??? Convicts once slept here. Now tenants do.

???Hello, Best Ever readers!

In this week’s newsletter, developers flip prisons, Trump’s tariffs threaten CRE, and big-box industrial dominates.

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Let’s CRE!

?? NO-FLUFF NEWS: CRE HEADLINES

?? Trump’s Wealth Fund: President Trump signed an executive order this week directing officials to create a plan for a U.S. sovereign wealth fund. The planned $900 billion fund would leverage $5.7 trillion in federal assets and could mirror funds that have been significant CRE investors since 2008.

?? Big-Box Domination: Large industrial leasing was dominated by big-box deals in 2024, with nearly half of the top 100 leases being signed for more than one million square feet. The average size of top leases, however, dropped slightly to 968K square feet in 2024, down from 987K in 2023.

???Affordability Spike: Affordable housing completions are expected to peak at a multi-year high in 2025, reaching 78,377 units, 12.6% higher than 2024, according to a Yardi Matrix report. This momentum, however, may be short-lived, as 2026 deliveries are set to fall to 64,745 units.

???Record Absorption: The U.S. multifamily market posted record-breaking absorption in Q4 2024, with 183,600 units absorbed — a 118% jump from 2023. Annual absorption hit 530,600 units, double the previous year's figure and approaching the 2021 record.

???Conversion Explosion: Office-to-apartment conversions have exploded since 2021, with the pipeline growing 484% from 12,100 to 70,700 units by 2025. The surge comes as work-from-home trends leave offices vacant while housing inventory remains tight, sitting 25% below 2019 levels.

?? TOP STORY: DEVELOPERS ARE FLIPPING OLD PRISONS. HERE’S HOW.

In this brave new CRE world where investors have to be more creative than ever to get deals done, we’ve seen just about everything converted to mixed-use and multifamily — office buildings, hotels, and even baseball stadiums.

Add prisons to that list. After a massive prison-building boom that added over 1,000 facilities between 1970 and 2000, the trend has reversed dramatically since 2010. Nearly 200 state and federal correctional facilities have closed from 2000 to 2024, driven by sentencing reforms and drug decriminalization. Municipalities and developers are now converting these old prisons into multifamily and mixed-use communities.

Case Study: The Liberty Crest Apartments in Fairfax County, Virginia — formerly the Lorton Reformatory — is an example of a successful prison-to-residential conversion. Built in 1910, the prison closed in 2001, and Fairfax County purchased the 2,400-acre site for $4.2 million...