| STILLINGER CAPITAL | Small-Bay Flex & Garage Condo October 25, 2026 |
| Durable goods spending hit $2,443.6B in August, up 2.0% from $2,395.6B, while consumer sentiment collapsed to 48.1 from 51.7. That divergence is the whole story for small-bay flex. People are still buying boats, trailers, side-by-sides and project cars even as they tell surveyors they feel broke. Those purchases need 20 ft clear height and a 14x14 door, and HOAs will not allow them in the driveway. Ownership demand for garage suites tracks the goods number, not the mood number. Watch the gap. |
10-Yr UST 4.96 ↓0.17 | SOFR 3.9 ↑0.02 | 30-Yr Mtg 7.32 ↓0.08 |
HY Spread 3.4 ↑0.13 | Durable Gds 2443.6 ↑48.00 | Sentiment 48.1 ↓3.60 |
| THE ASSET |
Housing starts fell to 1,221K in September from 1,288K, down 5.2%, and permits slipped to 1,400K. Total construction spending still rose to $2.203T in August, up 0.85%. Read those together. Residential subcontractors are freeing up while overall volume holds, which is the window where a 490 to 1,080 sq ft garage condo shell gets built at a better number than it did eighteen months ago. Concrete, steel and door packages are the whole budget on these buildings. There is no tenant improvement allowance, no HVAC fit-out, no elevator.
Comps are moving the right way. JLL closed a $20M construction loan on a Fort Lauderdale self-storage development, and BREIT lined up $1.7B of CMBS against 19M SF of industrial. Industrial CMBS is gaining issuance share led by SASB deals. Small-bay flex sits between those two prints and benefits from both. We do not have a public cap rate series for garage condominiums. Anyone quoting one is guessing.
| BULLISH | Softer residential starts free trade capacity; industrial and storage debt markets print actively. |
| THE DEMAND |
Durable goods spending printed $2,443.6B in August against $2,395.6B prior, a 2.0% move. Total vehicle sales dropped to 16.378M in September from 16.98M, off 3.55%. Consumer sentiment fell to 48.1. Unemployment ticked to 4.2%. Real disposable income was flat at $18,410.5B, down 0.03%. So the buyer is still acquiring durable toys and equipment but is being more deliberate about the big-ticket vehicle decision.
The RV channel is still functioning as an industry, not contracting. Winnebago is nominating Jay Johnson to its board at the December annual meeting. RVDA is running its 2026 Dealers Convention with full seminar programming. Victron is running installer training in Denver Nov 5-6. Marine shows consolidation rather than retreat: Hewes Marine announced a sale, private equity acquired Burgess, and Blue Water Index raised a $2M seed. None of that is a demand number. We do not have current RV shipment or boat registration counts in this signal set, and we are not going to pretend otherwise.
| NEUTRAL | Durable goods up 2.0%, but sentiment 48.1 and vehicle sales down 3.55% cut both ways. |
| THE CAPITAL |
The 10-year Treasury printed 4.96% on October 22 versus 5.13% prior, a 17 basis point drop. SOFR ticked up to 3.90% from 3.88%. The 10Y-2Y spread held flat at 0.31%. High yield widened to 3.40% from 3.27%, up 3.98%. The 30-year mortgage eased to 7.32% from 7.40%. CRE loan delinquency fell to 1.53% from 1.56%. That is a credit market that is functioning, not one that is seizing.
What is actually clearing matters more than the curve. Hampshire got a construction loan for a 41,000 SF Meadowlands industrial project. A $20M construction loan closed on Fort Lauderdale self-storage. Blackstone's UK industrial CMBS swelled to £1B on strong demand. Meanwhile Blackstone wrote down real estate values broadly, Two Sigma shuttered its real estate unit, and distressed sales surged 26%. Capital is highly selective. Small industrial and storage product is getting financed. Office and stressed multifamily are not.
| NEUTRAL | Rates improved and delinquency fell, but HY widened 3.98% and distressed sales jumped 26%. |
| THE TAX ANGLE |
The Federal Register published a correction on September 28, 2026 covering Information Reporting Regarding Qualified Opportunity Zones and updated QOF certification and decertification procedures. If you hold a garage condo project inside a Qualified Opportunity Fund, the certification and decertification mechanics are the part to read. Decertification is the risk nobody models. Lose QOF status and the deferral and the ten-year basis step-up go with it.
Separately, the mechanic that actually moves the needle on a garage suite is cost segregation. A 490 to 1,080 sq ft unit is mostly concrete slab, steel, a 14x14 overhead door, site work and electrical. A cost seg study reclassifies qualifying components into 5, 7 and 15-year property instead of 39-year. Site improvements like paving, drainage and exterior lighting commonly land in 15-year. That front-loads depreciation into the first ownership years, which is exactly when your debt service is heaviest at a 4.96% ten-year. This is general information, not tax advice. Run it with your CPA against your specific entity and basis.
| BULLISH | Cost seg mechanics favor hard-cost-heavy garage condos; OZ guidance clarified rather than restricted. |
| Buford, GA | Gwinnett County Public Schools redistricting plan dated Sept 23 signals household growth; no direct industrial or flex print today. |
| Fort Mill, SC | Development moratorium ended Oct 1. A 270K SF project won approval Oct 7 over resident opposition. Warehouse rezoning advancing. |
| Concord / Lake Norman, NC | Lake Norman townhome case saw neighbors supporting while planners urged denial. Odd politics. No flex-specific data today. |
| Forney, TX | No new Forney-specific signal today. Nearest Texas print is Venu's $60M McKinney sale-leaseback, roughly 40 miles north. |
| Benton, KY | No new data today. Benton remains the lowest-signal site in the portfolio; treat as lake-recreation demand, not industrial. |
We map capital sources across private lenders, family offices and funds, and run cost segregation studies for owners of qualifying commercial property.
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