These 10 cities have the most distress

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Industrial Outdoor Storage Demand Gains from Household Formation link

• Nearly 3.2 million households were formed over a span of 24 months ending in March, coinciding with an 18% increase in online retail sales, driving demand for industrial outdoor storage (IOS) space.

• IOS properties have emerged as prominent niche commercial real estate investments due to the growth of e-commerce and the limited supply of IOS spaces.

• IOS lots play a critical role in last-mile distribution, attracting the attention of investors on a broad scale due to their durability and importance in the e-commerce supply chain.

U.S. Office Vacancy and Sublease Space Reach Record Highs in Q2 2023 link

• Record Highs: The U.S. office vacancy rate hit a record 16.4% in Q2 2023, surpassing the previous peak of 16.3% during the Global Financial Crisis. Sublease space also reached a record high with 259 million square feet available, a significant increase from the previous cycle’s peak of 143.3 million square feet in Q2 2009.

• Absorption and Construction: While net absorption remained negative, it was positive in 37% of the metro office markets. Construction activity continues to slow, with 88.4 million square feet underway, a 46% decrease from the cycle’s peak in Q3 2020.

• Return to Office and Downsizing: The return to the office remains gradual with most firms adopting hybrid working models. Tenant downsizing has become the norm, with large occupiers implementing space reductions of at least 20% to 30% on new leases and renewals. This trend is expected to put sustained upward pressure on vacancy rates.

Comparing Class A and Class B/C Office Rents in Major Markets link

• Flight to Quality: Office tenants are increasingly opting for Class A properties with top amenities over Class B or C spaces, a trend observed across several major markets.

• Rent Gap Varies: While Class A rents are higher than Class B/C in all surveyed areas (NYC, SF, Bay Area, Boston, Chicago), the gap varies. It's widest in NYC ($75.65 for Class A vs $50.53 for Class B/C) and narrowest in Chicago ($22.14 for Class A vs $21.61 for Class B/C).

• Age Matters: Class A buildings are generally younger than Class B/C. The largest age gap is in San Francisco (Class A average year: 1980, Class B/C: 1928), while the smallest is in Chicago where rents are nearly the same for both classes.

Apartment Rent Growth Projections for the Next 5 Years link

• Rebound from the Decline: After a -0.6% decline in U.S. year-over-year multifamily rent growth in May 2023, the first negative turn since the Global Financial Crisis of 2007-2008, a significant rise is expected.

• Positive Outlook: Data analytics firm Markerr predicts a 3.9% increase in rent across the top 100 markets in the USA through 2024, followed by a 5% jump in 2025.

• Stabilizing Growth: Post the initial surge, more normal growth rates of 3% to 1.5% are projected for the third to fifth year.

These 10 cities are seeing the biggest jump in foreclosures as high home prices and property taxes bite link

• Foreclosures have surged 13% in the first half of 2023, with Atlantic City, New Jersey seeing the sharpest increase - nearly 7 out of every 10,000 housing units facing foreclosure.

• The average property tax on a single-family home rose 3% to $3,901 in 2022, pushing some homeowners towards foreclosure despite low mortgage rates.

• Despite 90% of homeowners having a mortgage rate below 6%, the median home price in the US is 44% more expensive than before the pandemic, exacerbating affordability issues.

Migration Into America’s Most Flood-Prone Areas Has More Than Doubled Since the Start of the Pandemic link

• Nearly 400,000 more people moved into the most flood-prone counties in the U.S. in 2021 and 2022, marking a 103% increase from the previous two years. This trend is also observed in areas most vulnerable to wildfires and heat, driven by the housing affordability crisis.

• The counties with the highest wildfire risk saw an influx of 446,000 people over the past two years, a 51% increase from 2019 and 2020. Similarly, counties with the highest heat risk saw 629,000 more people move in than out, a 17% uptick.

• Despite the increasing risk from storms, drought, wildfires, and extreme heat, states like Florida, Texas, and Arizona have exploded in popularity due to factors such as affordable housing, warm weather, and lower taxes.