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Office to Apartments Conversion Numbers by Metros

Plus, 2024 U.S. Investor Intentions Survey Results and 5 more Real Estate Insights

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Real Estate Trends

Multifamily Capital Activity to Pick Up This Year link

  • The Mortgage Bankers Association (MBA) forecasts a significant increase in lending and borrowing for the multifamily sector in 2024. This year is expected to see $576 billion in loans for commercial real estate (CRE) and multifamily, marking a 29% rise from 2023.

  • Multifamily is set to absorb $339 billion, a 25% increase from the previous year. This growth trend is anticipated to continue into 2025, with projections reaching $717 billion for all CRE and $404 billion specifically for multifamily lending.

  • This positive shift in the multifamily sector indicates a recovery and growth phase. It reflects a broader trend of increasing investment and confidence in the multifamily and CRE sectors, signaling a robust market outlook for the coming years.

2024 U.S. Investor Intentions Survey link

  • Investors in 2024 face challenges such as higher-for-longer interest rates, tight credit conditions, and differing buyer and seller expectations. Over half of the investors surveyed plan to buy more assets in 2024 than in 2023, despite less favorable pricing conditions.

  • Dallas, Miami, Raleigh, Atlanta, and Nashville are top investment markets, with a preference for Sun Belt cities and high-growth secondary markets. Investors are increasingly adopting opportunistic and core-plus strategies, seeking higher yields and stable income.

  • Recession fears have eased compared to last year, with over 60% of investors expecting to purchase more real estate in 2024. Despite lower property values, 40% plan to sell more assets in 2024, indicating a significant shift in investor sentiment and strategy.

Risks

Apartment Owners Report Surge In Rental Application Fraud link

  • Over 70% of major apartment landlords have observed a significant increase in fraudulent rental applications in the last year. This alarming trend highlights the growing challenge in the rental market.

  • According to a survey by the National Multifamily Housing Council and the National Apartment Association, 93% of the 75 owners and managers experienced fraud in the past 12 months. The rise in fake documents for securing apartments is a concerning issue for property owners.

  • The estimated increase in fraudulent applications is around 40% compared to the previous year. This surge indicates a pressing need for more stringent verification processes in the rental application system.

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Something I found Interesting

Hedge-fund and “the Big Short” star Greg Lippmann bets on commercial-property debt shunned by others link

  • Greg Lippmann, known for his role in "The Big Short," targets undervalued commercial mortgage bonds. He sees potential in this sector, despite its current distress and market skepticism.

  • Lippmann's hedge fund, LibreMax Capital, specializes in structured financing. They manage $10.2 billion and are focusing on commercial mortgage-backed securities, expecting higher recoveries than current prices suggest.

  • The commercial real estate market faces challenges with property price slumps and high debt. However, Lippmann's strategy involves selective investment in mispriced securities, anticipating a shift in market conditions and potential rate cuts by the Federal Reserve.

Proptech

Proptech startups saw their fair share of failures link

  • The proptech sector experienced significant downturns in late 2023, with notable startups like Here, Veev, and Zeus Living shutting down. This trend reflects broader challenges in investment and market stability, particularly as high interest rates impact funding.

  • Industry experts predict a continued phase of consolidation and attrition in proptech. Companies with unique, resilient solutions may still find growth and higher valuations, but many face lower valuations compared to their peak in 2021.

  • Venture capital in proptech is undergoing a major shift, with a pullback in funding due to higher interest rates. This change is leading to a reduction in risky investments and could result in a decade-long cycle of adjustment in venture capital allocations.

One Chart

Washington, D.C. leads with 5,820 units transitioning from offices to apartments in 2023, an 88% increase from the previous year. New York City follows with notable projects like the transformation of New York's iconic Flatiron Building. Dallas-Fort Worth also identifies over 50 buildings, including downtown skyscrapers and suburban offices, for potential residential conversion.

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Vidit

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