The Signal

Falling construction pipeline tightens future small-bay supply

Construction spending fell to $2.158T in July from $2.168T, down 0.47%. Building permits dropped to 1.394M in August from 1.433M, off 2.72%. Housing starts fell to 1.275M, down 2.6%. Read that as a slower shell pipeline into 2027. For a product where the entire cost stack is slab, steel, 20 ft clear and a 14x14 door, fewer competing projects means the units delivered now face less shadow supply in 24 months.

The adjacent comp is instructive. Basis Industrial closed a $24M construction loan for a Wayne, New Jersey self-storage build and $20.5M for Surprise, Arizona. Capital still funds ground-up small-format industrial when the sponsor has a track record. Industrial production ticked up to 103.07. What we do not have today is a public rent or price-per-foot index for 490 to 1,080 sq ft garage condo suites. Nobody publishes one. Underwrite off your own comps and closed sales, not a national series.

Hershey record attendance meets soft durable goods print

America's Largest RV Show in Hershey posted record-setting opening day attendance, the highest since 2021, per RVBusiness on September 18. That is the single cleanest demand read available for garage condos. People who show up in Hershey in September buy 30 ft trailers in October and then discover their HOA will not let them park it. Product news reinforces it: Aliner brought back the Alite for 2027, OPUS upgraded the OP15 and OP13 with more storage and power, Renogy is running live full-system power on the floor.

The counterweight is the macro. Durable goods spending slipped to $2,380.1B in July from $2,404.7B, down 1.02%. Consumer sentiment at 55.2 is up sharply but still historically weak. Unemployment held at 4.1%. Real disposable income rose 0.37% to $18,122.5B. Vehicle sales at 17.19M annualized are the bullish tell. We have no RV shipment or boat registration number in today's signals, and Trade Only's spring 2026 boat market analysis is not detailed here. Do not assume marine strength.

Rates up across the curve, credit still open

Every cost-of-money line moved the wrong way. 10-year Treasury 5.01%. SOFR 3.85%, up 6.35% in one print. 30-year mortgage 6.95%, up 19 bps. The 10Y-2Y spread sat flat at 0.27%. High yield spread flat at 2.70%, which tells you risk appetite has not cracked. CRE loan delinquency actually improved to 1.53% from 1.56%. So the story is expensive money, not broken money.

Institutions are still writing large checks. CalSTRS added $5B in CRE commitments. Ares and a Canadian pension launched a $2.4B U.S. logistics JV. Brightshore Capital, formerly GTIS, launched a $250M debt platform. Hines and Rialto closed an office credit fund at $1.1B. Industrial CMBS is gaining issuance share led by SASB deals, though $12.73B of industrial CMBS faces lease rollover risk. None of that capital is chasing 600 sq ft garage suites directly. But the debt platforms funding small-format industrial are the same shops, and a 3.85% SOFR floor means floating construction paper prices materially above last year.

New opportunity zone reporting rules hit fund sponsors

The IRS published proposed regulations on September 11 requiring qualified opportunity funds to file information returns and furnish statements to investors who dispose of their interests, plus new statements from QOZ businesses to the funds. Read the actual Federal Register notice if you hold a QOF interest. The practical effect is a paperwork and tracking burden on the fund, and a cleaner audit trail on your basis and holding period. A garage condo project sited inside a designated zone can be a qualifying business asset, but the structure has to be built correctly from day one. You do not retrofit a QOF.

The more common mechanic for a single-unit owner is cost segregation. A garage condominium is not one asset. It is a shell, plus a 14x14 overhead door, door operators, dedicated electrical, lighting, HVAC if installed, floor coatings, and site improvements like paving and fencing. A study can reclassify a meaningful share of basis into 5, 7 and 15 year lives instead of 39. That accelerates depreciation into the early years. If the suite supports a trade or business, Section 179 and bonus rules may apply to certain components. This is general information, not tax advice. Run it past your CPA before you file.

We map capital sources across private lenders, family offices and funds, and run cost segregation studies for owners of qualifying commercial property.