscape, a new development, will bring La Jolla landlords more leverage in achieving competitive price per square foot rates and encourage more foot trafﬁc to support local businesses. Pacific Beach Market Activity Paciﬁc Beach retail maintains stable fundamentals , with vacancy declining 1.8% year-over-year to a tight 2.5%, driven by 55,000 square feet of net absorption and minimal new deliveries. Vacancy now sits well below its ﬁve- and 10-year averages and is projected to compress further by year-end. Availability remains limited at 3.0%, with 94,000 SF on the market and no space under construction. Asking rents average $41.00 per square foot, reﬂecting modest 0.6% annual growth, trailing the broader San Diego market but expected to accelerate through 2026. Development Overview 4450 Lamont Street: 14-unit, mixed-use development planned and approved. Rose Creek Village: 60-unit affordable housing project serving low-income families and veterans. It broke ground on Garnet Avenue and is expected for completion by 2027. Paciﬁc Beach owners have stated they are increasingly interested in adding residential components to existing retail properties. Ocean Beach Market Activity The Ocean Beach area maintained solid momentum, with vacancy declining 0.8% year-over-year to 2.7%, supported by 40,000 square feet of net absorption and limited new deliveries. Vacancy remains below its ﬁve- and 10-year averages and is expected to hold near current levels through year-end. Availability stands at 3.7%, with 170,000 square feet on the market, while construction activity is minimal at 2,900 square feet. Asking rents average $38.00 per square foot, reﬂecting 1.0% annual growth, slightly trailing the broader San Diego market but remaining positive overall. Development Overview Matthews™ secured two leases in the last six months here and leased an additional 3,000-square-foot space on the second ﬂoor of 4967 Newport Avenue. Strong privately-owned businesses and popups are taking advantage of lower rents and a more stable local customer base, shifting into the area from northern markets. Transaction Activity La Jolla Matthews™ facilitated a purchase of a property on Girard Avenue for $2.2 million and are taking on the leasing assignment. Matthews™ also put Free People on the main intersection of Girard Avenue and Prospect Street. The Matthews™ team also sold the corner of Pearl Street for $2.6 million and executed a lease with Roam Hardware. Pacific Beach 960 Turquoise Street: The Turquoise Tower developer out of Los Angeles recently acquired the French Gourmet site for $7 million. While there are no formal plans, ﬁlings, or construction underway, market assumptions have contemplated a signiﬁcantly larger project that is potentially up to three times the existing footprint. This reﬂects longer-term investor interest along the corridor. The Matthews™ team executed 18 Paciﬁc Beach leases in 2025. However, summer 2025 saw more vacancies in Paciﬁc Beach than it had in over a decade. 61% of on-market retail from summer 2025 was absorbed by Q1 2026. Tavern on the Beach Bar sold for $4.4 million, and the parking lot next to Maverick’s at 870 Garnet Avenue sold for $4.35 million. Ocean Beach Rite Aid on Niagara Avenue sold for $12.6 million, signaling that demand remains strong. Despite having one of the lowest vacancy rates in San Diego, business owners along Newport Avenue are reporting sales are down 60% from previous years.

Amara Bagabo

Associate

2/23/26

Los Angeles Strengthens Eviction Protections and Habitability Standards Heading Into 2026

Los Angeles has enacted a new round of housing legislation that meaningfully changes how rental properties are owned, operated, and underwritten. As of early 2026, updated eviction rules and habitability standards have expanded tenant protections, extended enforcement timelines, and shifted additional capital and operational responsibility onto housing providers. Together, these changes affect when evictions can occur, how much unpaid rent is required before legal action is permitted, and what constitutes a legally “habitable” unit. Just-Cause Evictions Apply Broadly Across the Market One of the most consequential changes is the near-universal application of just-cause eviction requirements. Nearly all residential rental units in Los Angeles, including single-family homes and condominiums, are now subject to just-cause protections once a tenant has occupied a unit for six months. While at-fault evictions, such as nonpayment of rent or lease violations, remain permissible, no-fault terminations have become significantly more restrictive. Owner move-ins or major renovations now trigger mandatory relocation payments that can exceed $20,000 for long-term or vulnerable tenants. In practice, this has removed much of the flexibility owners once had to recover units without incurring meaningful cost. Higher Bar for Nonpayment Evictions In February 2026, the Los Angeles County Board of Supervisors voted to raise the nonpayment eviction threshold in unincorporated areas to two months of Fair Market Rent. While the City of Los Angeles continues to maintain a one-month FMR threshold, the county’s move reflects a broader policy trend toward delaying enforcement and increasing tenant protections. For operators, this change can allow arrears to grow substantially before an eviction filing is even permitted. In higher-rent units, that delay can translate into several thousand dollars in unpaid rent, increasing short-term cash flow exposure and placing more pressure on reserves and rent collection discipline. Right to Counsel and New Habitability Requirements The Right to Counsel for income-qualified tenants is now fully in effect. Tenants earning at or below 80 percent of Area Median Income are entitled to legal representation in eviction proceedings. Landlords are also required to include a formal Notice of Right to Counsel, provided in the tenant’s primary language, with any eviction notice. Failure to comply can result in immediate dismissal of a case. Separately, state law has expanded habitability standards as of January 1, 2026. Landlords are now required to provide and maintain a working stove and refrigerator in most residential units. This change eliminates the long-standing no-appliance rental model common in Southern California and introduces new maintenance obligations, as well as additional exposure to repair-and-deduct claims. Implications for Owners, Investors, and Underwriting The combined effect of these measures is a rental environment where evictions are slower, more technical, and more expensive. Regulatory risk is no longer a background consideration in Los Angeles; it is now central to asset performance. Several operational realities are becoming increasingly important in 2026: Rent caps remain constrained: As of February 2, 2026, the city implemented a new RSO rent increase formula that caps annual increases at 1% to 4% and removes the utility passthrough previously available to landlords. Eviction timelines are longer: With legal representation now common, unlawful detainer actions that once resolved in roughly two months can extend six to nine months if contested. Maintenance issues carry greater legal weight: Under expanded habitability standards, something as routine as a non-functioning refrigerator can pause enforcement and derail an eviction case. Looking Ahead Los Angeles has firmly moved away from a light-regulation model. For housing providers, preserving value now depends on disciplined operations, thorough documentation, and underwriting assumptions that reflect longer timelines, higher compliance costs, and tighter revenue ceilings. In this environment, local regulatory knowledge and operational execution are no longer differentiators, they are requirements.

Changes to the Los Angeles Mansion Tax and Measure ULA

Changes to the Los Angeles Mansion Tax and Measure ULA Los Angeles’ famed “Mansion Tax” was a misnomer from the beginning. The city’s property transfer tax, officially known as the ULA Tax, was introduced as part of Measure ULA to fund affordable housing programs and provide resources to tenants at risk of homelessness. But what most voters failed to recognize in November 2022, when Measure ULA was billed as a tax on luxury home sales, is that its provisions apply broadly to residential and commercial properties above a certain value threshold. The so-called Mansion Tax was never just about mansions. Updated ULA Tax Thresholds Following its first year in effect, the ULA Tax adjusted its thresholds to account for inflation. As of mid-2024, transactions above approximately $5.3 million are subject to a 4% transfer tax, while transactions above $10.6 million are assessed a 5% tax. These updated thresholds represent modest increases from the original $5 million and $10 million benchmarks, but continue to capture a wide swath of commercial and multifamily transactions across Los Angeles. One Year Later: Revenue vs. Market Impact While Measure ULA was originally projected to generate between $672 million and $1 billion annually, early collections fell well short of expectations. Initial reports showed revenue lagging significantly during its first year, coinciding with a sharp slowdown in transaction volume as owners accelerated sales ahead of implementation and buyers adjusted underwriting assumptions post-launch. More recent data paints a mixed picture. According to LA Business First, Measure ULA has now generated approximately $1 billion across more than 1,400 transactions since taking effect. Supporters argue the tax has become a meaningful funding source for housing initiatives, calling it an “economic engine” for the city. However, opponents continue to point to structural distortions in the market. Research cited by CalMatters from UCLA and the RAND Institute estimates the policy has resulted in 1,900 fewer apartment units delivered annually, including a reduction in affordable housing production. A separate study by Harvard, UC Irvine, and UC San Diego researchers found that the slowdown in sales significantly reduced property tax collections, offsetting an estimated 63% of the transfer tax revenue generated by Measure ULA. New Developments: Amendments May Head to the Ballot In a notable shift, the Los Angeles City Council has voted to advance proposed amendments to Measure ULA for further review by the city’s Housing and Homelessness Committee. The proposal, introduced by Councilmember Nithya Raman, includes a 15-year exemption from the ULA Tax for new commercial, multifamily, and mixed-use construction, tied to the issuance of a certificate of occupancy. “The proposed 15-year exemption tied to a project’s certificate of occupancy could give developers the certainty needed to move forward on multifamily and mixed-use projects, helping bring much-needed housing supply back online in Los Angeles.” – Adam Feldman Additional elements of the proposal include a one-time exemption for Palisades fire victims and technical changes intended to accelerate the deployment of collected funds. While an attempt to fast-track the amendments to a near-term ballot failed, the stated goal is to place the revised measure before voters in November 2026. Industry groups, including NAIOP SoCal, have noted that a development-focused exemption could materially reduce ULA exposure on qualifying projects, restore financing certainty, and unlock reinvestment that has stalled under the current structure. Current Listings Exposure Under Measure ULA Despite ongoing debate around amendments, Measure ULA continues to affect a significant share of active inventory across Los Angeles. According to CoStar, at the start of 2026, more than 1,000 active listings fall within or near the current ULA tax thresholds, underscoring the policy’s broad reach across commercial and residential assets: $5,000,000–$5,150,000 value: 53 properties $10,000,000–$10,300,000 value: 31 properties $5,150,000–$10,300,000 value: 800 properties $10,300,000+ value: 492 properties Outlook for the Mansion Tax Compared to the pre-implementation rush to sell in 2023, today’s environment is defined by hesitation. Owners and buyers remain cautious, particularly when transaction values fall near ULA thresholds. While proposed amendments signal growing acknowledgment of the tax’s unintended consequences, uncertainty will likely persist until voters weigh in. Until then, investors should expect continued friction in transaction activity, heightened sensitivity around pricing and timing, and ongoing headwinds for commercial and multifamily development in Los Angeles, even as the policy’s long-term future remains in flux.

Catching the Falling Knife : Why Los Angeles’ 1900–1930s Apartment Buildings Took the Biggest Hit on Value In 2025

For decades, Los Angeles’ oldest apartment buildings built in the early twentieth century were viewed as untouchable assets. Properties from the 1900s through the 1930s were prized for their scarcity, central locations, and architectural character. Owners believed these buildings would consistently attract buyers willing to pay near asking price, regardless of broader market conditions. That assumption no longer holds. In 2025, the market is no longer treating early vintage multifamily as a protected category. The current correction is not evenly distributed across the market. Instead, value declines have been concentrated most heavily in buildings constructed between 1900 and the 1930s. In this segment, discounts now exceed anything observed during earlier stages of the post-pandemic reset. This is what it means to catch a falling knife. The Market Reset Since 2021: Establishing the Baseline To understand why 2025 stands out, it is necessary to start with the broader market reset. From the 2021 peak through 2025, Los Angeles multifamily values declined approximately 15 to 20 percent overall. This assessment is based on median sale prices and price-per-unit trends within the same ZIP codes. Because pricing remained elevated into early 2022, that year serves as a reasonable proxy for peak market conditions. Across the data: Median sale prices declined by roughly 15 percent from peak levels Median sale price per unit declined approximately 12 to 13 percent By 2024 and 2025, properties were consistently closing below list price, shifting leverage toward buyers This initial decline affected nearly all property types. Newer construction, mid-century buildings, and older stock all repriced as higher interest rates, tighter lending standards, and rising operating costs forced buyers to reassess projected returns. However, by 2025 the correction had become more selective. 2025: When the Market Drew a Line on Vintage When 2025 sales are isolated and compared with prior years, a clear divergence appears, particularly among early-vintage buildings. What the Data Shows: Buildings constructed between 1900 and 1919 are closing at a median discount of approximately 16.5 percent below list price in 2025 In prior years, these properties typically sold at or near asking price Buildings from the 1920s and 1930s close roughly 7 to 8 percent below list, representing a deterioration of more than seven percentage points versus historical norms Post-war assets from the 1940s and 1950s show declines, but at more moderate levels Buildings constructed in the 1980s and 1990s are holding pricing better in 2025 than during the immediate post-2022 reset Properties built in the 2000s and 2020s repriced earlier in the cycle between 2022 and 2024 and have largely stabilized While the broader market remains down roughly 15 to 20 percent from peak levels, early vintage buildings are experiencing additional value erosion beyond that baseline decline. Why Early-Vintage Is Being Singled Out This repricing cannot be explained by interest rates alone. Higher rates affect all assets. The drivers here are structural. Insurance Constraints Insurance has become a gating issue for many early twentieth century buildings. Properties built before 1930 increasingly face higher premiums, limited coverage options, or an inability to secure insurance from standard carriers. Buyers are incorporating this uncertainty directly into pricing decisions. Deferred Maintenance and Capital Exposure Issues such as aging electrical systems, obsolete plumbing, seismic risk, and life safety upgrades were once viewed as long-term considerations. In 2025, these risks are being priced at acquisition. Costs that were previously deferred are now reflected immediately in purchase price reductions. Regulatory Limitations Rent regulation restricts an owner’s ability to offset rising operating expenses, particularly in older buildings that require more ongoing capital investment. As expense growth accelerates and income flexibility narrows, buyers demand wider margins of safety. A More Analytical Buyer Pool The buyer universe has changed. Investors who once emphasized architectural character and scarcity now focus on risk-adjusted returns. Even smaller transactions are underwritten with stricter assumptions. Architectural appeal no longer offsets operational and capital risk. Why This Is Different from Prior Cycles In the past, early vintage Los Angeles apartments performed well during downturns. They were seen as safe investments because they stayed full, were in good locations, and had steady demand. What’s different now is the transparency of risk. The risks embedded in these buildings, insurance exposure, capital intensity, and regulatory constraints were always present. What has changed is that capital markets now price these risks explicitly and simultaneously. What was once a hidden risk is now front-page underwriting. “Catching the Falling Knife”: What It Really Means The phrase is often misapplied. In this context, it describes a market segment where prices continue to adjust downward as risks are reassessed. Buyers Who Should Avoid This Segment Under-capitalized investors Yield-only buyers Operators without deep rehabilitation or construction expertise Owners assuming values will revert to 2021 pricing. For these groups, today’s discounts are not opportunities; they are warning signals. Buyers Who Can Engage Selectively Investors targeting a low basis Long-term hold horizons Proven experience with heavy capital programs Owners with no near-term debt pressure and sufficient reserves Early vintage buildings are no longer hands-off investments. They now require active management and come with real risks. This analysis is meant to describe what’s happening in the market, not to predict the future. Owners with strong finances and a long-term view might benefit from these price changes, but others may not. The Broader Lesson for Los Angeles Multifamily Since 2021, Los Angeles multifamily values have declined meaningfully, roughly 15–20% overall from peak levels. But in 2025, the market is no longer asking whether an asset is multifamily. It is asking: What risks am I inheriting if I buy a 90 to 100-year-old building? For properties constructed between 1900s – 1930s, the answer has changed meaningfully. Final Thought For much of Los Angeles’ history, early twentieth century apartment buildings were viewed as irreplaceable assets. In 2025, the market increasingly treats many of them as liabilities unless proven otherwise. This does not suggest values cannot stabilize. It does not imply that every early-vintage building is unviable. It does mean that blind confidence is no longer rewarded. The knife is still falling. For early-vintage multifamily, success will not come from optimism or precise market timing. It will come from discipline, capitalization, and a clear understanding of the risks being acquired.