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What's in store?
Inflation, treasury yields & cap rates. If that doesn’t pique your interest, how about a talking robot? But first…
Venture Partner Announcement 🚀
We’re excited to officially announce Michael Patton, Founder/CEO of Fetch Package, as one of Stellifi’s venture partners. Michael has scaled Fetch to 25 markets across the country, servicing around 400K units with the majority of the NMHC Top 50. Reach out to us to get in touch with Michael and learn more about building PropTech, his involvement with Stellifi, or his company’s latest launch: Fetch Storage and Fetch Market.
Fresh Off the (Stellifi) Press 📰
What We’re Reading 📖
- Helene, Milton & New Risks: Hurricane season struck forcefully this past month, with Helene and Milton causing and estimated $250 billion in damages. High-risk areas like Florida and Texas are used to soaring insurance premiums, but a newer risk for these markets is the prospect of having their claims denied, as nearly 50% of homeowners' claims saw last year. The recent devastation has also highlighted risks in markets previously considered safe. In cities like Asheville, for example, flood insurance was often overlooked by homeowners and carriers alike, until now.
- Cap Rates & the 10-yr: A recent CBRE report looked at just how closely cap rates are tied to the 10-year Treasury. The write-up ends with an optimistic outlook for cap rates over the next quarter, but the recent surge in the 10-year may throw a wrench in these expectations. In the face of seemingly sticky inflation, the uptick in the 10-year suggests that investors are lowering their expectations for future rate cuts. That said, we’re holding out hope that inflation will continue its downward trend because of what we see in housing.
- Housing Inflation is Cooling? September's CPI came in higher than expected, but there's a silver lining. Housing, which makes up ~30% of the CPI, may finally be slowing down. It appears we’re now seeing the effects of a surge in housing supply, which had a delayed affect on CPI, something we noted in our Q1 update earlier this year. The cooldown should continue even as demand catches up, thanks to the lag between real-time rent and CPI, and the effects of lower mortgage rates and increased single-family starts.
- The Nuclear Option: Increasing energy demand, and strain on the power grid, presents challenges to CRE. But tech giants, alongside the DOE, are making some big investments that will bring new capacity online for the high-consumption data centers that power AI. Here are some noteworthy announcements:
- To kick it off, in June the Department of Energy (DOE) announced a $900 million investment in small modular reactors (SMRs) and they’ve just opened up applications for this initiative.
- Google and Amazon have both unveiled new nuclear plans—Google will purchase power from nuclear sites, while Amazon will do the same and invest in SMR production through AWS.
- Microsoft has also made a major move by signing a 20-year purchase agreement with Constellation Energy that will help reactivate the Three Mile Island facility. Constellation has reportedly ordered this $100 million transformer, so it seems the plans are full steam ahead.
- JLL is acquiring Raise Commercial, a tech-enabled brokerage firm, to enhance their leasing business.
- CBRE has purchased NRG Energy’s renewable advisory group, boosting their sustainability services and helping clients with renewable energy decisions.
- Costar has struck a deal to acquire Visual Lease, a virtual lease administration software, which will greatly expand their operational capabilities.
- Appfolio acquired LiveEasy, a moving concierge platform, to boost their resident experience offerings.
Featured Image: Housing Inflation is Cooling
Housing inflation has been much stickier than other categories, but the month-over-month “shelter” inflation was more than cut in half in September.
NMHC OpTech 2024
This week we attended NMHC OPTECH in the nation’s capital. Alongside the usual multifamily tech titans, there were some new faces, including... a robot? No, this isn't the property manager of the future, but it did join a panel to introduce NMHC’s new innovation arm - RETTC.
There were plenty of great sessions at OPTECH, but one in particular hit close to home - the “Beyond the Horizon” talk with Fifth Wall’s Brendan Wallace and former Common founder/CEO Brad Hargreaves, who currently runs Thesis Driven. A big theme of this discussion was that selling into multifamily real estate at scale is incredibly challenging, a sentiment echoed by the audience’s reaction. It’s a topic we often discuss internally, but seeing a room full of operators nodding in agreement was validating.
There are many reasons a software rollout in a real estate portfolio can fail, and there a few commonalities when its a success. These three characteristics of a successful tech rollout ring true in our experience as operators and investors:
- Commitment: The customer needs to be fully committed, ideally with buy-in from the top. Without support from senior leadership, it’s tough to implement changes throughout an organization.
- Value: There must be tangible value for the end-user, often the on-site property manager. If the solution doesn’t help them achieve their goals or make their lives easier, it doesn’t matter if the CEO initiated the pilot.
- Ambassadors: Balancing these desires of the leadership and the needs of the end-users requires an ambassador. As operators and investors, we can bridge the gap between innovative solutions and their prospective customers. It’s crucial to value the insights of industry veterans while recognizing that their intuitions about technology may not always be accurate. Oftentimes it requires a third party to set expectations for all parties, and explain to the property manager why this time, it’s different.
Next up on the conference circuit: CREtech. Let us know if you’ll be there!
