Inner SPARK January 2025
Spark Multifamily Investment Group
I help you achieve financial freedom and create the life of your dreams through passive real estate investments.
Hi Everyone,
Happy New Year to you all!
Laura and I just returned from our first visit to Costa Rica. The trip was a combination of yoga retreat and outdoor adventure with a sizable group led by two of the yoga instructors from Kroc Rec Center Greenville.
It's a beautiful country - mountainous and green.
We loved our stay at La Cusinga Eco Lodge on the Pacific Ocean at Uvita de Osa. It was a small boutique resort perched 200' above the ocean and next to a national marine park with access to a private beach.
Laura and I stayed in a detached 600sf bungalow with full on ocean view. The resort had no air conditioning and no TV and it was wonderful. The lobby, bar and restaurant were all open air. The staff was very friendly and over the week, friendships developed.
We came to love being awoken at 5am every day by the howler monkeys before the sun rose at 530am. Most days started with 630am yoga in an open air studio followed by breakfast and then the days activities. The air and water temperature was perfect.
Besides the monkeys, another highlight was getting up close to two pumas - think Mountain Lions - on a hike at Corcovado National Park.
I can tell you this is not the typical vacation Laura and I take. But it was fabulous to go with many good friends and enjoy a unique expereince in a beautiful place. It was great to unplug for a week or so.
THE LATEST NEWS FROM SPARK
Brian Walsh and the PPOG team has been extremely busy meeting with countless construction vendors at our latest acquisition, the Flats @ Old Buncombe as we finalize the Cap Ex plan for this asset. It's a major undertaking and we want to be sure the cap ex plan we developed provides the highest return possible for dollars invested.
Dan Rowley has been busy preparing all the year end 2024 reporting we provide out investors as well as working closely with our CPA to gert tax returns completed and K1s out to all of our investors in a timely manner.
This Month’s Newsletter
Once again, we’re delighted to offer educational content about multifamily investing to you through Inner Spark. Much of this content deals with the ever evolving multifamily market. After several boom years, we are entering a new phase of the economic cycle. In this edition, you’ll find:
Spark on,
Commercial Property Pricing Begins To Find Its Footing
Commercial property prices are showing signs of stabilization and growth, with CoStar Group's November Commercial Repeat Sale Indices (CCRSI) report highlighting positive trends heading into 2025. The value-weighted U.S. composite index, which tracks high-dollar trades in major markets, rose 1.3% in November, marking four consecutive months of growth—a streak not seen since mid-2022. Although the index remains 2.5% lower than a year ago, the pace of decline has slowed significantly, suggesting improving market conditions. Short-term financing preferences, driven by optimism about further interest rate cuts, reflect renewed investor confidence. The Federal Reserve's recent interest rate reductions also appear to be aiding this trend, even as inflation remains a concern.
Smaller markets are experiencing similar momentum, with CoStar’s equal-weighted U.S. composite index showing consecutive gains for three months. Investment-grade properties in smaller markets saw annual price increases of 3.4%, the largest rise since late 2022. General commercial properties also recorded a 3.3% year-over-year price gain. While November repeat-sales activity declined month-over-month, the annual transaction volume grew by 7.4%, with investment-grade properties driving the increase. These indicators collectively point to a gradually recovering commercial property market, with both high-value and smaller-market assets contributing to the sector’s stabilization.
Click the link to read the whole article.
Roughly 90,000 Build-to-Rent Units Underway Across U.S.
The Build-to-Rent (BTR) market remains a robust alternative for renters unable to achieve homeownership due to tight housing inventory and volatile mortgage rates. With the U.S. economy showing resilience, including a 2.8% real GDP growth in Q3 2024, and a steady—though slowing—job market, demand for BTR products continues to rise. As of November 2024, nearly 90,000 BTR units are under construction nationwide, with the Sun Belt leading the charge at 57,000 units, followed by the West with 23,100 units. This development reflects the appeal of BTR’s single-family-style rental housing, especially in regions with ample space for community-focused amenities.
Looking ahead, the BTR market is expected to grow further, with 56,992 units projected to complete in the South by mid-2027, while the West follows with 23,115 units. The Midwest and Northeast lag with 7,964 and 1,782 units, respectively. Despite mortgage rates remaining elevated around 6.69%, compared to the 10-year average of 4.47%, the BTR sector offers a practical solution for renters and developers alike. Persistent inflation, potential tariffs, and economic uncertainties may test the market, but with 10,000 additional planned BTR units in the pipeline, the sector is poised for sustained growth amidst ongoing challenges in homeownership affordability.
Click the link to read the whole article.
领英推荐
Fed Cuts Interest Rates and Markets Plunge After 2025 Forecast
On December 18, 2024, the Federal Reserve implemented its third and final interest rate cut of the year, lowering the federal funds rate by 25 basis points to a target range of 4.25% to 4.5%. While widely anticipated, the Fed's announcement of only two expected rate cuts in 2025, down from four projected earlier, introduced a cautious outlook. Fed Chair Jerome Powell emphasized the Fed's measured approach, stating, "Our policy stance is now significantly less restrictive... we can therefore be more cautious as we consider further adjustments to our policy rate." The decision reflects progress in inflation control, which has decreased from its peak during 2022 but remains persistent, projected at 2.5% for 2025. Powell highlighted the U.S. economy's resilience, citing strong GDP growth and a solid labor market, but noted that future cuts would hinge on inflationary progress.
The announcement had immediate market repercussions. The S&P 500 plunged 3%, marking its sharpest drop since August, while the Russell 2000 index fell 4.4%, its worst performance in over two years. These declines were fueled by investors recalibrating expectations for monetary easing and pricing in a longer period of elevated borrowing costs. Treasury yields rose, with the two-year yield experiencing its largest jump in months, while the U.S. dollar surged to its highest level since late 2022. Powell reiterated the Fed's focus on economic indicators and data-driven policy, stating, "We are at or near a point at which it will be appropriate to slow the pace of further adjustments." As markets react to these developments, the Fed's cautious approach underscores its intent to balance economic growth with inflation control, entering a pivotal phase of monetary policy.
Click the link to read the whole article.
Rents Expected to Grow in 2025 on Strong Multifamily Fundamentals
The multifamily sector is poised for a strong performance in 2025, with rents expected to grow on the back of solid fundamentals and tightening supply. Multifamily retained its dominance in commercial real estate, accounting for 35% of total sales volume in 2024. Declining interest rates anticipated later in 2025 could unlock sidelined capital, further driving activity. Skyrocketing home prices and mortgage rates at 7.5% continue to make renting a more attractive option for households. Occupancy rates, currently around 93%, are projected to rebound to 94% by year-end, and rent growth is expected to accelerate from 1.2% in 2024 to 3-4%. Regional trends indicate stronger growth in the Midwest and Northeast, with rent growth forecasted at 4.5% and 4.2%, respectively, due to limited supply pressures. In contrast, the Sun Belt will experience slower growth, reflecting higher vacancy rates stemming from overbuilding.
Operational challenges, however, continue to put pressure on net operating income (NOI). Rising costs, including a 15-20% spike in insurance premiums and increases in labor and materials costs, are squeezing margins, especially in oversupplied Sun Belt markets where occupancy rates have declined 10-15%. Despite these challenges, the slowdown in new multifamily construction, with permits down 20% in 2024 and completions expected to drop another 15% in 2025, will push rents higher in high-demand markets such as Atlanta, Phoenix, and Dallas. Investors are presented with a unique opportunity to acquire assets below replacement costs in high-growth areas, with cap rates in secondary markets like Raleigh and Nashville trending upward. These conditions, coupled with stabilizing fundamentals, position multifamily as a leading investment choice for 2025.
Click the link to read the whole article.
EnerSys Completes Negotiation of U.S. DOE Award Supporting Development of Lithium-ion Gigafactory
EnerSys has finalized a $199 million funding agreement with the U.S. Department of Energy (DOE) to construct a cutting-edge lithium-ion cell manufacturing facility in Greenville, South Carolina. Spanning 500,000 square feet, the facility will exclusively produce advanced lithium-ion cells for EnerSys products, catering to critical sectors such as defense, industrial, and commercial markets. Scheduled to begin construction in 2025 and enter commercial production in 2028, the gigafactory aims to strengthen the U.S. energy supply chain and meet the domestic sourcing requirements of the Department of Defense. This project underscores EnerSys' commitment to innovation and sustainability in energy storage solutions.
The Greenville gigafactory represents a significant step in EnerSys' strategy to lead in stored energy solutions, leveraging its expertise across industries such as telecommunications, electric vehicles, and defense. The project aligns with the company's sustainability goals, emphasizing reduced environmental impact and positive societal contributions. While the initiative promises to advance EnerSys' market position, its forward-looking projections remain subject to potential risks and uncertainties, as outlined in the company's filings with the Securities and Exchange Commission. This initiative reinforces EnerSys' vision of shaping the future of energy systems globally.
Click the link to read the whole article.
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