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Good morning. RentCafe’s 2024 year-end report saw Miami retain its title as the nation’s hottest rental market, but surging Midwest metros like Suburban Chicago and Milwaukee are heating up.

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Market Snapshot

*Data as of 12/16/2024 market close.

STATE OF THE Market

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• Tax policy shift: Trump's tax plan aims to restore full bonus depreciation, reversing the current phase-out and boosting immediate benefits for property owners.

• Market momentum: The US real estate market is set for growth in 2025, driven by economic expansion, Sun Belt migration, and strong demand across retail, office, and data center sectors.

• Manufacturing slump: US factory activity contracted in December, with production hitting its lowest since mid-2020, as looming tariffs spurred inflation fears and disrupted supply chains.

• REIT evolution: Industry collaboration has transformed REITs into essential investment tools, with indices like the FTSE EPRA Nareit Series enabling broader access to global real estate markets.

• Renter retention: The 2025 multifamily market will focus on affordability and tenant retention, as record-high supply in 2024 stabilizes occupancy but slows rent growth in oversupplied areas.

• Vacancy surge: Tampa's multifamily market faces a 15-year high in vacancies, above 10%, as surging supply outpaces strong tenant demand and pressures rent growth into 2025.

• Office to multifamily: Link Logistics plans to replace an 8.3-acre office park in Culver City with a 1.1K-unit apartment complex featuring affordable housing, retail space, and extensive amenities.

• Debt opportunity: Canyon Partners Real Estate closed its largest US real estate debt fund at $1.2B, targeting multifamily and defensive assets as the CRE market braces for $1.5T in maturing debt.

• Portfolio deal: CAPREIT sold a 2-property, 304-unit multifamily portfolio near St. Mary’s City, MD, for $68M, capitalizing on strong investor demand in the region.

• Top deals: South Florida’s 2024 multifamily market saw subdued pricing due to high interest rates, with Grant Cardone leading the pack with a $500M+ Broward portfolio acquisition.

• Denver expansion: Consolidated Investment Group secured $17.5M financing for two fully leased industrial buildings in Aurora’s Eastpark 70, driven by Denver International Airport's logistics appeal.

• Data center expansion: Digital Realty Trust (DLR) is seeking rezoning approval to develop a 3 MSF data center on its recently acquired 155-acre site in west Charlotte, purchased for $160M.

• Charlotte data hub: Digital Realty Trust (DLR) filed for rezoning to develop a 3 MSF data center on a 155-acre site in west Charlotte, acquired last month for $160M.

• Luxury revamp: Raytheon(RTX) sold its 15-acre Dallas industrial site to Park Place Dealerships, which plans to replace the vacant plant with a luxury Porsche dealership and Volvo service center by 2027.

• Affordable luxury: Luxury outlet malls like Belmont Park Village and Woodbury Common are thriving by offering deep discounts on high-end brands, attracting budget-conscious shoppers.

• Retail resilience: Centennial reports “incredible" holiday retail sales and traffic, driven by strong consumer confidence, investment in experience-based concepts, and thriving secondary market assets.

• Burlington expands: Burlington (BURL) has signed a 12-year lease for 78 KSF at RXR Realty (RXR) and Hudson Bay Capital's 620 Sixth Avenue, doubling its previous space.

• Office loan crunch: Regional banks face mounting stress as falling values drive a surge in CRE loan modifications, with $500B in maturing mortgages threatening defaults and fire sales in 2025.

• Put it in Park: Morgan Stanley (MS) is selling the 28-story, 1 MSF office building at 2 Park Avenue to Haddad Brands for $360M, with the buyer set to occupy the space.

• Silicon Valley return: Industrious will launch a 459-seat, 40.3 KSF co-working office at 1881 Page Mill Road in Palo Alto next fall, marking its reentry into Silicon Valley.

• Pricey peninsula: Menlo Park leads US office rents, with Sand Hill Road driving prices over $200 PSF, as VC firms and tech companies prioritize proximity to talent and capital in this supply-constrained, high-demand market.

• Hedge fund hotel: Elliott Investment Management acquired The Gates Hotel South Beach in Miami Beach for $52.5M, backed by an $82.5M Deutsche Bank (DB) loan.

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📈 CHART OF THE DAY