The Signal

Permits down 2.7% thins the competing pipeline

Building permits printed 1,394K in August, down 39K or 2.7% from 1,433K. Housing starts fell to 1,275K, off 2.6%. Total construction spending slipped to $2.158T, down 0.47% month over month. That combination matters more to small bay flex than most people assume. Garage condo product competes for the same dirt, the same concrete and metal building crews, and the same electrical subs as residential and light industrial. When the residential pipeline thins, crew availability improves and bid coverage widens on a 20 ft clear shell.

On the adjacent side, Basis Industrial closed a $24M construction loan for a Wayne, New Jersey self storage project, and industrial CMBS is tracking a record issuance year led by SASB deals. Capital still funds small format commercial. Industrial production held at 103.07, up 0.02%, so the tenant side economy is flat rather than falling. What we do not have is a published price per square foot index for garage condominiums. No NCREIF series exists. Underwriting rests on local comps, your own sell out pace and replacement cost.

Hershey record attendance meets soft durable goods

America's Largest RV Show in Hershey posted its highest opening day attendance since 2021, per RVBusiness. Manufacturers showed up with 2027 product. Aliner brought back the Alite after nearly a decade out of production. OPUS upgraded the OP15 and OP13 with more power and storage. Total vehicle sales ran 17.19M SAAR in August, up 2.58% from 16.757M. Consumer sentiment jumped to 55.2 from 49.5, an 11.5% move. Real disposable income rose 0.37% to $18.12T. Unemployment held flat at 4.1%.

The offset is real. Durable goods spending fell 1.02% to $2,380.1B in July. People feel better and are buying vehicles, but the broad durables line is soft. The structural driver has not changed. Huntersville is hearing a townhome proposal near the Red Line station and Lake Norman planners are urging denial on another townhome project that neighbors actually support. Every attached unit built is a household with a boat, a side by side or a project car and nowhere legal to put it. No RVIA wholesale shipment print appears in today's feed, so treat Hershey traffic as retail intent, not confirmed unit volume.

Front end repriced while long end fell

The 10 year fell 7 basis points to 4.94. SOFR went the other way, up 23 basis points to 3.85, a 6.35% jump. The 2s10s spread compressed to 0.25 from 0.27. That is the expensive combination for a developer. Floating construction debt reprices up while the long end that anchors your exit barely moves. The 30 year mortgage hit 6.95, up 19 basis points, which stalls the homeowner who planned to trade up into a house with a bigger garage and instead buys a suite.

Credit itself is not the problem. High yield spreads sat flat at 2.70. CRE loan delinquency fell to 1.53% from 1.56%. Institutions are leaning in. CalSTRS added $5B in CRE commitments, Ares launched a $2.4B logistics JV with a Canadian pension, and Blackstone is weighing a secondary sale on a real estate fund. The visible stress is concentration. FedEx lease rollover has roughly $3B of CMBS exposure flagged. A garage condo project sold across eighty separate owner users has no single tenant capable of vacating 400,000 square feet.

Opportunity zone reporting rules get real teeth

The IRS released proposed regulations on September 11 covering information reporting for qualified opportunity funds. QOFs would file information returns with the IRS and furnish statements to investors who dispose of their interests. QOZ businesses would furnish statements to the fund. If a small bay site sits inside a designated zone, the ongoing compliance load on the fund rises. Read the docket before assuming your structure still pencils administratively.

Separately, the mechanic most garage condo buyers miss is use. Depreciation and Section 179 follow business use. A contractor who buys a 1,080 sq ft suite to hold equipment and inventory can run a cost segregation study. The door opener, dedicated panel, interior lighting, paving, striping and fencing often land in 5, 7 or 15 year classes instead of the 39 year building line. A collector who parks a car purely for pleasure generally gets nothing. Same box, very different outcome. The Section 250 proposal also published this cycle references depreciation but applies to domestic corporation FDII, not your suite. This is general information, not tax advice.

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