Gray Report Newsletter: April 27, 2023

The fundamentals in the apartment market continue to improve, but the sales environment for multifamily investment assets remains sluggish, with little movement in closing the still-wide bid-ask gap. Investors have doggedly sought out distressed apartment properties that are expected to emerge from high interest rate conditions, but these properties have yet to arrive in force. While there are some signs that the Federal Reserve will pause their interest rate hikes, rates are not expected to come down in time to eliminate the potential for distress, and well-prepared investors could find some very attractive buying opportunities in the latter half of this year.

Multifamily, the Nation, and the Economy

U.S. Apartment Market Rallies After 3+ Volatile Years

Via RealPage: “Early signs are pointing toward the return of more normal seasonality and stabilization, as net apartment demand rebounded back into positive territory in 2023’s 1st quarter.”

• Multifamily Refinance Risk Assessment: Analyzing Performance Metrics & Identifying High-Risk Hotspots (Trepp) 
• Real estate report: ‘Generational housing bubble is on the horizon’ (IU)
   
• Biden Administration Considers Tougher Regulation of Money-Market, Hedge Funds (The Wall Street Journal)

Multifamily and the Housing Market

Multifamily Urban and Suburban Submarket Performance Showing Similar Trends

Via Fannie Mae: From the report: “[W]e believe that the . . . urban submarket rebound will continue, especially as many employers are encouraging their workers to come into the office a few days a week and many renters appear to prefer living in more urban locations.”

• The Sociology Of Housing: How Homes Shape Our Social Lives (Harvard Joint Center for Housing Studies)
   
• Rising Single-Family Rental and Built-For-Rent Market (Berkadia)
   
• Expert Analysis: What Makes Millionaires Want to Rent and not Buy? (RentCafe)

Multifamily Markets and Reports

March 2023 Rental Report: Midwest Surges as Western Markets Decline

Via Realtor.com: “Among the top 10 metros experiencing the fastest year-over-year growth, six of them are located in the Midwest: Indianapolis, IN (10.3%), Cincinnati, OH (9.6%), Milwaukee, WI (7.8%), St. Louis, MO (7.4%), Chicago, IL (6.8%) and Detroit, MI (6.6%).”

• Low-Income Homebuyers Are Less Likely to Migrate from Cities, More Likely to Miss Potential Cost Savings (Freddie Mac)
   
• 4 Surprising Multifamily Realities (GlobeSt)
   
• Where Americans Want To Live: These Ultra-Affordable, Up-and-Coming Real Estate Markets (Realtor.com)

Commercial Real Estate and the Macro Economy

Spring 2023 Retail Report

Via Colliers: “For the first time since 2016, major U.S. retailers opened more stores than they closed in 2022, according to Coresight Research . . . As a result, analysts suggest 2023 will be the “year of the store,” with retailers hedging their bets on brick-and-mortar as an alternative option to shopping online.”

• Looking for green shoots? Watch the credit cycle (CBRE)
   
• How the shopping mall is transforming (JLL)
   
• Different Takes on US Commercial-Property Sales in Q1 (MSCI)

Other Real Estate News and Reports

U.S. Office Sublease Availability Nearly Doubles Since Pandemic

Via CBRE: Office sublease space has nearly doubled in the U.S. since the COVID pandemic began in Q1 2020 and ushered in hybrid working arrangements.

• US CoreLogic S&P Case-Shiller Index Gain Slows to a Crawl, Up by 2% Year Over Year in February (CoreLogic)
   
• ‘Frightening Tsunami’: Office Investment Nose-Dives In Q1 To Lowest Point Since 2010 (Bisnow)
   
•  Asian Investors Are Now The Dominant Force In Real Estate Capital Raising (Bisnow)