For the week of Dec. 30th-Jan. 3rd
Leading the week’s news were notable transactions activity in the multifamily and office sectors, and attention on Fannie Mae and Freddie Mac as the market awaits what a Trump presidency might mean for the future of these lending arms. The latest construction data points to steady volume with a notable decline in multifamily starts.
As 2025 gets underway, here’s our top 5 list of news stories making headlines—and why they matter.
- Fannie Mae and Freddie Mac Move One Step Closer to Privatization
An agreement released last week between the Federal Housing Finance Agency (FHFA), which controls Fannie Mae and Freddie Mac, and the outgoing Treasury Department could require FHFA to solicit feedback from market participants on how releasing the companies from government control would affect the mortgage and housing markets. President-Elect Trump is expected to proceed with a release, which would raise hundreds of billions of dollars for the government and end 16 years of government control.
Why It Matters: When and if the new Trump administration moves forward with plans to potentially release Fannie and Freddie, trade groups representing mortgage lenders, bond investors, and other stakeholders are likely to object over concerns it could disrupt the mortgage bond market. The ultimate decision lies with the new head of the Treasury Department Bessent and FHFA officials.
- Major Multifamily Deals in December Surpass 20 as Investors Interest Gains Traction
A LightBox analysis of dealmaking in the final days of 2024 found that there were more than 20 announced sales of $75 million or more on multifamily properties in December 2024. The sales included assets in major cities like San Diego, Denver, Seattle, and Charlotte. In related news, Blackstone Real Estate Income Trust sold a portfolio of eight multifamily properties to Brookfield Properties for $885 million. The portfolio included 4,143 units across the U.S.
The multifamily sector’s momentum is further supported by growing confidence among commercial real estate (CRE) lenders. According to the Mortgage Bankers Association (MBA), lending activity in the sector surged 56% year-over-year in Q3, underscoring robust demand. Despite a supply shock, multifamily showed resilience in the final quarter, with a modest 0.2% effective rent growth and a 10-basis-point (bps) increase in vacancy rates. Looking ahead, a slowdown in completions is expected to drive declining vacancy rates and stronger rent growth, solidifying multifamily’s position as a favored asset class.
Why It Matters: The recent transactions and lending uptick demonstrate growing institutional investor demand for quality assets despite the challenges of distressed assets and refinancing maturing debt. Transactions in multifamily are poised to rebound this year as investor sentiment shifts and market conditions stabilize, with the strongest demand in Sunbelt states like Texas, Florida, and Arizona. Working in multifamily’s favor are areas with positive employment that supports moderate rent growth, the high relative cost of home ownership, and the wave of loan maturities in the next two years.
- Construction Spending Holds Steady in November, Multifamily Starts Down 27%
November’s construction spending was virtually unchanged from the month before at a seasonally adjusted annual rate of $2,152.6 billion, according to the latest report from the U.S. Census Bureau. The November figure is a moderate 3.0% higher than the November 2023 estimate of $2,090.7 billion. A modest gain in single-family residential construction outlays helped offset a small decline in nonresidential spending. Although data center, power, and highway and street outperformed, most other nonresidential segments weakened during the month. The overall pace of multifamily construction remains tepid with private multifamily declining by 27% year to date through November 2024. This slowdown is further underscored by a 19% year-to-date reduction in permit activity, reflecting broader hesitations in new development.
Why It Matters: Total construction spending continues to moderate as elevated interest rates and tight credit conditions weigh on activity. New construction could be hampered by higher mortgage rates, President-elect Donald Trump’s threat to impose tariffs on imports, and the continuing labor shortages.
- Top Three Retailers Growing Faster Than Smaller Players
On the heels of holiday retail spending that was up a modest 3.8 % year over year, the share of the market accounted for by the three biggest U.S. retailers is growing. Walmart, Amazon, and Costco are growing faster than the rest of the retail segment and actively investing in future growth strategies. In 2014, the top three accounted for about 11% of total retail sales. In their last three reported quarterlies, the share grew to 17% of retail sales. Dollar stores and certain grocery chains like Kroger, Albertsons, and Sprouts Farmers Market are losing ground to Walmart’s membership perks and delivery services.
Why It Matters: Walmart, Amazon, and Costco reported spending $47 billion on capital expenditures in 2023, roughly four times what Target, Best Buy, Kroger, and Albertsons collectively spent. Competition among retailers for cost-conscious consumers will drive demand for warehouse/distribution facilities to support online ordering and delivery as well as new store openings in strong-growth metros, including six new Costco stores in Texas and California.
- Notable D.C. Office Building Sells at a Discount as Metro Breaks 10-Quarter Occupancy Trend
Leading the year’s office transactions, Boston-based REIT, BXP, just bought one of Washington, D.C.’s tallest office buildings at a discount. The office property has reportedly been vacant for about two years. BXP closed the transaction at $34 million, amounting to roughly a third of the property’s assessed value and just over half of the $61 million that Hines paid for the development three decades ago. The office was formerly anchored by law firm Williams & Connolly LLP.
Why It Matters: The D.C. office market recorded its first occupancy gains in Q4 2024 in 10 straight quarters. Government and law firm tenants accounted for 39% and 20% of lease volume, respectively, and more than half were relocations, a sign of growing confidence in the metro’s appeal to office tenants.
For commentary on these CRE developments and more, tune in to the LightBox CRE Weekly Digest podcast.
Did You Know of the Week
Did you know that property listings initiated on LightBox’s RCM platform in the last two weeks of 2024 doubled that of the final two weeks of 2023? Although year-end listings activity is generally light, this could be an early sign of transactions momentum building.
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