Top 5 Real Estate Stories From This Past Week

30k of you have been getting my weekly email sharing the top 5 stories in regards to money and real estate for a few years now... But the same people reading my emails may not be the same people reading my LinkedIn.

So here are the #TLDR top 5 stories from last week (let me know in the comments which story was your favorite)...

1. 6 Best Cities For Office To Multifamily Conversion 🏙
2. Eviction Moratorium Party Ends In Fistfight 🥊
3. Is Your City In Distress? 🏚
4. Running An Apartment Costs How Much? 💵
5. The US Is On Pace To Break A Record... 🥇

🏙 6 Best Cities For Office To Multifamily Conversion

Arpit Gupta of NYU’s Stern School of Business and Stijn Van Nieuwerburgh and Candy Martinez of Columbia University’s Graduate School of Business published a paper that every real estate investor should read. 

The TLDR version is that there is projected a potential $500B drop-in office valuations in the US by the end of this decade as a result of remote work. As a result, the trio used a set of criteria to identify commercial office properties that are physically suitable for conversion to apartments, yielding an estimate of roughly 11% of all office buildings across the US. 

Here are the 6 best cities for this type of conversion. 

🥊 Eviction Moratorium Party Ends In Fistfight

A group of landlords in California threw a party in California to celebrate the end of the eviction moratorium. The result of this somewhat tasteless party was a number of tenant rights groups picketing and even entering the party to directly confront the landlords. The end result was a fistfight between the two groups. 

Here is our take. It is okay to make money off of real estate because it is after all a business. However, if tenants are struggling to make ends meet and have a true commitment to paying their rent then we want to be able to help those tenants stay in their home. At the end of the day we are all humans and have our basic needs.

🏚 Is Your City In Distress?

KBRA released a report on the magnitude and change in distress rates of the largest metropolitan statistical areas (MSA) in the commercial mortgage-backed securities (CMBS) market. 

Key observations from the report are as follows:

• The distress rate across the 20 largest markets was 7.2%, which is slightly above the national CMBS rate of 6.8%.

• The MSAs with the highest distress rates by property type include New York (retail, 17%), Denver (office, 40.2%), Houston (mixed-use, 75.5%), and San Francisco (lodging, 59.3%; multifamily, 22.7%).

• While the rates for the majority of these MSAs were lower than the national rate, seven exhibited higher rates, with five over 10%. Chicago topped the list at 22.7%, with Denver, Philadelphia, San Francisco, and Houston rounding out the top five.

You can see where your city ranks here. 

Running An Apartment Costs How Much? 🤑

Operational costs for apartment companies grew by 8.6 percent on average year-over-year in the second quarter of 2023, according to a new report from Marcus & Millichap.

The cost hikes in the past year were most visible in turnover, marketing, and especially insurance costs, with each rising by more than 10 percent year-over-year. 

Florida led all markets for the highest increases in expenses with Kansas City, Oakland, Orange County, and Phoenix rounding out the top 5. 

You can see where your market ranks here. 

The US Is On Pace To Break A Record... 🥇

The US is on course to complete construction on over 460k new apartment units in 2023. This is the highest figure on record according to estimates from industry experts at RentCafe.

The building boom has seen over 1.2 million new units delivered in the last 3 years, with the gap between single-family home and apartment construction opening to its widest point in about 50 years. 

Many people are celebrating the news as this in theory should reduce rent prices and lower housing prices. 

That's all for this week, which of the 5 stories was most interesting to you?