Tag Archives: LeverCapitalPartners

Why Everyone Wants Retail And Lever Knows Where It’s Headed

by: Ethan Kletter

Retail real estate is not just back, it is leading the pack. Across the U.S., investors, lenders, and developers are chasing well-located assets in a sector that has proven its resilience and growth potential. Vacancy has fallen to its lowest level in more than 20 years, rents are climbing, and competition for quality properties is fierce. But while capital is pouring in, not everyone knows where the next wave of opportunity lies.

As of Q1 2025, the U.S. retail vacancy rate stood at just 4.0 percent, down from 4.2 percent the year prior, marking the lowest level in more than two decades (CBRE). Average asking rents rose 2.1 percent year over year (JLL), while net absorption reached 15.6 million square feet, outpacing new deliveries of 9.8 million square feet (Cushman & Wakefield). These fundamentals highlight a simple reality: demand for retail space is far exceeding supply.

Neighborhood and service-oriented centers are driving much of this activity. These assets offer tenant durability, consistent foot traffic, and spending patterns that hold up even during downturns. Grocery anchored centers remain highly attractive to both investors and lenders due to their essential service nature and reliable customer base. Unanchored retail strips also provide investors with flexibility and lower downside risk, making them well-suited for re-tenanting strategies and long-term value creation.

Retail’s importance is growing as capital reallocates from sectors with weaker fundamentals. Office properties continue to face structural challenges from hybrid work and declining tenant demand. Retail by contrast has not only stabilized post-pandemic but proven its resilience and ability to adapt.

Demographic trends are also fueling retail’s relevance. Population growth in Sun Belt and other high-migration markets is increasing the need for neighborhood and service-based retail. Inflation and consumer spending shifts are driving demand for accessible, essential-service retail closer to where people live. At the same time, consolidation within the sector and the emergence of new brands are generating fresh leasing activity, adding momentum to already strong fundamentals.

Looking forward, the sector is positioned for sustained strength. Limited new construction means supply will remain constrained, keeping upward pressure on rents. Tenant quality will continue to drive asset value, favoring properties with essential-service anchors, national credit tenants, and strong leasing momentum.

Growth markets such as Charleston, Las Vegas, Phoenix, and Florida are expected to deliver outsized performance. Charleston rents, for example, increased 5.3 percent year over year in Q1 2025 (Cushman & Wakefield), fueled by strong in-migration and limited supply. These dynamics illustrate how well-positioned assets in the right markets will continue to outperform, creating opportunities for investors who can access them early.

The challenge is that barriers to entry are higher than ever. The best deals rarely make it to public listings and often trade within trusted networks. In this environment, speed, certainty of execution, and local intelligence make the difference between winning a deal and missing it entirely.

A recent example illustrates our approach. Lever Capital Partners arranged financing for a ground-up retail development in the Southwest Las Vegas submarket that included inline retail space and multiple build-to-suit pad sites. Despite lower than typical pre-leasing levels, we secured competitive financing by strategically marketing the project to lenders most likely to provide favorable terms and creating a competitive lending environment. Our endorsement of the sponsor’s proven track record and business plan enhanced lender confidence, resulting in a highly advantageous loan structure that maximized returns. The project ultimately attracted high-caliber tenants and achieved strong performance, validating both our strategy and our client’s execution.

The path forward in retail will reward those who have both access and foresight. Supply will remain constrained, tenant quality will continue to drive value, and select growth markets will deliver above-market returns for those who can move ahead of the curve. Lever Capital Partners is already positioned in these markets and actively sourcing the next generation of retail investments.

If you are looking to acquire high-performing retail assets during one of the most competitive environments in decades, our team can deliver the best available capital and close them with precision. In today’s market, everyone wants retail. The difference is knowing where it is headed. Position your retail deal for success, reach out to Lever Capital Partners today.

CBRE. (2025, April 30). U.S. Retail Figures Q1 2025. CBRE Research. https://www.cbre.com/insights/figures/q1-2025-us-retail-figures

Cushman & Wakefield. (2025, April). U.S. Shopping Center MarketBeat Q1 2025. https://www.cushmanwakefield.com/en/united-states/insights/us-marketbeats/us-shopping-center-marketbeat-report

Cushman & Wakefield. (2025, April 17). Charleston Retail MarketBeat Q1 2025. https://www.cushmanwakefield.com/en/united-states/insights/us-marketbeats/charleston-marketbeats

JLL. (2025, April). U.S. Retail Market Dynamics Q1 2025. https://www.jll.com/content/dam/jllcom/en/us/documents/reports/research-reports/25-research-us-retail-market-dynamics-q1-2025.pdf

Finding Opportunity in Office: How Lever Capital Partners Is Guiding a New Wave of Deals

by: Raisa Sarkisyan

Over the past few years, the U.S. commercial real estate market has undergone a seismic shift, none more dramatically than in the office sector. Once the bedrock of institutional portfolios, office assets have faced steep headwinds in the post-COVID landscape: hybrid work trends, elevated vacancies, pricing uncertainty, and lender pullback have forced market participants to re-evaluate what makes an office deal viable.

Yet amid this turbulence, interest in office is quietly resurfacing. Opportunistic investors are re-entering the conversation, not because the storm has passed, but because they know this is when real value can be created. And Lever Capital Partners is uniquely positioned to help these investors navigate that complexity.

The Office Reset: Post-COVID Challenges and Shifting Fundamentals

The pandemic introduced lasting behavioral and structural changes. Remote and hybrid work models remain sticky, pushing vacancy rates to historic highs in many core markets. As of Q2 2025, the national office vacancy rate is approximately 19.4%, up from 12.3% pre-COVID. In key markets like San Francisco, vacancy rates have reached 28.4%, and Chicago is hovering around 25.1%.

These pressures have translated into steep value declines. Office pricing is down 35–40% from 2019 peaks, and transaction volume has dropped sharply, over 60% below pre-pandemic averages in the first half of 2025. Investor hesitation is widespread, but so is opportunity: distressed pricing, low competition, and creative repositioning strategies have made this a compelling moment for experienced capital to step in.

Why Debt Is Leading the Way

In today’s market, debt is taking the lead. With equity investors more hesitant, and valuation uncertainty driving caution, debt strategies offer greater flexibility and lower risk exposure. This has coincided with a sharp pullback from traditional lenders: CRE lending volume among banks has declined nearly 40% since 2022, and many have placed office loans in a “watch” or restricted category.

As a result, the lending landscape has shifted. Non-bank lenders now account for roughly 66% of all non-agency CRE originations, including 26% from CMBS conduits, 21% from life companies, and 19% from private credit and debt funds. Borrowers face a more fragmented and opaque market, where execution hinges on aligning with the right capital at the right time.

Lever’s Role: Capital Clarity in a Complex Market

This is where Lever Capital Partners brings outsized value. As an advisor that works across the capital stack, not as a direct lender, Lever can identify and structure financing solutions that meet the evolving needs of each sponsor and asset. That might mean sourcing bridge-to-repositioning loans, arranging preferred equity in recapitalizations, or packaging bespoke capital stacks for non-core office acquisitions.

In a market where office deals require nuance, creativity, and speed, Lever’s deep network of capital providers gives sponsors a competitive advantage.

Market Outlook: A Window for the Bold

Looking ahead, the opportunity set continues to grow. Over $80 billion in U.S. office loans are maturing over the next 18 months, many on assets worth less than their current loan balance. This wave of maturities coupled with elevated interest rates and constrained refinancing options is leading to increased distress, recapitalizations, and discounted sales.

For sponsors willing to take a long-term view, particularly on value-add or repositioning plays, the dislocation presents a rare entry point. Lever is already helping clients capitalize on this window by delivering clarity, creativity, and capital when it’s needed most.

Conclusion: Redefining the Future of Office Finance

As the office sector continues to recalibrate, one truth is clear: creativity will define the next cycle of winners. While banks retrench and others wait on the sidelines, Lever Capital Partners is helping investors move forward with confidence.

By thinking beyond traditional financing and embracing the full spectrum of the capital markets, Lever is shaping what the next generation of office deals will look like, one capital stack at a time. Position your office deal for success, reach out to Lever Capital Partners today.

Credit Enhancement Strategies to Strengthen Your CRE Capital Stack in 2025

by: Adam Horowitz

In 2025, commercial real estate sponsors face a capital market shaped by cautious underwriting, selective lenders, and growing pressure across all asset classes. Debt is available, but it is harder to access. Equity is even more selective, especially for transitional and value-add projects. In this environment, credit enhancement has shifted from a supplemental tactic to a strategic requirement. It is no longer just about managing risk, it is about improving leverage, reducing pricing, and increasing the likelihood of closing.

Lever Capital Partners Helps Turn Strategy Into Execution

At Lever Capital Partners, credit enhancement is more than a checklist item, it is a core part of the deal strategy. Lever works with sponsors to design and structure enhancements tailored to each project’s profile, including preferred equity layers, corporate guarantees, or interest reserves.

With direct insight into what capital providers expect today, Lever helps align sponsor needs with lender requirements. Whether you are raising mezzanine capital, improving bridge loan terms, or securing equity for a repositioning play, Lever offers full-cycle support. The result is better terms, faster approvals, and fewer surprises from term sheet to close.

Strategic Use of Credit Enhancement in Today’s Market

Today’s capital providers demand clarity, alignment, and a credible path to execution. Enhancements allow sponsors to deliver those elements, especially on deals where asset performance, tenancy, or the business plan introduces complexity. Whether you are underwriting a lease-up, recapitalizing a distressed property, or managing construction risk, enhancement strategies can bridge the gap between lender caution and sponsor execution.

Unlike prior cycles, where enhancement was often limited to third-party guarantees, 2025 calls for a more strategic, deal-specific approach. Enhancements today are structured to reflect the actual risk and to strengthen the weakest parts of the capital stack. In a competitive market, even a small advantage can help sponsors secure capital that others cannot.

Why Credit Enhancement Matters in 2025

Credit enhancement matters because lenders and investors are more cautious. Traditional financing sources have lowered loan-to-value thresholds, raised debt service coverage minimums, and added more scrutiny before issuing approvals. At the same time, transitional assets like outdated office buildings or value-add multifamily still offer strong upside if sponsors can unlock the capital to execute.

Credit enhancements help improve the deal narrative. They solve for weaknesses in underwriting, such as unproven post-renovation values or lease-up projections. They offer lenders downside protection and give investors more confidence to move forward. In short, they help turn hesitation into commitment.

Common Credit Enhancement Tools in CRE

Here are the most common credit enhancement tools used in commercial real estate:

  • Personal Guarantees
    A sponsor or principal personally backs the loan, providing a fallback in case the property underperforms.
  • Corporate Guarantees
    A related company supports repayment, giving lenders more comfort in the borrower’s financial strength.
  • Letters of Credit (LOCs)
    A bank issues a letter of credit on the borrower’s behalf, guaranteeing payment to the lender in the event of default.
  • Cash Collateral
     Cash reserves are placed in escrow, typically for interest or operating shortfalls.
  • Mezzanine Debt or Preferred Equity
    These fill gaps in the capital stack and are structured to protect senior lenders while allowing the project to move forward.

Final Thoughts

In today’s market, credit enhancement is no longer optional. It is the edge that allows sponsors to win deals in a competitive, cautious capital environment. In a cycle defined by complexity, timelines, and tighter underwriting, the sponsors who succeed will be those who come prepared and structured.

With the right enhancement strategy and the right advisor, sponsors can turn complexity into opportunity, and gain access to capital others cannot. Position your deal for approval in today’s market, talk to us about credit enhancement solutions.

Why Slower Rent Growth Doesn’t Mean the End of Multifamily Investing

by: Adam Horowitz

The U.S. multifamily market, once the golden child of commercial real estate, is entering a new phase in 2025. After years of rapid rent growth, the pace has slowed. National averages show rents flattening or even declining in some overbuilt markets. The culprits are clear, a surge of new supply in key metros, rising affordability pressures for renters, and more cautious household formation in the face of economic uncertainty. For value-add investors, who often rely on rent increases to power returns, this shift requires a recalibration. The opportunity is still there, but success now demands sharper strategy, disciplined underwriting, and creative capital solutions.

Capital markets have also turned more challenging. Debt is more expensive, lenders are cautious, and equity partners are scrutinizing deals with greater intensity. Sponsors pursuing value-add plays are finding capital stacks harder to assemble, especially when projected rent growth is modest. This is precisely where Lever Capital Partners can provide an edge. Lever specializes in helping sponsors structure financing solutions tailored to today’s environment, including senior loans, preferred equity, rescue capital, and bridge debt. With deep relationships across private credit funds, non-bank lenders, and institutional investors, Lever delivers not just capital access but also strategic guidance on structuring deals that align with the current risk climate. Whether it is filling a capital gap on a repositioning deal or securing equity for a complex turnaround, Lever helps sponsors navigate today’s more selective and sophisticated capital landscape.

Despite the slowdown in rent growth, opportunities remain, but they are more market and asset specific than ever. Sunbelt markets like Austin, Phoenix, and Atlanta, which absorbed a flood of new deliveries in recent years, are seeing softening rents. In contrast, Midwest cities and certain urban infill locations with limited new supply are holding up better. For value-add investors, the key is to shift focus from relying purely on rental upside to identifying properties where operational improvements, repositioning, or expense management can drive value. Upgrading amenities, improving tenant retention, and enhancing management efficiency are strategies that can deliver returns even when rents are stable. In today’s environment, true value-add means more than riding market momentum, it requires hands-on execution.

Winning capital and closing deals in 2025 will depend on how well sponsors adapt to these new realities. Lenders and investors are demanding conservative underwriting assumptions. Rent growth projections must be realistic, exit cap rates stress tested, and business plans credible. Sponsors who can demonstrate a clear, operational path to improving net operating income (NOI) rather than simply banking on market appreciation will stand out. Moreover, capital providers are looking for meaningful sponsor equity and a track record of execution, not just financial engineering. Deals must be structured with alignment between sponsor and capital partner, and offers must come with certainty of closing. In this environment, having a vetted network of capital partners and an advisor like Lever Capital can make the difference between winning and losing competitive or distressed bids.

The multifamily sector remains a cornerstone of CRE investment, but the playbook has shifted. For value-add investors, the path to returns is now through disciplined underwriting, selective asset and market targeting, and creative, well-structured capital stacks. Lever Capital Partners stands ready to help sponsors meet this moment, providing not only access to capital but also the strategic structuring expertise required in today’s slower growth market. Those who adjust their strategies to the current landscape and partner with the right capital advisors will find that opportunity still exists, even amid the cooling rents. In fact, for those prepared to adapt, this period may prove to be the foundation for the next cycle of outperformance.

Multifamily Real Estate Is Changing FAST – Here’s How to Profit in 2025!

by: Adam Horowitz

The multifamily real estate sector in 2025 presents both challenges and opportunities. Investors must navigate financial distress, shifting rent trends, and evolving market dynamics. However, those who take a strategic approach can capitalize on emerging opportunities and position themselves for long-term success. This article explores the key factors influencing multifamily investments this year—why to invest, what to consider, where to focus, and when to act.

Partnering for Success in Multifamily Investment

At Lever Capital Partners, we understand the complexities of today’s housing market. As industry leaders in multifamily financing, we provide tailored solutions to help investors, developers, and property owners navigate market fluctuations with confidence. Whether you’re acquiring new properties, developing rental communities, or optimizing your portfolio, our expertise ensures you secure the most competitive financing for long-term growth.

Why Invest in Multifamily in 2025?

The multifamily sector is experiencing significant financial distress, which presents both risks and opportunities. Community banks have reported a 12-year high of $6.1 billion in delinquent loans, while the CMBS multifamily distress rate has climbed to 12.9% as of January 2025. Although acquiring distressed properties at deep discounts is not always straightforward, these conditions indicate a market where well-researched investments can yield strong returns.

Despite short-term volatility, multifamily properties remain a resilient asset class. Rising demand, improving affordability, and strong long-term fundamentals continue to make them attractive to investors.

Key Considerations for Investors

With an increasing supply of multifamily properties hitting the market in 2025, competition is intensifying. This may lead to stagnating rents in some areas, making market selection more critical than ever. Investors must conduct thorough research to identify locations where demand outpaces supply. Additionally, higher interest rates impact borrowing costs and deal structures, making strategic financing essential to maximizing profitability.

Top Markets for Multifamily Investment

Selecting the right markets is crucial for optimizing returns. Some of the most promising cities include:

  • Chicago, IL – Affordable pricing, a diverse economy, and a large population base create long-term stability.
  • San Diego, CA – High rental demand and a limited apartment supply ensure steady market conditions.
  • Columbus, OH – Affordable investment opportunities and ongoing infrastructure improvements enhance its market appeal.
  • Austin, TX – A booming tech economy and rapid population growth continue to drive rental demand.
  • Indianapolis, IN – Strong job growth and an affordable housing market make it an attractive investment choice.
  • Boston, MA – Economic stability is reinforced by key industries in education, healthcare, and technology.
  • Southwest Florida – Rapid population growth fuels sustained rental demand, particularly in key coastal cities.
  • Baltimore, MD – A strategic location and economic diversification create compelling investment opportunities.

When to Invest: Timing the Market for Maximum Returns

Several key indicators suggest that 2025 could be an ideal time for multifamily acquisitions:

  • Continued Demand Despite Increased Supply – While new developments are entering the market, strong demand persists in key areas, supporting rent growth and occupancy rates.
  • Improved Rent Affordability – Rent affordability has increased over the past 18 months, making multifamily housing more accessible to tenants.
  • Stable Employment Rates – With unemployment remaining below 5%, rental income streams are expected to remain steady.
  • Favorable Interest Rate Outlook – The 10-year Treasury yield and federal funds rate are expected to stabilize near 4% by the end of 2026, creating a more predictable financing environment.

Seizing Opportunities in the 2025 Multifamily Market

By staying informed on market conditions, selecting high-growth locations, and strategically timing acquisitions, investors can unlock the full potential of the multifamily sector in 2025.

For those looking to maximize opportunities in this evolving landscape, Lever Capital Partners offers expert guidance and tailored financing solutions to ensure long-term success.

Will Renting Still Be More Favorable Than Buying Across Major Metros by the End of 2025?

by: Kayla Refoua

As housing affordability remains a pressing issue in the U.S., many prospective homeowners are reevaluating whether buying a home is still within reach—or if renting will continue to be the smarter financial choice. With home prices, mortgage rates, and wage growth increasingly out of sync, renting is likely to remain the more viable option for many Americans in major metropolitan areas through the end of 2025.

At Lever Capital Partners, we recognize the challenges and opportunities presented by today’s housing market. As experts in the multifamily sector, we provide tailored financing solutions that empower investors, developers, and property owners to navigate the evolving real estate landscape. Whether you’re acquiring new properties, developing rental communities, or optimizing your investment portfolio, our strategic approach ensures you secure the most competitive financing for long-term success.

Affordability Challenges: Rising Home Prices and Mortgage Rates

The cost of buying a home has climbed beyond what the average household can afford. The median home price now exceeds affordability levels by more than $70,000, making homeownership increasingly difficult. This issue is compounded by:

  • High Mortgage Rates: While interest rates may stabilize or decline in 2025, they are still significantly higher than the ultra-low rates seen in previous years.
  • Housing Supply Shortages: A lack of available homes, particularly starter homes, continues to drive up prices.
  • Rising Construction Costs: Increased material and labor costs make building new homes more expensive, limiting supply expansion.

These factors have led to a significant decline in housing affordability. In 2019, 94% of U.S. counties had homeownership options within reach of median-income households. By 2024, that number had dropped to just 63%. Without a major shift in supply or affordability, many potential buyers will remain priced out of the market.

Renting: A More Practical Choice for Many

While buying a home is often seen as a long-term financial investment, renting continues to offer several advantages in the current economic climate:

  • Lower Upfront Costs: Unlike homeownership, which requires a large down payment and closing costs, renting typically demands a lower financial commitment.
  • Flexibility: Renters have the freedom to relocate without the burden of selling a home, which is especially valuable in uncertain economic times.
  • Less Financial Risk: With rising property taxes, insurance costs, and maintenance expenses, renting can provide more financial predictability.

Even if mortgage rates decline slightly, home prices remain high, making it difficult for many renters to transition into homeownership. As a result, the demand for rental properties—especially in urban centers—will likely remain strong.

How Investors and Lenders Are Responding

The shift toward renting is not going unnoticed by real estate investors and financial institutions:

  • Investors are focusing on multifamily housing as rental demand stays high, particularly in expensive metropolitan areas where homeownership is out of reach for many.
  • Lenders are introducing new mortgage products to attract buyers, anticipating opportunities when affordability improves. However, until housing supply increases, these efforts may have limited impact on shifting renters into homeownership.

By the end of 2025, renting is expected to remain the more favorable option for many individuals, particularly in major metropolitan areas where home prices continue to outpace wage growth. While homeownership will always be a long-term goal for some, economic conditions suggest that renting will still be the more practical and affordable choice for a significant portion of the population.

Will the Construction Slowdown Continue to Drive Up Asking Rents for Industrial Properties?

by: Tiara D’Mello

Limited Supply and Past Trends

A recent decline in construction starts could result in increased asking rents for industrial properties in 2025. Throughout 2024, industrial construction starts experienced a 33.5% decline, mirroring broader trends. In 2023, new starts fell by 40%, reflecting tightened loan conditions, rising costs, and economic uncertainty (Lung). Nationally, in-place rents increased by 7.5%, indicating supply constraints are already influencing prices. These trends highlight how reduced construction activity has consistently driven up rents by limiting the availability of new industrial spaces (CommercialEdge).

Rising rents in the industrial property sector offer exciting opportunities for both existing and new owners. However, securing capital for these projects can be challenging as we enter 2025. Lever Capital Partners, experts in the industrial real estate market, are here to help. We specialize in crafting tailored strategies to secure the most competitive financing solutions, whether you’re developing new projects, acquiring properties, or optimizing your investment portfolio for sustained success.

Future Trends and Demand-Supply Gap

Looking ahead, demand for industrial spaces remains robust due to e-commerce growth, nearshoring, and shifting supply chain strategies. However, the slowdown in new projects will likely continue to widen the gap between demand and available supply. Industrial facilities, particularly in key logistics hubs like Los Angeles and the Inland Empire, continue to report rising rents as vacancy rates tighten. For example, rents in the Inland Empire increased by 12.5% in 2024, demonstrating the price pressures created by sustained demand coupled with limited new construction (CommercialEdge).

This persistent demand is driven by several factors. The e-commerce sector’s expansion has increased the need for strategically located warehouses and distribution centers. Similarly, nearshoring—the practice of relocating production facilities closer to domestic markets—has spurred demand for industrial properties in North America. Additionally, evolving supply chain strategies emphasize the importance of proximity to major markets and transportation networks, further increasing demand for logistics hubs. These factors, combined with limited new construction, are expected to exacerbate the demand-supply gap, keeping pressure on asking rents.

Regional Variations

The impact of the construction slowdown varies by region, with high-demand areas like Southern California, Dallas-Fort Worth, and Chicago feeling the effects more acutely. Southern California, particularly Los Angeles and the Inland Empire, has consistently seen some of the highest rent increases due to its critical role in global trade and logistics. In these regions, vacancy rates have fallen below 2%, leaving tenants with few options and driving up competition for available spaces. Meanwhile, markets like Dallas-Fort Worth and Chicago, which serve as major inland logistics hubs, are also experiencing rising rents and tightening vacancies. However, regions with more available land or slower demand growth may not experience the same level of price increases, highlighting the localized nature of these trends.

Rising Costs and Inflation’s Impact

While construction slowdowns create supply challenges, rising costs and inflation also impact landlords. Higher expenses for maintenance and financing push property owners to increase rents to maintain profitability. Yet, it’s important to connect these costs directly to construction trends. Developers are pausing projects partly because high interest rates and economic uncertainty have made financing less viable. These factors intertwine, with slower construction reducing new supply and compounding the effects of inflation on rent increases (Coldwell Banker).

In addition, inflation has driven up the costs of raw materials and labor, making new developments more expensive. This has led many developers to delay or cancel projects, further straining the supply pipeline. For existing property owners, these rising costs create additional pressures to increase rents, as they seek to offset higher operational and financing expenses. The interplay between construction slowdowns and inflation highlights the broader economic dynamics at play in the industrial real estate market.

Strategic Implications for Tenants and Investors

The current trends in industrial real estate have significant implications for both tenants and investors. For tenants, rising rents and limited availability mean they must act strategically when securing space. Long-term leases and early renewals can help mitigate exposure to escalating costs. For investors, the supply constraints and rising rents present opportunities for strong returns, particularly in high-demand markets. However, navigating the challenges of financing and rising construction costs requires careful planning and market analysis.

How Will Multifamily Operating Expenses Affect NOI in 2025?

by: Dalton Morgan

Multifamily properties have long been considered one of the more resilient real estate asset classes. However, rising operating expenses are posing challenges to profitability. Factors such as high inflation, wage growth, and increased material costs due to supply chain disruptions are driving up these expenses. As operating costs rise, net operating income (NOI) is directly impacted, diminishing investment returns. Read on to see what we think the impact will be next year.

Rising Operating Costs

Operating costs have historically risen over time, but since 2021, the growth has accelerated. According to Moody (2024), expenses like payroll, utilities, repairs, and insurance are increasing at two to three times the rate of the preceding decade. For example, payroll and benefits have risen by $75 to $120 per unit annually, utilities by $55 to $95, and repairs and maintenance by $35 to $95 per unit depending on the market quartile (Globe St., 2024). 

Key Drivers of Cost Increases

Inflation: Rising prices for goods and services are significantly impacting multifamily properties. Utilities, which account for 15%-20% of overall operating expenses, have risen by an average of 10.7% across the top 50 U.S. markets, increasing total operating costs by up to 2% (Matthews).

Construction Materials and Labor: Prices for materials like timber, steel, concrete, and copper have surged due to high demand, supply chain issues, and inflation. Labor shortages are exacerbating the issue. As of May 2023, there were 396,000 job openings in construction (NAIOP). To attract skilled workers, companies are raising wages, which in turn increases development costs, further impacting NOI.

Insurance Costs: Insurance premiums for multifamily properties have risen 33% year-over-year, amounting to an additional $180 per unit (Matthews). This increase is driven by the heightened risk of natural disasters such as hurricanes, floods, droughts, and wildfires, which collectively cost the U.S. between $179.8 billion and $496 billion annually (Center for Disaster Philanthropy).

Impact on NOI and Rental Market Dynamics

Net operating income growth has slowed significantly, achieving only 2.8% in Q1 2024 compared to 24.8% in late 2021 (Globe St.). Owners may attempt to offset rising expenses by increasing rental rates, but market competition and tenant affordability concerns limit rent growth. The oversupply of multifamily housing is another factor. In June 2024, private-owned housing completions rose by 10.4% to a seasonally adjusted annual rate of 1.71 million units, with 656,000 being multifamily units (Globe St.).

With supply outpacing demand and mortgage rates keeping homeownership costly, property owners face limited room to raise rents. Moody’s forecasts asking rent growth in the low- to mid-1% range for 2024, while the gap between asking and effective rents exceeds $90 per unit. For a 100-unit property, this translates to $9,000 in unrealized rental income, while expenses remain elevated.

These factors also put pressure on debt service coverage ratios (DSCR), which generally need to be in the range of 1.20x to 1.25x. Rising expenses reduce the cash flow available for debt payments, heightening the challenges of refinancing and the risk of default, particularly in an unpredictable economic environment. At Lever Capital Partners, we understand the obstacles many investors encounter when acquiring or refinancing multifamily properties. Contact us today for a prompt analysis of your unique situation, so we can provide a customized solution that aligns with your investment strategy.

Future Outlook

Some factors may provide relief for multifamily property owners in 2025:

  • Onshoring and Supply Chain Adjustments: The push for onshoring could stabilize material costs over time. Infrastructure enhancements may balance supply and demand, potentially reducing construction expenses.
  • Interest Rates: Mortgage rates are expected to remain in the low 6% to high 5% range throughout 2025, a notable improvement from the 7% national average in 2023 (US News). Additionally, loan rates from Fannie Mae, Freddie Mac, CMBS, and other sources could drop by 1%-2% due to Federal Reserve rate cuts, easing borrowing costs.
  • Inflation Trends: Inflation is projected to slow to 2.4% by late 2025 (Goldman Sachs). However, potential tariff policies could push inflation closer to 3%.

While the outlook suggests possible improvements, the timeline and effectiveness of these changes remain uncertain. Multifamily investors must navigate ongoing challenges and adapt strategies to preserve NOI amid fluctuating operating costs and market conditions.

Secrets to Client Success: Leveraging Expertise and Strategic Partnerships

by: Adam Horowitz

In our years of experience, we’ve observed key factors that distinguish successful deals from unsuccessful ones. By studying what works, we’ve identified some core strengths of our clients that consistently lead to successful outcomes. Let’s explore three key strategies that have contributed to these successes. We’ll look at how one of our retail clients creates value before a deal even closes, how an industrial client leverages deep local knowledge, and how a multifamily client rigorously examines underwriting.

1. Creating Equity Before Closing

Over recent decades, many sponsors have turned away from retail investments, favoring multifamily and industrial sectors. However, the shift away from retail has presented valuable opportunities for those who remain. One of our retail clients has excelled in finding value-add assets in this sector by identifying spaces where they can secure tenants that the previous owner couldn’t. They’re highly selective, reviewing a large number of deals but quickly zeroing in on properties where their unique strengths will allow them to secure signed tenant contracts before closing. This ability to reduce vacancy and increase asset value even before a transaction is finalized is a powerful way to build equity upfront.

2. Knowing the Market—Down to the Street Level

When evaluating a property, having an in-depth understanding of the market can make all the difference. Often, lenders or LP investors will scrutinize location details, down to the side of the street. A client of ours in the industrial sector has a level of market knowledge that turns this type of analysis on its head—rather than hearing why investors have concerns, he explains to them why his choice of location is optimal. Knowing a market this intimately builds credibility with lenders and investors, who are more inclined to back a developer with this level of insight.

3. Trusting the Numbers—Rigorous Underwriting in Multifamily

Every proforma looks good on paper, especially when an exit cap is set low. But are the numbers realistic? Are they thoroughly tested, or simply optimistic estimates? One of our multifamily clients takes an exceptionally rigorous approach to underwriting, testing various scenarios across economic shifts, index changes, and local market dynamics. This client refuses to close on a deal unless it meets stringent criteria. By modeling both the upside and downside possibilities, they go into each project with a high degree of confidence in their decisions. This approach doesn’t just minimize risk—it allows them to make informed decisions they can stand by.

Leveraging Expertise and Strategic Partnerships

While each of these clients brings specific expertise to the table, they don’t attempt to handle every aspect of the process themselves. Instead, they focus on what they know best and outsource other critical components, like financing, to experts like us at Lever. By doing so, they streamline their efforts and ensure each element of a transaction is handled by a specialist. When these clients come to Lever, they trust us to manage the financing so they can focus on other priorities, secure in the knowledge that their deals are in capable hands.

This delegation enables them to hit their projected numbers consistently and sometimes exceed them. They rely on their strengths, whether that’s in creating pre-close equity, mastering their market, or rigorous underwriting, and turn to us to handle the financial aspects seamlessly. They know that the right financing partner can make the difference in a competitive market, allowing them to achieve their goals more efficiently.

Why a Client Relationship Matters

The distinction between having a client versus a customer is significant. Our clients bring all their financing needs to us because we know their business inside out, which enables us to represent them effectively. We’re prepared to answer lender questions without needing to consult our clients constantly. This deep understanding allows them to capitalize on the cost of our services within each deal, letting them concentrate on what they do best without distractions.

Our Client Exclusive Program exemplifies this approach. By working exclusively with Lever, our clients benefit from a dedicated, knowledgeable partner who handles the financing end with as much diligence and care as they apply to their own areas of expertise. Our collaboration allows them to pursue their vision confidently, knowing they have a financial partner invested in their success.

If you’re interested in exploring how our Client Exclusive Program could benefit your business, please reach out to us via email at ahorowitz@levercp.com. We’d be happy to discuss how we can help you focus on your strengths while we handle the financing to bring your deals to a successful close.

From Overbuilt to Optimized: The New U.S. Retail Landscape

by: Simone Mehdizadeh

Retail vacancy rates hit a 20-year low of 5.4% this summer, down almost 50% from the pandemic peak. Even before COVID-19, vacancy rates were already very high at 9.7% in January 2020. Three key factors are contributing to this historic drop in vacancy; store closings, better tenants, and conversions to mixed-use.

The recent surge in store closures that has ultimately surpassed openings is creating a window of opportunity for opportunistic retail investors across the country. A Coresight Research report highlights that 4,548 stores have closed compared to 4,426 openings, resulting in a net loss of 122 stores (CoStar). This shift has been driven by significant closures from retailers like Big Lots (not to mention many others) which plans to shut 258 locations nationwide. Despite this, according to CoStar, analysts remain bullish that the demand for retail space continues to outstrip supply, indicating a tight market and a substantial demand from various sectors for retail space. This imbalance between the need for retail space and its availability, combined with significant bankruptcy activity closing stores across the country, leaves a window of opportunity for investors to buy retail centers at a discount (due to recent vacancies) and take advantage of the many retailers looking to expand and willing to pay higher/market rents.


Developers are revitalizing shopping centers by introducing more experiential tenants such as entertainment venues, modern restaurants, and recreational activities that attract a broader customer base. This shift started in the mid-2010s when traditional retailers like bookstores were replaced by more trend-driven brands and entertainment options. Experiences like pickleball courts and escape rooms are now major draws. For instance, the State of the Escape Room Industry Report shows that 68% of owners plan to expand, indicating how these new activities boost foot traffic and help retail centers thrive. In today’s retail landscape, centers that incorporate experiential elements and are anchored by major grocery chains like Walmart, Target, or other essential retailers are experiencing significant revenue growth among nearly all tenants, while those lacking such features continue to face challenges.


Many middle-market retail centers that have been hit hard are being redeveloped into mixed-use spaces, combining retail with residential, office, and recreational elements. This transformation creates vibrant community hubs, boosting retail while meeting demand for housing and office space.  It also draws people into retail center locations as a destination and keeps them there as long as possible to maximize the return on investment. For example, Trademark Property Company is reducing retail space by 50% in one of their developments, and adding office, hospitality, and residential components to revitalize the area. Similarly, Paradise Valley Mall in Phoenix now includes residential amenities like a fitness studio and dog park, turning it into a desirable mixed-use destination.


Retail centers are becoming more attractive investments, particularly when compared to apartment and industrial properties with lower cap rates and less value-add opportunities. Our retail clients are finding good investment acquisitions all over the country where they can take advantage of the higher cap rates and add value quickly by utilizing the strategies above. Lever Capital Partners can help secure tailored financing solutions to help investors navigate retail real estate opportunities, secure profitable deals, and maximize returns. Whether you’re looking to finance a retail project or explore new investments, Lever’s expertise ensures you get the best guidance for success.