Retail Becomes Top Performing Asset Class

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“The best armour of old age is a well spent life preceding it.”

― Charles T. Munger,

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Overwhelming Majority of US Metro Areas Saw Home Prices Increase in Q1 link

• In the first quarter of 2024, 93% of U.S. metro areas reported an increase in home prices, reflecting widespread growth in the real estate market. This survey included 221 metro areas, indicating a robust national trend.

• The median price for existing single-family homes rose to $389,400, marking a 5% increase from the previous year. This escalation in prices occurred despite historically high mortgage rates.

• Monthly mortgage payments have surged as well, with a typical payment on an existing home now averaging $2,037, up 9.3% from last year. The significant price hikes are notable given the challenging economic conditions, including high interest rates.

Many Secondary Markets Experiencing Increase in Apartment Asking Rates link

• Apartment rents are surging in secondary markets while primary markets see a stagnation or decline. This shift indicates a broader trend of migration and demographic changes favoring smaller cities.

• Economic uncertainty looms over the U.S. multifamily sector, with mixed forecasts regarding the direction of interest rates by the Federal Reserve. Yardi Matrix speculates that rates might decrease by year-end despite the unpredictable economic climate.

• Supply dynamics have also evolved post-pandemic; markets that previously expanded rapidly are now experiencing flat or reduced rental rates. This suggests an adjustment period as the market absorbs the influx of new units.

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Retail Becomes Top Performing Asset Class link

• Retail leads as the best performing asset among major property types. Marcus & Millichap reports strong first-quarter fundamentals with high demand across multiple markets.

• Positive absorption of 1.4 million square feet in multi-tenant retail spaces highlights robust growth. This figure represents about half of the total new constructions for the quarter, emphasizing a healthy market expansion.

• High investor confidence reflects in increased transaction activities. The dynamic performance in the retail sector is influencing real estate investment trends, attracting more stakeholders to consider retail assets.

Multi-Tenant Retail Investment Sales Up 7.8% link

• Investment sales in multi-tenant retail properties have risen by 7.8% quarter-over-quarter. This upswing follows a significant year-over-year decline of nearly 18%.

• The market is showing recovery signs, outperforming the pandemic levels when investment activities had drastically slowed. Current cap rates are the highest since mid-year 2014.

• Analysts attribute this recovery to increased investor confidence and a gradual return to pre-pandemic market conditions. Strategic shifts in investment focus are also observed as the retail sector adapts to new consumer behaviors.

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That's all, folks.

Cheers,

Vidit

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