Matthews™ Summer 2025 Publication

SUMMER 2025 TM

DEALS DATA & DISRUPTION Reshaping CRE Dealmaking in 2025

NET LEASE TENANT REPORT Explore Data on 30+ Tenants

TARIFFS & CRE

NO ANCHOR, NO PROBLEM

Trade Tensions, Real Estate Reactions

Unanchored Strip Center Review

+ MORE

STABILITY The Key to Unlocking Multifamily Market Momentum

$73.68B 29,220 1,000+ IN DEALS CLOSED

TRANSACTIONS

AGENTS & EMPLOYEES

NATIONAL REPRESENTATION, LOCAL SPECIALIZATION NET LEASE RETAIL • SHOPPING CENTERS • LEASING SELF-STORAGE • INDUSTRIAL • HOSPITALITY • APARTMENTS HEALTHCARE • CAPITAL MARKETS • AUCTION SERVICES Scan to view Matthews™ premium services

W W W. M AT T H E W S . C O M

Table of Contents 06 Retail Recharged

96 Short Term Fixed Products

14 Tariffs & CRE

100 No Anchor, No Problem

22 Industrial Evolution

124 Local Intel

26 Net Lease Tenant Report

136 Hospitality Hotspots

65 From Dirt to Deal

143 Stability

71 Riding the Net Lease

150 Regional Shopping

Capital Markets Catch-Up

Trade Tensions, Real Estate Reactions

Top Activity in a Transforming Market

Explore 30+ Tenants

Unlocking Hidden Value

Rollercoaster

86 SoCal Multifamily in Focus

Strategic opportunities in Los Angeles & Orange County

Takeover

Unanchored Strip Center Review

The CRE Trends You Won’t See in the Data

Markets to Watch

The Key to Unlocking Multifamily Market Momentum

Center Report

Executives Kyle Matthews

Hutt Cooke

DeWitt Goss

Julia Leonard

David Harrington

J. A. Charles Wright

Patrick Graham

Spencer Reed

Raddie Zlatkov

Andrew Gross

Keegan Mulcahy

Jill B. Rowe

Duerk Brewer

Maxx Bauman

Kurt Sauer

Milton Braasch II

Sean Clancy

Matthew Wallace

Erik Vogelzang

Brayden Connor

Paul Mudrich

Michael Pakravan

Daniel Withers

Owen Fincher

Matt Fitzgerald

Joshua Bluestein

Nicole Capobianco

Carter Hadley

Bill Pedersen

Chuck Evans

Katie Carpenter

Jeff Perkins

Cory Rosenthal

Robert Goldberg

Lori Girgis

Jermaine Pugh

Contributors Jason Long

Christian Becker

Jeff Enck

Mitchell Glasson

Brandon Ellison

Lee Chandler

Nabil Awada

Mabelle Perez

Jack Kulick

Alex Larramendi

Mark Bridge

Lane McCool

Gerard Hamas

Ryan Foss

Doc Perrier

Ryan Kawai Sanchez

Nathan Fitzgibbons

Harrison Wachtler

Andrew Wiesemann

Luke Whittaker

Marc Filia

Siena Tyson

Nick Watson

Matt LoPiccolo

Blake Wagenseller

Haidyn DeJean

Chris Nelson

Rosie Cooper

Andreas Nava

Brendan Tyoran

Carter Hadley

Stew Weston

Olivia Proctor

Vincent Renna

Jacob Friedman

Clark Finney

Chase Cameron

Conrad Sarreal

Spencer Mason

Adam Gower

Nick Seltzer

Patrick Forkin

Geoffrey Arrobio

Brock Emmetsberger

Edward DeSimone

Grayson Duyck

Nick Hahn

Gannon Ethington

Joanna R. Manfro

Michael Moreno

Jesus Melo

Ed Laycox

Volt Migrino

PUBLICATIONS

DESIGN

Leanne Jenkins

Brooke Roberts

Taylor Simonian

Nayomi Garcia

Sam Kuzminski

Lindsey Beck

Anna Doka

Francisco Gonzalez

Alfonso Lomeli

Sophia Biazus

McKenna DeBont

SPECIAL THANKS TO

RESEARCH Daniel Spinrad

Arianna Kastner

This information has been produced by Mat thews Real Estate Investment Ser vices™ solely for information purposes and the information contained has been obtained from public sources believed to be reliable. While we do not doubt their accurac y, we have not verif ied such information. No guarantee, warrant y or representation, expressed or implied, is made as to the accurac y or completeness of any information contained and Mat thews Real Estate Investment Ser vices™ shall not be liable to any reader or third par t y in any way. This information is not intended to be a complete description of the market s or development s to which it refers. All right s to the material are reser ved and cannot be reproduced without prior writ ten consent of Mat thews Real Estate Investment Ser vices™.

Featured Articles 14

Tariffs & CRE

Trade Tensions, Real Estate Reactions

26

Net Lease Tenant Report Explore Data on 30+ Tenants

100

No Anchor, No Problem

Unanchored Strip Center Review

143

Stability

The Key to Unlocking Multifamily Market Momentum

Retail

RECHARGED CAPITAL MARKETS CATCH-UP

BY VOLT MIGRINO

Retail real estate has flipped the script on the so-called "retail apocalypse."

Instead of fading, brick-and-mortar retail is thriving. It is fueled by a lack of new supply, booming demand from value-driven and experiential tenants, and shoppers who still crave the convenience of in-person visits.

Investment is gaining steam, especially in essential and urban retail. While financing remains pricier than multifamily and on par with industrial, strong tenant demand and limited space give landlords the upper hand. The result?

A resilient, opportunity-rich sector primed for smart capital plays.

6 | SUMMER 2025

FROM "APOCALYPSE" TO REVIVAL

The Shifting Narrative of Retail Real Estate In the early 2010s, headlines of a “retail apocalypse” dominated the media, a dramatic, often exaggerated narrative forecasting the extinction of brick-andmortar stores. Although the term first appeared in the '90s, it gained real momentum around 2017 as household names like Aéropostale, American Apparel, and Sears shuttered hundreds of locations amid bankruptcy.

E-commerce was labeled the main reason. The socalled “Amazon effect” drove double-digit online sales growth (11%-20%) during the holidays, while physical department stores reported sharp declines (4.8%). Meanwhile, malls were overbuilt, growing at twice the rate of the population from 1970 to 2015, leading to declining foot traffic and empty storefronts. Add in a shift toward experience-driven spending, a squeezed middle class, and retailers crushed under bad management and heavy debt, and the stage was set for panic.

By 2015 there was a massive oversupply of retail…the culprit of the negative outlook on retail was brought on by oversupply more than anything.

But the narrative wasn’t just reactive–it reshaped the market. Developers pulled back. Lenders got cold feet. New construction ground to a halt. What was seen as a sector in decline was one of the most supply-constrained asset classes in CRE. The amount of leasing did not outpace the amount of deliveries… lenders were afraid of non-major brand gyms or furniture stores filling big-box vacancies.

Today, that very supply crunch is fueling retail’s resurgence. Industry professionals have since challenged the apocalypse myth, showing that consumer demand remained more stable than expected. As department stores faltered, dollar stores and discounters filled the gap. Contrary to the media headlines, retail didn’t die–it evolved. And that evolution set the stage for today’s revitalized, investment-worthy retail landscape.

THE DATA BEHIND THE COMEBACK Between 2010 and 2020, U.S. retail sales surged by 42%, while new supply ticked up just 4%. That imbalance tells the story of a sector that learned to do more with less by maximizing productivity within existing footprints and dramatically boosting sales per square foot.

Since 2018, deliveries have dropped to less than 25 million square feet annually–down from 300 million annually between 2000 & 2009. Since COVID, it’s averaged around 15 million.

Since the pandemic, physical retail has not just recovered, it’s surged past pre-COVID levels in many markets. In-person visits to retail and dining venues are booming, while e-commerce has cooled from its pandemic spike, reverting to a steadier, long-term growth trend. This points to a durable omnichannel environment rather than a digital takeover.

Annual U.S. Sales In-Store vs. Online Source: U.S. Census Bureau | in Trillions $5.39 $4.59

$4.66

$0.58 2018

$5.93

$4.60

$0.65 2019

$5.85

$5.82

$0.87 2020 In-store

$1.00 2021

$1.10

2022

$1.22

2023

$1.34

2024

Online

MATTHEWS™ | 7

THE SUPPLY CRUNCH THAT’S FUELING STRENGTH New retail construction remains historically restrained, squeezed by high financing costs and rising construction expenses. In Q1 2025, only 44.8 million square feet were under construction nationwide, and just 7.2 million square feet were delivered. For grocery-anchored centers, 2024 marked the second straight year of sub-100,000 square feet in net deliveries–down sharply from the 1.1 million annual average between 2015 and 2019.

Net Deliveries

Source: CoStar Group | *As of Q1 2025 250 M

Square Feet

200 M

150 M

100 M

50 M

0

’08 ’09 ’10 ’11

’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 ’24 ’25*

Low supply…

15 million annual deliveries now vs. 300 million in the past–is what’s defining today.

This prolonged slowdown in development has led to record-tight vacancy. The national retail vacancy in Q1 2025 stood at 4.2%, just 10 basis points above year-end 2024. The squeeze is a direct result of limited new supply and tenants right-sizing their physical footprints rather than abandoning them.

Yes, Q1 2025 saw the weakest absorption since the pandemic began at -3 million square feet. At first glance, this could signal a downturn. But paired with near-record-low vacancies and historically limited availability, the data tells a different story.

The negative absorption reflects strategic pruning, struggling legacy retailers exiting inefficient space, 8 | SUMMER 2025

rather than waning demand. And backfilling is swift: nearly one-third of new leases in Q1 were signed within five months of listing, with most vacant spaces released shortly after. This isn’t a collapse.

It’s a healthy churn, as better-positioned, modern tenants replace outdated ones.

THE NEW FACE OF RETAIL While legacy department stores like Sears, JCPenney, and Macy’s struggled under oversized footprints, shifting consumer preferences, and heavy debt, the broader retail sector evolved.

Macy’s plans to close 150 stores by year-end 2025, and JOANN Fabrics is shuttering all 800 locations– emblematic of the big-box retreat. But the space they leave behind isn’t staying vacant.

Retail has changed post-COVID. Big indoor malls are being demolished or converted into multifamily. Outdoor formats and experiential projects like American Dream in NJ are gaining traction.

Instead, a wave of vibrant new tenants is redefining what retail looks like. Today’s retail ecosystem revolves around value, necessity, and experience. Experiential concepts are drawing crowds with offerings that can’t be digitized. But the focus has shifted from theatrical spectacles to delivering an efficient, enjoyable shopping experience.

WHO’S THRIVING? Value retailers are expanding rapidly, fueled by inflation-conscious consumers and abundant real estate opportunities. TJX Companies plans to open 1,900 new stores globally, with 130 net new openings this year. Burlington is capitalizing on big-box bankruptcies, while dollar stores are capturing more post-pandemic foot traffic by expanding fresh food options and merchandise variety.

This results in steady leasing, where TJX, Burlington, and Tractor Supply are backfilling old Big Lots and JOANN's.

Essential retail–grocers, pharmacies, and superstores–continues to anchor the sector. These tenants proved indispensable during the pandemic and remain highly resilient. Grocery-anchored centers are investor favorites thanks to dependable foot traffic and low vacancies.

Aldi led the charge in 2024, adding over 2.3 million square feet and targeting 800 new stores by 2028. Publix, H-E-B, Sprouts, and Trader Joe’s are all ramping up growth in strategic markets, reinforcing a structural shift: today’s anchor tenants are no longer department stores– they’re essential, value-driven, and disruption-resistant.

SMALLER, SMARTER, STRONGER Even traditional players are reinventing themselves. Macy’s is rolling out small-format stores that emphasize apparel and beauty while leveraging omnichannel features. After a decade of physical contraction, Barnes & Noble is now in expansion mode, planning 60+ new stores in 2025 after opening 57 in 2024. Many are returning to former locations with a hyperlocal strategy and renewed focus on community engagement.

MATTHEWS™ | 9

CAPITAL ALLOCATION

Why Retail is Earning Investor Attention In Q1 2025, retail investment volume jumped 13% year-over-year to $9.8 billion, fueled by a surge in transaction activity and larger deal sizes.

Grocery-anchored centers led the charge, attracting four times more institutional capital than a year ago, while high-street urban retail saw renewed interest through targeted acquisitions.

It’s not truthful to say retail lending is any better than two years ago. Creativity is key to finding retail loans for certain owners.

THE MACRO TAILWINDS Retail’s performance is closely tied to a strong labor market and resilient consumer spending. In FY 2024, the U.S. unemployment rate averaged just 3.9%, with over 7.2 million jobs created since March 2020. The National Retail Federation projects 2025 sales growth between 2.7% 3.7%, due to continued wage growth and historically low unemployment.

But this labor strength is a double-edged sword. With payroll often making up around 20% of gross revenue for general retailers, rising wages can squeeze profit margins. For retail landlords and lenders, that means assessing not just demand, but tenant durability in a tightening labor market.

Low unemployment drives spending, but it also raises payroll costs. For retailers, that’s a real operational challenge.

Retail demand is also following demographic and economic shifts. As people continue to migrate from high-cost coastal markets to more affordable regions in the Sunbelt and Intermountain West, retail space per capita is shrinking in high-growth areas and rising in those seeing population loss.

Major economic development projects further tilt the balance. Intel’s $28 billion chip plant in Central Ohio, expected to generate 10,000 jobs directly and tens of thousands more indirectly, is just one example of how large-scale job creation drives retail demand in emerging markets.

RETAIL VS. MULTIFAMILY & INDUSTRIAL

A Capital Markets Reality Check

Despite retail’s solid fundamentals, the capital markets haven’t fully recalibrated. Financing terms for retail assets remain less favorable than those for multifamily–and on par with industrial. As of May 2025, multifamily loans typically feature lower interest rates (5.49% for 5-year fixed terms over $6M) and higher LTVs (up to 80%). Retail loans, by comparison, average 6.86% with max LTVs of 75%, similar to industrial.

10 | SUMMER 2025

POPULATION GROWTH & ECONOMIC CATALYSTS FUEL GEOGRAPHIC SHIFTS

Debt Service Coverage Ratio (DSCR) requirements further differentiate the risk profile. While 1.20-1.40 is standard, lenders often require 1.30-1.50 for retail, effectively capping loan proceeds even when LTV thresholds are met.

STNL

Stability Meets a Shifting Rate Environment With long-term leases and creditworthy tenants, these properties are seen as safe, steady investments, especially in uncertain economic times.

It’s no surprise that vacancy rates in key necessitybased STNL categories like fast food, supermarkets, and convenience remain exceptionally low, ranking from just 1.0% to 3.7% as of early 2025.

Yet even with those strong fundamentals, financing STNL deals isn’t what it used to be.

While investors continue to acquire STNL assets, the lending math has gotten trickier. Interest rates have climbed faster than cap rates, introducing a dynamic known as negative leverage–where borrowing costs (6%) exceed the asset’s return (5% cap rate).

The result? Compressed or even negative cash-oncash return in the short-term, despite the long-term quality of the asset.

Retail loans on single tenants are not better than two years ago. The loans are smaller because the rates are higher… Most of the stuff being done is 1031 cash.

This financing squeeze is why many investors say today’s loans aren’t “better than two years ago.” It’s not about the asset–it’s about the cost of capital.

Cap rates have responded to rising interest rates, but not fast enough to offset the higher cost of debt.

In Q1 2025, multi-tenant retail cap rates averaged 7.22%, up 18 basis points year-over-year. STNL cap rates rose more significantly, up by 58 basis points to 6.96%, continuing a steady nine-quarter climb from their post-pandemic low of 5.60% at the end of 2022.

Still, investors remain committed to STNL. Even with thinner immediate returns, these assets offer longterm security and inflation protection, especially when backed by high-credit tenants. Lenders continue to support the sector as well, seeing STNL as a lower-risk asset class, which helps sustain liquidity in the market. Combined with limited new development and rising replacement costs, existing STNL properties are well-positioned to hold value and even appreciate over time.

MATTHEWS™ | 11

WHY CAPITAL TERMS LAG Retail’s financing handicap is rooted in history. The sector still carries the stigma of the 2008 financial crisis and the “retail apocalypse.” Between 2008 and 2021, banks with CRE-heavy portfolios were nearly three times more likely to fail than peers. In response, regulators tightened risk standards, and lenders became more cautious.

Meanwhile, multifamily enjoys systemic support: Fannie Mae and Freddie Mac back more than 40% of all multifamily loans, de-risking the space and enabling friendlier capital terms. Industrial has benefited from e-commerce tailwinds, with demand for logistics and warehouse space seen as a long-term secular trend.

Retail, in contrast, lacks government guarantees and remains weighted down by its past, even if fundamentals tell a different story. Until capital markets fully digest the sector’s transformation, retail will continue to attract capital–just not always on equal terms. That said, record-low vacancies and sustained leasing velocity are prompting a growing number of lenders to revisit the sector.

Particularly in neighborhood and strip center formats, where service-oriented shop tenants are viewed as stable or easily backfilled, capital availability is improving and financing is becoming more accessible across the retail spectrum.

VOLT MIGRINO

volt.migrino@matthews.com (602) 317-8375 12 | SUMMER 2025

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Visit us online at GlobeSt.com MATTHEWS™ | 13

TARIFFS

AND

CRE

Trade Tensions, Real Estate Reactions CRE’s Cross-Sector Outlook

Recent tariff announcements by the Trump administration have had a significant impact on capital markets and commercial real estate (CRE) performance expectations, injecting considerable volatility and uncertainty into CRE markets. The news is impacting investor appetite for most forms of capital allocation, most notably for investors though, is the impact tariff announcements have had on bond yields.

Here’s a breakdown of the situation and the market reactions.

14 | SUMMER 2025

TARIFF ANNOUNCEMENT TIMELINE April 2, 2025

President Trump announced a new universal baseline tariff of 10% on all imports, effective April 5, and threatened higher “reciprocal” tariffs on various countries based on trade imbalances, which were to begin April 9. He also ended the de minimis import tax exemption for China on this day.

By May 12, 2025

The U.S. and China agreed to a 90-day partial rollback of some of the most recent high tariff rates, with U.S. tariffs on many Chinese goods reducing to around 30% and China reducing retaliatory tariffs.

Early-Mid April 2025

While higher reciprocal tariffs were briefly implemented on April 9, they were quickly suspended for 90 days for most countries except China due to adverse market reactions. Throughout April, tariffs on specific sectors like autos and increased steel and aluminum tariffs were also active.

May 23, 2025

Recent reports indicate President Trump threatened new 50% tariffs on imports from the European Union, potentially starting July 9, 2025, and reiterated considerations for tariffs on Apple products not manufactured in the U.S.

This jagged and unpredictable policy path wreaked havoc on financial markets, sending stocks up and down at near record passes. Consumer sentiment fell sharply this spring, largely due to tariff announcements and perceived weakness in the economy.

Next, let’s dive into each of the ways the shifting trade landscape is set to impact CRE performance and investment.

MATTHEWS™ | 15

CAPITAL MARKETS The tariff announcements, particularly the sweeping April 2 measures, triggered significant volatility across global financial markets. The VIX, often called the “fear gauge,” spiked to over 45 in early April, indicating a sharp increase in investor uncertainty.

Uncertainty and active market swings are good for day traders, but uncertainty usually sparks a “wait-and-see” approach from economists, the Fed, lenders, and CRE investors.

The VIX Spiked on Trump’s Tariff Announcement Source: Yahoo Finance

Volatility Index

60 45 30 15 0

January

February

March

April

May

Economists and financial institutions revised their forecasts, generally expecting lower global and U.S. GDP growth and higher inflation as a result of the tariffs. BlackRock, for example, lowered its 2025 U.S. GDP growth expectation to 0% and raised its core inflation expectation to 3.8% following the April announcements.

Some analysts predict a U.S. recession in 2025 is now highly likely.

This volatility has unique implications for investor behavior.

16 | SUMMER 2025

But, at the end of Biden’s presidency, the U.S. Treasury Department issued a wave of shortterm debt that matured this spring. The Trump administration was forced to kick more short-term debt into longer-term bonds, like the 5-year and 10-year, flooding the Treasury market, and keeping the rates from falling with economic expectations, making the Treasury levels more representative of bond market supply-and-demand than current economic expectations.

U.S. corporate credit markets also felt the impact, highlighting that the capital market dynamics in 2025 are driven by more than just tariffs. Trading volumes rose to 2025 highs in early April, and bid/offer spreads in corporate bonds widened dramatically during the peak volatility. This makes it harder for corporations to raise money in bond markets, lifting the cost they pay on newly issued capital, which in turn could restrict expansion and growth for the next one to five years at firms with significant debt maturing this spring.

The delay in rate decreases is preventing a run-up in CRE transactions while also complicating any refinancing efforts for investors with maturing debt.

Luckily for borrowers, the administration should be able to have kicked all of the short-term debt out by the second half of 2025 or 2026, and that is when we are likely to see 10-year Treasury rates down below 4%.

At the same time, Treasury bonds, the benchmark for CRE lending rates, are dealing with a battle between two forces, which is keeping the 10-year rate locked between 4.1% and 4.6%. First, the drop in consumer sentiment and economic growth expectations is putting downward pressure on these rates. If you graph the 10-year Treasury next to consumer sentiment for 2024, the relationship is easy to see.

Consumer Sentiment Bounces Following Trump’s Election I M PROVE D 2025 FORECA ST TO AI D CRE PE RFORMANCE BUT LI M IT R ATE CUTS Source: Matthews™ Research, University of Michigan, Federal Reserve

75 70 65

Trump Wins Election

Trump-Biden Debate

4.8% 4.4% 4.0% 3.6%

60

10-Year Treasury

Consumer Sentiment Index

80

3.2% Jan

Feb

March

April

May

June

Consumer Sentiment

July

Aug

Sep

Oct

Nov

Dec

10-Year Treasury

MATTHEWS™ | 17

INDUSTRIAL The biggest question mark in the tariff debate is the long-term impact it will have on global supply chains. The U.S. has long relied on goods made in China, and even small movements away from that would have massive impacts on where and how goods are stored. Even with the U.S. and China striking a deal on trade in May, it’s uncertain how firms will react, given they had already made plans to become less dependent on China.

Some firms, like Apple, have begun the process of relocating manufacturing hubs from China to India, a shift that, if widespread, would redirect the majority of import activity away from western hubs like Los Angeles to eastern ports like New York and Savannah. This is due to the speed and cost of shipping routes. To get from India to the U.S. West Coast takes roughly a week longer than from India to the U.S. East Coast.

New York City

Other firms, including IBM, Merck, and Roche, have announced intentions to bring manufacturing back to the U.S. This would be a massive win for U.S. manufacturing facilities, especially the modern big-box product that has seen vacancy climb since 2023. The largest industrial REIT owner in the U.S. Prologis used Brexit to illustrate that major trade disruptions, while challenging initially, tend to force businesses to adopt less efficient but more resilient supply chains that require larger inventory holdings, ultimately driving demand for the logistics real estate Prologis provides.

Mumbai

U.S. Imports Surge in Q1 2025 KE Y G ROW TH FROM SWITZE RL AN D, I RE L AN D, AN D OTH E R REG ION S ($B) Source: U.S. Census

14 .9

18 | SUMMER 2025

TA I WA N

S W IT Z E R L A N D

1 0.6

6.4

V I E TN A M

37. 8

In Q1, the U.S. Census Bureau recorded a surge in import activity from Europe, and these goods will follow the same shipping route to the U.S. East Coast.

11 . 2

OTH E R

51 . 3

19. 2

IRELAND

OTH E R

11 .4

M E X I CO

INDIA

8 .0

C A N A DA

3. 8 OTH E R Europe

Asia

Americas

Australia

5.0

CHINA

8.8

AU S TR A LI A

4 .0

OTH E R

Other

RETAIL The pullback in economic confidence is likely to spark a slowdown in consumer spending, especially luxury and discretionary items, including travel. The National Retail Federation is forecasting a “slower trajectory for consumer spending” in 2025 due to the uncertainty and inflation fears fueled by tariffs.

Major purchases, like new cars and homes, will likely be put on hold for most households.

Another factor is the rising cost of imported goods.

While some companies have announced plans to reshore or nearshore production, these processes take multiple years to come to fruition. In the meantime, consumer prices will rise, inflation will remain sticky, and workers will be able to buy less with their discretionary budgets. Businesses should expect less dining out, fewer shopping trips, and more moderate spending in the months ahead.

Luckily for the retail sector, vacancy has been near record lows for almost two years. Developers have largely neglected the property type, and some loosening in the market will likely spur heightened leasing and tenant upgrades for the most successful retailers.

HOSPITALITY The outlook for hotels is further complicated by disputes with China and the EU, whose populations have recorded a major pullback in international travel bookings in the U.S. A less healthy American consumer, combined with a sharp drop in international travel, is a double whammy that hotel chains will have to navigate this spring and summer.

Advanced travel bookings between Canada and the U.S. for the summer months (April through September) are reported to be down dramatically, potentially over 70% year-over-year, according to OAG aviation data. Flight Centre Canada also noted a 40% drop in Canadian business travel to the United States. Other Canadian airlines like Air Canada and WestJet are reportedly cutting back capacity on routes to U.S. cities due to weakening demand and reallocating planes to other markets, such as Europe.

Similarly, major European airlines, including Air France-KLM and Lufthansa, have reported weakening demand and a slowdown in bookings from Europe to the U.S. for the early summer months. Air France-KLM specifically noted a 2.4% decline in these transatlantic bookings.

While retail’s outlook can be rapidly improved with trade deal announcements and positive economic data, hotels are more dependent on sustained long-term confidence and should expect lower international bookings this summer.

MATTHEWS™ | 19

In conclusion, the Trump administration’s recent and dynamic tariff policies have cast a long shadow of uncertainty and volatility across the commercial real estate landscape. Beyond the direct cost implications, these trade measures have significantly disrupted capital markets, influencing investor sentiment, complicating lending environments due to Treasury market fluctuations, and forcing a widespread “wait-and-see” approach. While the industrial sector may find long-term opportunities in shifting supply chains and reshoring efforts, the immediate outlook for retail and hospitality is more challenged, facing reduced consumer spending and a sharp decline in international travel. Ultimately, navigating this unpredictable trade environment will require CRE investors and stakeholders to remain agile and closely monitor both the direct impacts of tariffs and their complex interplay with broader economic and capital market conditions.

20 | SUMMER 2025

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THE CRE RETREATS THAT EVERYONE TALKS ABOUT ARE BACK. ARE YOU ON THE LIST?

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TOP ACTIVITY IN A TRANSFORMING MARKET The national industrial sector noted a supply increase throughout the last few years, leading to a vacancy rate of 7.1% in Q2 2025. Absorption levels have struggled to adjust to the oversupply, and potential tariffs could further impact the segment. However, new trends have begun to appear, which could aid stabilization moving forward.

22 | SUMMER 2025

Apple’s entrance into Houston includes an upcoming 250,000-square-foot facility that is set to produce in-house AI servers, aligning with the broader trend of tech-driven manufacturing. To continue Houston’s standing as a powerhouse for data centers, Perrier stated that Texas Tax Code 313 and the availability of low-cost power will aid new data center developments.

Data center owners will see a variety of benefits when taking on a property. According to Vice President Andrew Wiesemann, “owners benefit from stable long-term income from credit tenants, as well as high barriers of entry, due to regulatory and zoning constraints.” Owners will also find the longer leases for these facilities enticing as terms range from 3 to 10 years, creating stability with the tenant.

Data centers are capital-intensive, with costs based on megawatt pricing, charging tenants based on power usage. “You need the right power, the right fiber, and the right team to get them [data centers] off the ground,” Vice President Nick Watson said, “but if you can check those boxes, they’re a rock-solid play.”

DATA CENTER BOOM Rising demand for AI production across the country has led to the rapid expansion of data center facilities. Due to this increase in demand, AI companies contributed to more than 50% of the growth in U.S. data centers in 2024. Some recent operators that leased data centers include Equinix, Aligned Data Centers, DataBank, and Vantage Data Centers. Now, competition is on the rise, and giants like Microsoft, Meta, and Google are expanding their data center operations nationwide. With this growth, the data center construction market is forecast to reach $112.33 billion by 2030.

Doc Perrier, Vice President and Director, noted Houston as a top performer for data center additions. “With significant investments from companies like Apple and Nvidia, there’s a surge in demand for high-performance computing hardware and AI server components,” Perrier stated.

FROM WHERE I SIT, they’re quickly becoming the backbone of our digital economy.

– NICK WATSON Vice President

CONSTRUCTION UPTICK PROJECTED FOR DATA CENTERS Source: Research & Markets

$112.33B

$48.18B

2024

2030

MATTHEWS™ | 23

IOS UPDATE

SHIFTS IN DEMAND

The IOS segment has recorded a strong rise in additions as institutional investors have shifted focus to this property type. “New developments all over the country have begun, due to evolving tenant requirements,” Wiesemann noted. “I expect to see more portfolios being sold or recapitalized throughout this year as well.” Notable IOS acquisition activity occurred in the first half of 2025, with Texas standing out as a prominent location for IOS growth.

In January, Alterra IOS acquired four properties in Dallas-Fort Worth that total 34.9 acres; then in May, it acquired two sites in Austin and San Antonio that total 8.7 acres. Texas metros are favorable locations for IOS, due to population growth and the state’s convenient central location.

Across the country, industrial construction has transitioned to smaller facilities under 50,000 square feet. The new focus on these properties is largely due to the oversupply of facilities over 100,000 square feet, which saw an influx in deliveries over the past couple years. Owners and tenants are now prioritizing smaller spaces as they offer many advantages.

When negotiating for an IOS property, owners must ensure they are finding an adequate price. “The IOS space still has strong demand, but for the right price,” Associate Market Leader Carter Hadley said.

Moving forward, areas to watch are well-located IOS sites with high barriers to entry as these will continue to outperform, according to Vice President Jacob Friedman.

SMALL IOS IS VERY HOT,

while large IOS is a mixed bag.

– CHRIS NELSON FVP & Senior Director

Certain markets are already seeing this transition in their industrial segments. Chris Nelson noted this trend increased in Southern California, specifically for small-bay, multi-tenant facilities.

“Southern California continues to remove industrial product from the market in favor of multifamily redevelopment, and the small-bay segment continues to be a main target for that,” Nelson said.

“Generally, many of the business parks are in infill areas and have total scale that makes sense to be able to build a residential project of enough density to pencil.”

Nelson added that as more rooftops are built in infill areas, there will be more demand for small industrial properties to house the tenants that provide goods and services to them. “Look forward to continued strong rent growth in this product segment in the years to come,” Nelson emphasized.

SMALL-BAY CONSTRUCTION INCREASE Source: CoStar Group, Inc. *National Industrial Construction up to 50,000 SF

8M Square Feet

One ongoing trend that First Vice President and Senior Director Chris Nelson noted is the varying performance in IOS properties depending on square footage. Nelson stated that the owner-user exit isn’t as available on larger sites, meaning owners have to lease and trade as a leased investment in order to get out of the project. “The basis of many of these initial acquisitions and, in turn, the lease rates needed to make the projects make sense are objectively high, although achievable,” Nelson explained.

Due to the influx of larger properties, smaller industrial facilities noted less supply availability.

However, tight vacancies for properties with less square footage allow for the ability to securely keep tenants on short-term leases without vacancy fears.

“This allows for continued rent increases, which will match rent growth in strong areas and inflation in general,” Watson stated.

6M 4M 2M 0

24 | SUMMER 2025

’23 Q2

’23 Q3

’23 Q4

’24 Q1

’24 Q2

’24 Q3

’24 Q4

’25 ’25 Q1 Q2 QTD

In Houston, Doc Perrier noted he expects to see continued rent growth for properties under 100,000 square feet, as well as an interest in craneserved buildings. “We are seeing an increase of manufacturing tenants in the market, and due to the lack of development over the past 10 years of crane buildings, vacancy is around 2.5 percent,” Perrier said. Most of the crane-served buildings in demand are in the 20,000 to 70,000 square foot range.

DEMAND FOR

strategically located, mid-sized facilities remains strong.

– DOC PERRIER FVP & Director

As such, Perrier stated that tenant requirements for manufacturing facilities surged nearly 300% in the first half of 2024 compared to 2020.

“This uptick in demand is driven by companies seeking to onshore production and capitalize on Houston’s port proximity and strong infrastructure,” Perrier explained. “Houston’s industrial market is transitioning from a phase of oversupply to a more balanced state.”

INDUSTRIAL PREDICTIONS The institutionalization of the segment is one factor that will aid activity in years to come. “Institutional capital is now flowing into specialized industrial segments, such as small-bay properties, IOS, and Class B/C assets under $5 million in high-performing markets,” Watson said. “This trend is expected to persist as these niches gain broader recognition for their stability and long-term upside.”

Vice President Spencer Mason also stated that as industrial construction slows down from the COVID-19 development surge, the lull will create positive effects in most major and secondary markets moving forward. “This includes stronger absorption, declining vacancy rates, increased leasing activity, and continued rent growth,” Mason expressed. Additionally, Mason added that as key unknowns, like tariff policies, begin to stabilize, the segment can expect a resurgence in activity.

“Investment groups will be more willing to reengage, and developers will be poised to break ground on new projects as market fundamentals continue to strengthen,” Mason said.

LOOKING AHEAD Investors should ensure they are aware of ongoing shifts and how they can impact investments. While there will always be changes in the sector, industrial remains ready for growth.

INDUSTRIAL IS POISED TO ADAPT

to any market and make itself a benefactor to the world.

– CARTER HADLEY Associate Market Leader

ANDREW WIESEMANN andrew.wiesemann@matthews.com (214) 295-7569 DOC PERRIER doc.perrier@matthews.com (346) 223-5954

CARTER HADLEY carter.hadley@matthews.com (949) 662-2260

JACOB FRIEDMAN jacob.friedman@matthews.com (773) 446-7583

CHRIS NELSON chris.nelson@matthews.com (858) 257-4562

NICK WATSON nick.watson@matthews.com (727) 579-8449

SPENCER MASON spencer.mason@matthews.com (303) 418-8668

MATTHEWS™ | 25

N E T LEAS E TENANT RE PO RT

26 | SUMMER 2025

JASON LONG jason.long@matthews.com (216) 201-9113

AUTO SERVICE

AUTOZONE K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

AZO BBB ±$62.9B ±6,526 Memphis, TN

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

15 5.62% 12 Years $1.5M

19 5.42% 12 Years $1.6M

6 5.84% 12 Years $1.1M

CA P R ATE CORRE L ATION

NN, NNN, or Ground Lease 5-10% Every 5 Years 15 Years $95,000 ±7,000 SF $2,440,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

26 5.13% 12 Years $2,245,778 3.75% 6.00%

8.0% 7.0%

CA P R ATE COMPA RISON

6.0% 5.0% 4.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

New Construction (15-20 Years)

5.02%

10 Years Remaining

6.05%

5 Years Remaining

6.24%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$88,173.88

$47,940.75

$128,407.01

ZONE 1

ZONE 2

ZONE 3

ZONE 4

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

City

Sales Price

Cap Rate

Sale Date

Bakersfield, CA

$1,650,000

5.70% 3/28/25

Huntingdon, TN

$949,000

6.15%

3/18/25

East Orange, NJ

$850,000

6.00%

1/10/25

Athens, GA

$1,638,000

4.58% 12/30/24

Winston-Salem, NC

$750,000

5.36% 12/10/24

Lakeland, GA

$1,000,000

7.80% 10/15/24

Warwick, RI

$1,450,000

6.45%

10/7/24

Raleigh, NC

$1,300,000

4.31%

9/19/24

Yonkers, NY

$2,892,785

5.00%

9/16/24

Las Vegas, NV

$3,300,000

4.36% 8/23/24

Oakhurst, CA

$1,200,000

5.50%

8/1/24

MATTHEWS™ | 27

AUTO SERVICE

CALIBER COLLISION K E Y STATISTIC S

BR ANDON ELLISON brandon.ellison@matthews.com (214) 432-4720

T YPICA L LE A SE STRUC TURE

CWD B ±$3.96M ±1,800 Lewisville, TX

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

33 6.40% 1 Year $4.0M

47 6.80% 1 Year $3.2M

11 6.30% 1 Year $3.7M

CA P R ATE CORRE L ATION

NN or NN 5-10% Every 5 Years or 2% Annually 10-15 Years $250,000-$450,000 ±10,000-15,000 SF —

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

48 6.30% 10 Years $4,158,361 5.45% 8.00%

9.0% 8.0%

CA P R ATE COMPA RISON

7.0% 6.0% 5.0%

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15

New Construction (15-20 Years)

6.00%-6.25%

10 Years Remaining

6.50%-7.00%

5 Years Remaining

7.00%-8.00%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$234,686.25

$132,393.37

$336,979.13

ZONE 1

ZONE 2

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

28 | SUMMER 2025

ZONE 3

ZONE 4

City

Sales Price

Cap Rate

Sale Date

Fuquay Varina, NC

$3,375,000

6.50%

4/17/25

Waterbury, CT

$5,000,000

6.36% 3/25/25

Minneapolis, MN

$4,400,000

7.16%

Cuyahoga Falls, OH

$4,917,199

6.75% 2/25/25

Minneapolis, MN

$2,300,000

6.22% 2/27/25

North Syracuse, NY

$2,385,970

6.50%

9/18/24

Merrill, WI

$1,371,000

7.00%

9/12/24

South Bend, IN

$4,400,000

7.07%

6/29/24

Frankfort, KY

$1,775,000

6.59% 7/26/24

Bethlehem, PA

$3,908,890

6.75% 12/30/24

Kathleen, GA

$5,797,348

6.60% 12/20/24

5/15/24

JACK KULICK jack.kulick@matthews.com (760) 642-9942

AUTO SERIVCE

JIFFY LUBE K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

Private Private Private ±2,100 Houston, TX

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

17 6.53% 10 Years $1.6M

26 6.78% 8 Years $1.5M

16 7.21% 10 Years $1.6M

CA P R ATE CORRE L ATION

NNN 10% Every 5 Years or 2% Annually 15 Years $108,000 ±2,500 SF $1,010,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

26 6.44% 8 Years $1,733,961 4.50% 9.07%

9.5% 8.5%

CA P R ATE COMPA RISON

7.5% 6.5% 5.5%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

New Construction (15-20 Years)

6.25%

10 Years Remaining

7.00%

5 Years Remaining

7.75%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$105,890

$60,841

$150,939

ZONE 1

ZONE 2

ZONE 3

ZONE 4

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

City

Sales Price

Cap Rate

Sale Date

Monroe, LA

$835,000

8.39%

4/16/25

Midlothian, VA

$976,000

8.30%

4/1/25

Aiken, SC

$1,064,000

6.50% 3/24/25

Olathe, KS

$1,622,967

7.75%

3/7/25

Clive, IA

$1,370,000

5.76%

2/27/25

Ville Platte, LA

$440,000

10.62% 2/21/25

Eugene, OR

$1,700,000

7.41%

2/7/25

Liberty Hill, TX

$4,290,000

5.51%

1/24/25

Cornelius, NC

$1,100,000

6.95%

1/22/25

Moore, NC

$1,350,000

7.41%

1/22/25

Manchester, NH

$1,530,000

6.90%

1/16/25

MATTHEWS™ | 29

BANK

BANK OF AMERICA K E Y STATISTIC S

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

GER ARD HAMAS gerard.hamas@matthews.com (332) 900-5769

T YPICA L LE A SE STRUC TURE

BAC (NYSE) AA±$336.6B ±3,743 Charlotte, NC

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

3 6.46%

6 5.14%

4 6.80%

—

—

—

$5.2M

$2.7M

$3.3M

CA P R ATE CORRE L ATION

— 5-10% Every 5 Years 15-20 Years $180,000 ±3,000 SF —

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

20 5.80% 7 Years $4,700,000 4.50% 8.00%

12.0% 10.0%

CA P R ATE COMPA RISON

8.0% 6.0% 4.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 YE ARS RE MAI N I NG ON LE A SE

RECE NT SA LE S COMPA R A BLE S

City

Sales Price

Cap Rate

Sale Date

Gilroy, CA

$3,700,000

5.24%

4/4/25

Bakersfield, CA

$2,070,000

6.44% 3/28/25

Stockton, CA

$1,900,000

9.05%

2/18/25

Gaithersburg, MD

$5,500,000

6.45%

2/6/25

30 | SUMMER 2025

New Construction (15-20 Years)

5.00%

10 Years Remaining

5.75%

5 Years Remaining

6.25%

GER ARD HAMAS gerard.hamas@matthews.com (332) 900-5769

BANK

CHASE BANK K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

JPM (NYSE) AA±$738.5B ±4,881 New York, NY

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

11 5.25%

9 5.30%

7 5.00%

—

—

—

$3.7M

$3.1M

$3.4M

CA P R ATE CORRE L ATION

Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

NNN Fee Simple or NNN Ground Lease 5-10% Every 5 Years 15-20 Years $180,000 ±2,750 SF —

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

25 5.00% 12 Years $3,600,000 4.00% 6.80%

12.0% 10.0%

CA P R ATE COMPA RISON

8.0% 6.0% 4.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

New Construction (15-20 Years)

5.00%

10 Years Remaining

5.75%

5 Years Remaining

6.25%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$168,221.44

$89,027.25

$247,415.63

ZONE 1

ZONE 2

ZONE 3

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

City

Sales Price

Cap Rate

Sale Date

Mooresville, NC

$2,827,929

4.95%

5/14/25

Fredericksburg, VA

$5,740,000

4.75%

4/9/25

Hampton, VA

$4,230,000

5.05%

4/7/25

Long Beach, CA

$3,700,000

5.35%

3/14/25

Cornelius, OR

$2,800,000

4.82%

2/19/25

Dallas, TX

$2,865,789

5.70%

—

ZONE 4

MATTHEWS™ | 31

GER ARD HAMAS gerard.hamas@matthews.com (332) 900-5769

BANK

WELLS FARGO K E Y STATISTIC S

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

T YPICA L LE A SE STRUC TURE

WFC (NYSE) A+ ±$245.76B ±4,304 San Francisco, CA

Lease Type

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

4 6.35%

8 6.48%

4 6.80%

—

—

—

$2.3M

$3.7M

$3.3M

CA P R ATE CORRE L ATION

Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

NNN Fee Simple or NNN Ground Lease 5-10% Every 5 Years 15-20 Years $180,000 ±3,000 SF —

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

7 5.20% 8 Years $2,700,000 4.50% 6.50%

12.0% 10.0%

CA P R ATE COMPA RISON

8.0% 6.0% 4.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

New Construction (15-20 Years)

5.00%

10 Years Remaining

5.75%

5 Years Remaining

6.25%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

32 | SUMMER 2025

City

Sales Price

Cap Rate

Sale Date

Turnersville, NJ

$4,100,000

5.85% 12/19/24

Reisterstown, MD

$5,630,000

8.10%

12/6/24

Stockton, CA

$3,500,000

5.70%

11/8/24

NATHAN FITZGIBBONS nathan.fitzgibbons@matthews.com (858) 351-3544

CASUAL DINING

CHILI’S K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

EAT BB+ ±$7.81B ±1,610 Dallas, TX

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

1 5.32% 10 Years $2.5M

3 6.02% 7 Years $1.5M

4 6.23% 11 Years $2.8M

CA P R ATE CORRE L ATION

8.0% 7.5% 7.0% 6.5% 6.0% 5.5%

NNN 5-10% Every 5 Years 15 Years $168,197 ±5,600 SF $2,271,651

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

10 6.40% 5 Years $3,466,000 4.28% 8.12%

CA P R ATE COMPA RISON

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15

New Construction (15-20 Years)

5.54%

10 Years Remaining

5.79%

5 Years Remaining

6.59%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

City

Sales Price

Cap Rate

Sale Date

Olathe, KS

$2,119,031

6.40%

5/16/25

Shawnee, KS

$3,110,000

7.00%

6/2/25

Myrtle Beach, SC

$2,212,063

6.28%

3/18/25

Apopka, FL

$3,998,000

6.25%

1/28/25

Palestine, TX

$1,300,000

5.75% 12/31/24

Batavia, IL

$1,664,000

5.90% 11/27/24

Anna, TX

$1,573,000

5.25% 10/25/24

MATTHEWS™ | 33

MARC FILIA marc.filia@matthews.com (949) 346-9522

CASUAL DINING

GOLDEN CORRAL K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

Private Private Private ±400 Raleigh, NC

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

11 7.70%

5 8.10%

3 —

—

—

—

$3.3M

$3.6M

—

RE NT DISTRIBUTION

NNN 5-10% Every 5 Years or 1.5% Annually 15-20 Years $240,000 ±10,000 SF $3,570,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

5 6.83% 12 Years $4,260,000 5.75% 7.50%

CA P R ATE COMPA RISON

$315,342.16

$257,504.04

New Construction (15-20 Years)

6.50%-7.00%

10 Years Remaining

7.00%-7.50%

5 Years Remaining

7.50%-8.00%

$373,180.30 RECE NT SA LE S COMPA R A BLE S

ZONE 1

ZONE 2

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

34 | SUMMER 2025

ZONE 3

ZONE 4

City

Sales Price

Cap Rate

Sale Date

Odessa, TX

$4,600,000

6.40% 12/13/24

Hesperia, CA

$4,000,000

8.01%

12/9/24

Schererville, IN

$4,470,000

9.87%

—

Clinton Township, MI

$4,122,564

7.76%

—

CASUAL DINING

HOOTERS K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

Private Private Private ±250 Atlanta, GA

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

2 7.41% 10 Years $2.8M

3 7.90% 8 Years $2.3M

2 6.31% 9 Years $2.7M

CA P R ATE CORRE L ATION

NNN Varies 20 Years $150,000-$200,000 ±5,000-7,000 SF $3,500,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

8 7.07% 9 Years $2,730,062 9.00% 6.36%

11.0% 9.0%

CA P R ATE COMPA RISON

7.0%

New Construction (15-20 Years)

—

10 Years Remaining

6.95%

5 Years Remaining

7.77%

5.0%

1

2

3

4

5

6

7

8

9 10 11 12 13 14

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$224,841.17

$165,789.98

$283,892.38

ZONE 1

ZONE 2

ZONE 3

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

City

Sales Price

Cap Rate

Sale Date

Aurora, CO

$2,300,000

5.87%

3/31/25

Concord, NC

$3,253,500

6.75%

1/17/25

Kansas City, MO

$2,364,208

6.27%

11/14/24

Daytona Beach, FL

$3,180,000

7.02% 12/18/24

Jacksonville, NC

$1,400,000

10.41%

8/2/24

Columbia, SC

$3,550,000

7.77%

4/12/24

Council Bluffs, IA

$2,103,000

7.04%

3/14/24

ZONE 4

MATTHEWS™ | 35

BL AKE WAGENSELLER blake.wagenseller@matthews.com (949) 209-8963

CASUAL DINING

IHOP K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

DIN — ±$307.26M ±1,700 Pasadena, CA

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

17 6.20%

21 6.30%

7 6.10%

—

—

—

$2.4M

$2.3M

$2.3M

CA P R ATE CORRE L ATION

NNN 5-10% Every 5 Years 15 Years $145,000 ±4,500 SF 1.9M

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

23 6.65% 6 Years $2.4M 5.00% 9.00%

9.0% 8.0%

CA P R ATE COMPA RISON

7.0% 6.0% 5.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

New Construction (15-20 Years)

—

10 Years Remaining

6.25%

5 Years Remaining

7.25%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$105,890

$60,841

$150,939

ZONE 1

ZONE 2

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

36 | SUMMER 2025

ZONE 3

ZONE 4

City

Sales Price

Cap Rate

Sale Date

Marysville, TN

$2,165,000

7.25%

3/28/25

Deland, FL

$2,123,000

6.00% 2/20/25

Colorado Springs, CO

$2,300,000

6.75%

1/17/25

Gilbert, AZ

$2,600,000

5.19%

1/10/25

Denton, TX

$3,360,000

5.50% 12/30/24

Austin, TX

$2,750,000

6.70% 12/19/24

Minneapolis, MN

$1,200,000

6.00% 11/22/24

Tallahassee, FL

$2,400,000

7.09% 10/28/24

Port Arthur, TX

$2,545,000

7.30% 8/30/24

Toldeo, OH

$1,690,000

7.14%

6/11/24

MARC FILIA marc.filia@matthews.com (949) 346-9522

CASUAL DINING

RED LOBSTER K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

— CCC+ Private ±500 Orlando, FL

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

17 5.60%

7 6.80%

— —

—

—

—

$2.5M

$2.8M

—

RE NT DISTRIBUTION

NNN 2% Annually 20-25 Years $250,000 ±7,000-9,000 SF $3,500,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

7 7.26% 14 Years $4,497,266 6.25% 9.00%

CA P R ATE COMPA RISON

$325,155.13

$223,821.71

New Construction (15-20 Years)

7.00%

10 Years Remaining

8.00%-8.50%

5 Years Remaining

8.50%-9.00%

$426,488.54 RECE NT SA LE S COMPA R A BLE S

ZONE 1

ZONE 2

ZONE 3

ZONE 4

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

City

Sales Price

Cap Rate

Sale Date

Pasadena, TX

$2,642,426

8.00%

8/7/24

Rapid City, SD

$1,889,000

6.50%

4/15/24

Talleyville, DE

$5,300,000

6.85%

9/21/23

St. Cloud, MN

$5,800,000

—

9/5/23

MATTHEWS™ | 37

CASUAL DINING

RED ROBIN K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

RRGB — ±$54.63M ±500 Greenwood Village, CO

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

1 6.15% 9 Years $3.9M

2 7.60% 7 Years $1.4M

4 6.73% 12 Years $3.0M

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

NNN 10% Every 5 Years 15-20 Years $150,000-$200,000 ±5,000-7,000 SF ±$3,100,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

CA P R ATE CORRE L ATION

16 6.56% 10 Years $3,317,099 5.77% 8.00%

8.0% 7.5%

CA P R ATE COMPA RISON

7.0% 6.5% 6.0%

5

6

7

8

9

10

11

12

13

New Construction (15-20 Years)

—

10 Years Remaining

6.77%

5 Years Remaining

7.20%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$208,406.06

$155,740.33

$261,071.78

ZONE 1

ZONE 2

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

38 | SUMMER 2025

ZONE 3

ZONE 4

City

Sales Price

Cap Rate

Sale Date

Prescott, AZ

$2,867,647

6.80% 4/24/25

Mesa, AZ

$3,769,230

6.50%

4/15/25

Oswego, IL

$2,100,000

6.80%

3/31/25

Tempe, AZ

$3,275,000

6.79%

3/19/25

Horseheads, NY

$1,750,000

7.60%

12/6/24

Chesapeake, VA

$1,203,000

7.59%

6/17/24

Auburn, WA

$3,900,000

6.15%

5/6/24

ANDRE AS NAVA andreas.nava@matthews.com (214) 466-2758

COFFEE

DUTCH BROS K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

BROS — ±$9.46B ±1,002 Grants Pass, OR

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

27 5.32% 13 Years $2.0M

46 5.08% 13 Years $2.0M

17 5.30% 12 Years $2.2M

CA P R ATE CORRE L ATION

6.0% 5.8% 5.6% 5.4% 5.2% 5.0%

Absolute NNN 10% Every 5 Years 15 Years $130,000 ±950 SF $2,000,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

49 5.09% 13 Years $2,411,929 4.00% 5.80%

CA P R ATE COMPA RISON

10

11

12

13

14

15

New Construction (15-20 Years)

5.06%

10 Years Remaining

6.17%

5 Years Remaining

—

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$123,166.94

$98,812.04

$147,521.84

ZONE 1

ZONE 2

ZONE 3

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

City

Sales Price

Cap Rate

Sale Date

O'Fallon, MO

$2,820,000

5.50%

4/18/25

Westlake, TX

$2,519,231

5.00% 3/27/25

Pensacola, FL

$2,735,000

5.48%

3/13/25

Tucson, AZ

$1,900,000

6.17%

3/11/25

Albuquerque, NM

$2,026,315

5.50% 2/21/25

Fresno, CA

$2,222,222

4.50% 2/20/25

Glendale, AZ

$2,673,000

5.20%

2/4/25

Lenexa, KS

$2,166,666

5.30%

1/24/25

Cameron Park, CA

$2,700,000

5.00%

1/23/25

Decatur, AL

$2,225,000

5.53% 12/27/24

ZONE 4

MATTHEWS™ | 39

OLIVIA PROC TOR olivia.proctor@matthews.com (214) 466-7522

COFFEE

STARBUCKS K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

SBUX BBB+ ±$96.65B ±40,000 Seattle, WA

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

72 5.61% 9 Years $2.5M

101 5.64% 9 Years $2.7M

48 5.71% 9 Years $2.6M

CA P R ATE CORRE L ATION

NN or NNN 10% Every 5 Years 10 Years $162,004 ±2,500 SF —

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

224 5.61% 9 Years $2,917,651 3.20% 7.00%

7.0% 6.5%

CA P R ATE COMPA RISON

6.0% 5.5% 5.0%

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15

New Construction (15-20 Years)

—

10 Years Remaining

5.84%

5 Years Remaining

6.30%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$159,079.25

$133,224.78

$184,933.71

ZONE 1

ZONE 2

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

40 | SUMMER 2025

ZONE 3

ZONE 4

City

Sales Price

Cap Rate

Sale Date

Cape Coral, FL

$3,240,000

6.02%

4/17/25

Riverside, CA

$2,850,000

5.09%

4/11/25

Scottsdale, AZ

$2,100,000

5.25%

3/31/25

Norman, OK

$1,800,000

5.51%

3/24/25

Concord, NC

$2,800,000

5.25% 2/27/25

Baton Rouge, LA

$2,291,000

6.00% 2/21/25

Palm Bay, FL

$3,675,000

5.85% 2/20/25

Kingsburg, CA

$2,850,000

5.26%

1/10/25

Las Vegas, NV

$3,725,000

5.10%

1/3/25

Blue Springs, MO

$2,580,000

6.30%

1/2/25

CHASE CAMERON chase.cameron@matthews.com (214) 692-2040

CONVENIENCE STORE

CIRCLE K K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

CRK BBB+ ±$67.5B ±6,876 Laval, CA

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

9 5.89% 8 Years $2.0M

21 5.82% 9 Years $2.6M

7 6.07% 8 Years $3.8M

CA P R ATE CORRE L ATION

Absolute NNN 5-10% Every 5 Years 10, 15 or 20 Years $180,074 ±3,250 SF $1,800,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

28 5.51% 12 Years $3,518,935 4.60% 6.50%

9.0% 8.0%

RECE NT SA LE S COMPA R A BLE S

7.0% 6.0% 5.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 YE ARS RE MAI N I NG ON LE A SE

RE NT DISTRIBUTION

$146,490.58

$57,452.02

$235,529.15

ZONE 1

ZONE 2

ZONE 3

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

City

Sales Price

Cap Rate

Sale Date

Chula Vista, CA

$4,100,000

4.21%

4/1/25

Crestview, FL

$2,050,000

4.75%

1/16/25

Tampa, FL

$2,715,000

5.24%

1/8/25

Kennesaw, GA

$5,538,000

6.50%

1/15/25

Sherwood, AR

$4,898,067

7.09% 3/28/25

Little Rock, AR

$4,123,261

7.15%

Mooresville, NC

$800,000

5.01% 12/20/24

El Paso, TX

$4,464,285

5.60% 11/15/24

LaGrange, GA

$5,800,000

6.52% 10/21/24

Morongo Valley, CA

$1,020,000

5.39%

9/9/24

Norco, CA

$790,000

3.87%

9/6/24

3/28/25

ZONE 4

MATTHEWS™ | 41

NICK SELTZER nick.seltzer@matthews.com (312) 690-6274

CONVENIENCE STORE

KUM & GO K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

Private Private Private ±800 Salt Lake City, UT

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters TE N A NT TR A NSAC TIONS

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

H1 202 4

H2 202 4

Y TD 202 5

0 —

8 5.68% 11.5 Years $5.4M

0 —

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

— —

— —

RE NT DISTRIBUTION

Absolute NNN 7.5-8% Every 5 Years 20 Years $300,000 ±4,875 SF NR

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

10 5.56% 12 Years $6,129,505 4.50% 7.50%

CA P R ATE COMPA RISON

$283,800.52

$132,452.35

New Construction (15-20 Years)

5.00%

10 Years Remaining

5.75%

5 Years Remaining

6.15%

$435,148.68 RECE NT SA LE S COMPA R A BLE S

ZONE 1

ZONE 2

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

42 | SUMMER 2025

ZONE 3

ZONE 4

City

Sales Price

Cap Rate

Sale Date

Des Moines, IA

$6,789,000

5.25% 12/30/24

Tulsa, OK

$3,900,000

5.66% 12/27/24

Sarcoxie, MO

$2,119,925

7.52% 12/23/24

Springfield, MO

$6,631,781

5.50% 12/20/24

Colorado Springs, CO

$4,455,958

5.79% 10/30/24

Rock Springs, WY

$3,029,061

6.50%

Little Rock, AR

$6,079,000

6.00% 9/23/24

Timnath, CO

$10,044,447

5.42%

Tulsa, OK

$3,505,000

6.00% 12/14/23

Tulsa, OK

$3,244,200

7.00%

10/9/24 7/3/24 12/7/23

NICK SELTZER nick.seltzer@matthews.com (312) 690-6274

CONVENIENCE STORE

QUIKTRIP K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

Private Private Private ±1,100 Tulsa, OK

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

1 5.00% 4 Years $3.1M

14 5.58% 8 Years $4.6M

3 5.58% 7 Years $3.3M

RE NT DISTRIBUTION

Absolute NNN Increases in Options Based on % of Construction Costs 15 Years $290,000 ±5,200 SF NR

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

16 5.73% 8 Years $5,654,879 5.00% 6.11%

CA P R ATE COMPA RISON

$296,379.72

$195,664.80

New Construction (15-20 Years)

5.25%

10 Years Remaining

5.50%

5 Years Remaining

5.85%

$397,094.64 RECE NT SA LE S COMPA R A BLE S

ZONE 1

ZONE 2

ZONE 3

ZONE 4

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

City

Sales Price

Cap Rate

Sale Date

North Kansas City, MO

$7,100,000

5.58% 4/30/25

Newnan, GA

$2,950,000

4.75% 3/25/25

Arlington, TX

$3,000,000

5.01% 12/31/24

Dallas, TX

$5,633,263

5.70% 12/12/24

Arlington, TX

$3,530,000

5.35%

Tulsa, OK

$3,333,500

5.90% 11/12/24

Matthews, NC

$4,697,500

5.81% 10/25/24

Liliburn, GA

$6,795,000

5.75%

10/7/24

Greenville, SC

$6,485,000

5.71%

9/26/24

Piedmont, SC

$4,725,000

5.71%

9/5/25

12/3/24

MATTHEWS™ | 43

CHASE CAMERON chase.cameron@matthews.com (214) 692-2040

CONVENIENCE STORE

WAWA K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

Private Private Private ±1,113 Media, PA

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

18 5.13%

16 5.09%

7 4.99%

—

—

—

$5.8M

$5.4M

$5.1M

CA P R ATE CORRE L ATION

Ground or Absolute NNN 5-10% Every 5 Years 20 Years $279,271 ±5,500 SF —

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

35 4.87% 18 Years $5,803,633 4.40% 5.35%

7.0% 6.0%

CA P R ATE COMPA RISON

5.0% 4.0% 3.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

New Construction (15-20 Years)

5.25%-5.74%

10 Years Remaining

6.00%-6.30%

5 Years Remaining

6.50%-7.00%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$288,339.96

$227,562.91

$349,117.01

ZONE 1

ZONE 2

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

44 | SUMMER 2025

ZONE 3

ZONE 4

City

Sales Price

Cap Rate

Sale Date

Ocala, FL

$4,240,000

4.60% 3/27/25

District Heights, MD

$6,610,000

6.35%

3/18/25

Pensacola, FL

$3,300,000

4.75%

3/31/25

Hanover, PA

$5,480,000

5.38% 3/24/25

Davie, FL

$4,845,360

4.85%

1/22/25

Flanders, NJ

$5,887,850

5.35%

2/12/25

Merrit Island, FL

$5,960,000

4.69% 12/19/24

Kill Devil Hills, NC

$5,782,178

5.05% 12/18/24

Hallandale Beach, FL

$7,740,000

4.84% 10/12/24

Palm City, FL

$4,891,602

4.60% 11/12/24

Oaklyn, NJ

$6,250,000

5.52%

5/9/24

EDWARD DESIMONE edward.desimone@matthews.com (646) 216-8570

DOLLAR STORE

DOLLAR GENERAL

T YPICA L LE A SE STRUC TURE 202 4 - PRE SE NT LE A SE S

K E Y STATISTIC S

DG BBB ±$20.28B ±21,000 Goodlettsville, TN

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

223 7.15% 11 Years $1.4M

366 7.40% 10 Years $1.3M

180 7.32% 10 Years $1.5M

NNN 5% Every 5 Years 15 Years $145,586 ±11,660 SF NR

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

CA P R ATE CORRE L ATION

622 7.15% 10 Years $1,536,413 5.00% 11.00%

9.0% 8.0%

CA P R ATE COMPA RISON

7.0%

New Construction (15-20 Years)

6.68%

10 Years Remaining

6.96%

5 Years Remaining

7.57%

6.0%

3

4

5

6

7

8

9

10

11

12

13

14

15

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$100,440.77

$71,987.79

$128,893.76

ZONE 1

ZONE 2

ZONE 3

ZONE 4

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

City

Sales Price

Cap Rate

Sale Date

Strawn, TX

$1,100,000

7.00%

5/1/25

Muskegon, MI

$2,087,800

6.90% 4/24/25

Waynesville, MO

$1,231,835

8.50%

4/21/25

Denair, CA

$2,150,000

6.10%

4/21/25

Fordland, MO

$851,571

8.40%

4/21/25

Boomer, NC

$1,400,000

7.45%

4/17/25

Talladega, AL

$1,047,000

7.80%

4/14/25

Phoenix, AZ

$1,325,000

7.50%

4/11/25

McKeesport, PA

$1,687,000

7.75%

4/11/25

Tunnel Hill, GA

$1,441,028

7.00%

4/10/25

Lexington, NC

$2,576,000

6.75%

4/10/25

MATTHEWS™ | 45

GANNON ETHINGTON gannon.ethington@matthews.com (309) 737-7869

DOLLAR STORE

DOLLAR TREE K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

DLTR BBB ±$18.18B ±2,050 Chesapeake, VA

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

7 7.63% 7 Years $1.6M

18 7.73% 7 Years $1.6M

20 7.43% 9 Years $2.1M

NN+ or Fee Simple $0.50 PSF During Option Periods 10 Years $130,000 ±10,000 SF $1,600,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

CA P R ATE CORRE L ATION

84 7.29% 8 Years $2,097,627 5.00% 9.02%

10.0% 9.0%

CA P R ATE COMPA RISON

8.0% 7.0% 6.0%

1

2

3

4

5

6

7

8

9

10

New Construction (15-20 Years)

7.31%

10 Years Remaining

—

5 Years Remaining

7.75%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$138,724.26

$95,645.62

$181,802.91

ZONE 1

ZONE 2

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

46 | SUMMER 2025

ZONE 3

ZONE 4

City

Sales Price

Cap Rate

Sale Date

High Point, NC

$2,651,034

7.25%

4/16/25

Tuscaloosa, AL

$1,902,700

7.30%

1/13/25

Knoxville, TN

$2,200,000

7.17%

12/9/24

Springfield, IL

$2,346,939

7.35%

3/19/25

Sunnyside, WA

$1,998,000

6.75%

9/24/24

Goose Creek, SC

$1,425,000

8.01%

8/28/24

Pendelton, IN

$2,000,000

7.35%

1/17/25

Elizabeth City, NC

$2,000,000

6.95%

8/4/24

Humble, TX

$2,162,000

7.25%

7/31/24

Calhoun, GA

$2,395,830

7.20% 4/28/25

Stigler, OK

$1,838,217

7.65%

2/12/25

Muskegon, MI

$1,982,260

7.00%

5/10/24

JESUS MELO jesus.melo@matthews.com (214) 295-5743

DRUGSTORE

CVS K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

CVS BBB ±$76.95B ±9,395 Woonsocket, RI

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

36 6.58% 11 Years $4.5M

40 6.74% 10 Years $4.7M

29 6.97% 9 Years $4.6M

CA P R ATE CORRE L ATION

8.0% 7.5% 7.0% 6.5% 6.0% 5.5%

NN or NNN 5-10% Every 5 Years 20-25 Years $303,000 ±12,500 SF $9,200,000 (If reported)

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

175 6.55% 9 Years $4,750,000 4.55% 9.50%

CA P R ATE COMPA RISON

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

New Construction (15-20 Years)

5.75%

10 Years Remaining

6.38%

5 Years Remaining

7.00%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$304,349.11

$277,046.14

$331,652.09

ZONE 1

ZONE 2

ZONE 3

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

City

Sales Price

Cap Rate

Sale Date

Clemmons, NC

$3,697,206

6.55%

9/5/24

Joliet, IL

$4,485,000

6.85% 10/23/24

Warsaw, IN

$2,133,766

6.50%

11/4/24

New Braunfels, TX

$4,150,000

5.97%

11/15/24

Waller, TX

$3,950,000

6.81% 12/27/24

Knoxville, TN

$4,112,518

6.86%

1/31/25

Arcadia, FL

$3,800,000

7.46%

3/8/25

Houston, TX

$5,875,000

7.31%

3/21/25

Boerne, TX

$5,225,000

6.09%

3/31/25

Franklin, TN

$3,272,727

5.50%

5/9/25

ZONE 4

MATTHEWS™ | 47

CHRISTIAN BECKER christian.becker@matthews.com (512) 430-4466

DRUGSTORE

WALGREENS K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

WBA BB ±$9.5B ±8,450 Deerfield, IL

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

121 7.21% 10 Years $4.2M

151 7.74% 9 Years $4.0M

76 7.91% 8 Years $3.5M

CA P R ATE CORRE L ATION

11.0% 10.0% 9.0% 8.0% 7.0% 6.0%

Absolute N or NN 5% Every 5 Years or Flat 15 Years $327,823 ±14,520 SF $8,280,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

454 7.36% 8 Years $4,200,000 3.00% 15.00%

CA P R ATE COMPA RISON

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15

New Construction (15-20 Years)

6.50%

10 Years Remaining

7.41%

5 Years Remaining

8.19%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$334,513.91

$216,603.72

$452,424.09

ZONE 1

ZONE 2

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

48 | SUMMER 2025

ZONE 3

ZONE 4

City

Sales Price

Cap Rate

Sale Date

Ridgecrest, CA

$3,150,000

9.68%

4/17/25

Cincinnati, OH

$1,720,000

8.43%

4/10/25

Upland, CA

$6,300,000

6.20% 4/10/25

Taylorville, IL

$3,050,000

8.56%

4/9/25

Fresno, CA

$3,000,000

11.40%

4/4/25

Bermuda Dunes, CA

$4,738,000

7.57%

3/28/25

Rutherfordton, NC

$1,590,000

7.86%

3/24/25

Brighton, CO

$4,962,500

7.30%

3/24/25

Purcell, OK

$3,375,000

10.16% 3/24/25

Arvada, CO

$4,623,800

7.30%

3/24/25

LEE CHANDLER lee.chandler@matthews.com (773) 289-0965

FAST CASUAL

CHIPOTLE K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

CMG — ±$68.24B ±3,750 Newport Beach, CA

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

27 5.10% 14 Years $2.9M

51 5.09% 14 Years $2.9M

27 4.91% 15 Years $3.3M

CA P R ATE CORRE L ATION

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

Absolute NNN or NN 10% Every 5 Years 15 Years ±$157,500 ±2,325 SF $3,186,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

37 4.81% 14 Years $3,632,256 4.00% 5.50%

6.0% 5.5%

CA P R ATE COMPA RISON

5.0% 4.5% 4.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

New Construction (15-20 Years)

4.86%

10 Years Remaining

5.04%

5 Years Remaining

5.42%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$160,561.17

$137,942.82

$183,179.54

ZONE 1

ZONE 2

ZONE 3

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

City

Sales Price

Cap Rate

Sale Date

Dixon, IL

$2,401,786

5.60%

4/10/25

Kennesaw, GA

$3,400,000

5.15%

3/26/25

Portland, OR

$3,320,000

4.95%

1/22/25

Carmel, IN

$1,721,952

5.50% 12/17/24

Madison Heights, MI

$2,759,259

5.40% 11/29/24

Conroe, TX

$3,500,000

5.21%

Lawrenceville, GA

$3,173,077

5.20% 10/24/24

Mishawaka, IN

$2,730,000

5.75% 10/10/24

Boise, ID

$2,800,000

5.15%

8/27/24

Jacksonville, FL

$4,509,900

5.10%

7/22/24

11/27/24

ZONE 4

MATTHEWS™ | 49

MARC FILIA marc.filia@matthews.com (949) 346-9522

FAST CASUAL

PANERA K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

PNRA BBB+ — ±2,200 St. Louis, MO

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

9 - 10 Y E A RS

7-8 Y E A RS

11 Y E ARS

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

8 5.66%

14 6.00%

6 5.49%

—

—

—

$3.5M

$2.6M

$3.6M

RE NT DISTRIBUTION

NNN 5-10% Every 5 Years 15 Years $183,657 ±4,000-5,000 SF $2,970,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

28 5.32% ±11 Years $3,748,821 4.50% 6.15%

CA P R ATE COMPA RISON

$217,436.77

$148,864.78

New Construction (15-20 Years)

4.50%-5.15%

10 Years Remaining

4.75%-5.75%

5 Years Remaining

5.75%-6.15%

$286,008.76 RECE NT SA LE S COMPA R A BLE S

ZONE 1

ZONE 2

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

50 | SUMMER 2025

ZONE 3

ZONE 4

City

Sales Price

Cap Rate

Sale Date

Arroyo Grande, CA

$4,032,000

5.00%

4/15/25

Denver, CO

$3,353,000

5.40% 2/25/25

Montgomery, NC

$3,528,000

6.00%

2/11/25

Amarillo, TX

$3,950,000

5.83%

1/30/25

Washington, UT

$3,428,571

5.25%

1/16/25

Abilene, TX

$4,800,000

5.00% 12/19/24

ALE X L ARR AMENDI alex.larramendi@matthews.com (737) 309-2717

MEDICAL

DAVITA K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

DVA BB ±$11.16B ±3,499 Denver, CO

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

11 6.89% 6 Years $2.6M

15 7.29% 6 Years $2.2M

7 6.85% 8 Years $3.0M

CA P R ATE CORRE L ATION

NN 5-10% Every 5 Years or 2% Annually 15 Years $132,719 ±6,000-12,500 SF NR

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

54 6.67% 7 Years $3,471,829 4.88% 10.00%

9.0% 8.0%

CA P R ATE COMPA RISON

7.0% 6.0% 5.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

New Construction (15-20 Years)

6.00%

10 Years Remaining

6.50%

5 Years Remaining

7.25%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$211,933.94

$132,165.68

$291,822.18

ZONE 1

ZONE 2

ZONE 3

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

City

Sales Price

Cap Rate

Sale Date

Dublin, GA

$2,850,000

7.00%

2/1/25

Grants Pass, OR

$2,750,000

7.30%

1/1/25

Dearborn, MI

$1,801,000

7.10%

1/28/25

Los Angeles, CA

$4,500,000

6.27%

1/1/25

Chicago, IL

$3,050,000

7.55%

11/1/24

Tuscaloosa, AL

$1,650,000

7.79%

11/12/24

San Antonio, TX

$2,900,000

7.47%

10/1/24

Ozark, AL

$3,169,800

7.60%

10/1/24

Dexter, MO

$1,050,000

7.10%

10/1/24

Colville, WA

$1,150,000

9.09%

9/1/24

ZONE 4

MATTHEWS™ | 51

ALE X L ARR AMENDI alex.larramendi@matthews.com (737) 309-2717

MEDICAL

FRESENIUS K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

FMS BBB ±$14.35B ±2,891 Waltham, MA

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

12 6.93% 5 Years $2.3M

14 6.82% 8 Years $4.4M

8 6.66% 5 Years $4.4M

CA P R ATE CORRE L ATION

NN or 2% Annually 5-10% Every 5 Years 15 Years $175,477 ±7,500-12,000 SF NR

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

30 6.96% 6 Years $3,473,957 5.20% 10.50%

9.0% 8.0%

CA P R ATE COMPA RISON

7.0% 6.0% 5.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

New Construction (15-20 Years)

5.50%

10 Years Remaining

6.00%

5 Years Remaining

6.85%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$211,933.94

$132,165.68

$291,822.18

ZONE 1

ZONE 2

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

52 | SUMMER 2025

ZONE 3

ZONE 4

City

Sales Price

Cap Rate

Sale Date

Smyrna, TN

$4,200,000

6.85%

3/1/25

Houston, TX

$5,804,000

7.00%

2/1/25

Brookefield, WI

$4,600,000

6.48%

2/1/25

Sidney, OH

$1,198,000

7.25%

12/1/24

Stafford, VA

$4,740,000

6.48%

12/1/24

Fort Collins, CO

$2,675,000

6.00%

1/1/25

Somerville, NJ

$6,500,000

7.67%

12/1/24

Farmville, NC

$4,000,000

6.25%

11/1/24

Schertz, TX

$4,600,000

6.52%

5/1/24

North Platte, NE

$1,758,200

7.00%

5/1/24

RYAN FOSS ryan.foss@matthews.com (972) 636-5722

MOBILE

AT&T K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

T (NYSE) BBB ±$202.63B ±5,947 (Jan 2025) Dallas, TX

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

2 8.75% 3 Years $1.9M

9 8.01% 3 Years $832,190

1 9.14% 3 Years $2.8M

CA P R ATE CORRE L ATION

NN 5-10% Every 5 Years 10 Years — ±3,000 SF —

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

10 6.80% 4 Years $2,236,926 5.75% 8.75%

8.0% 7.5%

CA P R ATE COMPA RISON

7.0% 6.5% 6.0%

1

2

3

4

5

6

7

8

9

10

New Construction (15-20 Years)

6.00%-6.25%

10 Years Remaining

—

5 Years Remaining

7.00%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

City

Sales Price

Cap Rate

Sale Date

Maplewood, MN

$2,850,000

9.14%

5/2/25

Russelville, AR

$500,000

7.20% 12/19/24

Marshall, MN

$523,636

8.25% 12/18/24

Brazil, IN

$935,000

9.17%

12/3/24

Goodyear, AZ

$750,000

—

10/31/24

Sedalia, MO

$1,662,071

8.50% 10/15/24

Erie, PA

$619,000

7.50%

10/3/24

Union, MO

$1,225,000

8.89%

9/11/24

Conway, AR

$775,000

7.35%

9/9/24

Dothan, AL

$1,300,000

8.70% 6/24/24

MATTHEWS™ | 53

RYAN FOSS ryan.foss@matthews.com (972) 636-5722

MOBILE

T-MOBILE K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

TMUS (NASDAQ) BBB ±$286.65B ±6,223 (Feb 2025) Bellevue, WA

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

4 7.81% 8 Years $1.1M

13 7.58% 13 Years $1.2M

3 6.88% 3 Years $1.6M

NN 5-10% Every 5 Years 10 Years — ±3,000 SF —

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

CA P R ATE CORRE L ATION

3 7.25% 7 Years 6.50% 6.50% 8.50%

9.0% 8.5%

CA P R ATE COMPA RISON

8.0% 7.5% 7.0%

1

2

3

4

5

6

7

8

9

10

New Construction (15-20 Years)

7.00%-7.25%

10 Years Remaining

—

5 Years Remaining

8.00%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

54 | SUMMER 2025

City

Sales Price

Cap Rate

Sale Date

Thomasville, GA

$1,752,000

6.25%

—

Defiance, OH

$1,466,700

7.50%

1/6/25

York, SC

$1,573,200

7.50% 12/26/24

Ahoskie, NC

$1,227,000

7.50% 12/19/24

Taylor, MI

$875,000

8.91%

Bessemer, AL

$1,006,700

8.80% 11/13/24

Fayetteville, TN

$1,372,000

6.25% 11/12/24

Centralia, IL

$1,090,000

7.95%

11/1/24

Blytheville, AR

$1,299,000

7.45%

8/20/24

Kimball, TN

$1,365,827

7.37%

8/9/24

11/27/24

RYAN FOSS ryan.foss@matthews.com (972) 636-5722

MOBILE

VERIZON K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

VZ (NYSE) BBB ±$186.56B ±6,415 (Dec 2024) New York, NY

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

6 7.26% 4 Years $1.8M

10 7.10% 5 Years $1.6M

5 7.36% 4 Years $1.8M

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

CA P R ATE CORRE L ATION

8.5% 8.0% 7.5% 7.0% 6.5% 6.0%

NN 5-10% Every 5 Years 10 Years — ±3,000 SF —

21 6.52% 6 Years $1,834,066 5.29% 7.58%

CA P R ATE COMPA RISON

1

2

3

4

5

6

7

8

9

10

New Construction (15-20 Years)

6.25%-6.50%

10 Years Remaining

—

5 Years Remaining

7.15%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

City

Sales Price

Cap Rate

Sale Date

Coral Springs, FL

—

—

5/2/25

Allen Park, MI

$1,494,700

7.20%

2/14/25

Palm Coast, FL

$2,420,000

—

2/12/25

Lake Charles, LA

$1,645,000

7.89%

1/21/25

Bloomington, IN

$1,650,000

6.98%

1/3/25

Chicago, IL

$1,568,659

8.34%

11/7/24

Victoria, TX

$1,300,000

8.06% 10/30/24

Hutchinson, KS

$1,671,486

7.40% 10/10/24

Fayetteville, GA

$1,683,000

8.00%

9/13/24

Jacksonville, NC

$560,000

6.96%

9/10/24

MATTHEWS™ | 55

CHASE CAMERON chase.cameron@matthews.com (214) 692-2040

Q U I C K S E RV I C E R E S TAU R A NT

ANDY’S FROZEN CUSTARD K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

Private Private Private ±150 Springfield, MO

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

3 5.87%

1 7.10%

4 6.13%

—

—

—

$2.6M

$3.1M

$2.4M

RE NT DISTRIBUTION

— 5-10% Every 5 Years or 1-2% Annually 15 or 20 Years $152,312 ±1,750 SF NR

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

4 5.69% 17 Years $2,671,506 5.50% 6.00%

RECE NT SA LE S COMPA R A BLE S

$152,312.66

$106,866.25

$197,759.06

ZONE 1

ZONE 2

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

56 | SUMMER 2025

ZONE 3

ZONE 4

City

Sales Price

Cap Rate

Sale Date

Morrisville, NC

$2,244,000

6.13%

4/2/25

Chandler, AZ

$3,359,800

7.00%

1/27/25

St. Charles, IL

$3,100,000

7.10%

10/15/24

Mesa, AZ

$2,548,400

5.89%

6/10/24

Odessa, FL

$2,050,000

5.85%

5/12/24

O'Fallon, MO

$1,730,000

6.13%

1/27/25

Kansas City, MO

$2,542,815

6.82% 11/10/23

Owasso, OK

$2,917,000

6.00%

1/6/23

Wichita, KS

$2,200,000

6.17%

5/25/23

HARRISON WACHTLER harrison.wachtler@matthews.com (615) 667-0160

Q U I C K S E RV I C E R E S TAU R A NT

BOJANGLES K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

— NR Private ±800 Charlotte, NC

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

CA P R ATE CORRE L ATION

7.0%

CURRE NT ON M A RK E T DATA

6.5% 6.0% 5.5% 5.0%

NN 5-10% Every 5 Years or 1.5% Annually 15 Years $165,000 ±2,800 SF $1,800,000

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15

YE ARS RE MAI N I NG ON LE A SE

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

17 5.56% 9 Years $2,553,333 5.40% 6.25%

RE NT DISTRIBUTION CA P R ATE COMPA RISON

$148,908.75

$110,614.33

$187,203.17

ZONE 1

ZONE 2

ZONE 3

ZONE 4

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

New Construction (15-20 Years)

5.50%

10 Years Remaining

6.35%

5 Years Remaining

7.00%

RECE NT SA LE S COMPA R A BLE S

City

Sales Price

Cap Rate

Sale Date

Nashville, TN

$2,950,000

5.84% 10/10/23

Gainesville, GA

$1,450,000

5.92%

9/19/23

La Vergne, TN

$2,630,000

5.96%

9/13/23

Lenoir City, TN

$1,780,000

5.85% 10/29/23

Salisbury, NC

$1,450,000

6.64%

9/16/23

Columbia, TN

$2,490,000

5.81%

8/7/23

Spartanburg, SC

$2,590,000

5.75%

6/21/23

Gastonia, NC

$3,580,000

5.00%

6/2/23

Moncks Corner, SC

$3,060,000

5.70%

5/18/23

MATTHEWS™ | 57

Q U I C K S E RV I C E R E S TAU R A NT

DAIRY QUEEN K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

BRK.B (NYSE) AA — ±4,254 Minneapolis, MN

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

16 6.15% 12 Years $1.7M

11 6.41% 13 Years $1.7M

10 6.36% 15 Years $2.1M

CA P R ATE CORRE L ATION

Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

Absolute NNN or 4, 5-Year Periods 8-10% Every 5 Years 15-20 Years $123,954 ±2,400 SF $1,168,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

12 6.20% 12 Years $2,416,060 4.18% 9.33%

8.0% 7.0%

CA P R ATE COMPA RISON

6.0%

New Construction (15-20 Years)

5.75%

10 Years Remaining

6.25%

5 Years Remaining

6.75%

5.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 YE ARS RE MAI N I NG ON LE A SE

RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$123,953.52

$81,402.96

$166,504.07

ZONE 1

ZONE 2

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

58 | SUMMER 2025

ZONE 3

ZONE 4

City

Sales Price

Cap Rate

Sale Date

Bigfork, MT

$1,150,000

6.26%

4/8/24

Indianapolis, IN

$1,710,000

6.60%

7/2/24

Lafayette, LA

$2,319,000

5.52%

1/26/24

Little Rock, AR

$2,825,000

5.50%

2/15/24

Farmers Branch, TX

$1,575,000

5.75% 2/28/24

Monmouth, OR

$2,260,000

5.98%

Clarksville, AR

$2,333,333

6.00% 6/28/24

Harrisonburg, VA

$1,300,000

6.44%

7/2/24

Fort Wayne, IN

$1,525,000

6.15%

9/25/24

Hiram, GA

$2,300,000

6.46%

9/5/25

Friona, TX

$480,000

8.10%

4/1/24

Hemphill, TX

$725,000

6.35%

1/31/24

5/31/24

Q U I C K S E RV I C E R E S TAU R A NT

FREDDY’S FROZEN CUSTARD & STEAKBURGERS K E Y STATISTIC S

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

T YPICA L LE A SE STRUC TURE

Private Private Private ±540 Wichita, KS

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

7 6.06% 15 Years $2.3M

9 7.64% 17 Years $3.0M

10 6.38% 16 Years $2.0M

CA P R ATE CORRE L ATION

7.5% 7.0% 6.5% 6.0% 5.5% 5.0%

SIENA T YSON siena.tyson@matthews.com (214) 466-7514

Absolute NNN 5-10% Every 5 Years or 1-2% Annually 20 Years $159,134 ±3,125 SF $2,606,743

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

33 6.08% 18 Years $2,761,398 5.25% 7.75%

CA P R ATE COMPA RISON

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

New Construction (15-20 Years)

6.00%

10 Years Remaining

6.50%

5 Years Remaining

7.00%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

City

Sales Price

Cap Rate

Sale Date

North Las Vegas, NV

$2,550,000

5.06%

4/17/25

Hoover, AL

$1,833,333

6.00% 2/28/25

Durant, OK

$1,844,000

7.05%

2/27/25

Little Rock, AR

$2,200,000

7.40%

1/3/25

Ogden, UT

$1,529,500

12.13% 12/20/24

Florence, SC

$2,125,000

6.59% 10/23/24

West Columbia, SC

$2,178,000

6.75%

7/23/24

West Chester, PA

$3,000,000

6.00%

7/16/24

Emporia, KS

$2,000,000

5.75%

5/16/24

Albuquerque, NM

$1,975,000

7.35%

5/14/24

MATTHEWS™ | 59

HAIDYN DE JE AN haidyn.dejean@matthews.com (602) 946-4862

Q U I C K S E RV I C E R E S TAU R A NT

KFC K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

YUM BB+ ±$11.08B ±3,925 Louisville, KY

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

24 6.10% 12 Years $1.5M

50 6.22% 16 Years $2.0M

10 6.29% 13 Years $1.6M

CA P R ATE CORRE L ATION

NNN or Ground Lease 5-10% Every 5 Years or 1-2% Annually 15-20 Years $98,000 ±2,800 SF $1,414,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

70 5.88% 15 Years $2,066,900 4.21% 6.92%

7.5% 7.0%

CA P R ATE COMPA RISON

6.5% 6.0% 5.5%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

New Construction (15-20 Years)

6.02%

10 Years Remaining

6.22%

5 Years Remaining

6.60%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$98,709.62

$65,287.13

$132,132.12

ZONE 1

ZONE 2

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

60 | SUMMER 2025

ZONE 3

ZONE 4

City

Sales Price

Cap Rate

Sale Date

Greer, SC

$1,945,260

6.50%

4/18/25

Brownsville, TN

$2,273,000

6.35%

4/11/25

Jerseyville, IL

$1,770,000

6.50%

4/11/25

Weirton, WV

$888,750

8.00% 3/24/25

Mexico, MO

$1,452,000

6.50%

3/17/25

Raeford, NC

$2,164,000

6.10%

1/30/25

Humble, TX

$2,194,690

5.65% 12/31/24

Aberdeen, NC

$2,768,000

6.25% 12/23/24

Shallotte, NC

$2,224,000

6.25% 12/20/24

Bradenton, FL

$1,960,000

5.25% 12/13/24

Gastonia, NC

$3,000,000

6.13%

11/25/24

BRENDAN T YOR AN brendan.tyoran@matthews.com (858) 351-4027

Q U I C K S E RV I C E R E S TAU R A NT

POPEYES K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

QSR BB ±$21.83B ±32,000 Toronto, Canada

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

14 5.87% 17 Years $2.5M

19 5.91% 17 Years $2.2M

15 5.85% 15 Years $2.2M

CA P R ATE CORRE L ATION

7.5% 7.0% 6.5% 6.0% 5.5% 5.0%

NNN 10% Every 5 Years 20 Years $140,000 ±2,450 SF $1,897,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

62 5.77% 16 Years $2,513,711 4.75% 7.00%

CA P R ATE COMPA RISON

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

New Construction (15-20 Years)

5.58%

10 Years Remaining

6.01%

5 Years Remaining

6.42%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$139,097.88

$107,649.96

$170,545.80

ZONE 1

ZONE 2

ZONE 3

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

City

Sales Price

Cap Rate

Sale Date

Bloomingdale, IL

$2,206,945

6.51%

4/2/25

Newark, DE

$2,350,000

5.30% 3/27/25

Jacksonville, FL

$1,495,000

5.15%

3/11/25

Denver, CO

$3,230,000

5.53%

3/4/25

Columbus, GA

$2,613,000

6.43%

2/21/25

Decatur, GA

$2,380,280

5.35% 2/20/25

Harrison, AR

$1,390,000

6.33%

Orlando, FL

$2,338,655

6.00% 4/24/25

1/24/25

ZONE 4

MATTHEWS™ | 61

HAIDYN DE JE AN haidyn.dejean@matthews.com (602) 946-4862

Q U I C K S E RV I C E R E S TAU R A NT

TACO BELL K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

YUM BB+ ±$11.08B ±3,925 Louisville, KY

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

30 5.72% 18 Years $2.0M

31 5.62% 18 Years $2.3M

17 5.50% 16 Years $2.3M

CA P R ATE CORRE L ATION

Lease Term Avg. Annual Rent Typical SF Avg. Sales

Absolute NNN, Fee Simple or Ground Lease 5-10% Every 5 Years or 1%-2% Annually 20-25 Years $110,000 ±2,500 SF $2,100,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

58 5.43% 18 Years $2,260,345 4.12% 6.15%

7.0% 6.5%

CA P R ATE COMPA RISON

6.0% 5.5% 5.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

New Construction (15-20 Years)

5.40%

10 Years Remaining

5.56%

5 Years Remaining

6.26%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$110,928.64

$74,021.51

$147,835.77

ZONE 1

ZONE 2

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

62 | SUMMER 2025

ZONE 3

ZONE 4

City

Sales Price

Cap Rate

Sale Date

Sparks, NV

$4,558,000

5.20% 4/24/25

Highland Park, IL

$1,775,000

5.50%

4/4/25

Fort Myers, FL

$3,100,000

5.32%

4/2/25

Ozark, AL

$2,753,636

5.25% 3/27/25

Sevierville, TN

$2,295,400

5.00% 3/25/25

Fresno, CA

$2,200,000

5.16%

3/19/25

Aurora, OH

$1,575,000

5.08%

3/14/25

Tulsa, OK

$1,872,580

5.35%

3/11/25

Mount Vernon, IL

$1,900,000

5.13%

2/19/25

Muskogee, OK

$1,725,000

5.90%

1/24/25

VINCENT RENNA vincent.renna@matthews.com (949) 207-6396

Q U I C K S E RV I C E R E S TAU R A NT

WENDY’S K E Y STATISTIC S

T YPICA L LE A SE STRUC TURE

WEN B+ ±$2.50B ±6,393 Dublin, OH

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

24 5.85% 11 Years $2.3M

32 5.76% 11 Years $2.3M

16 5.60% 11 Years $2.0M

CA P R ATE CORRE L ATION

NNN 5-10% Every 5 Years or Annual Increases 20 Years $128,015 ±3,200 SF $1,988,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

60 5.55% 15 Years $2,658,420 4.75% 8.00%

9.0% 8.0%

CA P R ATE COMPA RISON

7.0% 6.0% 5.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

New Construction (15-20 Years)

5.25%

10 Years Remaining

6.00%

5 Years Remaining

7.00%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

RE NT DISTRIBUTION

$129,543.52

$92,890.95

$166,196.09

ZONE 1

ZONE 2

ZONE 3

Less than 2%-16% of all properties

Less than Higher than Higher than 15%-50% of all 50%-84% of all 85%-98% of all properites properties properties

City

Sales Price

Cap Rate

Sale Date

Charleston, SC

$3,142,857

5.00%

4/3/25

Bradenton, FL

$1,836,735

4.90%

4/3/25

Naperville, IL

$1,575,000

5.65% 3/27/25

Winston-Salem, NC

$2,250,000

6.33% 3/26/25

Chesapeake, VA

$1,225,000

5.65% 3/25/25

Rock Hill, SC

$2,611,607

5.40% 3/24/25

Englewood, CO

$2,476,000

5.30%

3/12/25

Edgewood, MD

$2,400,000

5.63%

3/7/25

Laredo, TX

$1,322,000

5.50%

1/29/25

Lake Wales, FL

$1,925,000

6.62%

1/17/25

ZONE 4

MATTHEWS™ | 63

HARRISON WACHTLER harrison.wachtler@matthews.com (615) 667-0160

Q U I C K S E RV I C E R E S TAU R A NT

ZAXBY’S K E Y STATISTIC S

Stock Symbol Credit Rating (S&P) Market Cap # of Locations Headquarters

T YPICA L LE A SE STRUC TURE

Private Private Private ±941 Athens, GA

Lease Type Rent Increases Lease Term Avg. Annual Rent Typical SF Avg. Sales

TE N A NT TR A NSAC TIONS

H1 202 4

H2 202 4

Y TD 202 5

Transactions Avg. Cap Rate Avg. Term Remaining Avg. Sale Price

4 6.50%

5 6.75%

3 6.80%

—

—

—

$3.0M

$3.2M

$3.1M

CA P R ATE CORRE L ATION

10.0% 9.0% 8.0% 7.0% 6.0% 5.0%

NN or NNN 10% Every 5 Years or 2% Annual 15-20 Years $185,000 ±3,000 SF $1,900,000

CURRE NT ON M A RK E T DATA

# of Properties Avg. Cap Rate Avg. Lease Term Remaining Avg. Price Lowest Cap Rate Highest Cap Rate

11 6.50% 11 Years $3,500,000 6.25% 7.25%

CA P R ATE COMPA RISON

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

New Construction (15-20 Years)

6.25%

10 Years Remaining

6.75%

5 Years Remaining

7.25%

YE ARS RE MAI N I NG ON LE A SE RECE NT SA LE S COMPA R A BLE S

64 | SUMMER 2025

City

Sales Price

Cap Rate

Sale Date

Clermont, FL

$3,790,000

6.10%

3/1/25

Hot Springs, AR

$2,300,000

6.25%

1/1/25

Little Rock, AR

$2,780,000

6.44%

1/1/24

Benton, AR

$2,410,000

6.40%

1/1/25

Birmingham, AR

$2,350,000

6.25%

2/1/25

From Dirt

to Deal Unlocking Hidden Value

MATTHEWS™ | 65

In the world of commercial real estate, the most impactful deals rarely begin with a shovel in the ground—they begin with a vision.

A vision backed by deep knowledge, technical acuity, and the confidence to look at a raw parcel of land and see not what it is, but what it could become. This is the rare skillset that Rosie Cooper and Stew Weston bring to the table, reshaping the land advisory landscape in Southern California and beyond.

The Hidden Advantage Expertise Meets Execution

Rosie Cooper is not your average land broker. With degrees in civil and environmental engineering, as well as a master’s in development and construction from USC, Rosie brings a developer’s lens to every site evaluation. “I know how a developer is going to look at a project,” she says. “I understand the highest and best use, and what product type will generate the best yield for a site.” This blend of technical and market fluency allows Rosie to uncover 85–90% of a site's challenges before it breaks ground or goes to market.

On the other side of the table is Stew Weston, a seasoned deal-maker and master relationship builder. Described by colleagues and clients alike as “The Deal Whisperer,” Stew brings three decades of experience, strategic intuition, and a network that spans every corner of the institutional multifamily world.

Together, Rosie and Stew lead with a uniquely integrated approach, one that not only identifies value but engineers it.

66 | SUMMER 2025

“

When you get the team & Rosie’s running point, one client said, you’re getting a civil engineer, an environmental engineer, & a real estate strategist. There’s nothing else like that in the marketplace.

Turning Challenges Into Opportunity

Rosie and Stew’s impact is perhaps best illustrated by their work on a complex, unentitled 11.6-acre site on Lincoln Avenue in Cypress, CA. The property had significant environmental concerns, yet they navigated these challenges with clarity and confidence, meeting with city officials, liaising with environmental regulators (SARWQB), and presenting a transparent, de-risked opportunity to the market. The result: 21 qualified offers and a bidding war that maximized the value for the seller, increasing the unsolicited offer pool from low $60M to mid $70M. “We were able to present the environmental issue in a different way,” Rosie explained, leveraging her technical background to secure a national homebuilder willing to take on the clean-up. That’s not just selling land—that’s transforming it.

Site size, shape, & traffic patterns

The Art & Science of Land Strategy Effective land selection is as much science as it is art.

It involves a rigorous analysis of:

Zoning & entitlement complexity Environmental conditions & infrastructure readiness Competitive positioning & demographic trends

The Matthews™ advantage lies in integrating this diligence into a broader platform. “Many of our larger competitors operate in silos,” Rosie notes.

“Because Matthews™ includes retail, industrial, and office specialists, we can position a site as land, office, or even mixed-use. That allows us to clear the market more completely and drive value higher.”

Rosie’s development experience also allows the ability to creatively optimize these variables, sometimes suggesting density shifts or design

changes that significantly increase a site’s yield.

As one client described, “They are exceptionally thorough, creative, and strategic in who they approach and how.”

This analytical precision transforms how developers and capital partners view a deal. “Stew creates win-win outcomes with unmatched detail and diplomacy,” said another. That rare ability to bridge technical, transactional, and interpersonal dynamics creates consistent client confidence.

MATTHEWS™ | 67

Client Q&A

With Brian Hobbs | President & Co-Founder, Salt Development

Tell us about Salt Development.

Brian: We’re a boutique development firm, small in number but large in projects. We’re a multifamily developer originally founded in Southern California back in 2014. Since then, we’ve been active in the intermountain West, especially around Salt Lake City. We’ve purchased or developed land in Idaho, Utah, and California.

We do large multifamily projects that range from about 520 units down to 280 units. All of them are high-end, luxury, resort-style developments.

How did your relationship with Stew and Rosie begin?

Brian: Stew and I worked together in his previous life at CBRE when we were assembling a site in Anaheim.

We used him as a reference for market studies and thought processes.

Later, when it became clear that project wasn’t going to get approved by the city, we reached out to him again, not realizing he’d already joined Matthews™.

That morning, when we decided I should call him, he called me first.

What was a pivotal moment in the partnership?

Brian:I explained our situation—we had 76 acres, potentially 90 with options, in Orange County. Stew told me he was working with Rosie who had a deep background in land development, and they both wanted to meet.

They studied the site and came back with a presentation. At first, I was annoyed when they showed us that multifamily wasn’t going to pencil. But looking back, I tease them about it, they knew what they were doing.

Stew prepped me for the big reveal: that while the site didn’t make sense for multifamily, it was fantastic for single-family detached. That was the pivot.

Rosie and Stew helped us understand the current market, both multifamily and single-family, better than 68 | SUMMER 2025

we could’ve on our own. They opened our eyes. We had originally thought we’d just get out with our costs and a small profit. Now, we’re looking at a significantly higher return.

Was there a moment you knew you’d made the right choice in working with them?

Brian: Yeah. We were talking to a big bridge lender in New York about refinancing the land. They asked, ‘Who’s your broker?’ We said Matthews™. And they said, ‘you couldn’t do better.’ That gave us real peace of mind.

Stew is relentless, he pushes hard to get the best deal.

Rosie? She understands how projects actually get entitled, financed, and built. That combination is rare.

They’re in the weeds with you, mapping it out.

If we have additional land that we’re going to market, I absolutely am going to go to them. No question.

They’re the best choice.

How has the relationship expanded since then?

Brian: It’s grown into a real partnership. Stew and Rosie have supported us not only on that original Anaheim deal, but they’ve continued to advise and add value across multiple assets. One example is 4th West in Salt Lake City, one of the city’s premier core Class A apartment communities, with an unparalleled rooftop amenity deck. That was a flagship for us, and they helped reinforce its market positioning.

More recently, they’ve played a role in structuring bridge financing and raising debt and equity for a project we’re doing in Riverton, Utah. What sets them apart is that they they understand construction financing, entitlement risk, and equity placement.

They have the depth to handle everything from land entitlements to capital markets, whether it’s sourcing equity, arranging construction financing, or helping us evaluate feasibility. Rosie and Stew don’t just show up when there’s a listing, they’re in it the whole way.

Unlocking Value Strategic Vision in Action

Identifying Underutilized Assets In today’s high-priced land market, true opportunity lies in overlooked sites—vacant parcels, B-grade locations with A-level potential, or properties mispositioned by brokers unfamiliar with development intricacies. Rosie and Stew specialize in reframing these assets, often delivering 20–40% premiums over traditional valuations.

Zoning & Permitting Whether it’s obtaining substantial conformance for entitlement adjustments or navigating high-fire hazard areas, Rosie’s deep expertise allows them to reposition challenging sites for broader buyer interest.

Environmental & Regulatory Due Diligence Rosie’s ability to conduct pre-market due diligence—wetland assessments, fire zone constraints, required improvements—means developers enter negotiations with eyes wide open. This reduces retrades, shortens due diligence, and boosts closing efficiency

Execution Built on Trust & Tenacity While Rosie applies engineering insight to unlock physical value, Stew applies strategic insight to unlock relationships. He’s not simply a broker.

He’s a connector—someone who understands the subtleties of each stakeholder's goals and tailors his approach to fit.

His decades-long client relationships and deep market visibility means they often receives calls about sites that appear unworkable. Yet time and again, they find a way to make the impossible viable, whether through reentitlement, environmental remediation, or adjusting the development mix between for-sale and for-rent product types.

When challenges arise mid-deal, Stew is known for his persistence. “Stew went above and beyond,” one client shared. “Most agents would have walked away and left the heavy lifting to us. He did the opposite.”

MATTHEWS™ | 69

Case Studies Mission Grove Plaza | Riverside, CA ±9.97 AC | ~236 MF Units + 60 Townhome Units Marketed during entitlements, with the seller agreeing to close upon achieving final entitlements. Stew and Rosie guided the seller through a substantial conformance process post-entitlements, resulting in a lower-density plan that generated a 60% higher land residual compared to previous multifamily-only use.

The project received 13 offers and is currently in escrow.

Conclusion

4656 Lincoln Ave | Cypress, CA ±11.63 AC Environmental cleanup, entitlement complexity, and valuation uncertainty all loomed large.

Yet, the marketing campaign yielded 151 confidentiality agreements and 21 offers.

The Bowrey | Santa Ana, CA ±14.69 AC | 1,070 Proposed Units Despite the complexity of entitlement and infrastructure planning, Stew and Rosie secured five strong offers and achieved significant value per unit. This case reinforced their ability to balance entitlement scale with both affordability and feasibility.

Rosie Cooper rosie.cooper@matthews.com

The journey from raw dirt to closed deal isn’t for the faint of heart. It requires deep technical knowledge, real-world development fluency, and a sharp eye for untapped opportunity. For Rosie Cooper and Stew Weston, it’s not about putting deals together for the sake of transaction volume. It’s about unlocking value others can’t and delivering outcomes clients never imagined possible.

Key Takeaway True value in land lies in seeing beyond surface constraints. With technical insight, relentless execution, and market-savvy guidance, Rosie and Stew consistently deliver not just deals—but transformation.

70 | SUMMER 2025

(858) 337-7436

Stewart I. Weston stew.weston@matthews.com (562) 688-4500

Welcome to 2025, where the net

lease real estate market is shaking off a two year hangover of rate hikes and recession fears and steadying into a cautiously upbeat groove. After riding a wave of uncertainty, the industry is showing early signs of stabilization. Capital markets are firming up, interest rates are settling down, and CRE lenders are getting back in the game.

Net lease investment volume got a serious shot of adrenaline in late 2024, largely thanks to essential retail. Cap rates, which had been climbing like a

roller coaster for over two years, are now leveling out, though still higher than their pre-pandemic lows.

Tenant strategy is what’s powering demand, not just broad economic trends. Leading retailers are embracing omnichannel delivery, foodservice, and experiential concepts, while strategically downsizing and building recession resilience.

In terms of hotspots, investors' attention is heating up around auto service and car washes, foodfocused c-stores, rural dollar stores, urgent care clinics, and high-energy experiential retail concepts.

MATTHEWS™ | 71

MACROECONOMIC MOOD

CAP RATES

Clouds Lifting, But Bring an Umbrella

The Climb Might be Over

The U.S. economy isn’t exactly roaring into 2025, but it’s cruising at a manageable pace. GDP growth is slowing down (Blackrock lowered it’s 2025 U.S. GDP growth expectation to 0%). But here’s the twist–CRE sentiment is rising even as the economy cools.

Cap rates spent more than two years hiking uphill, and now they’re catching their breath. After peaking in late 2024, the first quarter of 2025 brought signs of a plateau. Here’s how it breaks down:

A whopping 88% of global real estate executives, surveyed by Deloitte, expect revenue growth in 2025, a complete u-turn from the doom-and-gloom vibes of 2023, when most were bracing for more losses. According to the Matthews™ 2025 Investor Survey, investors are planning to increase their investments starting in Q3 2025.

Office: ~7.9%

So, what’s fueling optimism?

Interest Rates: The Fed tapped the brakes in late 2024, and it’s giving CRE a breather.

Inflation: Still sticky, but expected to drift closer to target by year-end.

Psychology Shift: From “wait and see” to “let’s do deals”, though cautiously.

CRE performance is starting to decline from GDP trends. It’s no longer just about broad economic health—it’s about picking the right spots. These are the periods that determine the winners and losers in the investment market.

Retail: ~6.6% Industrial: ~6.3% Cap Rates Flattening for Retail and Industrial, but Still Climbing for Office Source: Matthews™, Real Capital Analytics

8.5% 7.5% 6.5% 5.5% 4.5%

2019

2020 Office

2021

2022 Retail

2023

2024

2025

Industrial

The retail sector saw the biggest cap rate jump last year–up 73 bps–but the increases are finally tapering off. Even industrial, the market darling, isn’t immune, but its fundamentals are strong enough to keep things stable.

What’s holding back a major rebound in transactions? Financing. Borrowing costs are elevated. The bid-ask spread is narrowing, but not gone. And there’s a backlog of inventory waiting for the right buyer–or the right rate cut.

While the Fed started trimming in late 2024, rates are still around 6% for NNN financing, double what they were just a few years ago.

That’s created cautious optimism mixed with frustration. Everyone’s watching the Fed, wondering: More cuts or more waiting?

72 | SUMMER 2025

Who’s buying right now?

Private Investors: Dominating, with an 8% quarterly gain in capital deployment. The all-cash buyers are the MVPs right now, with less dependence on debt they are in a better position to pounce on good deals.

REITs: Came roaring back in Q4 2024 (+180% year-over-year)

Institutional: Still shy, especially on big portfolios. The liquidity spigot hasn’t exactly returned to the market.

Cross-Border Capital: Quietly booming– international buyers doubled their market share to over 11% in 2024.

1031 Exchanges: Used to be a net lease staple.

Now? Many HNW investors are sitting out. Why? It’s hard to make the math work when you’re trading into high-rate debt.

The cash is there but it’s choosy and deals are getting done, but more selectively. Everyone’s recalibrating expectations.

Buyer Composition Through April 2025 Source: Matthews™, Real Capital Analytics

Retail

Industrial Cross-Border REIT/Listed

Office

User/Other

Private

Institutional

MATTHEWS™ | 73

SECTOR SPOTLIGHTS: THE HITS, THE MISSES, AND THE FUTURE Industrial & Logistics: Still the Star, Just Less Flashy Warehouses are cooling off from the red-hot frenzy of the past few years. Net absorption is positive, vacancy rates are rising, and rent growth is slowing but remains positive.

Small Bay Spaces (<100K): Tight and in demand

Big-Box (>250K): Facing vacancy pressure

Flight-to-Quality: Modern buildings with AIreadiness and automation-friendly designs are coming out on top

Industrial remains the top target for NNN investors, but the game has shifted to selectivity. It’s not about any warehouse, it’s about the right size, tenant, and market.

74 | SUMMER 2025

Shifting global supply chains because of recent tariff announcements further complicate the outlook.

While the outcome of the trade disputes remains uncertain, companies have already initiated efforts to shift production to other parts of Asia, nearshore operations to Latin America, or increase investment in U.S.-based manufacturing.

Apple was the first to announce plans to bring all iPhone production to India by the end of 2026, a major shift away from Chinese manufacturing.

As a prominent player, this move is expected to set a precedent, likely resulting in an increase in shipments from Mumbai to the U.S. as more companies follow suit.

Importantly, this shift would change global supply chains, moving the landing of goods from West Coast ports to East Coast ports.

Meanwhile, IBM announced an expansion to its U.S. production pipeline, a step that dramatically increases the outlook for industrial and warehouse spaces near its existing hubs.

AUTO SERVICES & CAR WASHES CRE’s Cool Kids Imagine a sector with high cash flow, essential services, and private equity interest. Welcome to auto services and car washes, the rockstars of the net lease world.

What’s driving the shift?

Durable Demand: Cars get dirty and need fixing–recession or not.

Strong Unit Economies: Car washes can pull in profit margins north of 40%, especially with monthly subscription models.

Sale-Leaseback Galore: Operators are in growth mode, turning to sale-leasebacks as a preferred capital-raising strategy—driving a surge of NNN opportunities in the market.

Also in play is the gradual phase-out of bonus depreciation benefits. Investors used to gobble up car washes to turbocharge tax write-offs. But with the deduction rate dropping (from 100% to 40% by 2025), that frenzy has cooled. The new administration’s One, Big, Beautiful Bill outlines a return to full bonus depreciation, an amendment that if, passed, would ignite the market.

On the auto services side, the market is shifting as high-tech cars roll out, specifically the electric vehicles (EVs) sector, which reported a 10% increase in sales in Q1 2025. Big players like NAPA and Jiffy Lube are focused on training teams for this new era of vehicles. The U.S. auto service market is estimated at $199.38 billion in 2025 and is expected to grow, according to Mordor Intelligence. An increase in service centers specializing in advanced technologies and EVs is likely in the near future.

Car washes are still going strong in 2025, with the market forecast looking at a jump from $33.46 billion to $35.39 billion, according to The Business Research Company. The 5.7% expected expansion is well ahead of Goldman Sachs forecast for the economy as a whole, highlighting the strength of the car wash sector this year.

Still, savvy buyers are doing their due diligence, this sector offers serious upside, just avoid overleveraged operators in hyper-competitive markets.

Monthly subscriptions are a solid move for places like Mister Car Wash and Tommy’s Express, bringing in reliable income. Plus, paying by phone is most common in today’s market. These popular chains are set to open more locations to meet demand.

6.0%

But wait there’s drama...

Zips Car Washes filed for bankruptcy in early 2025, reminding everyone that too much growth, too fast (plus expensive leases), can spell trouble.

2025 Expectations Source: Matthews™, Goldman Sachs, The Business Research Company

4.5% 3.0% 1.5% 0.0%

Goldman Sachs GDP Forecast

Car Wash Growth Forecast

MATTHEWS™ | 75

QSR: FOOD IS THE NEW FUEL The Double-Drive Thru Arms Race Quick service restaurants (QSRs) have gone all-in on drivethrus, and it’s paying off. Everyone from Taco Bell to Wendy’s is redesigning stores around speed, efficiency, and automation.

Even Chick-fil-A has employees taking your order car-side with iPads (AKA line-busting). Why? Because in the QSR business seconds matter.

QSRs are now so efficient–and traffic-driving–they’re playing the role of anchor tenants in strip centers. If a property has a modern, high-throughput QSR, it’s considered gold.

75%

of sales now come through the

drive-thru.

Source: National Restaurant Association

Double lanes, AI voice ordering, digital menu boards, and mobile pre-ordering are the fast-food future.

76 | SUMMER 2025

QSRs are intensely focused on drive-thru efficiency in 2025, recognizing it as a primary sales channel where speed directly impacts revenue. Major players like McDonald’s and Wendy’s are implementing double drive-thrus, while AI voice ordering is being tested at locations such as White Castle to further streamline order taking. Digital menu boards are now standard, and mobile pre-ordering is increasingly popular with chains like Starbucks, offering customers ultimate convenience.

It’s not just the old-school burger joints seeing action, a new wave of QSR concepts is growing fast and grabbing serious market share. Cava and Sweetgreen are leading the charge with build-your-own bowls packed with fresh, healthy ingredients, designed for the lunch rush crowd that wants fast and clean. Salad and Go is scaling quickly by keeping things simple, drive-thru only, limited menu, and low prices. On the drinks side, Swig is blowing up thanks to its “dirty soda” craze, with custom sodas, energy drinks, and sweet treats fueling a cult-like following (especially among Gen Z). These brands are lean, efficient, and built for today’s on-the-go consumers and they’re proving there’s a big appetite for more than just burgers and fries.

Beyond speed, QSRs are also getting smarter about their menus and how they reach customers in 2025. Plus, loyalty programs and mobile apps aren’t just for ordering anymore, they’re a big way to keep customers coming back for more deals and personalized offers. Case in point: McDonald’s is generating buzz with rumors of the long-awaited return of its cult-favorite Snack Wrap, which hasn’t been on the menu in over a decade. Even without an official announcement, fans are already fired up, proving just how powerful nostalgia and digital word-of-mouth can be in today’s QSR game. It’s all about making it easy and tempting to choose them over the competition.

CONVENIENCE STORES Road Trip Destinations Convenience stores are essential, high-frequency destinations offering gasoline and everyday items, with a proven track record of resilience across economic cycles. Many are backed by strong corporate guarantors like 7-Eleven and Circle K, strategically located on high-traffic corners with intrinsic real estate value. Investors may also benefit from favorable tax treatment, including accelerated depreciation and potential bonus depreciation.

Modern c-stores are transforming into road trip destinations, with operators like Buc-ee’s, Sheetz, and Wawa drawing travelers through clean facilities, fresh food, and branded merchandise. Bigger footprints help drive greater traffic and revenue, while brands like 7-Eleven, Casey’s, and Wawa are evolving with QSR concepts, curated food options, and delivery services to align with changing consumer demands.

“

C-stores remain a strong net lease investment, offering stable, passive income and consistent returns along with favorable tax strategies that help investors maximize after-tax dollars.

“

Nick Hahn

Associate Vice President

nick.hahn@matthews.com (949) 662-2267

GAS STATION STOPS TO GOURMET BITES Remember when convenience stores were just about gas and a Diet Coke? Not anymore.

Foodservice now generates almost 40% of instore profit, positioning it as a key performance

driver for c-stores (Source: National Association of Convenience Stores).

Prepared food sales jumped 11% in 2024, underscoring the growing demand for fresh, made-to-order offerings and their impact on revenue growth (Source: National Association of Convenience Stores).

Chains like Wawa, Sheetz, and QuikTrip are broadening their made-to-order food, gourmet coffee, and even seating areas.

Super-regionals like Buc-ee’s and Wawa are expanding into new states, building larger, foodforward locations, and cultivating loyal fanbases.

Major players are elevating their food far beyond typical gas station fare, drawing customers specifically for their diverse, made-to-order menus.

They’re spending over $7.5 million per store, and it’s not for new diesel pumps. It’s for kitchens.

Net lease investors love this shift. These new format c-stores offer longer leases, operate in recessionproof categories, and generate serious foot traffic. Just remember: not all c-stores are created equal. Food-forward models are the winners.

Older, fuel-reliant locations? Those may be future redevelopment sites.

And it’s clear why. Gas stations are no longer just a place to fill up—they’re turning into unexpectedly popular hangout spots. Picking up a quality bite or a great cup of coffee while there has become completely normal, fueling repeat visits. This shift marks a major change in how consumers view roadside stops.

To keep up and attract more customers, gas stations are also getting tech-savvy with tap-topay and loyalty programs. EV charging stations are becoming popular at major chains. Gas stations are transforming into all-in-one roadside stops, using EV charging wait times to drive in-store sales and broaden their appeal to all travelers.

MATTHEWS™ | 77

CASUAL DINING

is no small thing. Off-premises dining is still a big chunk so, things like curbside pickup, delivery menus, and ghost kitchens aren’t going anywhere.

Making a Comeback Casual dining has glowed up. While dine-in traffic isn’t what it used to be, the segment is thriving. With Darden’s power play in motion, the casual dining sector is evolving. Restaurants that master both offpremises convenience and on-premises experience are winning the suburban center game.

Loyalty programs are paying off, with brands like Chili’s and Red Robin seeing more frequent visits and higher spend from members. Average checks are up 6%, helped along with rewards, combos, and those upgraded drink menus. Alcohol is a big driver for happy hours and bar scenes are bringing in a solid crowd. And menus? Definitely getting more flexible. Diners are craving variety and value—whether it’s limited-time items, customizable combos, or shareable apps, the spots that keep things fresh and fun are winning right now.

Key Highlights for 2025 Nearly 75% of all traffic now comes from offpremises orders (Source: National Restaurant Association).

Consumers, especially millennials and Gen Z, increasingly crave fast and seamless pickup or delivery options, influencing how casual dining stores design their food and service models.

There is still a strong demand for good oldfashioned dine-in.

Suburban strip centers are becoming a sweet spot.

Why? They offer easy parking, high visibility, and room for dedicated pickup zones, drive-thrus, and dual-kitchen layouts.

Total foodservice sales are projected to reach $1.5 trillion in 2025, reflecting a 4.1% increase over the previous year, driven by steady growth across all segments. The full-service segment is expected to generate $533 billion. Texas Roadhouse reported same-store sales up 6.5% earlier this year, which 78 | SUMMER 2025

Casual Dining Chains Raised Sales in 2024 Source: Matthews™, Technomic Top 500 Chain Restaurant Report

15.0%

% Sales Change

10.0%

5.0%

0.0%

Texas Roadhouse

Chili’s Grill & Bar

LongHorn Steakhouse

GROCERY & DOLLAR STORES The Steady-Eddy All-Stars Necessity retail is undefeated. Grocery-anchored centers hit record occupancy levels in 2024, with national vacancy under 3.5%. Why?

Food’s not optional

In-person grocery shopping is still preferred

Discount grocery stores like Aldi and Grocery Outlet are booming

Investors love the stickiness of these centers: long leases, steady traffic, and dependable cash flow.

Premium pricing is justified–especially with anchors like Publix, Trader Joe’s, or Whole Foods (which is now testing out small-format urban concepts). Chains like Publix and Walmart are buying up the centers they anchor, which could shift leasing dynamics and deal flow in the years ahead. Grocery stores are still going strong in 2025, with total U.S. sales expected to hit over $1.6 trillion, up about 3.1% from last year, according to Coresight Research. Some of that’s from inflation, sure, but people are still showing up— just shopping a little smarter. Store brands and bulk buys are getting a lot more love, and loyalty programs are getting used. Chains like Kroger, Publix, and H-E-B are doing a solid job of keeping things fresh, affordable, and easy to navigate. Plus, stores that mix local products, solid produce, and friendly layouts are winning repeat visits.

Online grocery has cooled off from the pandemic boom, but it’s not going away, it’s still pulling in around 13% of total grocery sales. Grab-and-go meals, ready-to-eat options, and private label products are on the rise, too. With more people cooking at home again, either to save cash or eat a little better, grocers are helping with recipe kits, meal deals, and displays that make sense. Bottom line: if a grocery store makes life a little easier (and cheaper), it’s getting repeat business.

Grocery is More Resistent to Online Shopping Source: Matthews™, CapitalOne, ECDB

Technology

Clothing

Furniture

Grocery 0%

10%

20%

30%

40%

50%

60%

Percent E-Commerce

MATTHEWS™ | 79

DOLLAR STORES The Kings of Rural Retail Dollar General and Dollar Tree are still on a tear, especially in small towns and rural markets where they’re stepping in to fill the void left by closed grocers and drugstores.

39,000+ U.S. locations and counting

Plans for thousands of remodels + new builds

Expanding grocery offerings to become essential providers, not just bargain stops

Dollar stores are now considered “critical infrastructure” in retail deserts. For NNN investors, they offer:

Investment-grade credit (Dollar General: BBB)

Smaller building footprints

Strong performance in underserved areas The twist?

Family Dollar’s retrenchment means more real estate up for grabs–and a clearer runway for Dollar General to dominate.

80 | SUMMER 2025

Dollar stores are absolutely thriving in 2025, especially in small towns and rural areas. Plans for even more chains like Dollar General and Dollar Tree are not just your go-to for cheap snacks, they’re becoming essential spots for everyday groceries and household items. Dollar General is leading the way, with plans for remodels and new builds, and even ramping up its grocery offerings to keep customers coming back for more than just bargains. In fact, many of these stores are now considered critical in areas that are otherwise retail deserts.

What makes them even more attractive for investors is their smaller building footprints, making them easy to place in underserved areas, and their solid investment-grade credit. Plus, with Family Dollar scaling back, there’s a clearer path for Dollar General to expand and dominate.

HEALTH, WELLNESS, & EXPERIENCE: Urgent Care: Retail’s Healthiest Tenant Urgent care centers are the ultimate net lease trifecta.

Recession-resilient

E-commerce-proof

Traffic-driving

These operators love strip centers and pad sites. Why? Visibility, access, and proximity to where people shop and live.

They’re also the go-to solution for backfilling vacant drugstores (looking at you, Walgreens).

In 2025, urgent care centers are really taking off, with the U.S. market for urgent care expected to hit over $36 billion by the end of the year, according to Grandview Research. These places are recession-proof, immune to e-commerce, and they bring in plenty of foot traffic, making them a top choice for retail spaces. Big names like CityMD, MedExpress, and Carbon Health are expanding quickly—MedExpress continues to grow its footprint across the U.S., and Carbon Health is targeting nationwide expansion with a goal of reaching 1,500 clinics by 2025. They’re mostly setting up shops in grocery-anchored centers, where people already go for everyday shopping. With the ability to offer quick care and extended hours, urgent care centers are becoming a must-have, filling spaces left by other businesses that didn’t make the cut.

Since about 85% of Americans live within a 10-minute drive of an urgent care center, these spots are super convenient for busy folks who need a fast, affordable healthcare option. As consumers keep looking for convenience, urgent care is quickly becoming one of the biggest growth areas in retail real estate.

“

The urgent care sector has seen rapid expansion, fueled by private equity backing and aggressive growth from regional and national operators. These clinics offer investors access to affordable medical real estate under long-term leases with sizable tenants though, as with all net lease assets, understanding the operator is key to assessing long-term stability and risk.

Senior Vice President & Senior Director

“

Michael Moreno

michael.moreno@matthews.com (949) 432-4511

MATTHEWS™ | 81

BOUTIQUE FITNESS

EXPERIENTIAL RETAIL

A Comeback Story

From Pickleball to Ping Pong

After a pandemic wipeout, boutique fitness is back— Pilates, HIIT, Spin, Yoga—you name it, consumers want it in their neighborhood. Why?

The “experience economy” is in full swing. Retail isn’t just about shopping—it’s about doing something.

Shorter, targeted workouts

A sense of community

The convenience near home or their favorite coffee shop

Top formats:

Entertainment

Topgolf, Bowlero, Dave & Buster’s

Competitive Socializing

Axe throwing, ping pong lounges, pickleball clubs

Franchise chains like OrangeTheory, Club Pilates, and F45 are taking small strip centers bays and turning them into daily-traffic machines.

Boutique fitness is thriving in 2025, with consumers flocking to gyms that offer short, targeted workouts.

The demand for these types of fitness experiences continues to rise, driven by a need for convenience, community, and efficiency. In fact, the global boutique fitness market in the U.S. is expected to reach $36.98 billion in 2025, according to Research and Markets. People love having fitness options right in their neighborhoods, often near places they already visit like coffee shops or shopping centers, making it easier to fit in a workout.

OrangeTheory has grown to more than 1,400 locations globally and continues to expand. These gyms are attracting loyal customers with flexible membership options, high-energy classes, and a strong sense of community that keeps people coming back. The pandemic was a turning point after months of isolation, people realized that working out isn’t just about fitness, it’s also a social experience.

That shift is still fueling demand today. As more people look for quick, effective workouts that fit their busy schedules, boutique fitness studios are becoming an increasingly reliable tenant for retail spaces in 2025.

82 | SUMMER 2025

Immersive Retail

AR-enhanced showrooms, in-store events These concepts drive traffic, soak up large vacancies, and create buzz. For landlords struggling with former big-box space or dead anchors, these tenants can be game changers.

Experiential retail is on the rise in 2025, with shoppers craving more than just a traditional shopping trip. Axe throwing, ping pong lounges, and pickleball clubs are making their mark as new social hotspots. As part of this trend, global experiential retail is projected to grow by a CAGR of 14.02%, according to UnivDatos, as brands and landlords realize the power of creating interactive, fun environments.

These types of concepts are also helping to revitalize struggling retail spaces. For landlords with large vacant areas or former big-box stores, experiential retailers can be game-changers by filling those gaps and driving consistent traffic.

And it’s not just new concepts driving the shift— traditional retailers are jumping in too. Nike now offers in-store customization stations, Lululemon hosts workout classes, Dick’s Sporting Goods has rolled out its massive “House of Sport” stores complete with rock walls and turf fields, and Sephora is drawing crowds with hands-on makeup tutorials and beauty classes. Immersive retail experiences like AR-enhanced showrooms, in-store events, and themed pop-ups are turning stores into destinations, not just places to buy products.

DRUGSTORES From Cornerstone to Question Mark Once viewed as rock-solid staples of suburban corners and high-traffic intersections, drugstores are now CRE’s most unpredictable tenants. The trio of Walgreens, CVS, and Rite Aid are all in retrenchment mode–and its reshaping retail landscapes across the county.

The classic drugstore model just doesn’t carry the same weight it once did and they aren’t easy spaces to repurpose:

Size Mismatch: 10,000-12,000 square feet is too large for many retailers

Legacy Leases: Rents are often above market, with 15-20 years left on paper

Layout Quirks: Drive-throughs, vault-like interiors, limited co-tenancy flexibility Vacancy Risk: Dark stores may continue paying rent–or stop if bankruptcy hits

The Hard Reality: Widespread Closures

Walgreens: Shuttering 1,200 locations over 3 years–25% of its entire footprint

CVS Health: In the process of closing nearly 900 stores nationwide

That said, not all is lost. In fact, there’s a growing interest from a variety of backfill tenants:

Rite Aid: Deep in Chapter 11, with over 150 stores already gone

Discount retailers

Urgent care clinics

Altogether, this could unleash over 140 million square feet of vacant retail space by year-end 2025.

Medical spas

What’s behind the pullback?

QSRs

Still, backfilling success often hinges on the fundamentals of the real estate itself–not the previous tenant. If the site is high-traffic, easily accessible, and in a growing or stable trade area, then it likely has a second life waiting.

Aggressive growth has led to oversaturation

Shrinking reimbursement margins from pharmacy benefit managers (PBMs)

Operational challenges like staffing shortages, retail crime, and burnout

Failed diversification attempts (in-store clinics, primary care ventures)

Retail Health Clinic and Pharmacy Store Closures Source: Matthews™, ScrapeHero.com

15+

1-2

7-11

0

3-6

MATTHEWS™ | 83

SOCAL MULTIFAMILY

IN FOCUS STRATEGIC OPPORTUNITIES IN LOS ANGELES & ORANGE COUNTY

Southern California’s multifamily real estate market is entering a period of pronounced transformation and opportunity. With Los Angeles at the epicenter of technological innovation, infrastructure investment, and global attention—and Orange County maintaining its hallmark consistency and demand stability—investors are faced with two distinct but compelling value propositions.

This article explores the evolving dynamics shaping these two powerhouse markets and uncovers the key themes driving Southern California’s multifamily performance in 2025 and beyond.

95%+

$5.8B

L A RE MAI N S ON E OF TH E TIG HTE ST APARTM E NT MARKETS NATIONWI DE

L A SECON D ON LY TO NYC

OCCUPANCY RATE

84 | SUMMER 2025

IN 2024 SALES

3.17M

RESIDENTS (+16K IN 2024)

A RETURN TO G ROW TH I N OC AFTE R 2021 -23 LOSSE S

0.4%

RENT GROWTH IN OC IN 2024 A PAUSE AFTE R PAN DE M IC- E R A SURG E S , BUT STI LL 28% ABOVE 20 19

LOS ANGELES NABIL AWADA

nabil.awada@matthews.com (310) 844-9362

A MARKET RECHARGED BY DEMAND, INNOVATION, & GLOBAL MOMENTUM

Despite recent negative press, Los Angeles County remains one of the nation’s premier multifamily investment markets. While population loss during the pandemic gained attention, the narrative is more complex. Growth in nearby Riverside-San Bernardino underscores that limited housing, not waning demand, is pushing people outward. Los Angeles remains a highly desirable place to live and work.

The county boasts one of the lowest apartment vacancy rates nationwide at 5.0%. A deep pool of young workers supports long-term demand.

However, factors like rent control, increased taxation, and rising insurance costs create challenges that investors must navigate.

HEADWIND: TA X ATION & RE NT CONTROL

The ULA “Mansion Tax”, which imposes added costs on real estate transactions above $5.3 million, has reshaped investor strategies. Additional rent controls and regulations within the City of Los Angeles have further disincentivized investment. “ULA has made investors more cautious on exit. Some are building in a longer hold, others are discounting the exit cap or trying to stay under that threshold entirely,”

said Nabil Awada, Vice President and Associate Director. “Staying below the threshold means that owners are less likely to sell at a discount unless they really need to.”

“We’re seeing increased investor focus in San Gabriel Valley–strong job base, diverse renter pool, and less restrictive rent policies. Pasadena’s early rent control push in 2022 has actually redirected attention further east,” Awada added.

While Pasadena’s 2022 rent control targets buildings constructed before February 1, 1995, newer properties remain exempt, creating opportunity.

Despite these policy headwinds, Los Angeles continues to generate reliable returns, and voters have pushed back on further rent control expansion.

“Rent control is forcing us to underwrite conservatively—maybe 3% or less annually— and think harder about how we reposition units between tenants,” noted Awada. “For value-add deals, it’s all about repositioning units legally between tenants rather than relying on aggressive rent bumps.”

MATTHEWS™ | 85

With the passage of AB 1482 in 2019 and the failure of Prop 33, here is where LA rent control laws stand in 2025:

Properties Subject to Los Angeles Rent Stabilization Ordinance (RSO) } Pre-1978 construction in the City of Los Angeles is subject to RSO } Landlords can impose annual rent increases of 4%, plus an additional 1% if they pay for electricity and 1% if they pay for gas Properties Subject to AB1482 } Any properties incorporated in Los Angeles County that do not have their own protection ordinance (excluding the City of Los Angeles) } Properties in the City of Los Angeles built between 1979 and 2010, with the 15-year exemption rolling forward annually } Annual rent increases are capped at 5% plus the local Consumer Price Index (CPI) Exemptions } Properties built post-2005 are exempt from any rent control policies, following a rolling 15-year exemption basis } Single-family homes and condos remain exempt from local rent control

HEADWIND: NATUR AL DISASTE RS & INSUR ANCE

The 2025 Pacific Palisades and Eaton wildfires displaced over 150,000 residents and destroyed 16,000+ structures. In their aftermath, demand surged in submarkets like West Los Angeles, with spiking rents and vanishing vacancy.

“Investor interest has shifted toward fire-safe zones–the South Bay is gaining more attention because they weren’t affected by fires, and cities like Redondo Beach, Gardena, and Torrance have strong fundamentals,” said Awada.

SOUTH BAY CRE SALES SURGE IN 2025 Source: CoStar Group, Inc. & The MLS | YTD = Jan. 1, 2025 - May 22, 2025

Market

Sales Volume YTD 2024

Sales Volume YTD 2025

% Increase

Redondo Beach

$31.4M

$58.6M

87%

Gardena

$30.5M

$48.8M

60%

Torrance

$40.9M

$49.6M

21%

Rebuilding could take years as new development will be slow to replace lost housing stock. The resulting supply shock has boosted rental income potential and elevated property values across affected and adjacent areas, offering near-term momentum for multifamily owners, operators, and developers.

“With insurance premiums climbing in high-risk zones, I think we’ll see interest hold steady for at least another year or two–especially while there’s room to modernize units and push rents without competing with a ton of new supply,” said Awada.

At the same time, these wildfires have underscored the growing risk profile of investing in natural disaster-prone markets like Southern California. The financial hit on insurers is expected to ripple through the broader market.

Awada notes the financial impact: “Insurance premiums are rising sharply–20 to 40% increases aren’t uncommon–and that’s directly affecting underwriting.”

86 | SUMMER 2025

Investors should anticipate a sharp increase in insurance premiums, which will inflate operating expenses and weigh on underwriting. Roughly $1.3 billion in CMBS-backed commercial real estate lies within fire evacuation zones, and while lenders are unlikely to adjust strategy immediately, persistent natural disaster risk could lead to higher lending premiums or tighter financing terms—particularly if insurers begin pulling back coverage across Los Angeles County.

Source: CALFIRE

TAILWIND: HOUSING SHORTAGE

“Construction slowdowns and supply constraints are the dominant forces in the market,” Awada emphasized. “We’re going to see tighter occupancy, more demand for workforce housing, and likely some distress-driven sales as loans mature.”

HURST FIRE 799 Acres AUTO FIRE 56 Acres

EATON FIRE 14,117 Acres PALISADES FIRE 23,713 Acres

Los Angeles’ chronic housing shortage remains a powerful driver of demand. According to Zillow, Los Angeles has the second-largest housing shortfall nationally, trailing New York City.

With single-family home prices averaging $940,000, affordable to just 2.8% of renters, the metro is creating a higher-income rental base. Housing supply remains far behind demand: 22,000 units are under construction, but the shortfall ranges from 300,000 to 500,000 units.

Vacancy is expected to tighten 20 basis points each of the next two years, reaching just 4.7% by the end of 2026. Rent growth is expected to land just shy of 4% in 2025, even with the potential for increased rent control measures. With limited homeownership options and rent control impeding new supply, multifamily owners are poised to benefit from enduring tightness.

LOS ANGELES HOUSING SHORTAGE STALLS AMID NATIONAL GAINS Source: Zillow

Metro Area

Housing Shortage

Change in Housing Shortage YOY (#)

Change in Housing Shortage YOY (%)

% Non-Homeowner Households That Could Afford Typical Mortgage

United States

4,540,773

256,847

6.0 %

15.1 %

New York, NY

389,924

13,548

3.6 %

9.3 %

Los Angeles, CA

336,728

2,866

0.9 %

2.8 %

Chicago, IL

97,379

9,946

11.4 %

22.0 %

Dallas, TX

48,150

528

1.1 %

14.5 %

MATTHEWS™ | 87

TAILWIND: DE MOGR APHICS UNDE RSCORE E NDURING DE MAND

Los Angeles County’s nearly 10 million residents offer significant scale and strength for multifamily investors. After peaking at 2.2% during the pandemic, annual move-outs have dropped to just 0.3%.

Higher than average incomes are the most notable factor for LA renters, allowing owners to provide high-end housing options at rates far larger than the national average rent. Los Angeles renters earn $10K more than the national average, supporting rental rates that are 32% above the national average. And with the median age of 36 (versus the U.S. average of 39), the metro’s larger Gen Z and millennial population supports household formation and apartment demand.

“The demand we’re seeing from younger renters and tech workers is unlike anything I’ve seen in the last decade,” said Awada. “LA has become a lifestyle market–and these high-income renters are keeping occupancy tight even in newer Class A stock.”

With average household sizes larger than the national norm (2.8 vs. 2.5), LA’s constrained supply continues to suppress household formation, further fueling future multifamily demand.

TAILWIND: LOS ANGE LES 2 .0

Los Angeles is expanding beyond its entertainment roots, emerging as a tech powerhouse in AI, cloud computing, and cybersecurity. This shift has increased demand for amenity-rich, centrallylocated rentals.

“As tech spreads beyond Silicon Beach, tenants are chasing convenience and transit-oriented locations,” said Awada. “Mid-market demand is growing fast in places like West Adams, Koreatown, and Inglewood–areas with upside and access.”

The average tech salary in Los Angeles now exceeds national benchmarks, supporting robust demand for both premium and mid-market multifamily assets. This job growth has played a critical role in stabilizing Class A occupancy, even amid a surge of new deliveries in 2024, and has helped fuel sustained leasing velocity throughout the metro.

“For Class A, developers are targeting walkable, amenity-rich pockets near transit and coworking spaces,” said Awada.

The upcoming Summer Olympics in 2028 and FIFA World Cup in 2026 are also catalyzing infrastructure improvements and investor interest. These global events are driving an ambitious infrastructure agenda, most notably the “Twenty-eight by ’28” plan, which will modernize transportation networks, upgrade neighborhoods, and enhance citywide connectivity.

“Investors are eyeing transit corridors and Olympic-adjacent zones for value-add plays and short-term rental potential,” said Awada.

88 | SUMMER 2025

Entry costs can vary anywhere between $200,000$600,000+ per unit from the San Fernando Valley all the way to Long Beach. Despite the market’s reputation as a high-cost metro, smaller and more cost-effective options mean investors from all over the country can acquire properties in Los Angeles.

Deal variety like this provides options whether a syndicator with a 5-year time horizon, a private investor looking for long-term passive income, or a larger institution looking for a stable and safe return on capital.

TAILWIND: L A COUNT Y APARTME NT INVE NTORY OPTIONS FOR E VE RY INVESTOR

Los Angeles’ inventory includes the nation’s highest concentration of small apartment buildings (under 25 units), enabling easier entry for private capital. While the market includes institutional-grade properties, this diversity adds resilience and liquidity.

“Private capital is active in the Valley, South Bay, and Long Beach–looking for value-add deals where prices are soft but demand is solid,” Awada explained. “It’s institutional capital that’s turned cautious, especially post-ULA.”

INVENTORY BREAKDOWN BY NUMBER OF UNITS HIGH CONCE NTR ATION OF SMALLE R BUILDINGS IN L A Percent of Inventory

Source: CoStar Group, Inc.

60% 45% 30% 15% 0%

Los Angeles 5-10

10-25

United States 25-50

50-100

100-200

200+

TAILWIND: MARKET LIQUIDIT Y RE MAINS AMONG THE HIGHEST IN THE NATION

Despite the national slowdown in deal flow resulting from the rapid increase in the Federal Reserve overnight rate, Los Angeles County remains one of the most active apartment markets in the country. In 2024, nearly $5.8B changed hands for LA apartments, trailing only the New York City Metro, which includes parts of New Jersey and Connecticut. Los Angeles records four times more transactions than San Francisco and 2.5 times more than the entire Bay Area. “We’re seeing more sellers meet the market now, and buyer activity has stayed surprisingly strong considering the macro headwinds,” Awada commented.

2024 MULTIFAMILY SALES VOLUME ($B) Source: CoStar Group, Inc.

$0

$2

$4

$6

$8

$10

New York - NY USA Los Angeles - CA USA Atlanta - GA USA Washington - DC USA Seattle - WA USA Chicago - IL USA Denver - CO USA Phoenix - AZ USA Boston - MA USA San Diego - CA USA

MATTHEWS™ | 89

ORANGE COUNTY MARK BRIDGE

mark.bridge@matthews.com (949) 681-8388

A MARKET DEFINED BY STABILITY, AFFLUENCE, & SUPPLY CONSTRAINTS

Orange County’s multifamily market continues to be one of the most resilient and desirable in the U.S., distinguished by persistently tight vacancy, a highincome tenant base, and strong investor demand.

While rent growth has plateaued after a pandemicera surge, occupancy remains near historical highs, reflecting the county’s enduring appeal.

These tight conditions are driven by consistent job creation, limited housing supply, and a chronic affordability gap that keeps a growing portion of the population in rentals. Despite affordability and policy-related headwinds, the county’s fundamentals position it as a defensive, long-term play for multifamily investors.

90 | SUMMER 2025

“Orange County investors like the economic demographics, general county policies, rental market stability, and value stability,” says Mark Bridge, Executive Vice President. “Whether during the 2008 financial crisis or the COVID collections of 2020, Orange County stood the test better than its Southern California neighbors.” He adds that “Orange County rent growth has often been in the top 10 nationwide, and values have historically declined slower and rebounded faster than surrounding counties.”

As of late 2024, the apartment vacancy rate hovered around 4%, making Orange County the second-tightest rental market among the top 50 metros in the U.S.

HEADWIND: AFFORDABILIT Y CONSTR AINTS IMPACT CL ASS A PRODUCT

Affordability remains a defining pressure point in Orange County’s multifamily landscape, especially for Class A and luxury assets. Renters are increasingly cost-burdened, and the income needed to afford market-rate units continues to rise. As of Q2 2025, the average asking rent in Orange County reached $2,730 per month, a 25% increase since Q4 2019. To rent without being cost-burdened, a household must earn $54.94 per hour, 3.3 times the state’s minimum wage.

“The cost of housing in Orange County is sky-high, and is a major barrier to middle-income families,” says Mark Bridge. “That’s why Class B and C assets are in such high demand, they’re the only housing option left for much of the local workforce.”

This pricing ceiling is particularly relevant as Orange County has one of the highest shares of Class A inventory among major U.S. markets. As of Q2 2025, over 6,400 Class A units are under construction, representing 2.5% of the county’s 250,000-unit apartment base. In submarkets like Newport Beach, over 40% of its housing supply is high-quality Class A buildings.

Although this is below the national average of 3.0%, and significantly below the 6% to 12% under construction in the nation’s five most active markets, the pipeline is still substantial, especially given Orange County’s historic supply constraints.

“Orange County is an infill development location,” Bridge explains. “Most Class A development is happening on underutilized or vacant lots.”

But even these infill opportunities are limited. In November 2024, for example, a proposed 500-unit development in Anaheim Hills was rejected due to density concerns and the neighborhood’s wildfire evacuation risk highlighting the difficulty of bringing large-scale supply online even in a market with sustained demand.

As these new Class A units enter lease-up phases, landlords may face slower absorption and need to offer more concessions to fill units. The affordability ceiling also limits future rent growth prospects in this segment, as more tenants seek attainable alternatives in Class B and C properties.

INVENTORY BREAKDOWN BY NUMBER OF UNITS LOWE R CONCE NTR ATION OF SMALLE R BUILDINGS IN OC Percent of Inventory

Source: CoStar Group, Inc.

40% 35% 30% 25% 20% 15% 10% 5% 0%

United States

Orange County 5-10

10-25

25-50

50-100

100-200

200+

MATTHEWS™ | 91

HEADWIND: REGUL ATORY PRESSURE & SUPPLY-SIDE CHALLE NGES

Alongside affordability, regulatory pressure and development challenges continue to weigh on multifamily investment and construction. Despite statewide efforts to promote pro-housing policies, including ADU reform and density bonuses, Orange County’s approval processes remain slow and inconsistent.

“The entitlement process is still a hurdle, land costs remain high, and despite funding increases, we’re not producing enough units–especially for low-income renters,” says Bridge. While California has boosted support for housing production and preservation, reaching $249 million in Orange County in 2025, up 50% year-over-year, those gains still fall short of addressing the County’s estimated 121,000-unit shortage for low-income renters.

The region also faces deepening challenges around the loss of affordable development pipelines. Low-Income Housing Tax Credit (LIHTC) production and preservation dropped 61% between 2023 and 2024, severely limiting progress toward affordability goals. That drop comes just as the county grapples with alarming cost burdens: 81% of extremely low-income households pay more than half of their income on housing, compared to only 3% of moderate-income households.

Meanwhile, Santa Ana remains the only city in the county with stricter rent control than California’s AB 1482, capping rent growth at 80% of CPI or 3% annually since 2021. “Santa Ana’s rent control caused a larger decrease in pricing and slowed transaction velocity,” Bridge notes. “That aside, Santa Ana values have ticked up slightly from the bottom as the market adjusts post-rate hike.”

Despite the policy headwinds, Orange County’s underlying fundamentals, tight vacancy, economic diversity, and high barriers to entry continue to attract capital. However, rising interest rates have compressed investment returns, pushing average cap rates to around 4.4% and narrowing spreads, particularly for institutional-grade assets. Deal velocity has slowed in many submarkets, but liquidity remains strong in coastal areas like Irvine and Newport Beach, where institutional interest has persisted.

Where OC rent control laws stand in 2025: In Santa Ana, rent growth is capped at 80% of CPI or 3% annually, whichever is lower.

92 | SUMMER 2025

TAILWIND: POPUL ATION GROW TH & DE MOGR APHIC RESILIE NCE

Orange County’s population is once again trending upward, reinforcing long-term demand for multifamily housing. In 2024, the county added nearly 16,000 new residents, a 0.5% gain that marked a clear reversal from the average -0.3% annual population losses between 2021 and 2023.

This growth brought the total county population to 3.17 million.

Several of the county’s largest cities drove the expansion. Irvine led with a population increase of more than 3,600, followed closely by Santa Ana (+3,500), Garden Grove (+2,200), and Anaheim (+1,700). Stanton recorded the fastest percentage growth, jumping 3.6% thanks in part to new developments like Cloud House, a 321-unit apartment community featuring Orange County’s most expansive rooftop deck.

This return to population growth has translated directly into tightening multifamily fundamentals.

In Irvine, stabilized apartment vacancy stands at just 3%, well below the county average of 4.1%.

Projects like the 287-unit Enzo from TX partners and the upcoming 876-unit Volar by Garden Homes are helping to meet demand, but Orange County’s housing pipeline remains too limited to shift overall market dynamics meaningfully.

Supporting this demographic momentum is Orange County’s diverse, high-wage economy, anchored by leading employers across sectors like tourism, healthcare, education, and technology. Major firms– including Disney, University of Irvine, Broadcom,

Edwards Lifesciences, and Providence Health– ensure job stability and sustained household income growth. By the end of 2024, job growth was tracking at 1.4% annually, with unemployment under 4.5%—outpacing both state and national benchmarks.

These jobs support a median household income of approximately $116,000, yet with median home prices exceeding $1.2 million and mortgage payments nearly double the average apartment rent, home ownership remains out of reach for a large share of the population. In fact, roughly 75% of local residents cannot afford a median-priced home, making “rentership” the default housing strategy for many.

Orange County’s demographic profile adds further strength to its multifamily appeal. While the region experiences modest domestic outmigration due to its cost of living, this is offset by strong international immigration, a high birth rate, and growing numbers of young professionals and college graduates.

Millennials and Gen Z are continuing to form households, and a rising number of empty nesters are downsizing into high-quality rentals. These trends are expanding the county’s renter base across both age and income segments.

Additionally, Orange County has a high educational attainment and robust professional job growth, supporting a deep pool of tenants with the financial capacity to sustain elevated rents. As Mark Bridge notes, Orange County’s stable economy and diverse demographics are foundational to its long-term investment appeal.

POPULATION GAINS ARE CONCENTRATED IN OC’S LARGER CITIES 2.00% 1.75% 1.50% 1.25% 1.00% 0.75% 0.50% 0.25% 0.00%

Irvine

Santa Ana

Garden Anaheim Stanton Grove

Lake Forest

Population Change

Laguna Niguel

Tustin

San Juan Mission Fountain Capistrano Viejo Valley

Buena Park

4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0

Population Change

Percent Change

Source: CoStar Group, Inc., U.S. Census Bureau, May 2025

Percent Change

MATTHEWS™ | 93

TAILWIND: CL ASS B & C STRE NGTH , CL ASS A STABILIZING

Orange County’s multifamily market is increasingly defined by a split between high-cost and attainable housing.

Class B and C assets—largely built from the 1960s to 1980s—are outperforming due to their relative affordability.

With vacancy between 2.5% and 3.0%, these units are near full occupancy and continue to record modest but steady rent growth (1% to 2%).

THE CLASS DIVIDE IN OC Source: CoStar Group, Inc.

Units

Vacancy Rate

Rent

Class A

76,768

5.5%

$3,272

Class B

86,996

3.8%

$2,691

Class C

95,734

3.3%

$2,104

“Class B and C properties benefit from a broader renter base seeking affordability in OC’s high cost of living,” Bridge says.

Class A buildings, particularly recent deliveries in Irvine and Anaheim, saw some softness but are showing signs of stabilization. Rents across the county rose only 0.4% in 2024—a modest increase, but one that leaves average rents nearly 28% above pre-pandemic levels.

“Everyone is looking for value-add deals in OC,” Bridge notes. “That’s the play in today’s market.

Turnkey deals are tougher to move.”

Meanwhile, active development continues in key hubs. Irvine has more than 4,000 units in the pipeline. Anaheim’s $4B+ ocV!BE project will bring housing and entertainment to the Platinum Triangle. Santa Ana’s transformation is accelerating with the OC Streetcar, and major highway and infrastructure upgrades are enhancing both access and livability countywide.

94 | SUMMER 2025

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SHORT-TERM

FIXED PRODUCTS

R E V O E K TA

The commercial real estate landscape has been navigating a period of unprecedented interest rate volatility and uncertainty. The past few years marked significant changes in interest rates, driven by the Federal Reserve’s efforts to combat inflation. As these trends persisted, borrowers were reluctant to lock into long-term fixed rates at elevated levels with fears that rates may reduce in the future.

According to Associate Vice President Jackson Daily, the commercial real estate market recorded a dramatic shift to short-term fixed financing due to high interest rates. “Prior to 2022, most borrowers would lock in longer-term durations, such as 7 and 10 years—even in some cases up to 15 and 30 year fixed,” Daily said. “Today, we see more 3 and 5-year fixed loans. The majority of lenders have even stopped offering anything longer than a 5-year fixed loan due to the diminished demand.”

INTEREST R ATE CHANGES L AST SIX YE ARS Source: Federal Reserve Bank of Cleveland via FRED 2.5 2.0

Percent

1.5 1.0 0.5 0.0 -0.5

Jul 2019

Jan 2020

96 | SUMMER 2025

Jul 2020

Jan 2021

Jul 2021

Jan 2022

Jul 2022

Jan 2023

Jul 2023

Jan 2024

Jul 2024

Jan 2025

BENEFITS DRIVING THE TRANSITION PAYMENT CERTAINTY AMID VOLATILITY

ENHANCED FLEXIBILITY AND EXIT OPTIONS

Signing a loan with a short-term fixed rate allows the borrower to wait out high-rate environments, while still having stability in their payments. Additionally, short-term fixed products ensure that buyers will have more flexibility in their prepayment terms.

“Borrowers want to keep their prepayment penalty shorter,” Daily stated. “Rates are higher than they were before, so short-term prepay is highly desired.”

This is especially appealing to borrowers that want the option to sell the property or refinance sooner without incurring significant extra costs.

Compared to their long-term counterparts, shortterm fixed loans often come with more flexible prepayment terms and potentially lower penalties for early repayment. This is a crucial consideration for investors who may have a shorter hold period in mind, or who want the option to sell the property or refinance sooner—if market conditions or their investment strategy dictates.

In an environment where interest rates are volatile or trending upwards, a fixed rate acts as a shield. If market rates climb significantly during a fixed term, payments won’t increase, which saves considerable costs compared to a floating rate loan. This provides peace of mind and safeguards investments from economic uncertainty.

The rapid rise in rates has created a maturity wall of existing CRE loans that originated when rates were significantly lower. Many of these loans face challenges in refinancing at current higher rates.

Short-term fixed products, often provided by private debt funds and alternative lenders, have become critical in bridging this funding gap, providing necessary capital where traditional banks may be more cautious.

IDEAL FOR VALUE-ADD AND BRIDGE STRATEGIES Short-term fixed products are ideal for properties undergoing significant renovations, repositioning, or those that need time to stabilize their cash flow. They provide the necessary capital for a defined project timeline. Once the property has improved its value or stabilized its occupancy and income, the borrower can then seek more permanent, long-term financing based on an increasingly stable and higher-performing asset.

BRIDGING THE FUNDING GAP

“With a short-term loan, the loan amount is higher and borrowers are able to secure more funds,” Daily explained. Daily added that floating rate loans have also recorded an increase in activity. “Many borrowers have opted for floating rate loans in hopes that the Fed will begin a rate cutting path in 2025. While fixed rate loans offer stability, floating rate loans allow for borrowers to gamble on rates being lower in the future.”

MATTHEWS™ | 97

FLOATING RATE LOAN

VS.

SHORT-TERM FIXED PRODUCT

FE ATURE

FLOATI NG R ATE LOAN

SH ORT-TE RM FIXE D PRODUC T

Interest Rate

Fluctuates based on benchmark index

Remains constant for a specified short-term

Payment Stability

Variable; payments can rise or decrease based on interest rate fluctuations

Predictable; payments are stable at initially agreed upon level

Interest Rate Risk

Primarily borne by the borrower

Primarily borne by lender (for the term)

Refinancing Intent

Frequently used as a temporary solution before refinancing into permanent (often fixed) debt

Often used with the intention to refinance into a new, potentially lower fixed rate after the term

FUTURE TRAJECTORY The popularity of short-term fixed loans is not merely a fleeting response to current market conditions—it’s a trend likely to persist and evolve in the future. Even as interest rates potentially stabilize or decline, the experience of recent volatility has instilled a greater appreciation for flexibility in debt structures. Borrowers and lenders alike are becoming more adept at navigating dynamic markets, and short-term fixed products offer the agility to respond to changing economic signals.

The CRE market is increasingly focused on active asset management and value-add strategies rather than purely passive, long-term holds. Short-term financing aligns perfectly with this approach, allowing investors to unlock value within a specific timeframe before recalibrating their debt. With advanced analytics and better market insights, borrowers are more empowered to make informed decisions about debt tenor. They can more accurately forecast future rate environments and strategically time their refinancing efforts, making short-term fixed loans a calculated choice rather than a default.

The rise of short-term fixed products in CRE reflects a cautious, yet opportunistic, approach by borrowers navigating an uncertain interest rate environment. They seek the balance between payment predictability and the flexibility to capitalize on potential future rate reduction, while mitigating the risk of rapid interest rate increases.

JACKSON DAILY jackson.daily@matthews.com (949) 617-0274 98 | SUMMER 2025

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MATTHEWS™ | 99

N O A N CHOR, N O PROB LEM

UNANCHORED STRIP CENTER REVIEW

Unanchored strip centers—those smaller, convenience-driven retail properties ranging from 10,000 to 50,000 square feet—are stealing the spotlight in 2025. They might not have a big-name grocery chain or anchor tenant, but they’re more than holding their own. With tight retail supply and resilient consumer spending, these centers are commanding high occupancy, steady rent growth, and increased investor interest. Once seen as a secondary retail type, their adaptability, neighborhood-focused tenant mix, and ability to handle turnover with ease have redefined them as dynamic, core retail assets. This report breaks down the numbers behind this transformation, analyzing performance from coast to coast.

NORTHEAST J OA N N A M A N FRO

WEST

MIDWEST

CO N R A D SA R R E A L

PATR I C K FO R KI N

MID-ATLANTIC E D L AYCOX

SOUTHWEST G R AYSO N DU YC K

SOUTHEAST J E FF E N C K

Matthews™ Office Locations * Regions are defined according to RCA standards

100 | SUMMER 2025

PERFORMANCE OVERVIEW

CONSUMER SPENDING FUEL S RETAIL GROW TH The overall outlook for retail in 2025 is positive, supported by resilient consumer spending, easing financial pressures, and productivity gains. With job growth and rising wages continuing to put money in shoppers’ pockets, consumer spending, the lifeblood of retail, is strong despite uncertainties in the market.

Despite M-O-M Fall in 2025, Retail Sales Still Showing Positive Annual Growth Source: BLS

$700,000

60%

$600,000

50% 40%

$500,000

30%

$400,000

20%

$300,000

10%

$200,000

0%

$100,000

-10% -20%

$0 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May ’18 ’18 ’18 ’19 ’19 ’19 ’20 ’20 ’20 ’21 ’21 ’21 ’22 ’22 ’22 ’23 ’23 ’23 ’24 ’24 ’24 ’25 ’25 YOY Change

Americans Are Tired of Rising Prices, but in Reality, Inflation is Slower Than Wage Growth So Far in 2025 Source: BLS

Retail Business Applications Still Elevated Source: U.S. Census Bureau

1,200,000

10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0

1,000,000 800,000 600,000 400,000 200,000 0 ’14

’15

’16

’17

’18

’19

’20

Wage Growth

’21

’22

’23

’24

’14 ’15 ’16

’17

’18

’19 ’20 ’21 ’22 ’23 ’24

CPI Inflation

CC, Student, and Mortgage Debt Payments a Smaller Burden For Consumers Today Than 2019 Source: Federal Reserve

Overall Inflation has Been Sticky, but Retailer’s Production Costs Diminished in 2024 Source: BLS

12%

20% 15%

11% Retail PPI

# of Retail Business Applications

Retail Sales (Millions)

10% 9%

10% 5% 0% -5%

8% ’16

’17

’18

’19

’20

’21

’22

’23

’24

’17

’18

’19

’20

’21

’22

’23

’24 ’25

MATTHEWS™ | 101

THE METRICS: OCCUPANCY AND RENT GROW TH PROVING THAT YOU DON’T NEED A HEAVYWEIGHT TENANT TO BE A HEAVYWEIGHT CONTENDER Retail space is hard to come by in 2025, with national vacancy at historically low levels, around 4% to 5%.

Unanchored strip centers, while slightly trailing their grocery-anchored counterparts, average a 4.5% vacancy rate. Occupancy at unanchored strip centers is holding steady and likely contributing to the overall tightness in the market. Power centers see a vacancy rate of 4.3% and enclosed malls 8.7%.

Unanchored strip retail resilience stems from a few key strengths: Demand for high-quality retail space that far exceeds supply Resilience of service-oriented and local businesses Flexibility to accommodate a diverse tenant mix In today’s constrained development environment, where limited new retail construction is coming online, existing unanchored strip centers are well-positioned to capture demand and maintain high occupancy.

Construction Starts | Retail Strip Centers Source: CoStar Group, Inc.

7M 6M Square Feet

5M 4M 3M 1M ’15

’16

’17

’18

’19

’20

’21

’22

’23

’24 ’25*

*Through Q2 2025

Source: CoStar Group, Inc.

6M

Investor interest in unanchored strip centers has reached new heights. At the heart of their appeal is the relatively low acquisition cost, steady cash flow, and flexibility to adapt leasing strategies to local demand. While private investors have long dominated this space, institutional capital is increasingly entering the fold. Large funds and institutions are drawn by the sector’s straightforward investment and potential for scale, particularly in today’s yield-constrained environment.

A growing focus on value-add opportunities is further fueling momentum, as investors seek to unlock upside through improved management, strategic leasing, and targeted renovations.

Many of these assets, historically held by private owners, offer room to reposition rents, optimize tenant mixes, and enhance operational efficiency, better positioning them for revenue growth and broader investor appeal.

6.9%

CL ASS A

6.1%

5M Square Feet

INVESTMENT MOMENTUM BUILDS

CL ASS A

4M 3M 2M 1M ’15

’16

’17

’18

*Through Q2 2025

102 | SUMMER 2025

’19

’20

’21

’22

’23

7.2%

CL ASS B

By contrast, grocery-anchored retail centers show slightly lower cap rates in Q2 2025:

Under Construction | Retail Strip Centers

0

TAKING CENTER STAGE

Data shows that cap rates for unanchored strip centers in Q2 2025 average:

2M 0

These same fundamentals are fueling steady rent growth. The average asking rent for strip centers rose from $17.10 in Q1 2019, to $20.85 in Q2 2025, a clear signal of the value tenants place on visibility, convenience, and accessibility. With landlords in a strong position amid elevated occupancy and limited competition, unanchored centers are expected to meet or slightly exceed the projected 2% national retail rent growth rate for 2025.

’24 ’25*

5.4%

CL ASS B

This shift is supported by cap rate trends that suggest healthy return expectations. As of H2 2025, cap rates for unanchored strip centers average 7.0%. These yields remain generally higher than those for grocery-anchored centers, which average 5.7%, reflecting both the slightly higher perceived risk and the value-add potential unanchored centers offer. Many investors are capitalizing on this spread by pursuing active management strategies to boost NOI through improved leasing and repositioning efforts. These assets are increasingly viewed as stable alternatives to other asset classes such as office and multifamily, where returns may be compressing in many markets.

Sales Volume | Unanchored Retail Centers Source: RCA $16B $14B $12B $10B $8B $6B $4B $2B $0

’19

’20

’21

’22

’23

’24

’25*

*Through Q2 2025

However, the segment is not without nuance. Some unanchored centers, particularly those overlapping with categories like freestanding retail or housing vulnerable tenants such as pharmacies and discount retailers, may face short-term challenges. Closures and consolidation in these categories could temporarily raise vacancy rates, primarily in centers with concentrated exposure. Yet, landlords able to backfill with more resilient, service-oriented tenants often see limited disruption.

RETAIL’S QUIET CLIMBERS TRENDS IN THE UNANCHORED SPACE Resilience of Local Businesses Small, entrepreneurial “momand-pop” tenants continue to be a stabilizing force in unanchored strip centers. Their strong personal investment, adaptability, and long-term commitment make them reliable and valuable tenants.

Rise of Experiential and Service-Oriented Retail Fitness studios, salons, medical clinics, and diverse restaurants are increasingly occupying space, reflecting consumer demand for convenience and inperson services less vulnerable to e-commerce disruption.

Omnichannel Integration Retailers are leveraging unanchored centers as key touchpoints for e-commerce fulfillment—facilitating in-store pickups, returns, and last-mile logistics. These centers help bridge online and physical retail in a consumer-centric way.

MATTHEWS™ | 103

WEST REBOUNDING WITH STRONG URBAN CORE DEMAND LOS ANGELE S $239 M in H1 2025 SAN DIEGO $235M in H1 2025 SE AT TLE $11 0 M in H1 2025 L A S VEGA S $1 0 0 M in H1 2025

SOUTHWEST STABLE GROWTH WITH HIGH PRICING RESILIENCE DALL A S $ 324M in H1 2025 HOUS TON $175M in H1 2025 PHOENIX $120 M in H1 2025 DENVER $113 M in H1 2025

REGIONAL DEEP DIVE UNANCHORED STRIP RETAIL STANDOUT MARKETS

WEST

SOUTHWEST

MIDWEST

2024 Total Volume

$1.42B

$1.42B

$1.42B

H1 2025 Volume

$950M

$1.1B

$517M

Average PPSF

$301

$214

$145

Average Cap Rate

6.0%

7.0%

8.0%

104 | SUMMER 2025

MIDWEST STABILIZING, BUT STILL EARLY IN RECOVERY CHICAGO $334M in 2024 $93M in H1 2025

NORTHE AST PRICING STRENGTH RETURNS AMID CAUTIOUS OPTIMISM NYC $ 336M in 2024 $70 M in H1 2025 BOSTON $155M in 2024 $ 4 8 M in H1 2025

MID-ATL ANTIC REACCELERATION LED BY D.C. AND INSTITUTIONAL CAPITAL D.C . $212M in 2024 ( 3x 2023) $1 0 0 M in H1 2025

SOUTHE AST CONSISTENTLY LEADS IN VOLUME & MOMENTUM NA SHVILLE $111 M in H1 2025 ATL ANTA $157M in H1 2025

LE XINGTON $137M in H1 2025

TAMPA $13 1 M in H1 2025

JACKSONVILLE $113 M in H1 2025 SOUTH FLORIDA $27 7M in H1 2025

SOUTHE AST

MID -ATL ANTIC

NORTHE AST

$2.14B

$494M

$576.7M

$1.5B

$242.7M

$206.3M

$264

$219

$185

7.3%

7.9%

7.3%

MATTHEWS™ | 105

REGIONAL DEEP DIVE MID-ATL ANTIC

The Mid-Atlantic unanchored strip center market entered a transitional phase in 2024, showing signs of recovery after a volatile few years. Total transaction volume reached $494 million for the year—a 6% increase over 2023—fueled by a dramatic 925% surge in portfolio sales, even as individual deal volume declined 11.5% year-overyear. Despite a soft pricing environment in late 2024, with the average price per square foot dropping to $139 and cap rates rising to 9%, the market gained traction heading into 2025. In the first half of 2025, volume reached $243 million and pricing rebounded sharply to $219 per square foot, indicating a flight to higher-quality assets.

According to Ed Laycox, EVP of Single & MultiTenant Retail at Matthews™, the Mid-Atlantic remains “a premier investment geography for any investor type,” owing largely to strong demographic trends. “The robust population growth in Virginia and the Carolinas has only fueled the investment appetite more,” he explains, noting that REITs, private equity firms, and family offices have all been especially active.

THE D.C METRO AND SECONDARY MARKET DYNAMICS In 2024, performance was led by the D.C. metro, which posted $211.8 million in volume–more than tripling its 2023 total and making it the clear focal

106 | SUMMER 2025

E D L AYCOX

e d . l aycox@ m a t t h ew s .co m (3 32) 2 32- 9 4 0 4

point for regional investor interest. Laycox attributed the sharp pricing rebound in D.C. largely to replacement cost dynamics. “The cost to construct a new space for a tenant is very prohibitive in today’s market–the D.C. market in particular,” he says. “When you can buy a center 50-60% below replacement cost and still get a market cap rate, your future downside is limited.” This affordability relative to new construction is also helping drive retail vacancy rates in unanchored strip centers to all-time lows.

Richmond also emerged as a bright spot, matching its prior peak with $52 million in volume. Meanwhile, markets like Philadelphia and Baltimore saw pullbacks, and Pittsburgh, Harrisburg, and Norfolk remained relatively muted.

“SMALL INVESTORS ARE MOVING TO secondary markets of the Mid-Atlantic, chasing yield and lower price per square foot.”

Early 2025 data shows the D.C. metro leading the region with over $100M in transactions year-to-date, while Philadelphia is growing with $65M already transacted in H1 2025, already above 2024 volume.

SHIF TING CAPITAL COMPOSITION AND TENANT DEMAND

For smaller tenants like Starbucks and Five Guys, he adds, existing strip centers have become more attractive options in the D.C. market due to the high cost of new construction and limited site availability.

The capital composition of the market also began to shift. Institutional investors, after net selling nearly $97 million in 2024, returned in force in early 2025 with $55.7 million in net acquisitions— signaling renewed confidence in Mid-Atlantic retail opportunities. REITs were also active buyers in 2024, posting their largest net inflow in over a decade at $65.2 million. However, they have yet to record any deal activity in early 2025, suggesting a strategic pause or wait-and-see approach. As Laycox puts it, “the REIT and institutional investors are focused on the growth markets as they view these areas as opportunities for rent growth.”

ASSET PERFORMANCE: URBAN INFILL , SUBURBAN, AND VALUE-ADD Urban infill and suburban strip centers are performing well across the region, buoyed by the replacement cost advantages and tenant demand trends Laycox highlights. However, he points out that value-add opportunities are rare.

“Because retail vacancy is low just about everywhere in the Mid-Atlantic, finding a value-add investment is VERY difficult. The ones that are out there generally have some challenging issues or are priced too high—or both.”

Laycox also notes a significant shift in tenant mix and demand patterns across the region. Big and medium-box spaces are increasingly being filled by experiential retailers and medical users such as “kid’s play concepts, bounce zones, urgent cares, and outpatient surgery centers.”

Altogether, these trends point to a market in the early stages of reacceleration, with institutional and private capital leading the way and investor sentiment steadily improving.

Sales Volume Source: RCA

$1B $800M $600M $400M $200M $0

Q1’15

Q1’16

Q1’17

Q1’18

Q1’19

Q1’20

Rolling 4-Quarters

Q1’21

Q1’22

Q1’23

Q1’24

Q1’25

Quarterly Volume

MATTHEWS™ | 107

$5M

$65M

ALLENTOWN

PHIL ADELPHIA

$12M

PIT TSBURG H

$23M

BALTIMORE

$100M D.C .

H1 2025 VOLUME MID-ATL ANTIC

$13M

RICHMOND

Source: RCA

$8M

NORFOLK

By the Numbers | H1 2025

Construction Starts

Source: RCA, CoStar Group, Inc.

Source: CoStar Group, Inc.

$242.7M

PPSF

$219

Cap Rate

7.9%

Vacancy Rate

4.0%

Rent

$21.75/SF (1.54%)

Construction Starts SF

Sales Volume

500K

Buyer Composition

200K

0

2025 (YTD)

23.9%

’15 ’16

’17

’18

’19 ’20

’21

’22 ’23 ’24 ’25

’19 ’20

’21

’22 ’23 ’24 ’25

Under Construction

12.4%

Source: CoStar Group, Inc.

350K

Seller Composition

2025 (YTD)

100%

Institutional

Cross-Border

Under Construction SF

Source: RCA

Private

300K

100K

Source: RCA

63.7%

400K

300K 250K 200K 150K 100K 50K 0

108 | SUMMER 2025

’15

’16

’17

’18

REGIONAL DEEP DIVE MIDWEST

The Midwest unanchored strip center market began showing signs of stabilization and recovery in the second half of 2024, following a two-year slump from the post-pandemic peak. After substantial yearover-year declines through 2023 and early 2024, quarterly sales volumes rebounded sharply–up 50.4% YOY in Q3 and 82.9% in Q4. The year ended with $986 million in total sales, primarily driven by individual asset trades, which comprised more than $950 million of the total. As of H1 2025, $517 million in deals have traded. According to Patrick Forkin, SVP at Matthews™, this surge is “a strong signal that buyer confidence is returning,” underscoring a shift in market sentiment.

While transaction activity is on the mend, the market remains well below its 2022 peak of $1.75 billion.

Still, pricing trends are encouraging. The average price per square foot is $145 as of H1 2025 and Class A assets record $310/SF, reflecting a clear flight-to-quality. Cap rates rose to 8.2% in Q4 but decreased to 8% as of Q2 2025. Forkin explains that while these elevated cap rates “reflect continued risk pricing, they’re also driving interest from yieldfocused private buyers who dominate the region.”

He notes that bid-ask spreads are narrowing and that “high-quality deals are moving,” especially in core cities like Chicago, Milwaukee, Indianapolis, and St. Louis. While the cap rate spread between premium and value assets has widened, the volume and pricing data suggests growing buyer appetite, particularly for well-located or stabilized properties.

PATR I C K FO R KI N

p a t r i c k .fo r k i n @ m a t t h ew s .co m ( 7 7 3 ) 27 9 - 5 3 9 0

SUPPLY CONSTR AINTS AND OWNER BEHAVIOR The region’s inventory remains tight, largely due to the ownership profile. “The majority of these properties are privately owned by long-term holders who aren’t under pressure to sell,” Forkin explains.

“When sellers believe they’re in a strong pricing window, they’re realistic and ready to transact.

Otherwise, they’re comfortable holding for longer.”

This dynamic has kept competition strong for quality assets and limited the flow of new listings to the market.

LE ASING MOMENTUM DRIVEN BY SERVICES AND RESTAUR ANTS On the leasing front, service-oriented users have taken the lead. Forkin highlights tenants like medical, dental, urgent care, pet services, salons, and fitness centers as the primary drivers of demand. “These tenants are prioritizing visibility and accessibility over co-tenancy with a traditional anchor,” he notes. Additionally, restaurant demand has increased, with fast casual and local operators expanding in suburban locations offering patio space and drive-thru capabilities.

“NATIONAL CREDIT TENANTS ARE still active, but the real change has been the rise of experiential and neighborhood-serving users over traditional soft goods.”

MATTHEWS™ | 109

PRIVATE CAPITAL LE ADS, INSTITUTIONS MORE SELEC TIVE

SUBURBAN STRENGTH AND URBAN CHALLENGES Suburban strip centers are currently outperforming.

“Suburban centers with strong demographics and daily-needs tenants are leading in terms of performance and liquidity,” Forkin affirms. These assets typically offer features like ample parking, high visibility, and flexible layouts—ideal for today’s tenant base.

Private investors have carried the momentum through the downturn and into the early stages of recovery, accounting for nearly 90% of volume in 2023 and 2024. Institutional and REIT buyers, while still present, have become more selective. “Capital hasn’t disappeared—it’s just more selective,” Forkin says, pointing to continued interest in large metros like Chicago and Minneapolis. He emphasizes that institutional capital is still drawn to the Midwest’s value proposition: “Cap rates here are often 100 to 150 basis points higher than in the Sunbelt or on the coasts.” However, he also notes that many assets in the region are smaller and individually traded, which “doesn’t always match the acquisition strategies of larger institutional players.” Cross-border capital, once a small but steady contributor, has almost entirely exited the market since 2020. If private capital continuous to lead and macro conditions stabilize, the Midwest strip center market is wellpositioned for a more sustained recovery in the second half of the year.

Urban infill assets, while still appealing for their longterm potential, face more immediate headwinds.

Forkin cites reduced office occupancy, rising taxes, and population outflows in some cities as contributing factors to softened demand. “Several headwinds have impacted performance in recent years,” he notes, even as these assets maintain strategic value in dense, high-barrier markets.

FOCUS ON STABILIZED AND LIGHT VALUE-ADD PL AYS New construction remains limited, keeping investor focus on stabilized or lightly value-add assets.

“Most investor activity is focused on centers where there’s upside through lease-up, renewal, or modest cosmetic improvements,” Forkin observes. The common thread? “The ability to support modern tenancy needs is key.”

Sales Volume Source: RCA

$2B

$1.5B

$1B

$500M

$0 Q1’15

Q1’16

Q1’17

Q1’18

Q1’19

Q1’20

Rolling 4-Quarters

110 | SUMMER 2025

Q1’21 Quarterly Volume

Q1’22

Q1’23

Q1’24

Q1’25

$32M

MINNE APOLIS

H1 2025 VOLUME MIDWEST

$26M

Source: RCA

MILWAUKEE

$8M

DETROIT

$96M

$7M

CHICAGO

CLE VEL AND

$12M

$26M

INDIANAPOLIS

K ANSAS CIT Y

$3M

$41M

CINCINNATI

ST. LOUIS

By the Numbers | H1 2025

Construction Starts

Source: RCA, CoStar Group, Inc.

700K

$464M

PPSF

$145

Cap Rate

8.0%

Vacancy Rate

6.1%

Rent

$24.50/SF (2.51%)

600K Construction Starts SF

Sales Volume

Source: CoStar Group, Inc.

Buyer Composition Source: RCA

500K 400K 300K 200K 100K 0

2025 (YTD)

93.5%

’15

’16

’17

’18

’19

’20

’21

’22 ’23 ’24 ’25

’19

’20

’21

’22 ’23 ’24 ’25

Under Construction

6%

Source: CoStar Group, Inc.

350K

Seller Composition Source: RCA

2025 (YTD)

90% 5% Private

Institutional

Listed/REITs

Cross-Border User/Other

Under Construction SF

300K 250K 200K 150K 100K 50K 0

’15

’16

’17

’18

MATTHEWS™ | 111

REGIONAL DEEP DIVE NORTHE AST

In 2024, the unanchored strip center market in the Northeast began a clean and measurable recovery after a turbulent 2023. Total transaction volume for the year reached $576.7 million, up 12.9% year-overyear, with a particularly strong Q4 showing $171.2 million, a 43.2% YOY increase. This rebound was driven largely by individual property sales, which totaled $526 million for the year–up 15.5% YOY– while portfolio activity remained limited, accounting for just $50.7 million. In 2025, pricing strength returned. approximately $206.3 million in deals traded in the first half. While the average price per square foot increased to $201 in Q2, up 4.5% YOY and 16.4% above year-ago levels.

Confidence among Northeast buyers remains strong despite modest growth, as investors pay premiums for high-quality, well-located centers. Joanna Manfro, Vice President at Matthews™ explains,

J OA N N A M A N FRO

j o a n n a . m a n f ro @ m a t t h ew s .co m ( 203 ) 25 3 - 8 827

“CONFIDENCE STEMS FROM THE Northeast’s historical resilience in all economic climates, often acting as a ’flight to safety’ during turbulent markets.”

She notes that market downturns in the region tend to be less severe, often followed by quicker recoveries compared to trend-driven areas. This consistent historical performance continues to support buyer optimism, even amid broader economic uncertainty.

STRENGTH IN LE ASING AND PRICING Following a strong finish in 2024, investor activity remained measured but focused in the first half of 2025. While overall transaction volume moderated, particularly in Q2, the market continued to reflect a selective but steady flow of capital targeting highconviction opportunities. A total of 34 properties

112 | SUMMER 2025

traded in H1 2025, with the majority occurring in Q1, underscoring a continued appetite for quality assets despite macro uncertainty. Cap rates held firm at 7.3%, unchanged from the prior year, suggesting sustained competition and disciplined pricing.

strong, alternative to their home markets. Institutional buyers also remain engaged, drawn by the Northeast’s long-term reputation for stability.

MARKET HOTSPOTS AND EVOLVING DEMAND

Leasing fundamentals across the Northeast continue to support firm pricing. “The Northeast’s high barriers to entry and consistent demand generally support higher PPSF,” Manfro notes.

Certain submarkets within the Northeast are drawing heightened investor attention. “Suburban urban cores near major cities are attracting significant investor interest,” Manfro explains, highlighting areas such as Westchester, NY and Fairfield, CT, Northern New Jersey, NASA and Suffolk County, NY and Boston’s MetroWest region inside the 495 Corridor.

These locations have “not only weathered the postCOVID landscape but have sustained growth and investor interest due to their appealing live-work-play lifestyle and accessibility to urban hubs.”

She points out that while rent growth may be steady rather than rapid, the region’s lower risk profile and historical stability “justify the pricing for many investors,” helping to sustain elevated values.

E ARLY 2025 MOMENTUM AND BUYER TRENDS Looking into early 2025, momentum has continued, though at a more tempered pace. Investor appetite remains active, with private capital continuing to drive most activity. However, Manfro states that the buyer pool is broadening. “There’s increasing crossregional interest, notably from California investors seeking stability amidst their market dynamics,” she says. “Some Southeast investors are also evaluating the Northeast for slightly better yields,” viewing the region as less competitive, but still fundamentally

Necessity-based retail remains the cornerstone of demand across the region. Manfro emphasizes that essential services—food, health, and fitness— continue to underpin stable occupancy, but she also sees emerging shifts. “The resilience of these core sectors suggests continued strong occupancy alongside potential growth in experiential retail and services catering to evolving suburban lifestyles,” she notes, pointing to a gradual diversification in tenant mixes as suburban consumer preferences evolve.

Sales Volume Source: RCA

$1B $800M $600M $400M $200M $0 Q1’15

Q1’16

Q1’17

Q1’18

Q1’19

Q1’20

Rolling 4-Quarters

Q1’21

Q1’22

Q1’23

Q1’24

Q1’25

Quarterly Volume

MATTHEWS™ | 113

H1 2025 VOLUME NORTHE AST Source: RCA

$17M

NE W ENG L AND

$6M

$20M

ROCHESTER

BUFFALO

$48M

BOSTON

$17M

HARTFORD

$10M

$4M

PROVIDENCE

NE W HAVEN

$70M NYC

$12M

TRENTON , NJ

By the Numbers | H1 2025

Construction Starts

Source: RCA, CoStar Group, Inc.

Source: CoStar Group, Inc.

$206.3M

PPSF

$185

Cap Rate

7.3%

Vacancy Rate

5.0%

Rent

$23.13/SF (2.46%)

300K Construction Starts SF

Sales Volume

350K

Buyer Composition Source: RCA

250K 200K 150K 100K 50K

81.6%

0

2025 (YTD)

12.3%

’15

’16

’17

’18

’19

’20

’21

’22 ’23 ’24 ’25

’19

’20

’21

’22 ’23 ’24 ’25

Under Construction

3.9%

Source: CoStar Group, Inc.

180K

Seller Composition Source: RCA

75.2%

Private

Institutional

Listed/REITs

21.6%

Cross-Border User/Other

2025 (YTD)

Under Construction SF

160K 140K 120K 100K 80K 60K 40K 20K 0

114 | SUMMER 2025

’15

’16

’17

’18

REGIONAL DEEP DIVE SOUTHE AST The Southeast unanchored strip center market surged in 2024, emerging as one of the most active regions nationwide. Total transaction volume reached $2.14 billion–a 33.2% year-over-year increase–driven by robust growth in both individual and portfolio-level trades. Pricing metrics also strengthened, with the average price per square foot climbing to $230 and cap rates compressing to 7.1%, reflecting strong demand for neighborhood retail across the Sunbelt.

That momentum has carried into 2025, with $1.5B closing as of Q2. Pricing rose further to $264 per square foot, though cap rates have ticked up to 7.3% amid recalibrated risk premiums and tighter financing conditions.

According to Jeff Enck, Senior Vice President at Matthews™, the sustained surge in activity is no surprise. “Historically, the Southeast has imported a lot of capital from the West Coast and Northeast due to higher yields,” Enck explains. “That gap is narrowing, but the Southeast remains relatively attractive in terms of cap rates and price per square foot. Migration to metros like Miami, Atlanta, and Charlotte continues to rise–driven by job growth, business-friendly policies, and no or low income taxes. These factors are translating into persistent demand for essential-service retail.”

MARKET LE ADERS AND REGIONAL HOTSPOTS Miami/South Florida led all Southeast metros in 2025 with $283 million in sales, followed by Atlanta at $160 million, underscoring investor confidence in major gateway markets.

Vacancy rates across the Southern U.S. remained exceptionally low, averaging under 4%, with standout markets like Nashville, Miami, and Raleigh/ Durham posting vacancies below 3%. The Carolinas, in particular, have emerged as a national hotspot

J E FF E N C K

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for retail, supported by high occupancy (around 97%) and population growth across both urban and suburban corridors. Tourism-driven demand, especially in Florida’s coastal cities, further enhances the region’s appeal.

“NEARLY EVERY MAJOR MSA IN THE Southeast is in high demand,” he says.

“We’re seeing the most heat in highincome suburbs and dense, urban infill locations–particularly South Florida.

That’s where some speculative pricing has emerged, but it’s really limited to those rare, high-end corridors.”

SHIF TING CAPITAL STACK AND COMPETITIVE DYNAMICS Private investors remained the dominant force in 2025, accounting for 79.4% of acquisitions, but the tide is beginning to shift. Private investors have become net sellers, prompted by refinancing pressures, maturing debt, and capital market headwinds. REITs, by contrast, stepped in aggressively, acquiring $141 million in 2024 and $136 million in H1 2025. Their share of acquisitions now hovers near 20%, signaling a growing appetite for high-quality, yield-generating strip retail.

“There are still very few true institutions acquiring unanchored retail centers,” Enck says. “Curbline is a rare exception–they’re replacing their entire portfolio of grocery and power centers with strip centers. Meanwhile, quasi-institutional groups and funds are focusing on well-located strips that trade below replacement cost and offer long-term upside.

The challenge? There just aren’t enough quality properties to go around.”

MATTHEWS™ | 115

“Coffee is still in growth mode,” Enck says, “Along with both franchise and local restaurants, urgent care clinics, dental offices, and veterinary users.”

Buyer demand continues to outpace quality supply, particularly for centers offering stable tenancy, belowmarket rents, or redevelopment potential. Enck notes that while public and private interest is rising, buyers are struggling to compete–especially in a landscape where top-tier assets are increasingly scarce.

This evolving tenant-mix has helped keep demand high for available space, driving steady rent growth and keeping vacancy tight. In many cases, these newer tenants are backfilling older vacancies and stabilizing income streams, particularly in fastgrowing suburban trade areas.

INTEREST R ATE PRESSURE AND FINANCING TRENDS High interest rates have reshaped the market’s financing dynamics. “Treasury yields have remained fairly flat in recent quarters, with some short-term dips,” Enck observes. “Savvy buyers have been able to lock in opportunistic rates, but in general, we’re seeing fewer deals close unless the asset is high quality and offers long-term stability.”

OUTLOOK: STABILIT Y AND STR ATEGIC POSITIONING The Southeast remains one of the most liquid and competitive regions for unanchored strip center investment in mid-2025. Private capital continues to drive the market, but institutional and REIT activity is rising. The investor profile is shifting toward buyers with long-term hold horizon and value-add strategies centered around demographic tailwinds and essential-service tenancy.

Most financing is now coming from credit unions and life insurance companies. CMBS lending, once a staple of strip center financing, has all but dried up for these smaller assets. “Buyers are largely steering clear of short-term; high-leverage capital. Instead they’re targeting Class A or well-located Class B properties that pencil out under positive leverage.

Class B and C assets are still trading, but only when they deliver yields above borrowing costs,” he adds.

“Southeast retail continues to offer compelling fundamentals,” Enck concludes. “You’ve got population growth, tax advantages, a strong tenant base, and pricing that still looks attractive relative to other regions. That’s a powerful combination–and one that keeps buyers coming back.”

TENANT MIX AND LE ASING FUNDAMENTAL S Tenant fundamentals remain strong in the Southeast, with unanchored strip centers attracting a growing mix of convenience, dining, and medical uses.

Sales Volume Source: RCA

$5B $4B $3B $2B $1B $0

Q1’15

Q1’16

Q1’17

Q1’18

Q1’19

Q1’20

Rolling 4-Quarters

116 | SUMMER 2025

Q1’21 Quarterly Volume

Q1’22

Q1’23

Q1’24

Q1’25

$111M

NASHVILLE

$59M

$39M

R ALEIG H/DURHAM

CHARLOT TE

H1 2025 VOLUME SOUTHE AST

$160M

ATL ANTA

Source: RCA

$51M

ORL ANDO

$131M

TAMPA

$41M

FORT MYERS

$283M

MIAMI/SOUTH FLORIDA

Construction Starts

By the Numbers | H1 2025 Source: RCA, CoStar Group, Inc.

Source: CoStar Group, Inc.

$1.5B

PPSF

$264

Cap Rate

7.3%

1.2M

Vacancy Rate

4.0%

Rent

$21.79/SF (3.2%)

Construction Starts SF

Sales Volume

1M 800K 600K 400K 200K

Buyer Composition Source: RCA

0 2025 (YTD)

80.6%

’15

’16

’17

’18

’19 ’20

’21

’22 ’23 ’24 ’25

’19 ’20

’21

’22 ’23 ’24 ’25

Under Construction Source: CoStar Group, Inc.

Seller Composition

800K

8.8%

700K

Source: RCA

2025 (YTD)

91.5% 8% Private

Institutional

Listed/REITs

Cross-Border User/Other

Under Construction SF

7.7%

600K 500K 400K 300K 200K 100K 0

’15

’16

’17

’18

MATTHEWS™ | 117

REGIONAL DEEP DIVE SOUTHWEST The Southwest unanchored strip center market demonstrated clear signs of stabilization in 2024 following the sharp downturn in 2023. Total transaction volume for the year reached $1.91 billion, up 12.9% year-over-year, driven by consistent individual property trades, which totaled nearly $1.77 billion. While Q4 volume declined 19.2% yearover-year–likely due to macroeconomic caution or closing delays–the full-year uptick and a 286% year-over-year surge in portfolio sales pointed to a reemerging wave of institutional interest. Early 2025 activity confirms renewed momentum, with $1.1B in transaction volume and 142 properties closed or pending as of Q2 2025. According to Grayson Duyck, Vice President and Associate Director at Matthews™, 2025 has been off to a roaring start, “we’ve been the busiest we’ve ever been, in Dallas specifically.”

Pricing dynamics in 2025 are particularly strong.

The average pricing rose 11.2% year-over-year to $214 per square foot. This pricing strength was accompanied by a 11.2% year-over-year increase in total square footage traded. Cap rates have decreased 20 basis points over the last year to 7%, reflecting broader repricing trends. Yet in 2025, cap rates dipped to 7% by Q2, indicating increased bidding activity for stabilized products.

Duyck noted that investor psychology has shifted compared to a year ago. “People have gotten to the point where they’ve accepted market conditions and want to get deals done,” he explains. “Last year, buyers and sellers were far apart. Now, expectations have met the market.”

CAPITAL FLOWS AND INVESTOR PROFILES The composition of capital in the Southwest continues to evolve. Institutional investors returned in force in 2024 with $84.7 million in net acquisitions 118 | SUMMER 2025

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but have reversed course in early 2025, registering $95.3 million in net dispositions–likely signaling profit-taking amid shifting macro conditions. REITs remained more cautious, contributing modest net acquisitions of $29.4 million in 2024 and $19.7 million in net dispositions in 2025 as they selectively reposition their portfolios.

Private capital remains the most active and agile investor group, ending 2024 with a moderate $56.2 million in net outflows before returning to net buyer status in early the first half of 2025 at $110.2 million.

“PRIVATE OWNERS ARE MORE WILLING to play ball,” Duyck says. “They don’t need to hit exact return metrics like institutions do. They can move faster and make decisions quicker, which gives them an edge in competitive environments.”

TENANT TRENDS AND LE ASING FUNDAMENTAL S Southwest tenant demand remains robust, specifically in major Texas metros. Dallas, in particular, is seeing outsized activity from food and service users. “Restaurants are the most active in the market right now–especially franchise concepts and freestanding quick-service formats like Cava,” Duyck notes. “We’re also seeing a lot of boutique fitness–class-based models like pilates, yoga, barre, are outperforming the big-box gyms.”

Many of these tenants are adapting to high rents by shrinking their footprints. “To combat higher costs, tenants are taking less space. They’re still doing strong business, but they’re being smarter with layouts,” Duyck adds. Strong regional brands continue to show a preference for well-located,

Austin also remains a bright spot for growth, thanks to its booming tech sector and rapid population gains. Along with Phoenix and DFW, Austin continues to be a top market for tenant absorption and new development, particularly for flexible, service-oriented retail formats that cater to growing suburban populations.

unanchored centers–even over grocery-anchored formats in some cases. “These centers on busy streets are still pulling in great traffic,” he says.

“Tenants are seeing the same performance they would in larger centers, without the institutional lease structure.”

Drive-thru configurations also remain in high demand, although Duyck sees caution on the horizon. “Drive-thru space is red-hot,” he says. “But long-term, we’re going to see questions emerge around whether tenants can generate enough volume to justify the rent. It’ll be interesting to see how it plays out.”

SALES STR ATEGY AND MARKET CAUTION While pricing remains strong, Duyck advises that buyers need to approach new construction deals with caution. “Some of these centers have inflated NOI because of generous tenant improvement packages. The rents being paid now aren’t always replaceable,” he notes. “Exchange buyers, in particular, don’t always account for that. If you’re buying a deal, make sure the rent is sustainable in the long run.”

CONSTRUC TION CONSTR AINTS AND REGIONAL GROW TH Despite strong leasing, development activity remains restrained. “Construction costs are still high, and vacancy rates are extremely low– especially in Dallas, where retail vacancy is under 4%,” Duyck explains. “Because there isn’t much new construction, rents have gone up. It’s getting very competitive.”

OUTLOOK: NORMALIZ ATION AND COMPETITIVE POSITIONING The Southwest market appears poised for steady growth in 2025. Institutional participation may remain selective, but private capital is showing clear signs of renewed conviction. With pricing stabilizing and buyer expectations realigning, deal velocity is expected to improve–especially for well-located, Class A assets.

This imbalance between supply and demand is driving renewed suburban expansion. “Collin County, Frisco, Prosper, Forney–those northern suburbs are booming,” Duyck says. “High-net-worth families are moving out of the city. Places like Kaufman County and Walsh Ranch–these thousandacre master-planned communities–are drawing big interest.” Kaufman County has been recognized as the fastest-growing county in Texas and one of the fastest-growing counties in the nation.

“There’s so much growth and population expansion across the region,” Duyck concludes. “Investors have adjusted to the new normal, and we’re finally seeing that translate into real transaction volume.

Everyone’s back at the table.”

Sales Volume Source: RCA

$4B $3B $2B $1B 0 Q1’15

Q1’16

Q1’17

Q1’18

Q1’19

Q1’20

Rolling 4-Quarters

Q1’21

Q1’22

Q1’23

Q1’24

Q1’25

Quarterly Volume

MATTHEWS™ | 119

$113M DENVER

$22M

CO SPRINGS

$83M

OKL AHOMA CIT Y

$120M

PHOENIX

$322M

DALL AS

H1 2025 VOLUME SOUTHWEST

$57M

$183M

AUSTIN

$52M

Source: RCA

HOUSTON

SAN ANTONIO

By the Numbers | H1 2025

Construction Starts

Source: RCA, CoStar Group, Inc.

Source: CoStar Group, Inc.

1.8M

$1.1B

PPSF

$214

1.6M 1.4M

Cap Rate

7.0%

Vacancy Rate

6.5%

Rent

$21.68/SF (2.3%)

Construction Starts SF

Sales Volume

Buyer Composition Source: RCA

1.2M 1M 800K 600K 400K 200K

84.7%

12.9%

0

2025 (YTD)

’15

’16

’17

’18

’19 ’20

’21

’22 ’23 ’24 ’25

’19 ’20

’21

’22 ’23 ’24 ’25

Under Construction Source: CoStar Group, Inc.

1.2M

Seller Composition Source: RCA

74.8%

2025 (YTD)

21.7% 3.5%

Private

Institutional

Listed/REITs

Cross-Border User/Other

Under Construction SF

1M 800K 600K 400K 200K 0

120 | SUMMER 2025

’15

’16

’17

’18

REGIONAL DEEP DIVE WEST

The year 2025 is proving to be a pivotal recovery year for the Western U.S. unanchored strip center market. Total quarterly transaction volume reached $588M in Q1 2025 and $363M in Q2 2025, together the first half of the year represents close to a 40% year-over-year increase.

Pricing trends further underscore renewed confidence: the average price per square foot reached $301, while cap rates compressed to 6%, marking a significant shift from the wider spreads seen in 2023. These metrics suggest growing competition for limited quality assets and optimism around income durability and long-term upside.

According to Conrad Sarreal, First Vice President and Director at Matthews™, several structural and economic tailwinds are fueling the region’s momentum.

“WEST COAST MULTI-TENANT RETAIL continues to experience aggressive bidding and cap rate compression–often 50-100 basis points tighter than similar assets elsewhere,” Sarreal explains.

“California metros benefit from a deep pool of both private and institutional capital, particularly high-net-worth individuals and family offices. In cities like Los Angeles and San Francisco, cap rates can dip as low as 4.5% to 5.5% for prime locations.”

METRO PERFORMANCE AND INVESTOR FOCUS Performance across key western metros reinforces this recovery narrative. Los Angeles led the region with $625 million in 2024 transaction volume and

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posted a strong $249 million start in the first half of 2025, highlighting its central role as a gateway for both domestic and international capital. San Diego, Las Vegas, and Seattle also posted year-over-year gains in 2024 and 2025, underscoring investor interest in metros with strong demographic and economic fundamentals.

Urban core strip centers in these cities continue to attract significant capital thanks to tight vacancy (96%+), rising rents, and an evolving tenant mix that reflects modern consumer preferences. “These centers are poised in dense, high-traffic areas near affluent neighborhoods and transit hubs,” Sarreal says. “West Coast multi-tenant centers increasingly feature experiential tenants–boutique fitness, craft breweries, and specialty services–now making up 1530% of new leases in 2025, especially in places like Los Angeles and Seattle.”

Meanwhile, performance in San Francisco and Sacramento remained relatively muted. San Francisco has seen transaction volume fall sharply from its 2022 peak, with just $46 million recorded year-todate, as investors remain wary of broader economic headwinds and a sluggish return-to-office trend.

URBAN CORE RESILIENCE AND MARKET FUNDAMENTAL S The structural strength of urban strip centers continues to set the western region apart.

Development in dense urban cores remains constrained by sky-high costs and regulatory complexity. In cities like Los Angeles and San Francisco, urban retail development can cost $450$650 per square foot, while California’s CEQA regulations further slow the pipeline. As a result, new supply remained limited in 2024, adding just 0.2%0.5% of inventory in primary markets–boosting pricing power and tightening already low vacancies.

MATTHEWS™ | 121

“Despite population shifts, West Coast metros still benefit from high-income consumers and strong retail demand,” Sarreal notes. “With average occupancy rates between 95%-96%, tenant stability and consumer spending reinforce premium pricing.”

He points to the concentration of wealth in cities such as San Francisco ($160,000 median household income), San Jose ($150,000), and Seattle ($120,000) as key drivers of tenant performance and rent growth.

Secondary markets such as Sacramento, Tacoma, and Fresno are gaining momentum with 10-12% investment growth, fueled by private capital and affordability-driven migration. Tertiary markets, including Bakersfield and Spokane, showed 7-8% growth, attracting smaller private investors willing to accept higher yield and risk exposure.

Cap rate spreads illustrate the divergence: primary markets trade in the 4%-5% range, while secondary markets offer yields of 5.5%-6.5%, and tertiary markets reach 6.5%-8%.

CAPITAL COMPOSITION: INSTITUTIONS RETURN, REITS RETRE AT

OUTLOOK: A REPRICING MOMENT WITH STR ATEGIC OPPORTUNIT Y

Institutional investors have reemerged as key buyers, accounting for 11.9% of acquisitions in 2025 after remaining largely on the sidelines in 2023. This renewed activity signals rising confidence in the sector’s income durability and long-term upside.

Urban cores remain the benchmark for stability and institutional capital, while smart money increasingly targets secondary markets offering favorable yield spreads relative to borrowing costs. Tertiary markets remain opportunistic, but speculative, bets.

REITs, by contrast, have become net sellers, representing over 20% of dispositions so far this year. Private investors still dominate overall, but the buyer mix is shifting. “Secondary markets like Sacramento and Fresno are seeing growing interest from family offices and 1031 buyers,” notes Sarreal.

“These investors are pursuing value-add players like lease-up or repositioning and are drawn by higher yields and lower pricing relative to urban cores.”

“Urban hubs provide long-term stability, but the real growth story may be in the secondary markets,” Sarreal concluded. “They balance risk and reward more effectively and offer a yield premium that looks increasingly attractive given where debt costs are.”

As pricing stabilizes and buyer composition diversified, Western unanchored strip centers are once again positioned as a competitive asset class–both for core investors and value-driven players seeking durable income in a constrained supply environment.

SECONDARY AND TERTIARY MARKET DIVERGENCE While primary urban markets continue to anchor investment volume and pricing stability, secondary and tertiary markets are carving out their own roles.

Sales Volume Source: RCA

$4B $3B $2B $1B $0 Q1’15

Q1’16

Q1’17

Q1’18

Q1’19

Q1’20

Rolling 4-Quarters

122 | SUMMER 2025

Q1’21 Quarterly Volume

Q1’22

Q1’23

Q1’24

Q1’25

$75M SE AT TLE

H1 2025 VOLUME WEST

Source: RCA

$24M

$30M

SALT L AKE CIT Y

RENO

$27M

$46M

SACR AMENTO

SAN FR ANCISCO

$107M

L AS VEGAS

$249M $235M

LOS ANG ELES

SAN DIEGO

Construction Starts

By the Numbers | H1 2025 Source: RCA, CoStar Group, Inc.

Source: CoStar Group, Inc.

$950.6M

PPSF

$301

Cap Rate

6.0%

Vacancy Rate

5.3%

Rent

$27.16/SF (2.1%)

Construction Starts SF

Sales Volume

500K

Buyer Composition Source: RCA

81.6%

12.3%

400K 300K 200K 100K 0

2025 (YTD)

’15

’16

’17

’18

’19 ’20

’21

’22 ’23 ’24 ’25

’19 ’20

’21

’22 ’23 ’24 ’25

Under Construction Source: CoStar Group, Inc.

350K

Seller Composition Source: RCA

75.2%

Private

Institutional

Listed/REITs

21.6%

Cross-Border User/Other

2025 (YTD)

Under Construction SF

300K 250K 200K 150K 100K 50K 0

’15

’16

’17

’18

MATTHEWS™ | 123

LOCAL INTEL

THE CRE TRENDS YOU WON’T SEE IN THE DATA The retail landscape is in constant flux, shaped by evolving consumer behaviors, rapid technological advancements, and shifting economic tides. In this dynamic environment, staying ahead requires more than just reacting to trends—it demands a deep understanding of the market’s inner workings. At Matthews™, our market leaders are at the forefront of this transformation, navigating complex challenges and capitalizing on emerging opportunities.

In this article, they share their invaluable insights, offering an inside perspective on the retail segment's current state in their markets and the latest innovations driving the future of retail.

124 | SUMMER 2025

DALLAS TEXAS The Dallas retail market benefits from a rare combination of strong population growth, corporate relocations, and business-friendly policies—but what often gets overlooked is how underserved certain suburban trade areas still are. While the headlines focus on legacy corridors like Uptown or Preston Hollow, pockets in areas like Prosper, Forney, Celina, and Midlothian offer compelling returns with significantly less competition. As such, leasing momentum has begun to pick up in suburban submarkets—especially in areas with new rooftops and school developments.

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THE EASTERN END OF HENDERSON AVENUE IS SET FOR A MAJOR REVITALIZATION.

TREND TRACKER: UPCOMING BUILDOUTS

TOP RETAIL SPOT "Katy Trail Ice House: It’s become a goto for brokers, clients, & locals alike. It captures the essence of Dallas: casual, energetic, & relationship-driven."

ANDREW GROSS M A N AG I N G D I R E CTO R

andrew.gross@matthews.com (214) 295-4511

Acadia Realty Trust and Ignite-Rebees have broken ground on a 161,000-square-foot mixed-use development spanning a quarter-mile between Glencoe Street and McMillan Avenue. “Designed

by Dallas-based GFF, the project will feature 10 architecturally distinct buildings housing 75,000 square feet of retail space, 12,000 square feet of chef-driven restaurant space, and 74,000 square feet of office space,” Gross said.

MATTHEWS™ | 125

HOUSTON TEXAS

“An investor should not buy or sell a commercial property without local representation to offer a guiding hand,” Graham said, “as implications from zoning can include uncertainty, risk, and planning challenges. This may be different from what an investor from a different market is accustomed to when their prior markets had strictly controlled local zoning ordinances,” Graham stated.

Yet, without zoning, the market can react more quickly to supply and demand factors, he added. “If a shopping center or multifamily complex in Houston is charging above market rents because of high demand, the market will adapt,” Graham said.

"

THE LACK OF ZONING PRESENTS A LOWER BARRIER TO ENTRY THAN MORE RESTRICTIVE MARKETS.

FAVORITE RETAIL SPOTS "Sitting out on the patio at Mendocino Farms for lunch in Uptown Park on a pretty day is hard to beat. True Food Kitchen in BLVD Place and Local Foods on Post Oak are across the street from our office and making me convert to a healthier diet. I do, however, still enjoy a smash burger-double with fries and a cookies and cream shake from Burger Bodega on Washington."

T REND TR ACKER : COFFEE SHOP MOVES

“Payton Torres and Luke Armetta in the Houston office are representing a new concept coming to market called Black Sheep Coffee,” Graham said.

“They’ll be adding locations in 2025 and 2026 throughout Houston. Any shopping center will be enhanced with Black Sheep Coffee as a tenant in an end cap with a drive-thru.” With 14 specialty coffee projects permitted through Q3 2025, Houston’s caffeine infrastructure continues outpacing national growth averages.

126 | SUMMER 2025

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Houston has enjoyed a low cost of living, in large part thanks to the metro area not having traditional zoning, Market Leader Patrick Graham stated.

“Voters have rejected zoning ordinances multiple times,” Graham said. “Instead of zoning, we have private deed restrictions and municipal development regulations. That has massive implications on commercial real estate investments in this market.”

PATRICK GRAHAM MARKET LEADER

patrick.graham@matthews.com (281) 645-6151

RETAILERS TO WATCH DINING "Local restaurants near me are where I splurge. Thyme Table, Boss Chick & Beer, & Taki’s Greek. Can’t get enough."

SHOPPING "Ticknors Men’s Clothiers at Beachwood Place Mall. Gotta look sharp!"

T REN D T RACKE R: EXP E RIE N T IA L RETA IL

Due to shifting consumer preferences, experiential retail is the name of the game. “Experiential retail has come about in response to increased online competition and a refocusing of retailers on what the customer wants,” Wallace said. “Since those retailers are successful, space has become limited.

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CLEVELAND OHIO

Retail in Cleveland remains historically tight and recorded a 4.5% vacancy rate as of Q2 2025.

There has been ongoing positive absorption for the past two quarters, with spaces being quickly leased up. Due to consistently high absorption levels, about 40% of available space is Class C, creating limitations for the already tight retail sector. According to Market Leader Matthew Wallace, the lack of space is a function of the lack of development over the last decade. The construction decline pushed the Cleveland retail sector to focus on experiential retail opportunities.

YOU HAVE TO DRAW PEOPLE IN WITH GREAT SERVICE, CONVENIENCE, OR UNIQUE VALUE PLAY.

MATTHEW WALLACE

NATIONAL DIRECTOR OF SHOPPING CENTERS & MARKET LEADER matthew.wallace@matthews.com (216) 220-8860

As experiential retail drives demand in Cleveland, Wallace added Crocker Park as a notable property that continues to lean into consumer experiences.

Located in the Westlake submarket, the open-air mall boasts experiences from tenants like Color Me Mine, Urban Air Adventure Park, and The Escape Game. With its vast opportunities for consumers, Crocker Park recorded nine million visits in the last 12 months, and an average dwell time of 68 minutes.

MATTHEWS™ | 127

Supply is historically tight in Denver with approximately 381,000 square feet under construction, down 21.8% from 2024. “This scarcity of supply has created a landlord-friendly market and led to availability rates around 4.7%, which is among the lowest in a decade,” stated Brayden Conner, Associate Market Leader.

As supply remains tight, Conner added that he expects leasing velocity in high foot traffic areas to remain high. “As we see Denver continue to grow, we are seeing tenants put more emphasis on being near areas with heavy foot traffic counts like Sloan’s Lake, Lower Highlands & RINO,” Conner said. “There is also increased demand in suburban submarkets like Parker, Lone Tree, and Thornton.”

TREND TRACKER: DEVELOPMENT SPOTLIGHT

“While Denver is known for its abundance of outdoor activities, including skiing, biking, golf, and hiking, its retail trends are casting a similar picture,” Conner stated.

Conner also highlighted the ongoing movement for new developments across the metro. “Single-tenant development continues to be an arms race, with national tenants being the most aggressive on core locations,” he said. “New concepts are having to settle on locations outside the city. Regional brands like Swig, Good Times Burgers, and Mad Green continue to expand their footprints locally and are ramping up growth throughout the region.”

128 | SUMMER 2025

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DENVER C O LO R A D O

AS PEOPLE CONTINUE TO MOVE TO THE AREA & PRIORITIZE EXPERIENCES, ENTERTAINMENT VENUES & INTERACTIVE RETAIL CONCEPTS ARE DRIVING DEMAND.

STANDOUT RETAIL LOCATION “The Sloan’s Lake/Edgewater neighborhood, located west of downtown, is a market I would continue to keep a close eye on. Tennyson Street in that area has seen an uptick of luxury brands revitalizing the area.”

BRAYDEN CONNER

A S S O C I AT E M A R K E T L E A D E R brayden.conner@matthews.com (720) 780-5827 IN COLLABORATION WITH

ADAM GOWER

SAN DIEGO CALIFORNIA

FAVORITE RETAIL SPOTS One Paseo - A ±23.6 acre mixed-use site

boasting Class A office space, 40+ shops, & luxury apartments.

Valley Farm Market - A grocer with top-quality groceries & ready-made food.

KEEGAN MULCAHY MARKET LEADER

keegan.mulcahy@matthews.com (858) 324-1893

“However, even for owners with NNN leases, the trend still impacts their assets as tenants who are responsible for these expenses may be struggling to remain profitable.”

This activity has led to a decreased number of tenants that can afford to pay the current market rents, in conjunction with the increased expenses.

“Ideally, landlords can negotiate sales reporting clauses in their leases,” Mulcahy emphasized.

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With expenses increasing across the county, investors need to be cognizant as to how this trend can impact their tenants, according to Market Leader, Keegan Mulcahy. “Expenses have been climbing substantially over the past two to three years, and owners who have gross leases have felt the pain as it eats into their NOI,” Mulcahy said.

FOR LANDLORDS, UNDERSTANDING THEIR TENANT’S STORE SALES & PROFIT MARGINS IS CRITICAL.

TREND TRACKER: LATEST RETAIL MOVEMENT

“Investment sales velocity is starting to see an uptick,” Mulcahy said. “Particularly, the uptick has been seen with lower price point assets that purchasers can acquire all cash or are utilizing very low LTV, which helps deals to still pencil with today’s interest rates.”

Additionally, there are high volumes of opportunities with tenants who are backfilling vacant drugstores and bank branches. “With the amount of vacancy in both sectors, tenants and landlords are starting to get creative in ways to repurpose these buildings,” Mulcahy said.

MATTHEWS™ | 129

LOS ANGELES CALIFORNIA Los Angeles retail is defying national trends.

According to Market Leader Erik Vogelzang, infill locations are resilient, propped up by limited new supply and near-impossible entitlements. “This creates a supply-demand imbalance that keeps quality retail assets in demand,” Vogelzang said.

He added that a shift is occurring in the retail market. “The focus is moving away from traditional shopping toward experiential retail—restaurants, bars, coffee concepts, boutique fitness, and wellness,” Vogelzang stated.

"

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PEOPLE WANT TO GATHER, NOT JUST TRANSACT.

TREND TRACKER: EXPANSION MOVEMENT

“Stormburger is one to watch. Growing fast, brandforward, and picking smart markets with precision.

They’re building real brand equity early and it’s translating into smart expansion.”

130 | SUMMER 2025

TOP RETAIL DESTINATIONS “The Point in El Segundo hits every note.

Lifestyle-driven, hyper-local, & constantly buzzing. Chapman Plaza in K-Town is another standout with heritage architecture & booming foot traffic. Culver Steps is carving out its own cool factor with creative energy, a great tenant mix, & a perfect fit for that Westside tech-meets-culture vibe.

Abbot Kinney in Venice is still a must-hit for brand exposure, walkability, & consistent consumer draw. Downtown Manhattan Beach is a strong mix of daytime & nighttime traffic. We just placed Bread Head there in a fantastic deal. The South Bay as a whole is having a real moment.”

ERIK VOGELZANG MA RKET LEA DER

erik.vogelzang@matthews.com (424) 269-2947

PHOENIX A R I ZO N A

"The Phoenix restaurant market is one that is always evolving. With the revitalization of Downtown Phoenix & the continued growth of Scottsdale, new restaurant concepts are always coming into the Valley & looking to expand their footprint.

I am a food-forward person, so my favorite thing to do is find new great restaurants.

Though it is hard to keep up with trying them all since so many new concepts are

popping up all the time.”

MILTON BRAASCH II

A S S O C I AT E M A R K E T L E A D E R milton.braasch@matthews.com (602) 946-4854

Braasch added that Maricopa County, which encompasses the Phoenix metro, is one of the fastest-growing counties by population growth nationally. “I am continuing to watch this trend as we move through 2025 as it will drive where our market is headed,” Braasch said. “I foresee this growth continuing in all parts of the Valley, which will continue to push our CRE market forward as a pacesetter in the United States.”

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THRIVING RESTAURANT SCENE

Following the low retail vacancy rate trend across the country, Associate Market Leader Milton Braasch stated that Phoenix recorded a recordlow vacancy rate of 4.6% during 2024. “In a broad national market that is facing headwinds, the investment and continued population growth of the Phoenix metro can somewhat insulate the market to see continued strong performance,” Braasch said.

MORE PEOPLE = MORE DEMAND MORE DEMAND = ECONOMIC GROWTH ECONOMIC GROWTH = CRE PROSPERITY

v

TREND TRACKER: TRANSACTION MOVEMENT

“The biggest challenge we face in the transaction market continues to be navigating the cost of debt and managing the bid-ask spread as brokers,” Braasch said. “The more realistic we can be with clients on current market conditions, the more often we can bring out deals that are priced to sell, versus pricing six months in the past with deals that do not pencil for buyers.”

MATTHEWS™ | 131

NASHVILLE TENNESSEE The ongoing population increase in Nashville led to a rise in retail demand, pushing the vacancy rate to 3.3% as of Q2 2025. This is a continuing trend for the metro as vacancy has been below 3.5% since 2022. “It feels like all of Nashville is increasing significantly,” stated Managing Director Hutt Cooke. “There has been consistent demand in Nashville for nearly a decade."

"

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TENANTS AND INVESTORS SEE THE LONG-TERM GROWTH OF NASHVILLE AND WANT TO BE A PART OF IT.

Cooke stated that a prominent factor for Nashville is its investment community. “The largest landlords in this market did not just get lucky by being in Nashville,” he expressed. “They saw the growth and opportunity and took advantage of it.” The metro’s strong investment environment is also aided by the variety of investors coming to Nashville. “In recent years, we have had a lot of coastal capital come into the city and pay extremely high prices,” Cooke added.

“Local folks have a low cost basis, keep up with market rent, and cash flow. Different business models and they both can work.”

TREND TRACKER: QSR COMPETITION

According to Cooke, investors should keep an eye out for new QSRs coming to Nashville. “QSR operators are exploding the Nashville market,” he said. “We are seeing new corporations make a big splash in Nashville to keep up with their competitors.”

132 | SUMMER 2025

New QSR tenants are taking over projects under 10,000 square feet, with tenants like Dutch Bros Coffee and Whataburger actively expanding in Nashville. Dutch Bros Coffee recently made a move in its growth plans by leasing a space in Murfreesboro that will be its 13th store in the metro.

NEWCOMERS & LOCAL FAVORITES “I am very excited about the new Italian sandwich shop, All'Antico Vinaio. They recently opened two new locations in Nashville.

Being located in Broadwest, I go to Halls at least once a week. It is hard to beat a Halls Chophouse Steak.”

HUTT COOKE

M A N AG I N G D I R E CTO R hutt.cooke@matthews.com (615) 667-0097

CHICAGO ILLINOIS

AREAS TO MONITOR "Chicago is full of neighborhoods with great retail like Gold Coast and Lincoln Park. There is

retail for everyone in Chicago!

The Gold Coast is especially popular as the area consists of high-end retailers, such as YSL , Peter Millar, among many others. The area also boasts quite a few high-end restaurants and upscale hotels, like the Waldorf Astoria.”

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While investors may target areas like The Loop or Magnificent Mile, other locations are important to track for their strong performance, according to Market Leader Joshua Bluestein.

THE SOUTH & WEST SIDES OF CHICAGO ARE SHOWING GREAT PROMISE & GROWTH, DRIVEN BY STRONG LOCAL DEMAND & LIMITED E-COMMERCE PENETRATION.

Bluestein added that performance levels are varied across Chicago. “The areas with the most increase in sales and leasing velocity are in single-tenant and high-traffic corridors, as well as Chicago suburbs,” he said. “In the suburbs, vacancy rates have dropped to a near 20-year low, mainly due to quite a bit of new development.”

Meanwhile, core areas are noting a slowdown in performance. “Leasing and sales are slowing down in Downtown Chicago, such as The Loop and River North,” Bluestein added. “Vacancy rates in The Loop are about 30% with concerns over high rent costs, staffing, and safety issues.”

TREND TRACKER: VALUE & LUXURY RETAILERS JOSHUA BLUESTEIN MARKET LEADER

joshua.bluestein@matthews.com (773) 290-2335

“The most active retailers in the Chicago MSA right now are value-oriented retailers like GAP and Uniqlo who are making a splash with new locations in core, high traffic areas, such as Michigan Avenue,” Bluestein said. “Premium and boutique brands, like Hotel Chocolat and Marine Layer, are also adding new locations. These higher-end brands are targeting areas like Lincoln Park for their stores.”

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NORTHERN NJ NEW JERSEY Associate Market Leader Jermaine Pugh stated that while Hudson County may be overlooked for nearby New York City, it offers a variety of retail opportunities. “Hudson County’s Gold Coast shares many of the same development fundamentals as Brooklyn, with strong rent growth, prime lots, and ideal conditions for transit-oriented, mixed-use projects,” Pugh said. “Unlike New York City, the area benefits from pro-growth local governments, streamlined approvals, and more landlord-friendly rent laws.”

Pugh added that cities like Jersey City, Hoboken, and Weehawken offer a more efficient and profitable development path without the regulatory burdens faced in New York City. Yet, Pugh said that the bid-ask gap is necessary to watch as it is occurring on most active listings. “Buyers can’t raise their offers, due to current high interest rate pressures, while sellers are reluctant to lower prices since they can’t clear their debt at reduced price points,” he emphasized. “This disconnect will likely come to a head as loans mature, forcing owners to either sell or inject additional equity to meet loan-to-value requirements.”

TREND TRACKER: NEW TENANT ARRIVALS

According to Pugh, the most active retail tenants are food and beverage operators, boutique fitness and wellness brands, and healthcare or daily-needs service providers.

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THESE TENANTS DRIVE DEMAND IN MIXED-USE & GROCERY-ANCHORED CENTERS, ESPECIALLY IN SUBURBAN & TRANSIT-ORIENTED AREAS.

134 | SUMMER 2025

Some particular tenants adding new locations in the area are CAVA and Sweetgreen as Pugh said they are targeting New Jersey suburbs with highincome demographics for their growth. CAVA is adding new locations in East Brunswick, Union, and Marlton; meanwhile, Sweetgreen is delivering properties in Morristown and Westfield, with the Westfield location recently opened.

TOP RETAIL DESTINATIONS “The best retail spots are in Northern New Jersey’s Gold Coast . Hoboken’s Mile Square is an eclectic mix of national retailers, trendy boutiques, & authentic global cuisines.

A go-to spot is Downtown Montclair. This affluent suburb is known for its vibrant arts, culture, & dining scene. Its main retail strip— Bloomfield Avenue —thrives on high-end shops, boutique fitness, bookshops, indie cafés, & experiential concepts that align with the community’s creative energy.”

JERMAINE PUGH

A S S O C I AT E M A R K E T L E A D E R jermaine.pugh@matthews.com (718) 701-5129

WHY NEW YORK? “The energy you feel in the city reverberates off the density of the buildings around you and what goes on within their walls. If a candidate’s eyes light up when they talk about the possibility of working on that as a product of their profession, then they’re probably for us.”

CORY ROSENTHAL

EXECUTIVE MANAGING DIRECTOR & NATIONAL DIRECTOR, MULTIFAMILY cory.rosenthal@matthews.com (646) 974-5705 IN COLLABORATION WITH

BROCK EMMETSBERGER

TREND TRACKER: TRANSACTION MOVEMENT

The Matthews™ New York specialists are currently marketing properties in Chelsea at pricing that is 2530% lower than where comparable properties sold for on a price per square foot basis in 2015, showing that upside in both yield and basis is available.

The current interest rate environment will create opportunities for future recapitalization, appreciation, and outsized returns in a market that has historically had the highest barrier of entry. Transaction volume is expected to remain low, while attractive yields for first-time Manhattan buyers persist. Both pricing and volume are expected to increase when the Federal Reserve begins a consistent campaign to target lower interest rates.

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WE LOOK FOR PEOPLE WHO HAVE SPENT TIME HERE, ARE ENTHUSIASTIC ABOUT WHAT THE CITY OFFERS, & RECOGNIZE IT'S UNIQUENESS IS NOT SOMETHING YOU CAN FIND ANYWHERE ELSE.

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NEW YORK N E W YO R K

As Manhattan multifamily, mixed-use, and retail-driven property values have remained relatively stagnant since Q2 2023, a once-in-a-decade opportunity is presenting itself for investors to purchase at 10year highs for yield and 10- to 20-year lows on a price per square foot basis, depending on property location and degree of rent regulation. The market is currently experiencing the longest sustained duration of offering properties for sale in downtown Manhattan with above 6% yields since 2010-2011, as well as multifamily buildings selling for below $500 per square foot, which has also not occurred in prime downtown markets since 2010-2011.

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HOSPITALITY HOTSPOTS MARKETS TO WATCH THE SOUTHE AST ’S SHINING ACTIVIT Y Events and new deliveries make the Southeast a standout region nationally. In just the first quarter, the Southeast added over 6,000 rooms, a large jump compared to the 3,600 rooms that opened in Q1 2024. Of these new additions, more than half opened in Florida, with around a quarter opening in Georgia. Combined, both states are looking forward to hosting a variety of events.

FLORIDA LE ADS SOUTHE AST HOTEL OPENINGS IN Q1 2025

Number of Room Deliveries in the Quarter

Source: CoStar Group, Inc. 3,500

3,226

3,000 2,500

2,482

2,000 1,500 1,076

1,463 852

1,000

471

500 0

16 Florida Q1 2024

Florida Q1 2025

Georgia Q1 2024

■ Economy and Midscale

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Georgia Q1 2025

48

North Carolina North Carolina South Carolina South Carolina Q1 2024 Q1 2025 Q1 2024 Q1 2025

■ Upper Midscale and Upscale

■ Upper Upscale and Luxury

FLORIDA B OASTS FULL E VENT SL ATE

see hundreds of thousands of visitors arrive for the events, and is forecast to have a total $1.3 billion economic impact on Miami-Dade County.

Although Florida led the region in new deliveries for the first quarter, it recorded a decline in sales.

Associate Vice President Mabelle Perez stated transactions in Florida have fluctuated for the past few years. “Sales activity went parabolic in Florida from 2021 through 2023,” Perez stated. “In 2024, concerns around interest rates, insurance, and the presidential election all created a perfect storm to decrease sales activity coming into Q1 2025.”

The state recorded a total $9.7 billion in transactions for the first quarter, led by the Full Service segment, but this volume is still a decrease from the $13.5 billion achieved in Q1 2024. Despite this slowdown, Florida added 3,226 rooms that opened in the first quarter of this year. About two-thirds of the new additions are in the Full Service segment, with two 750-room hotels delivering in Orlando.

As the state adjusts to the deliveries, it is also preparing for new events that will drive room bookings. One of the most notable events on the way is the 2026 FIFA World Cup, which will feature Miami as a host city next year. The events will begin in June and July, but Miami officials are already preparing for visitations. The city is expected to

Hard Rock Stadium will welcome visitors, and nearby areas like Wynwood, Downtown, and Miami Beach will also become hotspots. Spillover benefits are also expected to aid Fort Lauderdale and West Palm Beach, thanks to the Brightline high-speed rail system. With service connecting to these metros, as well as Orlando, hoteliers can capitalize on increased visitations for the World Cup. Other metros across the state are recording increased activity, according to Perez. “Places like Tampa, Sarasota, and Fort Myers are heating up,” Perez said. “People are drawn to better cap rates, infrastructure growth, and population migration in these areas.”

Tampa, specifically, is notable for its job growth, cruise traffic, and airport expansion, which are all enticing factors for investors.

“Florida as a whole will remain a top target,” Perez emphasized. “We’ve got population growth, no state income tax, and a tourism economy that keeps evolving. I don’t see that slowing down anytime soon.”

EVENT LINEUP

FLORIDA SALES DIP IN Q1 2025

Source: CoStar Group, Inc.

(MIAMI, ORLANDO, AND WEST PALM BEACH)

16 14

Billions ($)

12 10 8 6 4 2 0

Q1 2024

Q2 2024

Q3 2024

Q4 2024

Q1 2025

MATTHEWS™ | 137

DEMAND GAINS IN THE SOUTHE AST Similar to Florida, Georgia also noted ongoing hotel construction in the first quarter with the addition of 1,463 rooms. Atlanta consistently benefits from an influx of travelers, due to the presence of HartsfieldJackson International Airport. In 2024, the airport served 58.8 million passengers, which is a 10% increase over the previous year. Corporate travelers greatly contribute to the airport’s activity, with corporate demand rising in the second half of 2024.

Atlanta is also set to host World Cup events next year with eight matches, as well as one semifinal. The matches are expected to total an economic impact of $1 billion, and the metro estimates more than 300,000 visitors arriving for the tournament. There is a $120 million initiative in the works to prepare the city for its guests, and hoteliers are already preparing to accommodate the visitor influx.

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North and South Carolina are noting increased visitations, due to their strength as popular destinations for both corporate and leisure travel.

In Charlotte, the metro’s prominence as a financial center allowed for an increase in group travel, with group business accounting for about a quarter of its performance in 2024. This comes as the metro hosted about 45 events at the Charlotte Convention Center. Now, Charlotte is expected to note RevPAR growth of more than 5% for the rest of 2025.

Charlotte’s construction pipeline will continue increasing to meet demand, according to Associate Lane McCool. “Though particularly for business and convention-related travel, Charlotte is seeing steady demand growth,” McCool said. As more visitors arrive in the metro, there are about 1,800 rooms underway, and more than 3,600 rooms are planned with openings in 2026 and after.

McCool added that Raleigh-Durham is another key metro that benefits from constant business travel.

“Raleigh-Durham stands out due to its thriving technology, life sciences, and academic sectors,” McCool stated. “With proximity to major universities and 29 hotels planned or under construction in Wake County, this indicates strong developer confidence in long-term demand.”

The Research Triangle in the metro is a prominent area to watch, due to its economic strength and business travel. Its successful performance led Raleigh-Durham to record an occupancy rate of 66.9% at the end of Q1 2025.

While Charlotte and Raleigh-Durham are frequently visited as corporate travel destinations, Charleston is a standout market for leisure travel. The metro is home to several historical sites, and is also appealing for its beaches and golf courses. Despite its enticing location and variety of leisure opportunities, Charleston has a high barrier to entry, due to limited developable land and zoning regulations.

This difficulty led to only 72 rooms opening in 2024, but now there are more than 3,000 rooms in the planning phase, with the upscale segment accounting for 56% of the inventory. Vice President Mitchell Glasson stated that strategic timing is key when it comes to Charleston’s construction pipeline.

“Investors should focus on upscale and upper midscale properties, which maintain strong occupancy at 72% and offer stable returns,” Glasson emphasized.

EVENT LINEUP

ATLANTA , CONCORD, CHARLOTTE, CHARLESTON

One new development that leisure travelers can look forward to is The Cooper, which will open on the eastern side of Charleston in June 2025. The upper upscale hotel consists of 209 rooms, five dining locations, a meeting center, a rooftop pool, and more. The Cooper will deliver in the Charleston/West Ashley submarket, which Glasson noted as a highperforming area in the metro. “Despite flat RevPAR growth in 2024 at $120.27, Charleston/West Ashley’s dominance with a $183.52 RevPAR highlights its premium positioning,” Glasson said.

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CALIFORNIA BEGINS HOSPITALIT Y RECOVERY Across the state, California recorded struggles in visitations since COVID-19. The Bay Area was one of the hardest-hit markets, noting decreases in international and domestic travelers. This slowdown is one factor that led to one of the metro’s most difficult periods in transaction volume, according to Associate Ryan Sanchez. “In the two years leading up to 2025, we saw a significant downturn in overall transaction volume, with 2024 being the fourthlowest year in the last 15 years,” Sanchez said.

Now, the Bay Area is forecast to slowly start noting a recuperation in its hospitality sector as higher-end hotels are outperforming lower-tier hotels. “Room rate increases for non-luxury hotels are lagging behind inflation, compressing profit margins as operational costs continue to climb,” Sanchez stated.

EVENT LINEUP

LOS ANGELES, BAY AREA, SAN DIEGO

140 | SUMMER 2025

“In essence, luxury hotels are regaining the ability to command higher prices, whereas budget hotels struggle to achieve meaningful rate increases in real terms,” Sanchez explained.

Several events are on the way in the Bay Area, which will increase both international and domestic visitations. Expectations for convention room night bookings are forecast to be greater than 600,000 this year, which will be approximately 40% above 2024 levels. San Francisco will continue to see an uptick in visits moving forward as it is hosting the 2026 Super Bowl and is a host city for the World Cup.

MIDWEST DEMAND SHIF TS New opportunities in the technology industry increased performance in Midwest markets.

Specifically, Columbus is gaining attention for its Intel semiconductor investment, according to Associate Luke Whittaker. “The market is evolving into a tech-centric, innovation-driven place, which is creating a ripple effect on corporate travel and extended-stay demand,” Whittaker stated. Across the region, Whittaker noted that Indianapolis is benefiting from its strong calendar of conventions and sports tourism, while suburban areas in Chicago are seeing renewed interest because of industrial growth and regional business travel.

As the Midwest records an uptick in visitors, it is also noting a change in activity within its hospitality segments. Visitors are now most attracted to selectservice and extended-stay hotels, which led to these sectors outperforming in the Midwest.

“These properties tend to be more costefficient to operate and cater to a mix of transient, corporate, and long-term guests— especially construction crews, healthcare travelers, and government-related stays,” Whittaker said.

The increase in demand for these hotels will also benefit smaller Midwest cities. “Affordability, infrastructure investment, and population shifts to lower-cost regions will continue to attract both institutional and private capital,” Whittaker stated.

These trends are expected to stay moving forward, which will aid the entire region.

EVENT LINEUP

CHICAGO, INDIANAPOLIS, COLUMBUS

MATTHEWS™ | 141

NATIONAL TRENDS AND FORWARD E X PECTATIONS

with March noting the greatest occupancy rate at 75%. New rooms in this segment are also expected to rise, with 42,000 rooms under construction expected for delivery this year and in 2026.

Extended-stay hotels are not only recording increased demand in the Midwest, but also across the country.

Other trends that will benefit the hospitality sector include the addition of technology efficiency in business models. “Automation is picking up with mobile check-in, AI-enhanced operations, and leaner teams,” Perez stated. “Cap rates will stay tight in core markets, but value-add and conversion opportunities will offer great upside in less saturated areas.” New activity also includes how rising insurance premiums are pushing buyers to look at newer builds or inland assets that are better prepared for storms.

“Buyers are asking deeper questions about flood zones, roofs, and insurance, which will matter more in underwriting,” Perez said. Overall, these new changes in the hospitality industry will set the stage for top performance in the years to come.

“Extended-stay is leading the pack in terms of developer and investor demand,” Perez expressed. “They’re operationally efficient, have stable occupancy, and appeal to workforce and long-term guests.”

Due to their popularity, the extended-stay sector recorded stable performance in the first quarter of 2025. Occupancy averaged 70% in this timeframe,

MITCHELL GLASSON

MABELLE PEREZ

LANE MCCOOL

mitchell.glasson@matthews.com (949) 432-4502

mabelle.perez@matthews.com (786) 206-9739

lane.mccool@matthews.com (980) 256-6991

142 | SUMMER 2025

RYAN KAWAI SANCHEZ

LUKE WHITTAKER

ryan.sanchez@matthews.com (949) 287-5854

luke.whittaker@matthews.com (317) 493-0055

STABILITY The Key to Unlocking Multifamily Market Momentum

The U.S. multifamily market is navigating a complex, transitional period, marked by both mounting pressures and promising opportunities. In a wideranging conversation that touched on multifamily investing, fiscal policy, and investor psychology, Capital Markets FVP and Director Clark Finney delivers an unfiltered assessment of the sector’s central challenge.

MARKETS THAT ARE DEPENDENT ON economics thrive in stability. And any level of marginal stability that people can count on will naturally increase transaction volume.

It isn’t interest rates or recession fears–it’s instability.

Instability continues to shape the multifamily landscape, as macroeconomic pressures—including elevated interest rates, persistent inflation, and a growing national debt—apply sustained downward force. The wave of upcoming debt maturities adds another layer of complexity, presenting both challenges for existing owners and opportunities for well-capitalized buyers.

Yet amid these headwinds, early signs of recovery are emerging. Capital markets, while still wary, are beginning to show increased liquidity and a gradual return of financing options. Meanwhile, resilient tenant demand and a rebalancing of supply dynamics have helped correct property values, with recent trends indicating that the sector may be approaching a period of stabilization.

STABILITY, HOWEVER INCREMENTAL, is what will unlock volume.

MATTHEWS™ | 143

PRE-COVID TO PRESENT: A SHIFT IN CHAOS, NOT CLARITY Finney’s perspective on the multifamily market is both lived and learned. “I grew up in multifamily, literally in an apartment,” he reflects. Now entrenched in the capital markets as a broker, Finney has witnessed firsthand how volatility, fiscal and monetary policy, and investor psychology has redefined the sector’s landscape. “It’s been a treadmill,” he said of the post-COVID period, marked by surging yields, overleveraged bridge loans, and policy whiplash. “Progress? Maybe. But we’re still on edge.”

Now in 2025, interest rates remain elevated and erratic, a defining force in the commercial real estate market’s cautious posture. “The 10-year Treasury was 4.5% last year, and it’s 4.5% today,” Finney observed. “But the real shift has been psychological.” The industry has begrudgingly accepted a new normal, where buyers, sellers, and lenders have recalibrated expectations and started to transact, despite elevated borrowing costs.

The new normal, however, is anything but straightforward.

The Federal Reserve’s monetary policy has been a major influence on rate dynamics, driving the effective federal funds rate to 4.33% by May 2025 after an aggressive tightening cycle. While Fannie Mae forecasts a gradual decline, to 3.9% by Q4 2025 and 3.1% by Q4 2026, the behavior of the 10-year Treasury yield has told a different story.

Between September and December 2024, even as the Fed began cutting shorter-term rates, the 10-year Treasury yield rose from roughly 3.6% to 4.8% by mid-January 2025.

This counterintuitive movement, where long-term rates increased even as short-term policy rates fell, created a disconnect that further complicated financing conditions for commercial real estate.

Investors demanded a greater yield to compensate for long-term inflation uncertainty, pushing commercial mortgage rates higher just as the market was hoping for relief.

Recent Treasury data reflects this volatility: Jan Feb Apr May

4.63% 4.45% 4.28% 4.5%

While Fannie Mae projects the 10-year to average around 4.3% through 2025 and 2026, with a modest drop to 4.2% in Q4 2025, many in the industry, including Finney, remain skeptical that rate stability is imminent.

Persistent interest rate turbulence has had a ripple effect, especially on loans originated during the lowrate years of 2020-2021. Many of these were shortterm, floating-rate deals that are now maturing into a much harsher environment. The result is a growing number of “performing matured” loans–deals past their maturity date but still active under extension agreements. Refinancing in today’s market is no easy feat.

THERE’S NO PRODUCT OUT THERE that’s going to save some of these borrowers,” Finney admits.

Yet, he also sees a silver lining: this stress is giving rise to innovative structured finance solutions and creating openings for well-positioned buyers.

THE MARKET HAS FINALLY ACCEPTED that this is what it is. That mindset shift– however reluctant–has at least brought some clarity. And clarity, even at higher costs, is better than chaos.”

144 | SUMMER 2025

THE THREE PILLARS OF PROGRESS: EXPECTATION, VOLATILITY, EQUITY 1. EXPECTATION MANAGEMENT After years of dislocation, buyers have adapted to underwriting deals with 5.5% coupons, and sellers have relinquished the dream of 2021-level valuations. “Nobody loves these numbers,” Finney admitted, “but at least we all know where we stand.” This alignment has injected some life back into originations and transactions. “There’s finally a shared baseline,” Finney says, “and that alone has brought people back to the table.”

2. VOLATILITY IN THE BOND MARKET Persistent rate volatility continues to paralyze confidence. “The 10-year Treasury is bouncing 20 basis points every other week,” Finney explains. “How can you close a 90-day deal when your cost of debt keeps changing?”

Indeed, long-term rates, critical benchmarks for 75-85% of all multifamily loans, remain erratic.

“Even if people don’t love a 6.5% coupon,” Finney notes, “they’d rather that than a world where it might be 6.0% one day and 7.2% the next. Predictability, even when painful, enables action.”

3. EQUITY ON THE SIDELINES Despite headlines about “dry powder,” most investors aren’t deploying. “It’s not that the numbers don’t work, it’s psychological,” Finney emphasizes. “People are shell-shocked. They’re keeping cash in the bank, bracing for their kid’s tuition, a new car, or a 7% mortgage reset.”

Even institutional investors are hesitant.

“There’s barely any equity out there. Every deal we’re working on right now, even great ones, had an equity shortfall.” Finney attributes this to widespread risk aversion and a pervasive wait-and-see mindset, exacerbated by macroeconomic crosscurrents.

INFLATION AND THE EROSION OF CONFIDENCE Inflation remains elevated, with the Consumer Price Index (CPI) now 13% above pre-COVID trends.

Headline Personal Consumption Expenditures (PCE) inflation is forecast at 3.2% for 2025, revised upward due to persistent supply chain disruptions and the inflationary impact of new tariffs implemented earlier this year.

EVERY TIME WE FEEL LIKE INFLATION is under control, something else throws fuel on the fire,” Finney says. “Whether it’s government spending or tariffs, it all finds its way into pricing and into people’s heads.”

This inflation dynamic has direct implications for multifamily owners: rising insurance premiums, property taxes, maintenance costs, and construction expenses. These all erode net operating income. At the same time, tenants’ rent thresholds are hitting affordability ceilings. “You want to push rents to offset costs, but you can only push so far before you lose tenants,” Finney explains. “We’re walking a tightrope.”

FISCAL INSTABILITY AND ITS SPILLOVER EFFECT With the national debt surpassing $36 trillion and projected to hit $46 trillion by 2035, all three major credit rating agencies have downgraded the U.S. government. This has raised borrowing costs and injected further uncertainty into long-term capital markets.

The debt-to-GDP ratio FY 2024 2025 2035*

123% 100% 118% *projected to suprass historical peaks

MATTHEWS™ | 145

“What the bond market needs is a signal that we’re even trying to fix this,” Finney says. “But instead, we’re cutting taxes and increasing spending. You can’t run a country like that and expect confidence to hold.”

As sovereign risk premiums rise, multifamily borrowers are directly impacted. Higher Treasury yields mean more expensive debt, which in turn depresses property values and complicates refinancing for assets already struggling with high leverage.

New trade policies have added another layer of complexity.

Tariffs introduced in early 2025 are expected to reduce long-run U.S. GDP by nearly 1%, while increasing consumer prices. “We’re basically taxing ourselves for no gain,” Finney says. “And it’s creating stagflation risk–lower growth and higher prices. That’s the worst combo for real estate.”

Recent economic forecasts are reflecting that concern. The Congressional Budget Office (CBO) projects real GDP growth to slow from 2.3% in 2024 to 1.9% in 2025. The Survey of Professional Forecasters goes further, lowering its 2025 GDP forecast to just 1.4%.

IT’S LIKE WE’RE ON THE EDGE OF A soft landing,” Finney notes, “but one gust of bad data could turn it into a crash.”

HOUSEHOLD STRESS Beyond the headlines, Finney is keeping a close eye on consumers. Auto loan delinquencies have risen sharply, and Buy Now, Pay Later (BNPL) defaults are creeping up. “People are still spending, but a lot of it is on credit or deferred payments.”

IT TELLS ME MIDDLE-CLASS AMERICA is stretched thin. That’s the renter base for most of these Class B and C properties,” Finney warns. “If they start pulling back, demand softens, and that hits landlords hard.”

146 | SUMMER 2025

Despite financial strain, U.S. retail sales rose 5.2% year-over-year in April 2025, and international travel volumes exceeded pre-pandemic levels. “It’s the paradox of this market,” Finney reflects.

PEOPLE ARE MAXED OUT . . . and still spending. We’re either on the edge of a pullback or we’re more resilient than we think.”

New and used vehicle sales also continue to recover, and restaurant spending remains strong. While encouraging, Finney urges caution: “The consumer is propping up this recovery, but it’s built on a fragile foundation. If job numbers slip or credit tightens further, it could turn quickly.”

EQUITY MARKET OPTIMISM VS. REAL ECONOMY CONFLICT Meanwhile, equity markets have surged to record highs, with the S&P 500 breaking 6,100 in early 2025. But Finney remains wary of drawing parallels to the real estate market. “The stock market is not the economy. Just because Apple’s up 12% doesn’t mean your cap rate is dropping.”

He points to concentrated gains in tech, the anticipation of future Fed cuts, and excess liquidity as drivers of market euphoria. “We need to be careful not to let Wall Street’s optimism distort Main Street’s reality.”

SOFT VS. HARD LANDING: PREPARING FOR BOTH The road ahead is uncertain, and Finney believes multifamily investors need to prepare for both upside and downside scenarios.

If inflation moderates and the Fed cuts rates gradually, there’s potential for a late-2025 recovery.

But if consumer stress deepens or trade-related inflation spikes, recession risks mount.

“If earnings fall and layoffs rise, that’s when the equity drawdown happens,” Finney warns.

“And that’s when a lot of real estate valuations get re-tested.”

SCRAPPY OPERATORS ARE STILL getting deals done,” Finney says. “But you have to be disciplined. The winners in this market are going to be the ones who underwrite conservatively, structure creatively, and stay close to the ground.”

As for what will mark the real turning point? “When expectations are managed, bond markets calm down, and equity comes off the sidelines—that’s when the engine restarts,” Finney says. “Until then, it’s about survival and positioning.”

MULTIFAMILY MARKET PERFORMANCE: STABILITY EMERGING FROM THE STORM The multifamily sector in 2025 is working through a turbulent yet transitional period. While macro-level uncertainty continues to weigh heavily on capital markets, property-level fundamentals are showing signs of stabilization.

DEALS ARE GETTING DONE . . . just not home runs,” Finney says.

“If the rate holds steady, people can underwrite again. It’s not pretty, but it’s stable.”

Vacancy rates peaked at 6.0% earlier this year but are now tracking toward 4.9% by year-end as demand steadies and completions slow.

RENT GROWTH AND TENANT SENSITIVTY After explosive growth in 2021–2022, rent increases flattened out in 2023 and early 2024.

Fannie Mae projects a 2–2.6% growth for 2025, with a potential rebound in 2026. Still, affordability ceilings are real. “You’ve got tenants walking away over $25,” Finney notes.

“It’s not just about comps anymore—it’s about real-life budgets.”

The percentage of units offering concessions remains high, especially in oversupplied metros.

But Finney emphasizes that this is cyclical: “A lot of these markets are just digesting supply. If they can get through this year without bleeding rent rolls, they’ll be in better shape next year.”

INVESTMENT ACTIVITY IS THAWING Property values are still down more than 20% from their 2022 highs, but recent cap rate compression hints at a turning point. Investors are beginning to step in, drawn by lower basis deals and improving yield profiles.

“You’re not going to get rich overnight,” Finney says. “But if you can buy at or below replacement cost, solve the debt side creatively, and wait out the volatility—there’s money to be made.”

SUPPLY & DEMAND: A NARROWING GAP Following the pandemic-era construction surge, new supply is finally cooling. Multifamily starts are down 74% from 2021 peaks, and permit activity dropped 24% in 2024. Deliveries remain elevated, but the pipeline is shrinking.

Absorption rates have recovered from 2022 lows 2024 2025

+550,000 UNITS ABSORBED 370,000*

*projected

MATTHEWS™ | 147

Transaction volumes remain well below pre-2022 levels, but momentum is building. Q4 2024 saw a 33% quarter-over-quarter increase in volume, and major investors like Blackstone and KKR have re-entered the market with multi-billion-dollar multifamily acquisitions.

Many are pursuing creative capital stacks involving structured notes, mezzanine debt, and preferred equity. But for some, Finney is blunt, “there’s no product that can save them. They’re handing back the keys.”

Finney sees this as a pivotal moment: “Smart capital is sniffing around. Everyone’s hunting for value-add. Turnkey deals are a harder sell right now unless they’re deeply discounted.”

A STAGGERING $351.8B

REGIONAL DYNAMICS: NO MORE NATIONAL PLAYS The days of nationwide one-size-fits-all strategies are over. Some Sunbelt markets, flush with pandemic-era development, are facing weak absorption and rising distress—Houston, for instance, has a criticized loan share of 38%.

in multifamily bank loans alone are scheduled to mature between

2023

2027

OUTSTANDING COMMERCIAL MORTGAGES SET TO MATURE IN 2025

$957B 20% of the total

$4.8T TOTAL

IF YOU’RE NOT UNDERWRITING block-by-block, you’re missing the mark,” Finney says. “The spread between top and bottom quartile markets has never been wider. This is where local knowledge is a must.”

Meanwhile, legacy markets like New York and Los Angeles are showing quiet resilience, with vacancy tightening and rent growth returning.

LOAN MATURITIES: THE QUIET RECKONING A wave of multifamily loan maturities is underway, and many borrowers are running out of options.

“They’ve extended two, three times. Now lenders are saying, ‘we’re done,’” Finney adds.

With nearly $1 trillion in commercial mortgages maturing in 2025 alone, borrowers who financed under ultra-low-rate conditions in 2021 are facing refinancing hurdles in a much tighter credit environment.

148 | SUMMER 2025

The rise in “performing matured” loans—those technically past due but kept alive through shortterm extensions—indicates mounting pressure beneath the surface. “These aren’t going to hit the open market,” Finney notes. “The lender doesn’t want their dirty laundry out there either.”

Instead, expect many troubled assets to quietly change hands through off-market placements with well-capitalized buyers.

Despite the looming maturity wall, capital is beginning to flow again.

Total commercial and multifamily mortgage borrowing and lending is projected to increase by 16% to $583 billion in 2025, up from $503 billion in 2024. Multifamily lending alone is expected to reach $361 billion, also a 16% increase. The Mortgage Bankers Association (MBA) anticipates further growth in 2026, with total CRE lending reaching $709 billion and multifamily accounting for $419 billion.

PEOPLE FINALLY STOPPED HOLDING their breath,” he said. “Once sellers, buyers, and lenders aligned on what ‘normal’ looks like, even if it’s not ideal, deals started to move again.”

Finney attributes this rebound to improved pricing transparency and more widespread acceptance of current market conditions.

Multifamily loan spreads narrowed 149 bps, reaching their lowest point since Q1 2022. This tightening of spreads is a positive development for borrowers, indicating increased competition among lenders. Banks led with a 34% share, up from 22% in Q4 2024, reflecting strengthened balance sheets and a favorable regulatory environment. CMBS conduits emerged as the second most active group with a 26% share, a substantial increase from 9% a year prior. Life companies maintained a steady 21% share. In contrast, alternative lenders, including debt funds and mortgage REITs, saw their share decline sharply to 19% from 48% a year earlier.

Government agency lending for multifamily assets also saw a 15% year-over-year increase, reaching $22 billion in Q1 2025.

CONCLUSION: STABILITY THROUGH SELECTIVITY The U.S. multifamily market enters the second half of 2025 at a pivotal juncture, pressured by economic headwinds, yet buoyed by solid fundamentals and improving capital flows. While global dry powder remains plentiful, investor sentiment is cautious, shaped by stagflation fears, rising delinquency signals in consumer credit, and policy volatility.

In this environment, capital is becoming more selective—flowing into resilient sectors like multifamily, but only where risk is matched by compelling upside.

Finney offered a grounded perspective:

THE NEXT THREE MONTHS ARE GOING to be extremely telling.” With inflation, trade dynamics, and consumer behavior all in flux, market direction could swing sharply. Still, Finney is guardedly hopeful. “We survived 2024,” he said. “And if I’m being honest, I feel more confident about America today than I did a year ago.”

Ultimately, multifamily investing in 2025 is less about timing the bottom and more about navigating volatility with discipline and vision. “Real estate’s not rocket science,” Finney added. “It’s who’s willing to work the hardest, the longest, to find the deal that pencils.” In a market defined by complexity, that scrappy persistence—and a clear-eyed view of risk— may be the greatest competitive advantage of all.

CLARK FINNEY clark.finney@matthews.com (214) 530-5496

MATTHEWS™ | 149

REGIONAL SHOPPING CENTER Report

Matt LoPiccolo

(858) 289-3957 MATT.LOPICCOLO@MATTHEWS.COM

Grayson Duyck

(214) 295-4247 GRAYSON.DUYCK@MATTHEWS.COM

Jeff Enck

(470) 704-8872 JEFF.ENCK@MATTHEWS.COM

Ed Laycox

(332) 232-9404 ED.LAYCOX@MATTHEWS.COM

Joanna Rotonde Manfro (203) 253 8827 JOANNA.MANFRO@MATTHEWS.COM

Patrick Forkin

(773) 279-5390 PATRICK.FORKIN@MATTHEWS.COM

150 | SUMMER 2025

SHOPPING CENTERS National Overview

Supply and Demand The U.S. consumer is facing a wave of headwinds that look poised to slow retail spending in 2025.

Consumer sentiment has plummeted to lows not seen since the pandemic began, and many economists are worried about a second round of inflation due to the inventory shocks associated with the new trade policy. Credit card debt maturities are rising to levels not seen since the Great Financial Crisis, and student loan payments resumed in full this Spring. All of this suggests retail could be in trouble, but the reality is that there is a shortage of highquality retail space, and the pullback in consumption is expected to slow growth rather than turn negative.

NATIONAL QUARTERLY SHOPPING CENTER SALES VOLUME $6B

$12B

$18B

$24B

2019

2020

2021

2022

2023

The shopping center market has been historically tight over the last three years, so much so that tenants are finding it difficult to find spaces to expand into. Investors targeting value-add plays are coming up dry, and tenants are staying in older centers longer than they would like. While store closures are never good for all retail landlords, loosening vacancy rates in 2025 is likely to spark a wave of new leases from recent retail winners.

2024

2025 Source: Matthews™, CoStar Group, Inc., Capital Economics

Sales Trends Rent Trends Shopping centers have recorded positive rent growth for the longest consecutive stretch on record, a trend which is expected to continue in 2025. The property type has become a safe haven for CRE investors.

Limited new supply and long lease terms have shielded the asset class from the large boom-andbusts felt in multifamily and industrial markets, while new and exciting trends in the experiential retail space have helped the product evolve.

Transaction activity is roughly in line with prepandemic figures but still sits nearly 40% below the peak level recorded in 2022. The market, however, has shown positive signs in 2025, with Q1 showing 25% more deal activity than in the first quarter of last year. Driving this surge is the return of widespread institutional activity. These investors often have access to the best information, and their willingness to acquire more space shows significant confidence in the future of retail. Retail pricing has also held up better than the other major property types, with the price per square foot of shopping centers rising 6.1% over the past 12 months.

MATTHEWS™ | 151

WEST WEST TOTAL

EAST BAY

LOS ANGELES

SAN DIEGO

SAN FRANCISCO

ORANGE COUNTY

Vacancy

6.2%

7.0%

7.1%

5.4%

9.5%

4.3%

Average Rent

$30.20

$34.58

$37.98

$37.60

$45.94

$39.38

Rent Growth

+1.9%

-0.2%

+0.5%

+2.8%

+0.7%

+4.8%

Space Under Construction

4.7M SF

162K SF

419K SF

332K SF

103K SF

114K SF

Source: Matthews™, CoStar Group, Inc.: Through Q1

Demand Drivers The West Coast remains the costliest retail market for investors to break into, a factor which is largely attributed to the region’s high-skill workers and elevated disposable income. Suburban retail centers across the West have demonstrated resilience and stronger performance compared to some urban cores, adapting to shifts in work and lifestyle patterns. Looking ahead, recent return-to-office mandates are likely to benefit urban retail corridors, particularly in Los Angeles and San Francisco.

The strength of California’s tech sector, particularly in AI and semiconductors, is anticipated to create positive spillover effects on consumer spending from its high-earning workforce. The high population growth observed over the last two decades has led to the region occupying eight of the top 10 most retail-scarce metros in the country per population.

RETAIL SPACE PER CAPITA: LOWEST 10 METROS

Source: Matthews™, CoStar Group, Inc., Capital Economics 40.0

SAN JOSE

West Coast

WASHINGTON D.C.

40.9

SAN DIEGO

42.1

Other

INLAND EMPIRE

42.7

National

NEW YORK

42.8

SEATTLE

43.0

EAST BAY

43.8

SACRAMENTO

45.8

ORANGE COUNTY

45.8

LOS ANGELES

46.4 55.9

MAJOR METRO AVG. 32

39

46

53

SQUAR E FEET PER PERSON

The demand is there from investors, most people are just trying to wait out interest rates or pricing, but if we saw even a minor reduction in entry costs, transaction volume would rise rapidly. The fundamentals in the market are too strong for investors to overlook.

- Matt LoPiccolo

SENIOR VICE PRESIDENT

152 | SUMMER 2025

60

LENDER COMPOSITION 3%

Sales Trends Q1 2025 was the strongest on record for West Coast shopping centers since Q1 2022 when interest rates were nearly 250 basis points lower. Institutional investors have significantly ramped up activity in West Coast metros, with 90% of the deal volume in some cities attributable to these types of investors.

These factors culminated in a very active start to 2025, propelling sales volume ahead of prepandemic levels. This could spark a rapid increase in activity if interests do fall in H2 2025.

19%

17%

11%

9% 13%

34%

57% 36% 2024

The rise in confidence is not just among investors, as many lenders and banks are reporting a heightened appetite for shopping center loans in the first four months of 2025. Competition from lenders will help ease financing costs as spreads narrow in order to secure deals.

Bank

CMBS

2025 Through April Financial

Insurance

Private/Other

Source: Matthews™, CoStar Group, Inc., Real Capital Analytics: Through April ’25

WEST TOTAL

EAST BAY

LOS ANGELES

SAN DIEGO

SAN FRANCISCO

ORANGE COUNTY

PPSF

$292

$321

$386

$361

$518

$409

PPSF GROWTH

+0.6%

+1.6%

-1.2%

+0.3%

-4.8%

+3.3%

CAP RATE

6.3%

5.8%

5.7%

5.8%

5.2%

5.3%

12-MONTH DOLLAR VOLUME

$10B

$594M

$2B

$970M

$245M

$735M

DOLLAR VOLUME VS 2019

+2%

+131%

+5%

+40%

-63%

+16%

Source: Matthews™, CoStar Group, Inc., Real Capital Analytics: Through Q1

MATTHEWS™ | 153

SOUTHWEST SOUTHWEST TOTAL

AUSTIN

DALLAS-FORT WORTH

DENVER

HOUSTON

PHOENIX

Vacancy

6.5%

4.8%

6.9%

5.7%

7.4%

6.5%

Average Rent

$22.43

$31.22

$25.04

$26.74

$24.72

$25.81

Rent Growth

+1.4%

+1.0%

+4.3%

+2.4%

+1.6%

+3.7%

Space Under Construction

11.0M SF

1.3M SF

2.5M SF

240K SF

2.4M SF

1.7M SF

S O UT HEAST

5%

4%

2%

1%

WEST

3%

M I D-AT L A N T I C

While rising mortgage rates have slowed population migration nationally, the Southwest continues to record elevated population growth despite the headwind. This signals that we could see an even larger spike in move-ins in H2 2025 or 2026, once interest rates moderate.

6%

M I DWEST

The Southwest benefits from its proximity to highcost West Coast locales, and many metros in the Southwest remain the top destination for households moving away from California. This spurred stable population growth, 50-80 basis points above the national average each year this decade. As a result, much of the current development pipeline contains neighborhood and power centers with necessity and grocery-based retailers. This is especially true for rapidly growing cities like Dallas-Fort Worth and Phoenix, which are also the cities recording the strongest rent growth in 2025.

POPULATION GROWTH BY REGION SINCE 2020

N O RT HEAST

Demand Drivers

Source: Matthews™, U.S. Census Bureau

Restaurants are the most active in the market right now–especially franchise concepts and freestanding quick-service formats like Cava. We’re also seeing a lot of boutique fitness-class-based models like pilates, yoga, barre, are outperforming the big-box gyms.

- Grayson Duyck

VICE PRESIDENT

154 | SUMMER 2025

S O UT HWEST

Source: Matthews™, CoStar Group, Inc.: Through Q1

LENDER COMPOSITION

Sales Trends

18%

21%

3%

Activity is ramping up across the five states that constitute the Southwest, so much so that April transaction volume was already 50% of the Q1 total for shopping centers. Both institutions and REITs have been net buyers here through the first four months of 2025, typically the first firms to become active at the start of a new cycle. This is an encouraging sign, as these areas recorded some of the strongest pricing growth and cap rate compression in the country during 2021 and 2022, but have also been some of the most affected by rising interest rates.

7% 39%

43%

37%

32%

2024 Bank

2025 Through April CMBS

Financial

Insurance

Source: Matthews™, CoStar Group, Inc., Real Capital Analytics: Through April ’25

Because population growth is driving much of the need for new retail space, sales pricing for suburban shopping centers has been strongest of late, growing by nearly 4% since interest rate hikes began. Grocery-anchored centers in surrounding suburbs have been highly sought after as a result.

SOUTHWEST TOTAL

AUSTIN

DALLAS-FORT WORTH

DENVER

HOUSTON

PHOENIX

PPSF

$209

$311

$270

$239

$223

$219

PPSF GROWTH

+1.0%

+1.6%

+1.3%

0%

0%

+1.8%

CAP RATE

7.1%

6.2%

6.8%

6.7%

7.3%

6.9%

12-MONTH DOLLAR VOLUME

$5B

$424M

$964M

$609M

$933M

$851M

DOLLAR VOLUME VS 2019

-10%

-25%

-21%

-34%

+44%

-11%

Source: Matthews™, CoStar Group, Inc., Real Capital Analytics: Through Q1

MATTHEWS™ | 155

SOUTHEAST SOUTHEAST TOTAL

ATLANTA

CHARLOTTE

FORT LAUDERDALE

MIAMI

NASHVILLE

Vacancy

5.0%

5.6%

5.2%

4.8%

3.7%

3.9%

Average Rent

$23.71

$24.00

$25.97

$35.62

$51.14

$29.63

Rent Growth

+3.8%

+4.8%

+3.0%

+3.3%

+2.2%

+5.0%

Space Under Construction

8.3M SF

409K SF

244K SF

278K SF

480K SF

723K SF

Source: Matthews™, CoStar Group, Inc.: Through Q1

Demand Drivers The Southeast U.S. economy is projected to continue expanding in 2025, driven by its significant and ongoing population boom. The Southeast grew by more than 3.7 million people from 2020 to 2024, underpinning strong consumer demand and overall economic activity. Florida’s pace of in-migration has slowed slightly in 2025, but growth in Tennessee and the Carolinas is helping the region maintain its rapid population expansion.

This population influx supports generally resilient retail sales. The area has benefitted from a wave of new residents from the Northeast, who bring elevated incomes with them, supporting the need for more retail space. These factors are driving the nation-leading rent growth observed in the region.

While the growth pace in the Southeast might ease slightly in 2025, the underlying economic drivers remain robust. The region’s attractiveness to new residents and businesses is expected to sustain demand for years to come.

Historically, the Southeast has imported a lot of capital from the West Coast and Northeast due to higher yields. That gap is narrowing, but the Southeast remains relatively attractive in terms of cap rates and price per square foot. Migration to metros like Miami, Atlanta, and Charlotte continues to rise–driven by job growth, business-friendly policies, and no or low income taxes.

These factors are translating into persistent demand for essential-service retail.

- Jeff Enck

SENIOR VICE PRESIDENT

2024 INCOME GROWTH RATE

1.6% 1.2% 0.8% 0.4% 0% 156 | SUMMER 2025

1.4%

SOUTHEAST

1.0%

NATIONAL AVERAGE

Source: Matthews™, BEA

LENDER COMPOSITION

Sales Trends

14%

28%

The Southeast has been the strongest region for shopping center sales volume in the U.S. when compared to pre-pandemic benchmarks, an achievement that is a result of the radical transformation most of the region is undergoing. When companies went remote in 2020, workers flocked to the Southeast as a result of its business-friendly policies and higher quality of life. These trends will remain in place, bolstering the region’s diverse set of assets. From highend shopping malls in South Florida to strip centers in rapidly growing places like Raleigh, Charlotte and Charleston, the Southeast has assets that would benefit nearly all investors’ portfolios.

14% 10% 26% 69% 37% 2024 Bank

2025 Through April CMBS

Financial

Insurance

Source: Matthews™, CoStar Group, Inc., Real Capital Analytics: Through April ’25

Nashville stands out based on sales data trends so far in 2025, recording both the sharpest pricing increases and volume recoveries. Despite the rise in borrowing costs, investors are driving property pricing in Nashville higher at the fastest pace of all major metros in the country, increasing by 5.8% from Q1 2024 to Q1 2025.

SOUTHEAST TOTAL

ATLANTA

CHARLOTTE

FORT LAUDERDALE

MIAMI

NASHVILLE

PPSF

$185

$189

$203

$287

$385

$238

PPSF GROWTH

+3.4%

+3.8%

+2.0%

+4.0%

+0.5%

+5.8%

CAP RATE

7.4%

7.2%

7.1%

6.0%

5.8%

6.4%

12-MONTH DOLLAR VOLUME

$9.8B

$1.4B

$591M

$727M

$1.5B

$511M

DOLLAR VOLUME VS 2019

+12%

-7%

+55%

+94%

-21%

+152%

Source: Matthews™, CoStar Group, Inc., Real Capital Analytics: Through Q1

MATTHEWS™ | 157

MID-ATLANTIC MID-ATLANTIC TOTAL

BALTIMORE

PHILADELPHIA

PITTSBURGH

RICHMOND

WASHINGTON D.C.

Vacancy

5.7%

7.5%

6.1%

6.3%

5.3%

5.3%

Average Rent

$22.26

$25.22

$23.51

$16.69

$22.11

$35.12

Rent Growth

+3.0%

+0.6%

+1.4%

-3.1%

+2.6%

+6.3%

Space Under Construction

2.7M SF

117K SF

699K SF

75K SF

64K SF

114K SF

Source: Matthews™, CoStar Group, Inc.: Through Q1

Demand Drivers

The number one reason to deploy capital in the MidAtlantic is the supply and demand situation in the region, the stretch of land from Richmond to Baltimore is home to nearly 12 million people, and building is borderline unfeasible given construction costs. We’re seeing unbelievably rent growth numbers from older and even sometime outdated properties as a result.

The Mid-Atlantic region, encompassing Virginia, D.C., West Virginia, and Pennsylvania, is demonstrating positive economic underpinnings that create a favorable environment for retail sales demand. Broader data for the Mid-Atlantic area indicates a healthy labor market, with nonfarm payrolls showing notable year-over-year increases through late 2024. This expansion in employment across the wider region signifies a growing base of consumers with steady incomes, a key ingredient for sustained retail activity and consumer spending.

The biggest question mark in the region is the impact government job cuts will have on local population and employment trends. Luckily for investors in the market, the labor force here is the most skilled in the nation, unemployment is low, and it is likely the private sector employers in the area would gladly access this pool of workers, providing market stability despite the shock of federal job cuts. The city is recording a shocking 6.3% pace of rent growth at shopping centers, a pace that was likely not projected by even the most aggressive underwriters.

- Ed Laycox

EXECUTIVE VICE PRESIDENT

PERCENT OF ADULTS WITH GRADUATE DEGREES

27%

26%

WASHINGTON D.C.

SAN JOSE

24%

22%

19%

BOSTON

SAN FRANSICO

NEW YORK

Source: Matthews™, U.S. Census Bureau

158 | SUMMER 2025

LENDER COMPOSITION

Sales Trends

19%

28%

The Mid-Atlantic retail property sales market is showing a cautious recovery in transaction activity into early 2025, aligning with national trends. Investor focus is sharpest on resilient, high-quality assets like grocery-anchored shopping centers and retail in prime urban or dense suburban locations. While private buyers continue to dominate acquisitions, REITs and institutions have notably increased their purchasing activity here in recent months.

10% 9%

9%

32% 62% 30% 2024

Property pricing remains a mixed bag across the region’s major metros, but diminished pricing in the face of higher interest rates has helped spark investment activity. Pittsburgh and Baltimore, the two major metros where sales pricing is on a downward trend, have both seen deal volume rise well above pre-pandemic levels over the last 12 months.

Bank

2025 Through April CMBS

Financial

Insurance

Source: Matthews™, CoStar Group, Inc., Real Capital Analytics: Through April ’25

MID-ATLANTIC TOTAL

BALTIMORE

PHILADELPHIA

PITTSBURGH

RICHMOND

WASHINGTON D.C.

PPSF

$174

$191

$170

$127

$162

$309

PPSF GROWTH

+1.2%

-2.6%

0%

-3.8%

+1.9%

2.3%

CAP RATE

7.7%

7.4%

7.5%

8.4%

7.8%

6.7%

12-MONTH DOLLAR VOLUME

$3.3B

$583M

$375M

$133M

$337M

$1.3B

DOLLAR VOLUME VS 2019

-11%

+42%

-24%

+51%

+4%

-4%

Source: Matthews™, CoStar Group, Inc., Real Capital Analytics: Through Q1

MATTHEWS™ | 159

NORTHEAST NORTHEAST TOTAL

BOSTON

NEW HAVEN/ FAIRFIELD

NEW YORK CITY

NORTHERN NEW JERSEY

PROVIDENCE

Vacancy

5.6%

3.3%

7.8%

5.7%

4.6%

4.3%

Average Rent

$30.00

$29.40

$25.98

$71.71

$29.81

$19.99

Rent Growth

+1.0%

+0.8%

1.2%

-0.5%

+2.3%

+1.5%

Space Under Construction

3.1M SF

417K SF

312K SF

762K SF

464K SF

32K SF

Source: Matthews™, CoStar Group, Inc.: Through Q1

Demand Drivers Distinct economic characteristics set the Northeast apart from other U.S. regions, significantly influencing its retail real estate dynamics. The region’s tightly packed urban cores, established infrastructure, and greater land-use restrictions contribute to chronically tight retail market conditions. This scarcity means that even modest growth in consumer demand can exert sizable upward pressure on rents. This translates to strong performance metrics at well-located shopping centers that can offer a mix of essential services, experiential tenants, and convenience.

The region’s high population density and higher median household incomes create a concentrated and robust consumer base. However, this is often counterbalanced by a significantly higher cost of living, particularly for housing and energy, which can disproportionately affect disposable income compared to other regions.

One factor aiding urban retail in the Northeast is the rising number of employees headed back to offices.

VTS’s office demand index has New York City as the strongest primary market for recent office use, while Boston has recorded the strongest year-over-year increase of any market, at +31.7%.

Certain markets within the region, particularly suburban urban cores near major cities, are attracting significant investor interest. Their historical resilience through various economic cycles makes them attractive as “flight to safety” investments. Notably, areas like Westchester (NY) and Fairfield (CT) Counties and Northern New Jersey. As well as the MetroWestthe outer suburbs of Boston inside the 495 Corridor. These areas have not only weathered the post-COVID landscape but have sustained growth and investor interest due to their appealing live-work-play lifestyle and accessibility to urban hubs.

- Joanna Rotonde Manfro

FIRST VICE PRESIDENT

RETURN TO OFFICE: RECOVERY RATES New York City National Average

77% 69%

Source: Matthews™, U.S. Census Bureau

160 | SUMMER 2025

LENDER COMPOSITION

Sales Trends

7% 27%

Investors would be wise to continue tracking office use and multifamily leasing trends within the Northeast, as the region could be on the verge of a shift back into urban cores. This would benefit retail in the largest business hubs, particularly Boston and NYC. While current media sentiment is overwhelmingly negative on the region, it is crucial to remember the Northeast is one of the most highly educated and financially compensated regions in the country. Retailers will continue looking to access these markets, driving rent growth and property pricing higher at the locale’s shopping centers.

11%

10%

21%

41% 60% 23% 2024 Bank

2025 Through April CMBS

Financial

Insurance

Source: Matthews™, CoStar Group, Inc., Real Capital Analytics: Through April ’25

Banks have returned as the primary source of shopping center financing in the region, reiterating the positive outlook. More competition from a variety of lenders will benefit investors in multiple ways. First, competition on the lender side will reduce risk premiums and apply downward pressure on lending rates, and second, deals that were unable to secure financing in 2024 could presumably pencil if pursued today.

NORTHEAST TOTAL

BOSTON

NEW HAVEN/ FAIRFIELD

NEW YORK CITY

NORTHERN NEW JERSEY

PROVIDENCE

PPSF

$245

$254

$212

$652

$230

$152

PPSF GROWTH

+2.1%

-0.8%

0%

+3.3%

+2.7%

-1.3%

CAP RATE

7.3%

6.6%

7.8%

5.5%

7.0%

7.7%

12-MONTH DOLLAR VOLUME

$3.3B

$838M

$147M

$143M

$565M

$122M

DOLLAR VOLUME VS 2019

-24%

+14%

-20%

-64%

+40%

-25%

Source: Matthews™, CoStar Group, Inc., Real Capital Analytics: Through Q1

MATTHEWS™ | 161

MIDWEST MIDWEST TOTAL

CHICAGO

CLEVELAND

COLUMBUS

DETROIT

MINNEAPOLISST. PAUL

Vacancy

5.7%

6.6%

6.3%

5.8%

8.3%

4.1%

Average Rent

$17.49

$23.11

$17.16

$20.26

$20.00

$22.05

Rent Growth

+2.2%

+2.1%

+4.3%

+4.7%

+3.4%

+4.3%

Space Under Construction

4.1M SF

423K SF

235K SF

148K SF

276K SF

184K SF

Source: Matthews™, CoStar Group, Inc.: Through Q1

Suburban centers with strong demographics and daily-needs tenants are leading in terms of performance and liquidity.

These properties typically offer ample parking, high visibility, and flexible layouts—key attributes for medical, restaurant, and service-oriented tenants driving today’s leasing demand. New construction is limited across the board, so most investor activity is focused on stabilized or light value-add centers— properties where there’s upside through lease-up, renewals, or modest cosmetic improvements.

The ability to support modern tenancy needs is key.

Demand Drivers Midwestern real estate has long been a bastion of consistency for investors, and 2025 is no different. Each major metro is recording rent growth between 2% and 5% at local shopping centers despite a bumpy start to the year from a national perspective. Given the recent uptick in multifamily leasing in midwestern cities, it is increasingly likely retail fundamentals will maintain their stable path regardless of national economic problems.

Development activity also supports the region’s stability. Despite having the highest total population of all U.S. regions, developers have largely neglected the Midwest this cycle. Just 4.1 million square feet of shopping centers are currently under construction, roughly half that of the Southeast, despite similar population counts. This effect is especially pronounced in the Midwest cities like Columbus, where major businesses like Intel have spurred a wave of job creation.

- Patrick Forkin

MIDWESTERN SHOPPING CENTER RENTS ROSE FOR 12 CONSEQUTIVE YEARS

SENIOR VICE PRESIDENT

4.00% 3.00% 2.00% 1.00%

2013

2015

Source: Matthews™, CoStar Group, Inc.

162 | SUMMER 2025

2017

2019

2021

2023

2025

LENDER COMPOSITION

Sales Trends

8% 5%

Deal volume in the Midwest has handled the impact of rising interest rates better than most other U.S. regions. The area is still recording 10% more sales activity than the 2019 level, an important benchmark that highlights the region’s stability, liquidity, and safety. The Midwest will remain an attractive option for investors due to asset liquidity and a tendency to record stable per square foot pricing growth in the face of national headwinds.

13%

31%

85% 53%

2024

Columbus specifically has seen a major transformation to its retail scene, with more than 180% more deal volume occurring in the last 12 months than in 2019. The city is one of the fastest growing in the country and has a very stable spending base driven by Ohio State University.

Bank

2025 Through April CMBS

Insurance

Source: Matthews™, CoStar Group, Inc., Real Capital Analytics: Through April ’25

MIDWEST TOTAL

CHICAGO

CLEVELAND

COLUMBUS

DETROIT

MINNEAPOLISST. PAUL

PPSF

$127

$176

$96

$136

$119

$165

PPSF GROWTH

+2.2%

+0.6%

+4.3%

+3.8%

+0.8%

3.1%

CAP RATE

8.4%

7.9%

8.7%

8.3%

8.2%

7.5%

12-MONTH DOLLAR VOLUME

$4.8B

$1.2B

$179M

$310M

$262M

$142M

DOLLAR VOLUME VS 2019

+10%

+24%

+46%

+187%

+5%

-51%

Source: Matthews™, CoStar Group, Inc., Real Capital Analytics: Through Q1

MATTHEWS™ | 163

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