Greed in Capital Market - Q2 2025
Trade wars, inflation, unemployment, political unrest, looming recession! Fear not… “this is fine” (cue the meme of the dog sitting in a café engulfed in flames). As we navigate the current political and economic environment, remember three things. 1) Economic cycles are cyclical, 2) markets are efficient, 3) markets move largely by fear and greed. In fact, websites like feargreedmeter.com attempt to measure market sentiment (see clips below). This may go without saying, but let’s not be investors ruled by unchecked emotion. Instead, let’s take a closer look at market fundamentals so we can make informed decisions as it relates to real estate investments.
Capital Markets Update:
Real estate investment activity was off to a slow start in 2025 but has ticked up in Q2 partially due to stable and improving multifamily performance. Apartment demand hit a Q1 record in 2025, highlighting the sector’s strength despite slower job growth and rising inflation. In Q1 2025, apartment absorption surged past 138K units — the strongest first-quarter performance on record. Real Page anticipates total absorption of nearly 460K units in 2025, signaling continued multifamily apartment demand amid weaker job growth and rising economic headwinds.
On the development front, new supply is decelerating while demand is increasing. In Q1, net absorption rose by 77% year-over-year, totaling 100,600 units, significantly outpacing the 70,600 units delivered. This marks the fourth consecutive quarter where demand exceeded supply, resulting in the largest Q1 vacancy decrease on record. Strong absorption and tapering supply could help balance markets experiencing elevated vacancy rates due to prior construction surges, especially as multifamily apartment demand remains historically strong.
The average national rent grew by 0.9% year-over-year to $2,184 per unit, the first Q1 rent increase since 2022. The Midwest region led rent growth at 3.3%, while Southeast and Mountain regions faced slight declines.
Real page recently released their latest multifamily permitting data for Asheville, NC and Greenville, SC. Development in Asheville has increased exponentially, which will likely create flat/decreasing rents in the next couple years as new supply floods the market. Greenville, on the other hand, is poised to experience increasing rents and appreciation as demand outpaces supply–in line with the national data presented above.
Berkadia recently published a survey highlighting investor sentiment. A combined 83% of multifamily investors plan to make acquisitions in 2025 whereas only 2% intend to liquidate assets. Additionally, the Southeast remains the favored region for investment, followed by the Midwest—an area that was largely overlooked during the pandemic but is now attracting attention.
Despite improving apartment fundamentals, multifamily CMBS delinquencies surged in April, reaching 6.57%. This marks the sector’s worst performance since late 2015. Despite multifamily and lodging’s rapid rise, the office sector remains the most distressed, with delinquencies rising again to 10.28% in April. The current distress is largely concentrated in California, Washington DC, and New York.
Quick side-note/soapbox, it’s easy to read headlines highlighting real estate distress and assume all real estate investments are impacted, but context is king and it’s important to discern two things:
1) Asset class – are we talking about industrial, office, retail, or multifamily? Each asset class performs differently depending on various market conditions. For instance, COVID-19 negatively impacted office investments while simultaneously launching multifamily property valuations to peak pricing in 2021/2022. That said…not all office building investments are created equally…see below.
2) Location – what geographic areas are impacted? Not all markets are created equally. In the example above, office investments have experienced significant distress in specific markets, namely California, Washington DC, and New York. On the other hand, markets like Miami, Austin, Nashville, and Greenville, SC, have shown resilience and even growth. Population, politics, legislation, city planning, and various other factors play a large part in the success or distress in each market.
With the current economic environment, what are we focused on at 510 Capital?
Location – We are fortunate to live in one of the best real estate investment markets in the country. Our aim is to utilize our local expertise and operating experience to capitalize on investment opportunities in our backyard.
Development – Market fear has slowed development for multifamily housing. While I believe the next year or two will present relatively flat rent growth and asset appreciation, demand for housing units will likely outpace supply, creating significant value for investors, especially in Greenville, SC. That said, we are currently exploring a couple of development opportunities.
Back to the Basics – We are hyper focused on timeless real estate fundamentals – location, basis, debt structuring, value-creation, asset management, and business planning. In this environment, we are unwilling to veer from investment fundamentals to “make a deal work.” There may be some investment pain in the near term as a result of tariffs, inflation, debt pricing, and supply… so for now we are selective and cautiously optimistic. But ultimately, we are bullish for long-term investment potential.
510 Capital - Portfolio Highlights
Across our portfolio we are currently 94% occupied. We typically operate at an average occupancy of 96% but we’ve had a seasonal dip because of the spring-move outs and leasing velocity in Henderson County is still feeling the sluggish effects from the hurricane.
Approximately 3 years ago, the economy shifted from euphoria and record highs to panic selling and distress. In the midst of the chaos, inflation, and rising interest rates, we acquired 12 units in Hendersonville off-market. Since closing, we have completed substantial interior and exterior improvements which have allowed us to ethically and responsibly increase rents by over 25% in just 2 years. Not only do we provide a higher quality of living and safety for our tenants, but we can also provide outsized returns for our investors.
BEFORE
AFTER
Last, Ryan and I run a nimble and lean operation with over $12M in AUM and 100+ units. As we look ahead to the next 12 – 18 months, we are actively looking to grow our portfolio by approximately $5M-$10M. Thank you for being part of the team and we look forward to taking this journey together.
Notable Reads
Ryan’s Pick:
· Never Split the Difference by Chris Voss. This is a great book on negotiating. It’s worth reading multiple times over. The book teaches negotiating techniques from an FBI hostage negotiator, and it reads more like an intense action movie than non-fiction.
Luke’s Pick:
· Die With Zero by Bill Perkins. Of all the books I’ve read in the past decade, Die with Zero may be one of the most influential for me. It’s shaped the way I view wealth, time, inheritance, generosity, and health. Several good friends of mine have also read this book recently and it’s sparked meaningful conversations. This is a must read for anyone looking to revolutionize thoughts around wealth management. Once you’re finished reading it, please call me! I look forward to discussing it with you.
