Market Intel

Atlanta, GA Industrial Market Report Q1 2026

Atlanta’s industrial market is recalibrating as vacancy rises and leasing becomes more selective. Vacancy is currently 8.4%, up 0.9 percentage points over the past year and above long-term averages. Trailing 12-month net absorption totaled 2.2 million square feet, though logistics space posted slightly negative demand. Conditions vary by product type and location. Infill and smaller-format assets near population centers are generally holding up better than large logistics buildings in heavily developed corridors. Tenants are focusing more on operational fit, including access, loading, power, and circulation. Asking rents are $10.00 per square foot, up 2.3% year over year, which is above the national growth pace. Overall, market performance is softer than in prior years but still supported by Atlanta’s long-term distribution role. Key Findings Atlanta’s industrial market is transitioning into a more balanced phase, with performance increasingly tied to asset quality, location, and functionality. Leasing conditions remain uneven, with infill and shallow-bay properties outperforming larger logistics assets in oversupplied corridors. Development and investment activity have shifted toward discipline and specialization, supporting longer-term market stability despite near-term softness. Atlanta Industrial Supply & Demand Dynamics Source: CoStar Group, Inc. Atlanta Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.6% Current Population: 6,476,749 Households: 2,426,980 Median Household Income: $95,784 Atlanta’s economy continues to support industrial demand through population growth, strong logistics infrastructure, and a diverse business base. The metro has about 6.4 million residents and has added roughly 330,000 people since 2020. Its interstate network, airport access, and proximity to the Port of Savannah keep Atlanta a major distribution hub. Trade, transportation, and utilities remain key drivers of warehouse demand. While some office-using sectors have slowed, the region’s economic base still supports industrial real estate. Top Atlanta Demand Drivers Source: CoStar Group, Inc. IT Logistics Life Sciences Professional Services Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Atlanta Industrial Construction Construction activity remains elevated, but the pipeline is becoming more measured. Atlanta delivered 8.6 million square feet over the past year, and 23.1 million square feet is currently underway, equal to 2.7% of inventory. That is above the national pipeline level, keeping some pressure on lease-up in certain corridors. Still, the market is seeing a shift away from broad speculative development and toward build-to-suit, data infrastructure, and specialized manufacturing. This reduces some future supply risk and better aligns projects with demand. About 17.1 million square feet is expected to deliver in 2026. Infill redevelopment and adaptive reuse are also helping modernize older sites. Over time, this more disciplined development pattern should support gradual market normalization. SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc. Atlanta Industrial Sales Atlanta’s industrial investment market remains active, though buyers are more selective. Trailing-year sales volume reached $5.9 billion across 1,100 deals, above recent annual averages. Average sale pricing is $125 per square foot, while modeled market pricing stands at $128 per square foot, above the recent three-year average. Pricing varies by product type, with specialized assets generally commanding stronger values than logistics properties. Investors are showing the most interest in well-leased assets, infill locations, and properties with durable operating fundamentals. Assets with vacancy or lease-up risk face closer scrutiny and more conservative underwriting. Overall, sales activity shows that investor interest in Atlanta industrial remains solid, but capital is focused on quality, stability, and long-term relevance. Atlanta Industrial Sales Volume Source: CoStar Group, Inc. By the Numbers Q1 2026 | Source: CoStar Group, Inc. Sales Volume: $1.4B Price Per SF: $127 Cap Rate: 6.5% Vacancy Rate: 8.0% Rent Growth: 2.4% Asking Rent Per SF: $9.99 SF Under Construction: 22.9M SF Delivered: 3.1M SF Absorbed: 3.6M

Nashville, TN Retail Market Report Q1 2026

Nashville’s retail market continues to outperform most U.S. metros, supported by strong population growth, limited new development, and sustained tenant demand. Availability remains near historic lows, even as recent store closures have introduced select large-format opportunities for backfill. Leasing activity remains brisk, with spaces averaging roughly seven months on the market, about 35% faster than the national pace. Demand rebounded in late 2025 following a period of softer absorption, while minimal construction continues to constrain supply. Tight conditions have pushed asking rents to approximately $30 per square foot, with landlords maintaining pricing power even as rent growth moderates. Tenants are increasingly committing to longer lease terms, reflecting confidence in Nashville’s long-term retail fundamentals. Key Findings Investment activity totaled $331 million in Q1 2026, driven primarily by private buyers, as cap rates remain stable in the mid-6% range and investor demand persists for well-located assets. Retail rents remain elevated around $30/SF, supported by limited new construction and strong demand, while annual rent growth continues grow at 4.2%, exceeding the national average of roughly 2%. Retail availability is near historic lows around the mid-3% range and leasing activity outperforming the U.S., as spaces lease roughly two months faster than the national pace. Nashville Retail Supply & Demand Dynamics Source: CoStar Group, Inc. Nashville Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.1% Current Population: 2,184,511 Households: 887,394 Median Household Income: $91,783 Nashville’s economy remains one of the strongest and fastest-growing in the Southeast, supported by steady population gains and a diverse industry base. The metro’s unemployment rate stands at a low 3.1%, notably below the U.S. average of about 4%, highlighting the area’s strong labor market conditions. With a population exceeding 2.1 million, Nashville continues to benefit from sustained in-migration and job creation. Employment is well distributed across key sectors, including healthcare, professional services, logistics, retail, and hospitality, which provides stability and resilience against economic shifts. Continued corporate relocations and expansions, combined with a business-friendly environment, are expected to support ongoing economic momentum and reinforce Nashville’s position as a leading growth market. Population, Labor, & Income Growth Source: CoStar Group, Inc. Nashville Retail Construction Retail construction in Nashville has slowed following a recent peak, as elevated development, land, and labor costs continue to limit new project starts. Although approximately 770,000 square feet remains under construction, recent deliveries have been modest, with just over 60,000 square feet completed over the past year, reinforcing limited new supply. Developers are increasingly shifting toward mixed-use projects, incorporating retail within multifamily and office developments to align with urban population growth. New supply remains focused on smaller, service-oriented formats, particularly quick-service retail. With demand still outpacing deliveries, including roughly 38,000 square feet absorbed, construction constraints continue to support tight market conditions. SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc. Nashville Retail Sales Nashville’s retail investment market remained active in Q1 2026, with sales volume totaling approximately $331 million, reflecting continued investor interest despite a more selective capital environment. Activity continues to be driven primarily by private investors, with limited institutional participation, resulting in a higher concentration of smaller, single-tenant transactions. While deal flow has been dominated by these smaller assets, larger transactions have begun to re-emerge as private equity buyers target long-term growth opportunities. Pricing remains elevated, supported by strong market fundamentals, while cap rates have held in the mid-6% range. Overall, investor sentiment remains positive, particularly for well-located, income-producing retail assets. Atlanta Retail Sales Volume Source: CoStar Group, Inc. By the Numbers Source: CoStar Group, Inc. Sales Volume: $331M Price Per SF: $292 Cap Rate: 6.3% Vacancy Rate: 3.6% Rent Growth: 4.2% Asking Rent Per SF: $30.26 Under Construction: 770K SF Delivered: 60.8K SF Absorbed: 38K SF

Atlanta, GA Retail Market Report Q1 2026

Atlanta’s retail market is defined by steady fundamentals alongside evolving tenant dynamics. Vacancy remains low at 4.4%, though recent negative absorption reflects ongoing retailer consolidation and space repositioning. Rent growth of 5.3% highlights continued demand for well-located space, particularly in grocery-anchored centers and high-growth suburban corridors. At the same time, development remains disciplined, with 1.2 million SF underway, limiting oversupply risk. Retailers are increasingly tailoring formats to shifting consumer preferences, favoring convenience, value, and experiential concepts. As population growth and household formation persist, Atlanta’s retail sector is expected to maintain stable performance, with selective opportunities emerging through redevelopment and adaptive reuse. Key Findings Atlanta’s retail market maintains stability, with low vacancy and positive rent growth supported by steady population gains, disciplined development, and continued demand. Construction activity is measured and largely preleased, with redevelopment and mixed-use projects driving new supply, helping align inventory with demand while limiting oversupply and supporting long-term rent stability. Investment activity has moderated but remains healthy, with pricing holding firm and capital targeting grocery-anchored centers and value-add opportunities, reflecting confidence in Atlanta’s durable retail fundamentals and growth outlook. Atlanta Retail Supply & Demand Dynamics Source: CoStar Group, Inc. Atlanta Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.6% Current Population: 6,476,873 Households: 2,427,055 Median Household Income: $95,790 Atlanta’s economy remains resilient entering Q1 2026, supported by its diverse industry base and continued population growth. Anchored by logistics, professional services, and financial activities, the metro benefits from strong connectivity and a strategic location near key transportation corridors and the Port of Savannah. While office-using sectors, particularly technology and professional services, have softened, industrial demand remains robust, driven by distribution and manufacturing users. Corporate investment continues in innovation hubs like Midtown, reinforcing Atlanta’s long-term growth trajectory. With a relatively low cost of living, steady in-migration, and a highly educated workforce, Atlanta is well-positioned to sustain economic expansion and retail demand. Population, Labor, & Income Growth Source: CoStar Group, Inc. Atlanta Retail Construction Atlanta’s retail construction pipeline remains disciplined entering Q1 2026, with development largely concentrated in preleased, build-to-suit, and grocery-anchored formats. Lender caution and a focus on demand-driven projects have kept speculative construction limited, aligning new supply with absorption. Activity is concentrated in high-growth suburban corridors and intown mixed-use districts, where retail complements residential and lifestyle components. Redevelopment continues to shape the landscape, as older centers and malls are repositioned into mixed-use environments with modern retail formats. With a modest 1.4% inventory expansion over the past five years, construction trends reflect a measured approach that supports long-term rent stability and balanced market conditions. SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc. Atlanta Retail Sales Atlanta’s retail investment market in Q1 2026 reflects a measured pace, shaped by disciplined underwriting and selective capital deployment. Quarterly sales volume totaled approximately $450 million, below recent peaks, as investors remain cautious amid evolving financing conditions. Over the past 12 months, pricing has averaged roughly $230/SF, holding above the five-year average and signaling continued confidence in long-term fundamentals. Activity is concentrated in grocery-anchored centers and well-located suburban assets with stable cash flow, while value-add opportunities in intown districts attract redevelopment-focused capital. As bid-ask expectations continue to align, transaction activity is expected to remain steady, favoring assets with durable income and clear upside potential. Atlanta Retail Sales Volume Source: CoStar Group, Inc. By the Numbers Source: CoStar Group, Inc. Sales Volume: $450M Price Per SF: $229 Cap Rate: 7.2% Vacancy Rate: 4.4% Rent Growth: 5.3% Asking Rent Per SF: $24.46 Under Construction: 1.2M SF Delivered: 50.4K SF Absorbed: (147K) SF

The New Underwriting Playbook: What’s Driving Multifamily Decisions for 2026

For many investors, 2025 was defined by shifting inputs and unpredictable benchmarks that made pricing and valuation more challenging than in previous cycles. Elevated operating expenses, higher insurance costs, and ongoing financing uncertainty shaped performance. Still, sentiment was cautiously optimistic as fundamentals stabilized and expectations normalized. Going into 2026, seller and buyer expectations are slowly converging as sellers move off peak-era valuations and buyers price in higher financing costs, enabling more deals to transact, often through creative structures like assumable loans or seller carrybacks. While some owners still prefer to hold, motivated sellers and disciplined investors are driving improved liquidity as underwriting and pricing come into closer alignment. Underwriting in a Volatile Market Volatility continues to influence nearly every line of an underwriting model. Cap rates widened through 2025, with uneven movement across metros. Borrowing spreads remain inconsistent. Rent growth has cooled, even as operating expenses continue to rise. As such, both buyers and lenders are reassessing what sustainable value truly looks like. While lender activity has reignited, they remain highly selective–extending diligence periods, tightening underwriting standards, and scrutinizing assumptions with greater intensity. The effects are most pronounced in supply-heavy metros, where elevated deliveries are weighing on fundamentals. These markets face slower lease-ups, deeper concessions, and muted near-term pricing power. For underwriting, this translates to more conservative absorption timelines, tighter occupancy assumptions, and increased scrutiny of first-year revenue projections. A More Cautious Playbook Buyers in 2025 worked from a more conservative playbook, adjusting nearly every assumption that feeds into a deal model. Rent-growth expectations reset to around 1–2% annually in most markets, and some investors modeled flat rents in the first year or two of ownership, especially in areas with heavy new supply. Expense ratios have climbed as insurance, payroll, repairs, and maintenance costs remain elevated. Rather than assuming these will ease, buyers are accounting for higher year-one expenses and using conservative long-term growth assumptions. Insurance line items, in particular, often include wider cushions to account for carrier volatility. Hold periods are lengthening, extending beyond the typical five years to seven or even ten, giving investors more time for operational stability and gradual value recovery. Capital expenditure reserves have also widened, particularly for older properties, to reflect higher material and labor costs and a focus on long-term durability. Case study: 1431 Greene Avenue (2018 vs 2025) This side-by-side model illustrates the same asset underwritten the way a 2018 buyer would have vs. how a 2025 buyer underwrites it today. It shows how higher expense loads, more conservative income durability, and wider cap rates change value even when headline rents are higher. Key Highlights : PGI is up in 2025, but NOI is down because expense load is higher. Expense ratio jumps (~mid-30% → ~50%+). Cap rates reset (~4–4.5% → ~7–7.75%), driving value down. Per-unit and per-SF pricing compress accordingly. Evolving Underwriting Models: A Unified Framework for 2026 As volatility continues to reshape underwriting, investors have adopted a more sophisticated set of modeling tools designed to capture risk, lifecycle performance, and long-term value with greater accuracy. Three frameworks, scenario modeling, age-adjusted assumptions, and discounted cash flow (DCF) analysis, now form the core of multifamily underwriting. Scenario Modeling: Stress-Testing Under Uncertainty Buyers increasingly rely on multiple cases, base, downside, and recovery, to understand how properties may perform across future conditions. In many transactions, the downside scenario now carries greater influence, reflecting an industry preference for resilience over optimistic return projections. Scenario modeling helps quantify the impact of: Rent-growth volatility Operating-expense escalation Absorption timelines Exit pricing or financing costs Age-Adjusted Assumptions: Capturing Asset Lifecycle Performance Underwriting models increasingly incorporate asset-age dynamics, recognizing that multifamily performance follows a lifecycle rather than a straight growth path. NOI typically peaks in the early years of occupancy stabilization and then moderates as turnover, wear-and-tear, and system aging drive expenses higher. Common adjustments include: declining NOI per unit as properties age, expense growth outpacing rent growth over time, higher turnover assumptions, and widening exit cap rates for older assets. These adjustments produce a more accurate long-term valuation profile. Discounted Cash Flow (DCF) Models: Prioritizing Income Stability With cap rates less reliable as a single-year benchmark, DCF models have become a preferred tool for analyzing performance over an entire hold period. They allow investors to model: rent recovery trajectories, expense inflation, age-driven NOI changes, shifting debt costs, and exit-cap expansion. This approach emphasizes cash-flow durability and long-term fundamentals rather than short-term valuation anchors. Together, these three frameworks create a more disciplined, data-driven underwriting standard that aligns valuations with long-term fundamentals rather than short-term optimism. Each model addresses a different element of uncertainty: Scenario modeling tests volatility. Age-adjusted assumptions capture asset lifecycle realities. DCF modeling integrates all variables into a unified long-term view. By consolidating these approaches, investors can better evaluate risk, identify durable opportunities, and remain competitive in a more cautious, recalibrating market. Why a Fed Rate Cut Won’t Flip the Switch The Myth of Instant Relief Despite two consecutive Fed rate cuts in September and October, the multifamily market has not seen a sudden revival in deal activity. Lower rates help at the margins, but they don’t eliminate the deeper issue: uncertainty still outweighs affordability. Even as borrowing costs ease, the market is emerging from several years of rapid rate hikes and unpredictable economic swings. This environment conditioned both investors and lenders to prioritize stability, clarity, and durability over opportunistic speed. Many capital providers have only recently begun to feel confident that rates are settling into a more predictable range. That directional clarity, not just lower pricing, is what’s slowly bringing borrowers back to the table. But “slowly” is the key word. Underwriting remains cautious because the biggest unknowns for 2026 aren’t about interest expense, they’re about rent growth volatility, stubborn operating costs, and uncertainty around long-term asset performance. These fundamentals matter far more to valuations than a 25–50 bps rate movement. As a result, even with expectations that rates could drift toward the mid-4% range, underwriting models continue to emphasize safer cash flows, conservative rent assumptions, and risk-mitigating structures. In short: rate cuts may lubricate the system, but they don’t reset the risk environment. The market is improving, but lenders and investors are still behaving like operators who were burned by the last cycle. Until they see sustained evidence of stability and not just cheaper debt, capital will flow cautiously, not aggressively. Structural Challenges Still Loom The recent rate cuts do little to offset deeper structural pressures. Insurance premiums remain elevated, operating costs continue to rise, and rent growth has slowed across many supply-heavy metros. These forces persist regardless of interest rate trends. Today’s underwriting discipline—conservative rents, higher expenses, and tighter risk metrics, is now central to buyer and lender decisions. The Lag Effect Policy changes take time to filter through real estate markets. While borrowing costs have started to ease, the effects on valuations, seller expectations, and lender processes remain gradual. Sellers are recalibrating pricing, lenders are reassessing loan stress tests, and investors are waiting for more consistent signals before shifting strategy. The cumulative impact of recent cuts will likely unfold over the coming quarters rather than immediately. Atlanta’s Unique Position Heading Into 2026 While national underwriting trends are converging around caution, durability, and long-term valuation clarity, Atlanta presents a set of dynamics that both amplify and complicate this shift. The metro has been one of the most closely watched Sunbelt markets due to its rapid supply pipeline, institutional buyer base, and unusually high levels of operational turbulence over the past two years. Issues such as tenant fraud, delinquency, and collection instability, are arguably more severe in Atlanta than in other Sunbelt metros. They have weighed on near-term performance, even as fundamentals show signs of stabilizing. Still, operators report that the worst of these disruptions appears to be receding. As delinquency normalizes and the wave of news coverage softens, rents are expected to resume moderate growth in 2026, helping rebuild confidence in underwriting assumptions that had been heavily discounted over the past 18–24 months. New York Market: Expense Pressure and NOI Credibility Are Reshaping Underwriting In New York, buyer underwriting has shifted from cap-rate storytelling to expense and NOI risk. Insurance and real estate taxes now drive the biggest spread in models, so buyers start with cost durability before debating value. Buyers also no longer agree on a single “market NOI.” Where the market once aligned on NOI and then applied a cap rate, today different assumptions produce materially different NOI outcomes. That makes headline cap rates less informative, which is why scenario work and DCF cash-flow durability matter more here than any single market metric. Operating assumptions have reset higher across core lines. Insurance has roughly doubled, moving from about $600 per unit to $1,200–$1,500. Utilities have climbed from roughly $800–$900 per unit to around $1,200, and management fees are underwritten closer to 5% instead of 3% as regulation and labor burdens rise. Buyers are also building in more credit friction: vacancy/credit loss that used to sit near 3% is now often closer to 5%, reflecting tougher collections even in stabilized assets. Regulatory profile widens the gap further. Rent-stabilized assets are typically modeled with higher insurance and credit loss and weaker rent growth, pushing exit caps wider. A proposed policy overhang, COPA, giving the city or nonprofits first-refusal rights on NYC listings, adds timeline and liquidity risk, so buyers are padding sale assumptions. NYC underwriting is conservative, anchored in expense realism, debated NOI, and policy risk. What This Means for Multifamily Going Forward A More Disciplined Market Is Here to Stay The multifamily industry has entered a more disciplined, data-driven era. Underwriting now relies more heavily on verifiable performance, realistic expense growth, and attention to asset age and its impact on long-term NOI. Investors are focusing less on forecasting future rent growth and more on validating actual income streams, tenant quality, and market durability. Collaboration between investors, lenders, and capital partners will be key to restoring liquidity and rebuilding confidence. Many stakeholders now view this period not as a pullback, but as a reset that encourages better alignment between pricing, performance, and long-term fundamentals. The Takeaway: A Smarter, More Strategic Cycle The multifamily market is not contracting, it is maturing. The lessons of the past few years have introduced a greater focus on transparency, accuracy, and collaboration. Deals now require deeper diligence, stronger partnerships, and renewed confidence in operational performance. While interest rates may continue to ease, it is underwriting discipline, not monetary policy, that will guide the next phase of recovery. This shift toward precision and partnership suggests that the next cycle will be slower, steadier, and ultimately more sustainable than the last.

DJ Johnston

Executive Vice President

4/9/26

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

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

Austin McLeod

Senior Vice President & Director

4/2/26

Multifamily Supply Paradox: When Oversupply Meets Undersupply

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

David Treadwell

First Vice President

3/17/26

The Rise of Small-Bay Industrial

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

Belall Ahmed

Senior Associate

3/12/26

Institutional Capital Returns To Multifamily

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

David Ferber, CPA

First Vice President & Director

3/10/26

Tenant Radar: 10 Retailers Driving National Growth

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

Daniel Gonzalez

First Vice President & Associate Director

3/6/26

Top 10 Multifamily Markets in 2026

New York, NY By the Numbers 2025 | Source: Matthews™ Research Sales Volume: $8.3B Average Price Per Unit: $404.5K Cap Rate: 5.3% Vacancy Rate: 3.0% Annual Rent Growth: 7.0% Annual Net Absorption: 14,580 Units New York’s multifamily sector remains one of the tightest and most resilient leasing markets in the country, supported by strong fundamentals and sustained investor interest. Manhattan continues to assert itself as the premium rental market with effective rents surpassing pre-pandemic highs, while Brooklyn has evolved into a primary economic hub, attracting a younger, renter base that’s driving competition across the borough. Year-to-date total sales volume in New York has reached $8.3 billion, paired with an average price per units of $404, 500, reflecting continued confidence in the market despite elevated borrowing costs. Performance remains competitive with a 5.3% cap rate, underscoring New York’s status as a high-barrier metro. While investors have retreated from Manhattan’s most expensive core submarkets, capital is aggressively targeting high-yield opportunities in areas like Harlem and the Financial District, where redevelopment potential and discounted pricing remain compelling. The borough’s cap rates have stabilized between 6.0% and 6.3%, with per-unit pricing rising for six consecutive quarters, signaling the early stages of recovery. Brooklyn has also seen sales accelerate, with institutions accounting for a growing share of activity. Cap rates have compressed modestly, now aligning with Manhattan in the low 6%- range, while pricing remains elevated for waterfront assets. Operating conditions continue to outperform national benchmarks. The market’s 3.0% vacancy rate is well below the U.S. average, driven by structural undersupply, muted construction, and stable in-migration. Manhattan’s limited construction is hampered by construction costs and regulatory hurdles, causing a sharp drop in building filings. This is keeping the borough’s vacancy rate low, and is expected to fall to roughly 2.4% by 2026. Brooklyn, despite experiencing the highest level of completions in more than a decade, maintains one of the lowest vacancy rates nationally at 2%, supported by demographic tailwinds and demand for larger floor plans. These dynamics have propelled strong rent momentum market wide. Annual growth sits at 7.0%, with Manhattan expected to post gains near 6.8% by year-end 2025 and Brooklyn recording 6.7% growth alongside a cumulative 44% rent increase since 2019. Demand remains healthy across all boroughs, evidenced by 14,850 units of annual net absorption, supported by a strengthening labor market. New York City is projected to add 38,000 jobs in 2025, and in-person office attendance (particularly in Manhattan) has surged to 95% of its 2019 levels. The workers returning to office is amplifying demand for centrally located, premium rental housing. Looking ahead to 2026, slow entitlement processes, ongoing supply constraints, and durable demand drivers will continue to support low vacancy and positive rent growth. Manhattan’s long-term development opportunities increasingly lie in conversions, value-add repositioning and niche submarket plays, while Brooklyn’s most compelling strategies focus on delivering larger, family-sized units through reconfigurations of existing small stock. The recent election of Mayor Zohran Mamdani introduces increased attention around affordability and tenant protection policies, including the discussion of a rent freeze for stabilized units. While these proposals may influence sentiment at the margins, the market’s global prominence, economic depth continue to anchor its long-term performance. Maintaining quality of life is Manhattan is a demand driver that has been top of mind for developers and investors alike. Police Commissioner Jessica Tisch has agreed to remain in her role, and under her leadership the NYPD recently reported the fewest shooting incidents for the month of October since safety and private sector investment will be key in ensuring New York City’s prosperity for the years to come.” -Brock Emmetsberger, Executive Vice President Brooklyn, Manhattan, & U.S. Rent Growth Source: Matthews™ Research, CoStar Group, Inc. New York Vacancies Remain Well Below U.S. Norms Source: Matthews™ Research, CoStar Group, Inc. Bay Area: San Francisco & San Jose By the Numbers 2025 | Source: Matthews™ Research San Francisco Sales Volume: $8.3B Average Price Per Unit: $404.5K Cap Rate: 5.3% Vacancy Rate: 3.0% Annual Rent Growth: 7.0% Annual Net Absorption: 14,580 Units San Jose Sales Volume: $8.3B Average Price Per Unit: $404.5K Cap Rate: 5.3% Vacancy Rate: 3.0% Annual Rent Growth: 7.0% Annual Net Absorption: 14,580 Units The San Francisco Bay Area is entering 2026 on new footing, reasserting itself as one of the nation’s most dynamic multifamily markets. Supported by a powerful combination of tech-led job creation, population stabilization, and strengthening investor confidence, demand has reinvigorated investment. Across the region, demand is being reshaped by the rapid expansion of the AI ecosystem. San Francisco is experiencing a sharper and more immediate surge in activity driven by AI firms expanding office footprints and accelerating hiring. In comparison, San Jose’s performance is tied to Silicon Valley’s long-standing economic gravity and a renter base shaped by decades of exceptional wage growth and high barriers to homeownership. AI companies (databricks, openAI, and anthropic being a few of the many) have pushed office vacancy way down and helped increase multifamily rent growth. [In addition,] San Francisco’s unemployment rate compared to the rest of California, was around 3.5% [with] California’s above 5%. This has helped bring private and institutional buyers back to the market. – Jack Markey, Associate San Francisco posted $2.3 billion in annual sales volume, with assets trading at an average of $428,000 per unit and cap rates compressing to 4.5%, signaling investors’ increasing willingness to price in near-term rent acceleration tied to AI-driven demand. San Jose recorded $1.9 billion in sales, with average pricing at $488,000 per unit and slightly higher cap rates at 4.6%. While San Francisco is seeing faster cap rate compression amid strong bidding for well-located product, San Jose continues to attract capital seeking stability, income durability, and access to one of the wealthiest and most credit-stable renter populations in the nation. Across both metros, the investment narrative is improving, but San Francisco’s upside thesis is more growth-oriented, while San Jose’s is grounded in consistency and long-term absorption. Operating conditions are tightening throughout the Bay Area. San Francisco’s vacancy rate fell to 3.3% and annual rent growth reached 5.3%. This strength is supported by renewed population gains, limited new supply, and an inflow of high-income workers in the AI sector. The market’s acute supply-demand imbalance is highlighted by the absorption of 4,094 units outpaced deliveries. San Jose posted slightly higher vacancy at 3.6%, paired with 3.1% annual rent growth and a similar 4,191 units of net absorption. This is one of the strongest demand performances the metro has recorded in the past decade. Supply levels remain constrained across both metros, though San Francisco faces the most severe development limitations. Rising construction costs, zoning restrictions, and protracted entitlement timelines continue to suppress new starts, allowing demand to outpace completions and strengthening landlords’ pricing power. San Jose’s supply environment, while also tight, is less structurally constrained. The metro’s pressure comes from decades of undersupply relative to household formation and for-sale housing costs that consistently rank among the highest in the country. With mortgage rates near 7% and home prices continuing to climb, San Jose now has the nation’s largest rent-versus-own affordability gap, pushing new households directly into the renter pool and reinforcing long-term multifamily stability. Looking ahead to 2026, the AI sector plays a pivotal role in reshaping the market’s trajectory and both cities are well positioned. The expanding cluster of major AI and tech firms has fueled renewed office activity, contributed to a 1.3% uptick in population, and supported what is shaping up to be the strongest demand cycle since before the pandemic. Constrained supply, tech-driven job creation, and mounting investor interest positions the Bay Area as one of the top multifamily markets to watch, particularly for those looking to capitalize on the momentum of the burgeoning AI economy. Bay Area Rent Growth Leads California Source: Matthews™ Research, CoStar Group, Inc. Boston, MA By the Numbers 2025 | Source: Matthews™ Research Sales Volume: $3.1B Average Price Per Unit: $499K Cap Rate: 5.1% Vacancy Rate: 3.8% Annual Rent Growth: 0.2% Annual Net Absorption: 5,982 Units The Boston MSA enters 2026 as one of the most stable and opportunity-rich multifamily markets in the country, supported by strong population gains, a deep reservoir of high-earning renters, and a rapidly expanding tech, life sciences, and employment base Unlike many Sunbelt metros that are still absorbing a surge of new construction, Boston’s fundamentals benefit from a more measured supply pipeline, despite strong employment pull. Major employers, including Meta, Google, and Amazon, continue to scale engineering and R&D operations across the market, attracting high-earning renters and reinforcing the metro’s appeal as a premier innovation hub. This strength helped drive $3.1B in sales volume, average pricing of $499,000 per unit, which is nearly double the U.S. average, and a market cap rate of 5.1%. 34% of transaction volume over the previous five years involved public and institutional buyers. Within the same period, private capital accounted for 65% of seller volume and nearly half of buy-side volume. The delta between the average sale price of $13.6 million and trailing four quarters’ median sale price of $2.4 million, suggests that while public and institutional players continue to be involved in a smaller amount of large deals, smaller private buyers account for the majority of deal activity. Across the market, leasing has remained steady with annual net absorption reaching 5,982 units. The vacancy rate is about 200 basis points below the national rate of 8.4%, at 6.5%. These conditions indicate that new and existing renters are quickly filling available units, and underscores the structural demand. At the same time, Boston’s renter preferences are shifting decisively toward higher-tier apartments. While rent growth has decreased from 2022 double-digit, rents remain among the highest nationally and growth exceeds the U.S. average. Class A units maintain the highest rents and continue to post meaningful absorption. This trend, combined with steady investor activity and a development pipeline increasingly concentrated in desirable urban nodes, reinforces the market’s long-term stability. With a highly educated, growing population and sustained demand from the region’s thriving tech and innovation sectors, Boston is poised for tightening fundamentals and improved rent performance in 2026. While political attention around housing affordability remains heightened, with discussions around rent stabilization drawing close scrutiny, market conditions remain fundamentally sound. Renter Appetite for Class A Apartments is Evident, Outpacing Class B Absorption Source: Matthews™ Research, CoStar Group, Inc. Boston’s Net Population Sees Spike in the Last Year Source: Matthews™ Research, CoStar Group, Inc. Chicago, IL By the Numbers 2025 | Source: Matthews™ Research Sales Volume: $3.1B Average Price Per Unit: $499K Cap Rate: 5.1% Vacancy Rate: 3.8% Annual Rent Growth: 0.2% Annual Net Absorption: 5,982 Units Chicago’s multifamily market enters 2026 as one of the most undersupplied and demand-driven major metros in the country. Demand continues to outpace new supply, with the region absorbing roughly 7,500 units in 2025, well above the 4,800 units delivered in the same period, pushing vacancy down to 3.5%. This supply imbalance is expected to intensify in 2026 as only 10,000 units remain under construction, representing just 1.8% of total inventory, far below the national average and the market’s long-term average. With scheduled deliveries projected to fall to some of the lowest levels since 2012, Chicago is set for continued vacancy compression and rent gains. Rents are accelerating across every submarket and asset class. Annual rent growth reached 3.7% market-wide, with premium Class A properties posting a stronger 4.0% increase as renters demonstrate a pronounced “flight to quality” in a constrained supply environment. Demand remains strong in Downtown Chicago and the North Lakefront, accounting for more than one-third of total absorption and continuing to benefit from their concentration of employment, transit access, and amenity-rich neighborhoods. Investment activity mirrors this optimism: sales volume has risen sharply to $3.8B in 2025, cap rates average 6.7%, and premier assets often trade at even tighter yields as investors price in ongoing rent growth and stable occupancy. Major employers across finance, consulting, healthcare, manufacturing, and life sciences continue to deepen their presence, while transformative projects such as the Illinois Quantum and Microelectronic Park further elevate Chicago’s position as a tech and research hub. This enhances the market’s ability to attract and retain a high-earning renter pool. Together, these forces of a high-income renter pool, strong absorption, and limited new supply, position Chicago as one of the nation’s top-performing multifamily markets heading into 2026. Chicago Leads the Nation in Apartments Rent Growth Source: Matthews™ Research, CoStar Group, Inc. Deliveries Decreased Significantly Over the Last 12 Months Source: Matthews™ Research, CoStar Group, Inc. Miami, FL By the Numbers 2025 | Source: Matthews™ Research Sales Volume: $1.7B Average Price Per Unit: $330K Cap Rate: 5.3% Vacancy Rate: 4.3% Annual Rent Growth: 0.7% Annual Net Absorption: 5,846 Units Miami enters 2026 as one of the nation’s most demographically advantaged multifamily markets, supported by strong fundamentals and one of the deepest in-migration pipelines in the country. The region continues to attract high-income households, young professionals, and remote workers drawn to Miami’s tax advantages, lifestyle appeal, and growing corporate presence. More recently, high-income policy refugees are anticipated to leave New York and choose Florida markets like Palm Beach and Miami. This adds a new layer of durable, upper-income demand that will help solidify the rent floor and support the next phase of growth. These powerful demographic forces helped fuel 5,846 units of net absorption in 2025, keeping vacancy at a healthy 4.3% despite substantial new deliveries across the metro. While rent growth moderated to 0.7% in 2025 due to the heavy wave of new deliveries, Miami is expected to regain momentum in 2026 as supply pressure eases and demand continues to deepen. Much of the elevated pipeline is beginning to taper, setting the stage for improved performance as thousands of new units lease up and population inflows remain robust. Investor activity remains strong, with $1.7B in sales volume, an average price per unit of $330,000, and cap rates holding at 5.3%, signaling sustained confidence in Miami’s long-term growth trajectory. Miami’s expanding finance, technology, hospitality, and healthcare sectors, reinforced by ongoing corporate relocations and international investment, continue to diversify the local economy and strengthen the renter base. With absorption outpacing expectations, vacancy tightening, and supply set to normalize, Miami enters 2026 with the foundation for renewed rent growth and sustained investor interest, placing it firmly among the top multifamily markets to watch. Asking Rents in Miami Trend Higher than the U.S. Average Source: Matthews™ Research, CoStar Group, Inc. The Sunshine State is the No. 1 Destination for Migrating New Yorkers Source: Matthews™ Research, MovingPlace Atlanta, GA By the Numbers 2025 | Source: Matthews™ Research Sales Volume: $16.5B Average Price Per Unit: $174.5K Cap Rate: 5.2% Vacancy Rate: 6% Annual Rent Growth: 0.6% Annual Net Absorption: 20,576 Units Atlanta enters 2026 from a position of emerging strength as the market begins to stabilize after several years of historically elevated supply. Despite vacancy averaging 6% in 2025 and rent growth holding at a modest 0.6%, the metro posted a substantial 20,576 units of net absorption, signaling renewed momentum as demand once again outpaced new deliveries. Investor confidence remained firmly intact, with $16.5B in multifamily sales, an average price per unit of $174,500, and cap rates at a competitive 5.2%, underscoring long-term conviction in the region’s demographic and economic fundamentals. The market’s near-term challenges, primarily elevated vacancy and competitive lease-up conditions, are beginning to recede. The development pipeline is contracting sharply, with expected 2025 deliveries down roughly 40% from the prior year’s peak, marking a decisive shift toward more balanced supply conditions. This moderation is pivotal: for the first time since 2021, absorption is poised to consistently keep pace with, and potentially exceed, new supply. Demand drivers remain firmly entrenched. Metro Atlanta continues to outperform in population and household growth, supported by a broad-based employment ecosystem spanning logistics, education and health services, technology, and professional services. Even as certain office-using sectors cooled in 2025, the region’s overall economic profile remained resilient, ensuring a steady inflow of renters seeking relative affordability and proximity to expanding job centers. Growth nodes such as Midtown, West Midtown, and North Fulton continue to benefit from ongoing corporate relocations and high-skill employment announcements. Atlanta’s strong absorption, moderating construction pipeline, and durable economic base position the metro for a meaningful inflection in 2026. We’re optimistic that we will see an increase in transactional velocity in 2026 – Connor Kerns & Austin Graham, First Vice Presidents & Associate Directors With rent growth expected to return to positive territory by mid-year and investor appetite remaining elevated, Atlanta stands out as one of the nation’s most compelling multifamily markets heading into the next cycle. Atlanta Multifamily Demand Nears Pandemic-Era Peak Source: Matthews™ Research, CoStar Group, Inc. Atlanta Multifamily Transaction Volume Source: Matthews™ Research CoStar Group, Inc. Washington, D.C. By the Numbers 2025 | Source: Matthews™ Research Sales Volume: $4.4B Average Price Per Unit: $313K Cap Rate: 5.6% Vacancy Rate: 4.1% Annual Rent Growth: 0.8% Annual Net Absorption: 7,709 Units Washington, D.C. enters 2026 with strengthening multifamily fundamentals supported by one of the most stable, recession-resistant demand bases in the country. The region experienced a temporary pause in rent growth in 2025 due to elevated deliveries, yet leasing performance remained exceptionally resilient. The market absorbed a substantial 7,709 units over the last year, pushing vacancy down to 4.1% and reaffirming the region’s depth and durability. Investor activity remained robust, with $4.4B in sales volume, an average price per unit of $313,000, and cap rates holding at 5.6%, reflecting long-term confidence in the metro’s steady leasing velocity and strong income stability. Demand continues to be anchored by the region’s diversified economic foundation. Federal government agencies, legal services, education and research institutions, and professional and business services collectively sustain one of the country’s most reliable employment ecosystems. These sectors not only support consistent household formation but also create a resilient base of high-credit renters who value proximity to major job centers, transit infrastructure, and urban amenities. Even as portions of the national economy softened in 2025, D.C.’s employment profile remained steady, enabling the market to absorb new supply at a pace that outperformed expectations. Looking ahead to 2026, D.C.’s outlook is bolstered by several key tailwinds. Supply growth is set to moderate from its recent highs, reducing pressure on vacancy and setting the stage for a more balanced leasing environment. Population and job growth remain concentrated in high-income, urban neighborhoods with sustained demand for quality rental housing. The market’s ability to quickly absorb new units in 2025, combined with its structurally stable employment base and durable renter demographics, positions Washington, D.C. for above-average investment appeal as it heads into 2026. D.C.’s Population Growth Follows National Trends, But Continues to Outperform Source: Matthews™ Research, CoStar Group, Inc. Northern New Jersey By the Numbers 2025 | Newark & Hudson County | Source: CoStar Group, Inc. Sales Volume: $1.1B Average Price Per Unit: $314K Cap Rate: 5.7% Vacancy Rate: 3.0% Annual Rent Growth: 6.2% Annual Net Absorption: 4,329 Units Northern New Jersey’s multifamily market is shaping up for a standout 2026 as it benefits from powerful cross-currents of demand, ranging from New York City spillover to robust local household formation and an increasingly affluent renter base. After another year of exceptional performance the market enters 2026 with some of the enters 2026 with robust fundamentals. Net absorption reached 4,329 units, easily outpacing new supply and driving vacancy down to just 3.0%. Vacancy tightened across every major submarket over the past year, falling 150 basis points in Newark, 190 basis points in Jersey City, and 90 basis points in Hoboken. Rent growth surged to 6.2% in 2025, one of the strongest increases among major U.S. metros. Hudson County commands rents $1,200 to $1,500 above Newark due to superior transit access to Manhattan. Yet relative affordability still favors New Jersey, a dynamic that is likely to intensify if New York expands rent regulations. Rent growth has not recorded negative performance since 2017, marking Northern New Jersey as one of the very few metros to post consistent gains throughout the pandemic and recovery period. With $1.1B in sales volume, $314,000 average price per unit, and cap rates at 5.7% reflect a market that offers both near-term momentum and long-term durability. Should new rent controls be implemented in NYC, demand is expected to shift even more aggressively into Northern New Jersey’s nonregulated stock, accelerating rent growth and further tightening occupancy. Employment conditions further reinforce the market’s trajectory. While statewide job growth has appeared modest, Northern New Jersey’s economy tells a more robust story of diversification and resilience. Education and health services, along with the trade, transportation, and utilities sectors tied to the Port of Newark-Elizabeth, create a massive, stable base of employment. Northern New Jersey is also nearing the peak of its construction cycle. Nearly 7,700 units were delivered over the past 12 months, yet developers have started just 5,500 units over the same period. Looking ahead, Northern New Jersey is poised to maintain this strength in 2026 as several tailwinds converge. Limited construction activity across most submarkets will keep supply pressures minimal, allowing rents to continue rising from a position of already tight occupancy. At the same time, ongoing in-migration from Manhattan, driven by relative affordability, new luxury development in places like Jersey City and the Gold Coast, and expanding transit-oriented districts, is expected to sustain deep demand for high-quality rentals. Northern New Jersey enters 2026 with a compelling foundation for continued outperformance. Northern NJ Sees Highest Cap Rate in a Decade Source: Matthews™ Research, CoStar Group, Inc. San Diego, CA By the Numbers 2025 | Source: Matthews™ Research Sales Volume: $2.2B Average Price Per Unit: $403K Cap Rate: 4.7% Vacancy Rate: 4.1% Annual Rent Growth: (0.2%) Annual Net Absorption: 4,763 Units San Diego enters 2026 with one of the most stable and supply-constrained multifamily landscapes on the West Coast. In 2025, the market absorbed 4,763 units, enough to keep vacancy at a tight 4.1% despite a recent wave of deliveries, as a 20-year high of roughly 5,600 units have been completed so far this year. Although annual rent growth temporarily dipped 0.2%, the region’s underlying demand drivers remain among the strongest in the nation. These drivers include a high-income workforce, continued population gains, and a steady influx of renters priced out of homeownership in one of the nation’s least affordable for-sale housing markets. Investor confidence mirrors these fundamentals, with $2.2B in sales volume, an average price per unit of $403,000, and cap rates at 4.7%, signaling long-term optimism about the market’s trajectory. Conditions are set to strengthen further in 2026 as construction activity begins to moderate and the market rebalances. Much of the elevated supply delivered in 2024-2025 has already seen strong lease-up, particularly in coastal and infill submarkets where land scarcity and restrictive zoning limit future development. In addition, developers have notably pivoted towards smaller units. With fewer projects breaking ground and structural barriers keeping pipeline growth in check, vacancy is expected to tighten further over the next year. At the same time, the region’s expanding life science, defense, biotech, and technology sectors continue to attract high-earning talent. These dynamics point to a market poised for renewed rent growth, sustained occupancy strength, and competitive investor interest in 2026. San Diego Multifamily Supply & Demand Dynamics Source: Matthews™ Research, CoStar Group, Inc. Orange County, CA By the Numbers 2025 | Source: Matthews™ Research Sales Volume: $917M Average Price Per Unit: $453K Cap Rate: 4.4% Vacancy Rate: 4.2% Annual Rent Growth: 1.3% Annual Net Absorption: 4,725 Units Orange County continues to distinguish itself as one of Southern California’s most resilient multifamily markets, supported by exceptionally tight vacancies, durable renter demand, and a pronounced “flight to quality” that is reshaping leasing trends. The county benefits from structural supply constraints, high household incomes, and steady population drivers—all of which position it for strong performance in 2026. The median household income is almost $120K compared to the national average of about $89K, as the labor market continues to attract new residents. Orange County boasts an unemployment rate of -0.09% in comparison to the US rate of 0.54%. Investor sentiment remains confident despite elevated borrowing costs. Sales activity reached $917M in 2025, supported by sustained institutional interest. At $453,000 per unit, Orange County remains among the nation’s most expensive apartment markets, with pricing reinforced by limited land availability and consistent buyer competition. Cap rates hold firm at 4.4%, among the lowest in the country, underscoring the depth of capital targeting high quality, well-located assets. Operationally, the market is anchored by a 4.2% vacancy rate, which is materially below the national average and supported by steady demand from employment centers in Irvine, Costa Mesa, and the coastal submarkets. Even with moderate annual rent growth of 1.3%, absorption remains healthy, with 4,725 units absorbed, nearly matching new deliveries. Importantly, the market’s “flight to quality” trend continues to favor newly built, amenity-rich Class A properties, which are capturing a disproportionate share of leasing activity as high-income renters pursue upgraded, amenity-rich products in a limited-supply environment. With development heavily concentrated in Irvine and minimal new supply elsewhere, Orange County is poised to maintain tight occupancy levels into 2026. With this flight to quality, we are seeing more and more deals sell with negative leverage. We believe this to be a testament to the strength of Orange County multifamily. -Mark Bridge, Executive Vice President With a constrained pipeline, rising household incomes, and rebounding in-migration, Orange County is positioned for firmer rent growth and strengthening investment performance in 2026. As supply remains concentrated in only a handful of submarkets while demand deepens across the county, the market is set to maintain its standing as one of the most competitive and stable multifamily markets in the nation. OC Defies National Trends with Steady Apartment Development Source: CoStar Group, Inc. *Data was compiled through the research via Real Capital Analytics, CoStar Group, Inc. and Real Page, Inc.

Mark Bridge

Executive Vice President & Senior Director

3/5/26

Data Centers vs. Multifamily: How Georgia’s Growth Priorities Are Colliding

Georgia has emerged as one of the most active data center markets in the country. However, the speed and scale of this expansion are increasingly intersecting with multifamily housing priorities. What began as a straightforward economic development story is now evolving into a broader land-use and infrastructure debate, particularly across the Atlanta metro and its surrounding growth corridors. A New Kind of Development Conflict Unlike traditional opposition to industrial usage, resistance to data center development in Georgia reflects a more nuanced shift. Communities are not outright rejecting growth. Instead, municipalities and residents are increasingly weighing which forms of development best support long-term housing needs, infrastructure capacity, and cost stability. Large-scale data centers are capital-intensive and generate meaningful tax revenue, but they employ relatively few workers per acre. As a result, their placement on developable land has drawn greater scrutiny, especially where that land could otherwise support higher-density residential or multifamily housing. This shift has fueled a “new NIMBY” posture focused on protecting housing supply, infrastructure balance, and efficient land use rather than resisting growth outright. Diverging Growth Trajectories Between 2023 and 2024, the Atlanta metro became the nation’s fastest-growing data center market by both absorption and power capacity, with inventory expanding at an estimated annual rate of roughly 43%. Over the same period, multifamily and adjacent residential product types grew at a fraction of that pace, generally under 3% annually. While there are no widespread reports of multifamily shortages directly constraining data center expansion, the inverse concern has become more prominent. Local governments are increasingly questioning whether or not large tracts of land are being absorbed by low-employment industrial uses at a time when housing affordability and supply remain politically sensitive. Policy Response and Municipal Pushback By early 2026, at least ten Georgia municipalities had enacted moratoriums or zoning restrictions targeting new data center development. At the state level, proposed legislation has called for greater transparency around land use, reconsideration of tax incentives, and, in some cases, broader limits on future approvals. Community opposition has focused less on the existence of data centers and more on proximity and scale. Projects located near residential neighborhoods have faced resistance due to persistent cooling-system noise, increased traffic, visual impacts, and concerns around environmental externalities. These issues often overlap with the same suburban markets where multifamily developers are seeking entitlements and infrastructure access. The Hidden Bottleneck The most significant point of friction between data centers and multifamily housing lies in shared infrastructure, particularly power and water. In December 2025, the Georgia Public Service Commission approved Georgia Power’s plan to add nearly 9,885 megawatts of new generation capacity, largely to support projected data center demand. While the more than $16 billion expansion, the largest in state history, enables continued growth, it has raised concerns around long-term rate impacts, if demand projections fall short. For multifamily operators, utility cost volatility is increasingly a material underwriting variable. Water usage has emerged as a parallel issue. Hyperscale data centers can require millions of gallons per day for cooling, intensifying drought-related concerns in certain submarkets and prompting questions around whether industrial cooling demands should take precedence over residential or agricultural needs. Growth Still Moving Forward Despite growing resistance, large-scale approvals continue in select jurisdictions. In January 2026, the Spalding County Board of Commissioners unanimously approved zoning for a $3.9 billion data center campus proposed by Wallace Jackson LLC. The 190-acre project, which allows for up to ten buildings totaling nearly five million square feet, ranks among the largest recent data center approvals in the metro region. Local officials framed the decision around long-term tax revenue and fiscal stability, underscoring how responses to data center growth remain uneven across the state. Implications for Multifamily Investors For multifamily developers and investors, Georgia’s data center boom is neither purely a tailwind nor a headwind. Instead, it introduces new layers of complexity around site selection, entitlement risk, and infrastructure coordination. Markets with heavy data center concentration may face tighter competition for land, power, and water. At the same time, municipalities seeking to rebalance development priorities may grow more receptive to higher-density residential proposals that demonstrate efficient land use and infrastructure alignment. A Balancing Act Going Forward Georgia’s experience underscores how next-generation infrastructure uses are reshaping traditional real estate dynamics. Data centers remain an economic asset, reinforcing the state’s role in the digital economy. At the same time, their rapid expansion increasingly competes with multifamily and residential priorities through shared land, utilities, and political attention. For commercial real estate stakeholders, the takeaway is clear: growth in one sector is now materially influencing feasibility, costs, and approvals in another. Understanding how data center expansion intersects with housing, infrastructure, and policy will remain a defining CRE consideration in Georgia through the remainder of the decade.

Connor Kerns

First Vice President & Associate Director

2/19/26

The Matthews™ Podcast — Jeff Enck

Jeff Enck on Southeast Shopping Center Trends In this episode of the Matthews™ Podcast, host Matthew Wallace continues the publication takeover series with Part 3 of the National Shopping Center Overview, breaking down the Southeast with Matthews™ Senior Vice President Jeff Enck. With 25+ years of retail investment sales experience and hundreds of transactions closed across the Southeast, Enck shares why strip centers have moved from underrated to one of the most competitive retail investment categories in the country, and what that means for both private and institutional capital. The Role of Strip Centers as a Primary Asset Class Traditionally, retail real estate was often viewed through the lens of grocery-anchored or power cents. However, Enck notes that over the last decade, and specifically the last two to three years, unanchored strip centers have shifted their strategies to exit grocery-anchored and power centers in favor of strips. Industrial Adoption: Major groups, including the first publicly traded REIT solely focused on strip centers (Curbline), have shifted their strategies to exit grocery-anchored and power centers in favor of strips. The “Apartmentization” of Retail: Investors are increasingly treating strip centers like “retail multifamily”. Because the bays are typically uniform (1,500 to 2,500 square feet), owners expect regular tenant turnover as an opportunity to reset and increase rents. Operational Efficiency: Re-tenanting smaller bays is more capital-efficient than filling large big-box spaces, often requiring less tenant improvement (TI) allowance. Essential Service Retail (ESR) and the Amazon Impact The narrative of the “retail apocalypse” has shifted as investors recognize the durability of “essential service retail”. Recession and Internet Proofing: Success in the space is driven by tenants that cannot be easily replaced by e-commerce, such as urgent care, hair salons, dentists, and local restaurants. The Amazon Synergy: Ironically, the rise of Amazon has helped strip centeres by creating a need for shipping hubs. Many centers now feature UPS or Pack Mail stores to handle the heavy volume of consumer returns. The Human Factor: COVID-19 revealed that local “mom and pop” tenants are often more resilient than national credit tenants because their personal livelihoods are tied to the business, making them more willing to collaborate with landlords during crises. Investment Dynamics of the Southeast Enck highlights the Southeast as a particularly attractive region due to its fundamental economic drivers. Growth Drivers: Tax-friendly states, job importation, and low cost of living have led to a massive influx of population, which in turn fuels the need for retail support. Market Concentration: Major metros like Charlotte, Tampa, Atlanta, Orlando, and Nashville are all performing solidly. Yield Opportunities: While core markets see heavily compressed cap rates, investors are increasingly looking toward secondary markets like Savannah, Knoxville, and Greenville to find better yield The Future of the Asset Class Early Innings of Institutionalization: The strip center market remains highly fragmented. Enck estimates that only about 1.5% to 2% of the approximately 68,000 unanchored centers nationwide are currently institutionally owned. Rent Growth Strategy: The primary attraction for large groups is “mark to market” opportunities—buying seasoned properties (10–30 years old) and raising below-market rents. Supply Constraints: New construction of traditional strips is limited due to high construction costs. Most new development is focused on small 2–4 tenant out-parcels (e.g., Chipotle and Starbucks) where rents are already at their peak, limiting future growth potential. Key Takeaways for CRE Professionals Stick to a Specialization: Enck advises young brokers to choose a property type and geographic focus and stay with it, rather than jumping between asset classes based on what is currently popular. Understand Risk from the Buyer’s Perspective: Learning how buyers evaluate risk, a lesson Enck learned from early struggles with difficult listings, is essential for long-term success Value of Professional Representation: Because 80% of strip center owners only own one or two properties, there is a significant opportunity for brokers to provide professional guidance to private clients.

Atlanta, GA Multifamily Market Report Q4 2025

Atlanta’s multifamily fundamentals reflect a market moving toward stabilization as demand increasingly aligns with a slowing pace of new supply. Net absorption totaled approximately 3,400 units, contributing to a vacancy rate of 6.3% as leasing momentum broadened beyond the most competitive lease-up corridors. Rent performance remains constrained, with average asking rents near $1,600 per unit and annual rent growth of -1.3%, as operators continue to balance occupancy and revenue through concessions and targeted pricing strategies. Performance varies by asset quality and location, with higher-end communities in amenity-rich, transit-accessible submarkets demonstrating stronger leasing traction than properties in areas with concentrated recent deliveries. As construction activity recedes and absorption continues, conditions are expected to support gradual normalization in occupancy and pricing, though near-term results will remain uneven across the metro. Key Findings Atlanta’s multifamily market is moving out of a supply-heavy expansion phase and into a period of improving balance as absorption gains traction and construction activity moderates. Operating performance remains bifurcated, with well-located, higher-quality assets demonstrating relative resilience while lease-up competition persists in corridors with concentrated recent deliveries. Investment activity is deliberate but sustained, reflecting disciplined underwriting, recalibrated pricing expectations, and continued interest in assets offering durable locations and value-creation potential. Atlanta Multifamily Supply & Demand Dynamics Source: RealPage Inc. Atlanta Demographics Source: CoStar Group, Inc. Unemployment Rate: 5.0% Current Population: 9,577,092 Households: 3,791,492 Median Household Income: $92,999 Atlanta’s economy continues to support long-term multifamily demand, anchored by its scale, affordability, and economic diversity. The metro area is home to approximately 6.4 million residents and has added roughly 330,000 people since 2020, driven primarily by international immigration and continued in-migration from higher-cost coastal markets. Household growth has been strongest in suburban counties such as Cherokee and Forsyth, reflecting demand for larger homes and strong school districts, while the City of Atlanta has also experienced renewed growth tied to multifamily expansion in intown neighborhoods including Midtown and Old Fourth Ward. The region’s economy is anchored by logistics, trade, professional services, healthcare, and higher education, supported by a deep corporate presence and extensive transportation infrastructure, reinforcing Atlanta’s position as a durable demand market for rental housing. Headquarter Relocations to ATL Source: CoStar Group, Inc. Airbnb Nike PrizePicks Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Atlanta Multifamily Construction Construction activity in Atlanta has moderated meaningfully following several years of elevated development, signaling a shift toward a more balanced supply environment. Approximately 17,100 units remain under construction, representing about 3.1% of existing inventory, with roughly 2,500 units delivered during the period. Development continues to concentrate in high-access intown districts and select suburban growth corridors, though fewer new starts reflect tighter financing conditions, higher costs, and increased underwriting discipline. As recent deliveries progress through lease-up and the pipeline continues to thin, new supply is expected to align more closely with long-term demand trends, reducing competitive pressure and supporting market stabilization. Units Construction Starts Source: CoStar Group, Inc. Units Under Construction Source: CoStar Group, Inc. Atlanta Multifamily Sales Multifamily investment activity in Atlanta remained active but selective, with approximately $6.7 billion in sales volume and average pricing near $192,000 per unit. Investors have focused on assets offering strong locations, operational durability, and identifiable value-creation opportunities, while underwriting has remained disciplined amid higher interest rates and conservative lending standards. Cap rates averaged approximately 5.3%, reflecting Atlanta’s relative attractiveness compared to national benchmarks despite ongoing price discovery. Transaction volume remains below long-term averages, though improving clarity around pricing and operating fundamentals is expected to support steady, opportunistic deal flow centered on well-located assets and targeted repositioning strategies. Atlanta Multifamily Average Price Per Unit & Cap Rate Source: Real Capital Analytics Atlanta Multifamily Annual Deal Volume Source: CoStar Group, Inc. By the Numbers Q425 | Source: Real Capital Analytics & CoStar Group, Inc. Sales Volume: $6.7B Price Per Unit: $192K Cap Rate: 5.3% Vacancy Rate: 6.3% Rent Growth: (1.3%) Asking Rent Per Unit: $1.6K Under Construction: 17.1K units Delivered: 2.5K units Absorbed: 3.4K units

Connor Kerns

First Vice President & Associate Director

1/23/26

Atlanta, GA Industrial Market Report Q4 2025

Atlanta’s industrial sector is recalibrating after years of heavy construction. With slower absorption levels, landlords have begun to offer concessions and invest in property upgrades. This activity has aided the metro as Atlanta bounced back with 2.6 million square feet absorbed in the fourth quarter. Large-format logistics facilities between 100,000 and 500,000 square feet face the greatest availability, while smaller inﬁll assets near population centers remain relatively tight. Although rental growth has cooled and near-term headwinds persist, Atlanta’s strategic role as a distribution hub and a slowdown in new construction should support gradual stabilization and long-term industrial fundamentals. Key Findings Deliveries have fallen nearly 40% from recent peaks, and developers have shifted away from speculative big-box logistics toward data centers and build-to-suit projects. Investors are prioritizing fully leased, mission-critical assets, while properties with vacancy face pricing pressure amid slower rent growth and elevated supply. Longer leasing timelines, increased supply, and rising sublease availability have increased landlord concessions and ﬂexibility across the market. Atlanta Industrial Supply & Demand Dynamics Source: CoStar Group, Inc. Atlanta Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.5% Current Population: 6,450,430 Households: 2,415,232 Median Household Income: $93,145 Atlanta remains a dynamic and resilient economic hub, driven by strong population growth, corporate investment, and a comparatively low cost of living and business operations. Although employment growth has moderated to 1.2% year-over-year, Atlanta’s diverse economic base in logistics, professional services, ﬁnancial activities, healthcare, and technology continues to provide stability. Looking ahead, innovation areas like Tech Square and Science Square are expected to support growth in IT, life sciences, and advanced manufacturing. Top Atlanta Leases Source: CoStar Group, Inc. Living Spaces Allen Distribution Fr8 Auctions Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Atlanta Industrial Construction The metro’s industrial construction pipeline has moved past its prior peak, with deliveries slowing sharply as developers respond to softer market conditions. Even as 18.9 million square feet remains under construction, new additions are below recent averages, keeping Atlanta among the nation’s most active markets. The focus has shifted away from speculative big-box logistics toward built-to-suit projects and data centers, which now dominate the largest developments underway. With only about 25% of space under construction still available and new starts down roughly 40% year-over-year, this approach should help absorb excess supply and support vacancy stabilization by late 2026. SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc. Atlanta Industrial Sales Transactions remain active despite softer year-over-year results. Sales volume totaled $1.4 billion in Q4 2025, down 10% from 2024 but roughly 70% above the pre-pandemic average from 2015 to 2019. Investor interest has become increasingly selective as higher vacancy and slower rent growth temper underwriting assumptions. Fully leased assets with longer average lease terms continue to command strong pricing, while properties with vacancy face greater scrutiny. Recent transactions highlight sustained interest for logistics and data center assets, particularly in North Fulton and other afﬂuent suburban submarkets. Looking ahead, deal activity is expected to remain steady into early 2026, supported by Atlanta’s long-term industrial fundamentals. Atlanta Industrial Sales Volume Source: CoStar Group, Inc. By the Numbers Q4 2025 | Source: CoStar Group, Inc. Sales Volume: $1.4B Price Per SF: $125 Cap Rate: 6.6% Vacancy Rate: 8.2% Rent Growth: 2.3% Asking Rent Per SF: $9.90 SF Under Construction: 18.9M SF Delivered: 1.2M SF Absorbed: 2.6M

Atlanta, GA Retail Market Report Q4 2025

Atlanta’s retail market remained historically tight in Q4 2025 despite experiencing roughly –1.7 million SF of net absorption driven largely by national retailer bankruptcies. Limited new development kept availability near a record low 4.1%, well below the U.S. average, and space continues to lease quickly, with market time falling below six months. Larger-format vacancies increased most, while demand remained strong for smaller footprints, driven by expanding concepts like Chipotle and Sugar Polish Nails. Northern suburbs captured an outsized share of leasing, supported by strong income and population growth, while in-town districts benefited from rising density. Rent growth moderated but remained above national trends, and constrained supply should keep fundamentals healthy through 2026 despite macroeconomic uncertainty. Key Findings Investor appetite remained strong, with $364M in sales volume and a tight 4.3% vacancy rate, supported by limited new construction and resilient demand across Atlanta’s highest-growth corridors. Retail rents climbed 3.6% year-over-year, pushing asking rates to $23.63/SF as scarce space and fast leasing velocity continued to bolster landlord leverage metro-wide. Despite negative absorption, pricing held firm at $225/SF and cap rates hovered near 7.2%, underscoring investor confidence in Atlanta’s long-term fundamentals and constrained supply pipeline. Atlanta Retail Supply & Demand Dynamics Source: CoStar Group, Inc. Atlanta Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.5% Current Population: 6,449,650 Households: 2,414,752 Median Household Income: $93,093 Metro Atlanta’s economy remained resilient in Q4 2025, supported by strong population gains, competitive living costs, and continued corporate investment. Job growth has moderated but remains diverse across logistics, healthcare, and professional services. Retail demand outperformed other property types, benefiting from rapid in-migration, limited new supply, and healthy tenant expansion. While the office and industrial sectors are recalibrating, innovation hubs like Midtown and West Midtown continue attracting major employers. Expanding healthcare infrastructure and growing life science and tech clusters further reinforce Atlanta’s long-term economic stability and support steady retail performance heading into 2026. Population, Labor, & Income Growth Source: CoStar Group, Inc. Atlanta Retail Construction Retail construction in Atlanta remains limited despite strong fundamentals, with only 0.2% of inventory underway and lenders reluctant to fund speculative projects. Most development is preleased or built-to-suit, driven by national chains like Chick-fil-A, Starbucks, and Circle K, while small-business-focused projects such as Upper West Market and Terminal South provide remaining availability. Recent deliveries include a Kroger-anchored center, a Kia dealership, and the fully leased High Street mixed-use district. Construction activity has slowed sharply, with 2024 marking record-low starts and minimal new square footage. Combined with ongoing demolitions and robust population growth, this constrained pipeline is expected to keep vacancies low for years. SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc. Atlanta Retail Sales Atlanta’s retail investment activity outperformed national trends in 2024, with sales exceeding both 2023 levels and the pre-pandemic average. Investors continue to target the Sun Belt’s strong population growth and tight retail fundamentals, culminating in the highest quarterly sales volume since early 2022. Major deals included Shaked Acquisitions’ $64 million purchase of Cobb Place Center and Georgetown Company’s $63 million acquisition of the Kroger-anchored Kedron Village. Urban redevelopment also gained momentum, highlighted by the $29 million Mall West End sale and a $450 million planned transformation. While demand remains healthy, softening rent growth and higher interest rates are expected to temper transaction activity. Atlanta Retail Sales Volume Source: CoStar Group, Inc. By the Numbers Source: CoStar Group, Inc. Sales Volume: $364M Price Per SF: $225 Cap Rate: 7.2% Vacancy Rate: 4.3% Rent Growth: 3.6% Asking Rent Per SF: $23.63 Under Construction: 762K SF Delivered: 48K SF Absorbed: (309)K SF

The Rising Tide of Hotel Delinquency

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

Mabelle Perez

Vice President

12/12/25

Beyond Validation: A Roundtable on Scaling, Capital, and the Future of Unanchored Strip Centers (2025 Edition)

The unanchored strip center sector has entered a new era! One that is not only defined by early adopters or contrarian thinkers, but by institutional validation, operational sophistication, and sustained performance across nearly every major U.S. market. What began years ago as a fragmented category dominated by private owners has now become a distinct property type with its own ecosystem of REITs, fund managers, operators, and capital partners. To explore this next chapter, Matthews™ hosted its second annual strip center roundtable, moderated by Jeff Enck, First Vice President of Shopping Centers at Matthews™. Joined by Kyle Stonis, Pierce Mayson, and Boris Shilkrot, Enck convened 13 of the largest owners and operators to carry on discussions from where last year’s event left off. In 2024, the industry debated whether unanchored strip centers truly warranted the attention they received. In 2025, the niche has matured and interest in the unanchored strip center space has only grown. Institutions are deploying capital, operators are expanding footprints, and retail tenants in unanchored strips are performing well despite an environment still shaped by shifting consumer behaviors and challenges with capital markets. The Thesis Revisited: Has the Space Been Validated? The discussion opened with a familiar question: Is the thesis behind unanchored retail still holding? Can a shopping center without an anchor remain competitive? The confidence was unmistakable. John Cattonar of Curbline, now the first publicly traded REIT dedicated exclusively to unanchored strip center retail, offered the clearest affirmation. “We wanted to create a pure-play REIT that had first-mover advantage,” he said, recalling Curbline’s October 2024 debut. “In the last twelve months, we’ve bought almost a hundred shopping centers for just under $900 million. We’re operating these centers for less than 10% NOI (compared to 20%-25% for power centers), we have less than 1x debt-to-EBITDA, and we have $800 million of liquidity. So, when you ask if the thesis has been validated–yes, at least at Curbline.” Cattonar’s remarks set the tone for the panel: what was once an emerging thesis has now become an established one—validated by performance, capital markets, and now the public market. Several operators noted that tenant demand, occupancy, and leasing velocity have reached levels that would have been unthinkable during the “retail apocalypse” era a few years ago. Kristen Neyland from Crow Holdings echoed this sentiment, pointing to their recent recapitalization. “We completed a major recapitalization of our portfolio—almost 200 assets totaling 4.5 million square feet. Our NOI is growing, leasing and operating metrics are strong, and we drew interest from global investors. It absolutely reinforces what we’ve been building for ten years and speaks to the power of scale and investor interest in this product type.” This asset class is legitimate, scalable, and overall is an institutional-worthy strategy. “These deals, Curbline going public and Crow’s recap in ‘23, have helped provide that institutional attention [to the space],” said Dusty Batsell of Baceline Group. “This has brought a lot of validation, but we still feel like there’s a lot more opportunity moving forward.” Others pointed to operational complexity as the driver of long-term advantage. “The reason we started buying strips at the time was the price point, it was below what a REIT would buy but above what a wealthy investor would buy,” said Derek Waltchack of Shannon Waltchack. They developed a core competency of managing these centers and learned early on that managing strips is not for the faint of heart. “You’ve got credit tenants, but you also have mom-and-pops. You have to build a management competency. And now, as institutions step in, they’re learning what we learned twenty years ago.” Is Raising Capital Easier Today? The next question turned to capital raising: has the broader embrace of essential-service strip centers made fundraising easier? For many, the difference was dramatic. “Yes,” said CenterSquare’s Robert Holuba. “When we started ten years ago, had I known how hard it was going to be to raise capital for retail, I probably would’ve never embarked upon the journey. But today, I had breakfast with some multifamily developers who told me how difficult their fundraising environment is with performance challenges and fundamentals. Meanwhile, we’re out raising programmatic joint ventures with public pension funds.” Holuba described the firm’s trajectory in three places. Early on, in 2016 and 2017, it was like a hypothesis…capitalizing on the negative sentiment of retail. 2.0 was coming out of COVID, it became an aggregation strategy with smaller dollar amount Now phase 3.0, it’s a bigger, more prestigious, iteration of buying with institutional capital. It’s evident that this shift didn’t happen by accident. It happened because performance forced recognition. And, one of the most unconventional fundraising stories comes from Don Tepman, also known as “The Strip Mall Guy.” His social media presence has evolved into a surprisingly potent capital channel. “Our average check size from a social media lead is north of half a million dollars,” he said. “That’s an investor who is sophisticated…But they have built familiarity with me, just by following me day-to-day [on social media]. It definitely opens up doors that otherwise wouldn’t be open.” However, he points out that social media doesn’t replace track record. It only complements it. “What keeps me up at night is not fundraising, it’s finding that next deal.” Other panelists go on to explain that today, the fundraising pitch has changed. You don’t need to convince people to invest in the asset class anymore (which used to be 80% of the pitch). “There are new investor types that we’re seeing, but the ability to show what we have produced and how assets are performing goes a long way [speaking louder than any pitch],” said Anthony Fanizio from Last Mile. The conversation then expanded to discuss how investor profiles have changed. Some groups are now fielding interest from institutional LPs who see strip centers as a stable, income-focused counterweight to more volatile asset classes. Others find that demonstrating strong performance in earlier funds has unlocked access to larger and more diverse capital pools. For some, such as Bond Street REIT and KM Realty, capital raising is increasingly tied to innovative structures such as the 721 UPREIT. These allow private owners to contribute assets into a REIT vehicle in exchange for operating partnership units. This is a powerful strategy in a fragmented sector full of long-time owners who want tax deferral but also want to stop operating their own centers. “Our growth has been through the high-net-worth individuals, we’ve rejected institutional equity so far,” said Randy Keith of KM Realty. “An UPREIT is a great exit strategy for individuals who own 1 to 20 shopping centers, whereby they can defer taxes and exchange into a REIT.” He explains that they aren’t easy, but they solve a real problem for private owners. If they want to grow the right way, UPREITs will become a major part of that strategy. The Changing Capital Markets Landscape The debt markets played a significant role in the conversation, particularly as interest rates have begun to soften. After two years of elevated borrowing costs and limited lender appetite, many panelists said they were pleasantly surprised by recent debt executions. “Banks have really stepped up in a number of ways on everything from spreads, structure and flexibility,” said John F. Morgan, Jr of SouthCoast Centers. With bank debt you can operate with more agility and right now they’re competing. Randy Keith added that they have started dealing more with banks, which has helped with spreads, but there’s certainly more competition than the more regional banks. North Pond Partners’ Taylor Brown noted that rates have influenced underwriting but have not fundamentally altered their acquisition philosophy. “Our vehicle’s an open-ended fund, so we’re not focused on IRR the way some are,” he said. “But yes, we’re modeling lower interest rates” The group was divided on what falling rates might mean for inventory. Some expect more selling from private owners who no longer feel trapped by ultra-low existing debt. Others believe that vacancy, not rates, is the real catalyst. “I think vacancy drives volume more than the rate story,” Don Tepman said. “When a mom-and-pop owner has a sudden vacancy, fear sets in. They don’t know how to backfill and that’s when they sell.” Several panelists predicted an uptick in modest vacancy as certain consumer categories soften—particularly lower-income households facing inflation pressure. “We’re already seeing some tenants close earlier than expected,” said one participant. “We’ve had a few businesses shut in mid-term because their economics just shifted. So yes, vacancy may creep up. But for strong operators, that’s an opportunity.” Unlocking Inventory in a Tight Market Enck asked the panel: is the lack of product the number one challenge in the space today? Bond Street REIT’s Luke Fox, “For us, yes lack of product has been a challenge, but we’re still finding opportunity in the market.” He also notes that private owners who have held properties for decades who are still on the fence about selling, that educating them on pricing and process can be slow. “There’s product out there but it’s figuring out where there’s inherent value from what is being spun out.” Some argued that compressed cap rates and strong fundamentals still entice sellers—just not in significant volume. Others believe that as rates normalize and certain centers experience modest vacancy, the logjam may break. But the group agreed that product scarcity underscores a larger reality: operators must be proactive, patient, and prepared to execute quickly. As Cattonar referenced, they’ve built a team at Curbline that can gather data and make decisions in a few hours because that’s what competing for product requires today. Leasing and Mark-to-Market: The Heart of Value Proposition One of the strongest themes emerging from the conversation was leasing. Nearly every operator reported exceptional occupancy levels and strong spreads. “We’re at 97% occupancy,” Cattonar said. “Our renewals have been 20% on a straight line basis, and new leases have been a 40% spread.” This doesn’t happen unless demand is deep and broad. Neyland shared similar results. “Right now we are at 94%-95% leased, and just this year we have already renewed 85% of our tenants. This tells us that there’s very strong demand and not a lot of available space. And that’s naturally going to put upward pressure on rents.” Yet, panelists emphasized that not all categories are equal. Boutique fitness, though popular, often hits a ceiling due to class-size constraints. Certain emerging fast-casual concepts, especially those backed by private equity, may expand too quickly and collapse under their own weight. “When you see the same bowl concepts and chicken concepts chasing ‘best space at highest rent,’ you worry,” said one panelist. “Some will survive. Many won’t.” Danizio added that sustainability depends on understanding each tenant’s economics. “Can a tenant really go from $25 per square foot to $35 per square foot? For some uses, absolutely. For others, it’s just not viable.” The mark-to-market opportunity remains compelling, but only for operators willing to study each tenant individually, not rely on market averages. Adam Greenbaum from AGW Partners shares that a majority of the properties they’ve bought have been from owners who have owned the property for 10 to 20 years, sometimes as high as 50 years. “It’s interesting to study what these longstanding owners think about their tenants. We’ve noticed that with the non-credit tenants, rents tend to be very low, remaining term short, and the landlord participates in no inducement costs.” Especially in markets like New York, rents can be upwards of five to ten times higher, but evictions take 18 to 24 months. He said that “having deep, meaningful relationships with tenants and staying connected throughout the lease term, helps with making the centers have more overall activity.” Enck transitioned the discussion to outparcel strips, which often command the highest rents in the market. But are these rents sustainable? Holuba described a recent portfolio of two-tenant outparcels with Starbucks endcaps—an anomaly rather than a strategic direction. “These assets usually trade to 1031 buyers at low cap rates,” he said. “It’s hard to compete for them consistently.” Riverwood’s founder, Ron Chanin, spoke from a developer’s perspective. “Currently it’s extremely difficult to develop,” he said. Land costs, construction costs, capital markets are all pushing rents to levels that may not be sustainable long term. “The last major development we completed would not pencil today.” Others argued that the economics of drive-thrus and mobile ordering have changed the calculus. “Cava, Chipotle, Starbucks, they’re doing volumes now that would have been unheard of ten years ago,” one panelist noted. “Underwriting must evolve.” Still there was broad agreement that retail located “on the road” that’s visible, accessible, and convenient, performs better than shadow-anchored space set back behind a large box. “Conventional wisdom was that the value of your shops, wherever it was in the shopping center, was based on the performance of the anchor behind it. And what we did during COVID was analyze cell phone data,” said John Morgan Jr. “What we learned was that less than 10% of traffic to an outparcel tenant goes into the anchor behind it.” He also pointed out that retention has been very high, even where maybe they thought internally the rents were a little higher than what the market was when the tenant came to take an option or renewal. Geography & Growth Strategy: Where to Look? The panel turned to geography. Tepman shared the most flexible view. “I look at where there are good deals. It’s not about the market, it’s about deals.” He made the point that if the fundamentals are there, he’s interested, whether it’s Indiana or California. Batsell took a different approach. “I would say we are pretty specific in terms of our geography, but it has a lot to do with operations.” Baceline Group looks more for Solid B centers, which require a lot of hands-on management. “We reorganized our operations to make sure that we are within a two- to three-hour drive of every property with boots on the ground so that we could provide a hands-on touch.” Shannon Waltchack continues expanding methodically into new regions, while AGW Partners has pursued a strategy shaped by tenant relationships, especially in markets like Atlanta where they see meaningful value-add potential. Riverwood, with decades of experience, remains highly selective and development minded. “We’ve had many offers to buy portions of our portfolio,” said Chanin, “but replacing these assets with something of equal quality is almost impossible.” Operations: The Hardest Part, But Biggest Advantages The group agreed that strip centers demand a level of operational intensity. Matthews™’ own Kyle Stonis added a dose of realism about the growing institutional interest in unanchored strip centers. “There are a lot of groups trying to get into the space,” he said. “But as Ron and others have pointed out, the operations of an unanchored strip are massive. The amount of management, leasing, and capital you have to deploy is tough for institutional groups to execute right now.” Stonis noted that many institutions initially believed they could build in-house operating capacity, but the reality has tempered their ambitions. “We’ve met with the biggest institutional groups over the last couple of years,” he said. “They would come in saying, ‘We want to buy unanchored strips and manage them ourselves.’ But fast forward twelve months—and that program isn’t going to work for them. So now we’re seeing LP capital sneaking in. They’re partnering with the operators who’ve already figured it out.” Crow Holdings maintained a lean but deep in-house bench and outsources property management and leasing to local partners. “It’s important to us to have dedicated local boots on the group expertise,” said Neylan. “With 2,000 tenants, you need partners who understand every nuance of the submarket.” Southcoast Centers has brought nearly operations in-house, outside of leasing. “It has a lot of benefits to be able to control the whole process and have standards and our systems communicate,” said Morgan. “You either have to outsource it and be committed to that, or be committed to doing it yourselves.” Others discussed the limits of traditional leasing models. For small-bay space, commissions are often too small to justify proactive outreach from third-party brokers. The group unanimously agreed: operational intensity creates competitive advantage. Scale only works when operations do. Others emphasized that scaling is about processes, not just people. Without systems, data, discipline, and repeatability, growth becomes dangerous rather than profitable. Luke Fox Bond Street highlights the importance of staying ready. “Opportunities appear quickly,” he said. “We prioritize the fundamentals of our thesis and remain prepared to act. That’s how you scale in an environment where product is scarce.” Dispositions: Sell, Recap, or Hold? The final business-oriented discussion addressed disposition strategies. CenterSquare plans to sell select assets annually. “Real estate needs to return capital to investors,” Holuba said. “Commercial real estate has seen a tremendous slowdown on return of capital back to investors, and it’s caused problems. Selling even five to ten assets a year helps maintain liquidity and keeps our platforms healthy.” Others, like Riverwood, see little reason to sell when high-quality assets are irreplaceable. “The problem is you’re going to exchange out and end up with assets that are not nearly as good as what you’re selling.” This divergence reflects the broader variety of strategies in the room—income-focused, value-add, open-ended core-plus, REIT-style aggregation, and long-term hold. Looking Ahead: Where is the Strip-Center Sector in Five Years? The conversation closed with predictions. Cattonar offered an unequivocal view. “At the asset level not much changes. As long as you buy great real estate that has leasable units, it will continue to perform.” But he noted that institutional ownership will increase dramatically. The headlines this room has created have shined a spotlight on this sector. Institutions that once ignored strip centers are now being asked, ‘what’s your strategy to get into unanchored retail?’ That demand will reshape valuations. Others pointed to the resilience of tenant demand. As one panelist noted, “in the sectors we all operate in (Salons, medical, QSR, daily needs…) there’s always a new entrepreneur ready to take space. That’s the beauty of this business.” Some warned of risks, including oversaturation of certain categories, private-equity-driven expansion of unproven brands, and potential macroeconomic pressures on lower-income consumers. But the overall sentiment was clear: the long-term outlook remains strong. The panel briefly touched on artificial intelligence. Some operators have begun using AI for property management tasks, data analysis, or marketing—but with caution. Conclusion This year’s roundtable revealed an industry that has grown more confident, more sophisticated, and more institutional in its approach. The sector is no longer fighting for recognition; it is shaping its own landscape. Unanchored strip centers have proven themselves as durable, efficient, high-performing assets with a long runway of opportunity ahead. As capital flows deepen, operations become more advanced, and platforms refine their growth strategies, the next era of the strip center market will be defined not by contrarian bets, but by professional excellence, disciplined execution, and an increasingly institutional backbone. If 2024 was about validating the thesis, 2025 was about scaling it. The sector’s next era will be shaped by disciplined operators, deeper capital pools, and the institutional infrastructure now forming around unanchored retail. The panel’s message was consistent: The runway is still long.

Jeff Enck

Senior Vice President

12/2/25

Atlanta, GA Multifamily Market Report Q3 2025

In Q3 2025, Atlanta’s multifamily market showed clear signs of stabilization following several quarters of softening fundamentals. Vacancy settled at 5.7%, down from its 2024 peak of 7.9%, with a net absorption of 3.5K units and 3.9K units delivered, signaling improving balance between supply and demand. However, rent performance remained modest, with asking rents averaging $1.6K per unit and year-over-year rent growth at 0.6%. This modest decline reflects ongoing rent concessions across the metro, particularly among new, high-end developments still competing for tenants. The market’s vacancy rate continues to trend lower, supported by a slowdown in new construction. The market’s resilience, paired with consistent absorption, has fueled optimism that rent growth will return to positive territory by mid-2026 as Atlanta works through the final stages of its post-supply correction cycle. Key Findings While the metro has seen a rebound in demand after a period of stagnation, Atlanta’s multifamily market continues to navigate vacancies and downward rent pressures, caused by an unprecedented wave of new supply. The market has recorded its 10th consecutive quarter of positive absorption, a significant turnaround from flat-to-negative trends in 2022. Looking ahead, rent demand is projected to align with new deliveries by year-end, with year-over-year rent growth expected to turn positive in Q2 2026, marking a critical inflection point for the market. Atlanta Multifamily Supply & Demand Dynamics Source: CoStar Group, Inc. Atlanta Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.5% Current Population: 6,446,199 Households: 2,412,627 Median Household Income: $92,862 Atlanta continues to assert itself as a powerhouse of growth and innovation, supported by robust population gains and diverse economic drivers. Between 2023 and 2024, the region added roughly 75,100 residents, eighth-highest nationally, drawn by its affordability and business-friendly climate compared to coastal hubs. Employment growth since early 2020 has nearly doubled the U.S. rate. The metro’s balanced economy spans logistics, finance, professional services, and healthcare, with the latter buoyed by major new hospital investments. While tech layoffs and paused developments have softened momentum in some office sectors, Midtown and West Midtown remain magnets for corporate expansion, including new hubs from Cargill, Nike, and Airbnb. Looking ahead, innovation clusters like Tech Square and Science Square will drive advances in biotech and advanced manufacturing, reinforcing Atlanta’s position as a leading U.S. center for talent, technology, and sustainable growth. Headquarter Relocations to ATL Source: CoStar Group, Inc. Airbnb Nike PrizePicks Population, Labor Force, & Income Growth Source: CoStar Group, Inc. Atlanta Multifamily Construction Development activity continued to decelerate, reflecting a sharp decline following several years of record completions. Approximately 14,500 units were under construction, marking the metro’s lowest active pipeline since mid-2020 and signaling a clear return to pre-pandemic norms. Despite the slowdown, new deliveries continue to weigh on fundamentals. Activity remains concentrated in Downtown Atlanta, North Gwinnett, and Henry County, where industrial expansion and proximity to major transportation corridors continue to support growth. Construction costs have stabilized, but stricter lending standards and negative rent growth have limited new groundbreakings. Developers are adopting a cautious stance, focusing on project completion and lease-up rather than launching new developments. Units Construction Starts Source: CoStar Group, Inc. Units Under Construction Source: CoStar Group, Inc. Atlanta Multifamily Sales Multifamily investment maintained steady momentum, reflecting improved confidence despite ongoing rent and vacancy headwinds. Sales volume totaled approximately $5.2 billion, with assets trading at an average price per unit of $188K and cap rates stabilizing near 5.2%. Transaction activity was largely driven by private capital and REITs targeting long-term positioning in supply-constrained submarkets such as North Fulton and Alpharetta. While pricing expectations still limit deal flow, buyer sentiment has improved as the gap between bid and ask prices begins to narrow. With construction moderating investors view 2025 as an attractive entry point ahead of a projected recovery in fundamentals and rent growth by mid-2026. By the Numbers Q3 2025 | Source: RealPage, Inc. Sales Volume: $5.2B Price Per Unit: $188K Cap Rate: 5.2% Vacancy Rate: 5.7% Rent Growth: 0.6% Asking Rent Per Unit: $1.6K Under Construction: 16.8K units Delivered: 3.9K units Absorbed: 3.5K units

Atlanta, GA Industrial Market Report Q3 2025

Atlanta remains one of the country’s most dynamic and resilient economies, driven by strong population growth and corporate investment. The region added about 75,100 new residents between 2023 and 2024, which aided employment to outperform the national rate. Employers are drawn to innovation hubs like Midtown and Tech Square, which noted move-ins by Cargill, Google, and Cisco. Healthcare is also growing, led by investments from Emory and Children’s Healthcare of Atlanta. Atlanta Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.5% Current Population: 6,444,306 Households: 2,411,462 Median Household Income: $92,735 Population, Labor, and Income Growth Source: CoStar Group, Inc. Key Findings The metro’s industrial sector is transitioning from a period of record-breaking activity, but elevated supply continues to pressure demand and rents. There is 14 million square feet under construction, driven mostly by major data center projects from QTS, Microsoft, and Meta. While sales activity has softened, transactions remain about 50% above pre-pandemic levels, aided by institutional and user-driven deals. Market Performance Industrial activity across Atlanta has entered a period of recalibration after years of rapid expansion. The vacancy rate rose to 8.5% in Q3 2025, well above the 10-year average of 5.8%, as new deliveries continue to outpace absorption. Demand has softened, with several third-party logistics and housing-related ﬁrms giving back space amid elevated interest rates. Availability is especially high in submarkets like Kennesaw/Acworth, where over 15 large facilities have been added since 2023. Rent growth has slowed to 1.8% annually, down from a long-term average near 8%, though well-located properties near the airport and along I-75 still see strong pricing. With construction starts down sharply, tighter vacancies and renewed rent growth are expected by year-end 2025. Atlanta Industrial Supply & Demand Dynamics Source: CoStar Group, Inc. Atlanta Construction Industrial construction in Atlanta has moved beyond its peak, with deliveries slowing sharply. There was 14 million square feet of space underway in Q3 2025, the lowest construction level noted for the metro this year. Developers have scaled back speculative building in response to higher ﬁnancing costs and weaker absorption, leading to a 20% annual decline in new projects. Still, with the 14 million square feet under construction, Atlanta remains among the top ten U.S. markets for new industrial supply. Much of this activity is concentrated in large data center developments by QTS, Microsoft, and Meta, which are reshaping the region’s industrial landscape and future growth. SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc. Sales The metro’s industrial investment activity has slowed but remains above long-term averages. Total sales volume reached roughly $1.6 billion in Q3 2025, about 30% lower than the same period in 2024. Elevated vacancies and slower rent growth have made underwriting more conservative, limiting aggressive pricing. Institutional buyers like EQT Exeter REIT and Ares Management remain active, while Georgia Power’s $94.8 million acquisition of the River Park E-Commerce Center highlighted increased user-driven purchases. Data centers continue to attract strong investor interest, particularly in North Fulton and Airport/North Clayton, positioning Atlanta for renewed transaction momentum once capital markets stabilize. Sales Volume Source: CoStar Group, Inc.

Atlanta, GA Retail Market Report Q3 2025

The Atlanta retail market maintained historically tight fundamentals through Q3 2025, driven by strong demographic growth, despite encountering recent negative absorption. The overall vacancy rate held at a low 4.2%, still well below the 10-year average of 5.5% and the national average of 4.9%. This tightness fueled rent growth, with market asking rent reaching over $24.00/SF and increasing 4.2% year-over-year, which is double the national average of 1.8%. However, the pace of rent growth has stalled recently, cooling from record 2023 highs. Leasing activity is challenged by national bankruptcies, which added notable space in mid-to-large box segments, although brands like Burlington and World Market are readily backfilling these vacancies. Consequently, net absorption is expected to remain negative or flat through 2026. Key Findings With $931M in sales volume and an average price of $223 price per SF, investment interest remains steady. Atlanta maintains strong fundamentals with a low 4.2% vacancy rate and healthy 4.3% rent growth, keeping the market tight despite minor absorption challenges. The construction pipeline holds 622K SF of space under construction, only 0.2% of inventory, while 322K SF was recently delivered, ensuring minimal oversupply risk. Atlanta Retail Supply & Demand Dynamics Source: CoStar Group, Inc. Atlanta Demographics Source: CoStar Group, Inc. Unemployment Rate: 3.4% Current Population: 5,451,074 Households: 2,407,237 Median Household Income: $91,468 Metro Atlanta remains a major hub for growth, adding over 75,000 residents between 2023 and 2024 and benefiting from a low cost of living, strong job market, and diverse economy. While employment growth has slowed and tech firms have downsized, sectors like logistics, healthcare, and retail remain robust. Midtown and West Midtown continue attracting major companies such as Cargill, Airbnb, and Nike, and large healthcare investments are driving new demand. With its educated workforce, high incomes, and innovation districts like Tech Square, Atlanta is well positioned for continued economic strength and expansion. Population, Labor, & Income Growth Source: CoStar Group, Inc. Atlanta Retail Construction Retail construction in Atlanta remains limited, with just 0.2% of inventory under construction versus the national 0.4%, due to lenders’ reluctance to fund speculative projects post-Great Recession. About 25% of ongoing developments are available, often multi-tenant spaces targeting local businesses. Recently completed projects include a 125,000-SF Kroger, a 78,000-SF Kia dealership, and Phase I of the High Street mixed-use district, all largely preleased. The CBD Submarket has seen growth, including Carter’s Summerhill development. With construction starts at record lows and nearly 4 million SF demolished in five years, retail additions will remain limited, supporting low vacancy despite population growth. SF Construction Starts Source: CoStar Group, Inc. SF Under Construction Source: CoStar Group, Inc. Atlanta Retail Sales Atlanta’s retail property market remained strong in Q3 2025, with $931 million in sales, nearly 25% higher than Q3 2024, signaling growing investor confidence. Major transactions included high-profile urban and suburban assets such as 85 Krog St NE (33,000 SF, fully vacant but high redevelopment potential), 661 Auburn Ave NE (31,000 SF, fully leased in a prime downtown location), and 2400 Jonesboro Rd (57,000 SF, grocery-anchored, mostly leased), highlighting a mix of size, location, and occupancy that drew investor interest. Overall demand remained robust, supported by low vacancy and minimal new construction. These trends suggest Atlanta will continue to attract retail investment, with strong market fundamentals supporting sustained activity. Atlanta Retail Sales Volume Source: CoStar Group, Inc. By the Numbers Source: CoStar Group, Inc. Sales Volume: $931M Price Per SF: $223 Cap Rate: 7.2% Vacancy Rate: 4.2% Rent Growth: 4.3% Asking Rent Per SF: $23.62 Under Construction: 622K SF Delivered: 322K SF Absorbed: (76K) SF

2025 Cap Rate Recap

In 2025, the CRE market shifted to a new landscape as interest rate volatility eased and economic conditions stabilized. Investors recalibrated their strategies to adjust to the new environment, and the key metric for this re-evaluation is cap rate performance. Understanding cap rates in the current environment is essential for any investor. Cap rates, the ratio of a property’s Net Operating Income (NOI) to its market value, is a reflection of risk, market fundamentals, and future growth potential. Below are what investors should focus on for cap rates across retail, net lease, multifamily, and industrial. 2025 Market Performance The Federal Reserve cut interest rates in September for the first time in nine months. Interest rate cuts have been a major anchor for cap rates, as well as inflation. As inflation noted moderate levels, it led to a more predictable environment for real estate investment. However, these levels don’t mean the market will return to the low-rate, high-growth environment noted in prior years. Debt is still more expensive than it was a few years ago, and many investors remain on the sidelines. As a result, a good cap rate in 2025 is not a one-size-fits-all number. It’s a rate that aligns with an investor’s specific risk tolerance and investment goals. A lower cap rate in a stabilized, core market may be ideal for a low-risk, steady income strategy, while a higher cap rate in a value-add property might suit an investor looking for higher returns with more work. Retail: Activity Driven by Essentials and Experience The retail sector continues to show resilience in 2025. While some traditional retail spaces face challenges, well-located, service-oriented, and essential retail centers are thriving. Cap rates in this sector reflect this divergence. Essential Retail Grocery stores and drugstores have proven to offer strong, consistent cash flow. Cap rates for premium, well-leased assets in this category remain compressed, reflecting high demand and perceived stability. Matthews™ Associate Princeton Douglass, who specializes in drugstores across Florida, stated that drugstores here have traded at lower levels compared to other states. He shared an example of a Walgreens in Kissimmee with only three years remaining that traded in August at a 7.63% cap rate. “This goes to show that location makes all the difference as we are seeing the same format deals trade in double-digit cap rates in other regions,” he said. “I expect this trend to continue as uncertainty grows in the drugstore space and buyers will be more focused on where properties are located.” Douglass added that Walgreens will benefit moving forward, due to the company going private. “I think we will see more smaller-format stores emerge, along with locations in better markets,” Douglass said. “We have already seen a handful of newly-constructed locations in Florida.” QSR’s and Convenience Stores According to Matthews™ Associate Vice President Jake Linsky, cap rates for QSRs rose at the beginning of 2025, but remained stable since then. “One of the primary drivers of this increase is the higher cost of capital,” Linsky said. “As a result, transactional volume slowed, leading to a buildup of inventory on the market. With this oversupply, buyers have had greater leverage in selecting assets, giving them a clear advantage over sellers.” Despite recent interest rate cuts from the Fed, Linsky stated that he expects cap rates to maintain the same stability. “Many investors I’ve spoken with expect immediate cap rate compression following a rate cut,” he said. “However, this is rarely the case.” Cap rates will typically lag eight to six months after an interest rate adjustment. In order for cap rates to drop, the oversupply of inventory must be accounted for. “Once the backlog of inventory is absorbed, we are more likely to see meaningful cap rate compression,” Linsky added. Similar to QSRs, convenience stores have maintained stability throughout 2025. Despite stable cap rates across this tier, Matthews™ Associate Nick Seltzer stated that the signing of the Big Beautiful Bill aided in maintaining stabilization. “We have noticed a slight 10-15 basis point compression in Absolute NNN gas station deals following the signing of the Big Beautiful Bill in July, reinstating 100% bonus depreciation permanently.” Upon the addition of 100% bonus depreciation, Seltzer said that a supply of inventory on the market became priced more aggressively. “Credit-worthy deals trade in the low- to mid-5% cap rate range, while short-term credit-worthy deals push above a 6% cap,” Seltzer stated. “Smaller unit operators tend to be priced well above a 7% cap rate, due to the added guarantor risk.” Seltzer added that cap rates are expected to remain steady as the year finishes. “The 10 to 15 basis point premium will hold as the market continues to factor in the advantageous tax benefits,” Seltzer said. “We also anticipate a surge in convenience store activity in the fourth quarter as investors seek these assets to mitigate their tax exposure before year-end.” Additional Retail Segments Value-Add Properties Investors are finding opportunities in older, underperforming retail centers. These facilities often note higher cap rates at 8% or more. Additionally, value-add locations may occupy prime sites and can be repositioned for multi-tenant use, medical offices, or other formats that meet consumer demand. Net Lease: Stability Attracts Investments The net lease market remains a favorable option for investors seeking long-term, passive income. This sector, defined by single-tenant properties with long-term leases where the tenant is responsible for most or all operating expenses, is seeing strong performance as stability becomes a priority. Cap rates for net lease properties are also showing signs of stabilization. In the first half of 2025, median cap rates for retail net lease assets saw a slight decrease, with the price per square foot rising. This is driven by renewed confidence in well-leased assets and a flight to quality. Emerging Sectors Beyond traditional retail, net lease sectors are gaining traction. For example, car washes are attracting heightened investor demand due to favorable demographics and attractive tax benefits. These properties often trade at slightly higher cap rates, reflecting their more specialized nature. Multifamily: A Split in Performance The multifamily sector noted varied activity in 2025. Across the country, Class A buildings averaged around 5% cap rates, while the Class B tier recorded higher cap rates at 7%. Matthews™ Vice President Eric Helwig stated that the 5% cap rates for the Class A tier can be attributed to the cost of debt for those assets, as well as equity return requirements for those buyers. “That sector of the market is still very active as institutional buyers look to acquire assets constructed within the last five years at attractive valuations,” Helwig said. “On the Class B and C side, those cap rates are closer to 7.0% locally and nationally. Investors are looking for 7-8% equity yields on current income to compensate for perceived risks with those assets.” Matthews™ Executive Vice President and Senior Director Mark Bridge added that the divide was also prevalent across smaller and larger multifamily properties. “The smaller assets saw less significant cap rate increases, as the larger multifamily buildings saw more significant cap rate rises, due to the function that higher rates have played a part in the financing of purchasing larger buildings,” Bridge said. Another ongoing split across multifamily is the difference in cap rates depending on location. Matthews™ First Vice President and Associate Director Connor Kerns, who specializes in Atlanta multifamily, said he has noticed good quality products in the metro’s preferred locations noting 5% to 6% cap rates, while lower-income neighborhoods recorded 7% to 8% cap rates. “We expect to see similar cap rates moving forward in the near future until there is a significant impact to the 5, 7, and 10-year treasury rates,” Kerns said. Looking Ahead Kerns added that while the recent interest rate cuts from the Fed are not enough to fully decrease cap rates, it is a step in the right direction. “There is more optimism entering the multifamily sector in anticipation for more interest rate cuts in the near term,” Kerns stated. Industrial Update After the oversupply of industrial added during the pandemic, the sector began to stabilize throughout 2025. Transactions under $10 million were the most prevalent, driven by private capital investments; meanwhile, institutional buyers were most active for transactions over $50 million. According to Matthews™ Vice President Andrew Wiesemann, cap rates have fallen between 6.5% to 7.5% for single assets. Across multi-tenant facilities, cap rates have increased throughout the year and are now in the 6% range. Looking to 2026, single-tenant deals may begin to note more investor interest due to stable performance. Cap rates for industrial are expected to record a recovery and stabilization, driven by the anticipation of further rate cuts from the Fed. Overall Trends for 2025 Performance throughout this year proves that the CRE sector has a variety of measured opportunities. The market is rewarding careful underwriting and a deep understanding of local market dynamics and property fundamentals. Across all sectors, the strength of the tenant is an essential factor in determining a property’s viability and cap rate. Additionally, facilities in prime locations with strong demographics will continue to outperform. By understanding the evolving cap rate environment across property types, investors can make informed decisions and find compelling opportunities in the year ahead.

Mark Bridge

Executive Vice President & Senior Director

10/17/25