Limon Net Lease Group

Marcus & Millichap Research Services

Multifamily Well Positioned to Face Economic Headwinds

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Multifamily Momentum: ​Strong Demand, Tight Supply, and Long-Term Resilience​​

Multifamily Absorption Surges Despite New Supply​

  • Over 145,000 units absorbed in Q1, outpacing 116,000 new deliveries​
  • Vacancy rate declined to 5.0%, lowest since late 2022​
  • Strong demand driven by job growth, favorable demographics, and affordability gap​

Affordability Gap and Construction Slowdown Support Rents​

  • Median home payments near $3,163/month vs. $1,827 for average rent​
  • Multifamily lease renewal rate at 55%, above the long-term average of 53%​
  • Single-family and multifamily construction both slowing due to costs and policy​

Short-Term Risks May Delay, Not Derail, Long-Term Demand​

  • Consumer sentiment dropped to 50.8 in April, may weigh on near-term household formation​
  • Long-term demand outlook remains strong despite near-term volatility​

*Through 1Q​
Sources: Marcus & Millichap Research Services, RealPage, Inc.​

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Private Investors Taking the Lead in CRE Investment

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Market Turbulence Could Drive Capital Toward CRE​

Financial Market Volatility Is Driving Capital Repositioning​

  • Stock market corrected 20% from mid-February to April 8 before partial recovery​
  • Bond market acting abnormally, yields rose instead of falling after tariffs​
  • Rising gold and crypto prices suggest investors are seeking safe havens​

Institutions May Pull Back While Private Investors Step In​

  • Foreign and institutional buyers may reduce CRE activity amid market volatility​
  • Portfolio rebalancing needs could lead some institutions to sell CRE assets​
  • Private investors made up 61% of CRE buyers in 2023, rising from 52% in 2020​

Private Capital Expected to Lead in CRE Investing​

  • Smaller equity funds and syndicators boosting multifamily average​
  • Private buyers likely to stay active as CRE offers long-term value​

Includes apartment, retail, office, industrial, and hotel sales $2.5 million and greater​
Sources: Marcus & Millichap Research Services, Real Capital Analytics​

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Financial Market Whiplash vs CRE Investment Durability

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Tariff Reprieve? Uncertainty Likely to Remain Elevated ​

90-day tariff reprieve, but not for China​

  • Tariffs for most countries set to 10%, China now 145%​
  • 13.4% of U.S. goods imports came from China in 2024 ​
  • Net effective tariff rate now at 27%, highest since 1903​

White House Policy Volatility and Uncertainty​

  • Tariff policies likely to change frequently, raising uncertainty and making decisions more difficult for consumers, businesses, and investors​
  • Uncertainty driving financial market volatility with wild swings in stock market and bond rates​

CRE may be positioned as most durable investment option​

  • Lower volatility, positive fundamentals, recession resistance, and inflation resistance all favor CRE investment ​

Sources: Marcus & Millichap Research Services, S&P Dow Jones Indices​

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Market Reacts to Tariffs – Implications for CRE

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Tariffs Trouble?​

Sweeping Tariff Policy Changes Elevate Uncertainty​

  • New executive order raises the U.S. effective tariff rate from 2.5% to 24%, the highest in over a century​
  • Country-specific tariffs hit China hardest at 54%, with steep rates also imposed on Vietnam, Taiwan, South Korea, Japan, and the EU.​
  • Product-specific tariffs include 25% on steel, aluminum, autos, and potentially pharmaceuticals, semiconductors, and lumber​

CRE Outlook Increasingly Choppy Over Short-Term​

  • Higher inflation and slowing economic growth may slow job creation, spending, and household formation — reducing apartments, retail, and industrial space demand​
  • Tariffs will, however, also increase construction costs, mitigating new supply risk​

CRE Opportunities​

  • Brief window of lower interest rates on debt financing ​
  • Historically, CRE outperforms in times of economic turbulence, rising inflation and financial market distress​

China based on previous 20% tariff imposed​
Sources: Marcus & Millichap Research Services, White House​

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Walgreens & Rite Aid Overview

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Abstract

The RetailStat webinar on March 31, 2025, covered Walgreens Boots Alliance and Rite Aid, focusing on the U.S. retail pharmaceutical market. The U.S. retail pharmaceutical market grew by 8.8% in 2024, reaching $348 billion, driven by higher volume that offset price deflation. Despite overall market growth, retail margins are being pressured by reduced pharmacy reimbursements, soft front-end sales, labor costs, and growing online competition.

Walgreens has faced challenges, including a 52% fall in EBITDA since FY19 and strategic reviews leading to store closures. In March 2025, Walgreens agreed to be acquired by Sycamore Partners in a deal valued up to $23.7 billion.

Rite Aid emerged from bankruptcy on August 30, 2024, eliminating approximately $2 billion in debt and closing 800 stores. However, it continues to face operational struggles and is in talks to bolster liquidity.

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Courtesy of retailstat.com

Rising Above Uncertainty: A Five-Year Perspective

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Looking Back, Looking Ahead: ​Commercial Real Estate Through Uncertainty​

Elevated Uncertainty Mirrors Early Pandemic Conditions​

  • The Economic Uncertainty Index is at its second-highest level on record​
  • Investors are contending with headlines about tariffs, deportations, government department cuts, and inflation risks​
  • The current climate echoes the volatility experienced in 2020, making short-term forecasting difficult​

Commercial Real Estate Performance Since 2020 Shows Resilience​

  • Retail, industrial, and multifamily have all seen strong rent and price gains since 2019​
  • Office experienced challenges, with higher vacancy, but still posted positive absorption in 2024​
  • Across most property types, commercial real estate values and fundamentals improved despite volatility​

Long-Term Perspective Remains Key Amid Today’s Risks​

  • Many investors who bought during peak uncertainty in 2020 have seen strong returns since​
  • Despite the noise, declining construction, favorable demographics, and U.S. economic strength support a long-term investment outlook​

Includes sales $1 million and greater​
Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics​

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