"We're seeing sort of surprising rent growth. Places that didn't go crazy in COVID and [now] have this sort of pent-up growth happening now, there's sort of stable markets that didn't see that crazy oversupply, and so now they're growing significantly."

In fact, in Institutional Property Advisors' recent Boston multifamily report, it expects Class A rents in the metro area to hit $4,150 per month, representing a 3.5% increase from 2024. Also, that's projected to outpace the national average growth rate of 2.8 percent.

In addition, Faron lists Northern Virginia as a multifamily area that's been fitting the bill for Shoreham. In fact, the region has been one that the developer has been consistently investing in over the last decade.

Faron said he's a "big fan" of Northern Virginia's "stable growth."

STRUGGLING SHORT-TERM MARKETS

Since the pandemic, there's been a shift. While Sunbelt markets like Austin have benefited from strong population growth, an influx of supply has caused some short-term issues in those regions. Now the best multifamily performances are happening in more Northern regions like New York, where supply is more limited.

Along with Austin, Faron noted that he's been seeing some short-term multifamily challenges with other Sun Belt areas including Nashville, Raleigh, and Tampa Bay.

However, he stressed that he's still a believer in these markets in the long term thanks to the encouraging trends he sees in them.

"There's great employment and drivers of growth over the long term," Faron stated.

"We're, looking at that and calculating how long until that supply/demand balance corrects."

ANALYZING EACH MARKET AND DEPLOYING VALUE-ADD

Some key fundamentals the company will consider are project deliveries, supply absorption, construction, and how long will the state of supply versus demand take to offset, according to Faron.

"We're teeing up some units because we think in certain markets that might be 18 months or 12 months away from sort of that absorption period after which you historically see that significant rent growth, we want to be delivering product when we're going to see the lack of supply and be the first [ones] there to appreciate some of that growth."

While Shoreham involves itself in both development and buying existing properties, Faron said he is seeing more value right now in exploring the latter in the current landscape.

Namely, finding the right value-add multifamily opportunities center Shoreham's concentration right now. This again, ties back to the markets the West Palm Beach-based firm feels comfortable in after studying.

"We're pretty picky about finding the right asset to purchase at what price and what basis we're purchasing them," Faron said.

"But when we find it, we're finding opportunities to produce opportunistic returns with simple pull-and-replace renovations."

Part of its investment strategy could include distressed, poorly maintained, older vintage assets. In fact, Shoreham sees value now in potentially acquiring some products originally built in the 1980s.

"We're able to purchase things with creative leverage, and getting an outsized yield for taking maybe late 80s rather than 90s [properties].

"When the market recovers, we see that compression between the spread for older and newer vintage products. So we think it's a good place to play," Faron highlighted.

"It's a safe, embedded accretive leverage with an upside option."

CAPITAL SHOULD START FLOWING DESPITE UNCERTAINTIES

As we sit early in 2025, uncertainties remain across the entire CRE industry. For example, what will happen with inflation, interest rates, and on policy from the new administration?

That being said, considering capital has been sitting on the sideline for a while now, Faron thinks this year will be a stronger one for transactions than last.

"Eventually that capital just needs to be deployed," he explained.

"I think once you get some sort of stability and a sense of what's happening, I think q2, q3, q4 of this year that should be pretty active."

While Faron is confident the activity will pick up this year, it may take until 2026 or 2027 until the "aggressive timing" in the entire industry returns.