The Signal

Build Costs Sticky While Residential Starts Pull Back

Construction spending hit $2.203 trillion in August, up 0.85% from $2.184 trillion. Vertical cost is not deflating. Housing starts fell 5.2% to 1.221 million and permits slipped to 1.398 million. For a small-bay developer that split is the whole story. Steel and concrete pricing stays firm, but subcontractor availability across Buford, Fort Mill and Concord loosens as residential builders slow down. Industrial production rose to 103.95, so the business side that fills 1,080 square foot bays with inventory is still expanding.

Adjacent capital still underwrites small format. BKM Capital is running a $3 billion buying program in small-bay industrial. BREIT lined up $1.7 billion of CMBS on a 19 million square foot portfolio. In storage, an adjacent comp only, JLL closed a $20 million construction loan in Fort Lauderdale and Provident funded an 891 unit project in Glen Rock. What does not exist is a public price per square foot index for garage condominiums. Nobody publishes one. Underwrite off your own comps and your own presale velocity.

Sentiment At 48.1 But Toys Still Need Homes

Consumer sentiment fell 6.96% to 48.1 in September. Durable goods spending slipped 0.56% to $2,422.5 billion. Real disposable income dropped to $18,366.1 billion and unemployment ticked to 4.2%. Vehicle sales fell 3.55% to 16.378 million. That is a consumer pausing on the next purchase. It is not a consumer selling the boat he already owns. The distinction matters because garage condo demand tracks the installed base of RVs, boats and collector cars, not this quarter's shipments.

The supply chain is consolidating, not retreating. LCI Industries reaffirmed its merger with Patrick and rejected the unsolicited Monomoy proposal on October 30. Northpoint executives flagged resilience in the Canadian RV market. Hewes Marine announced a sale and private equity acquired Burgess. Money is buying marine and RV infrastructure through the soft patch. On the parking side, the Lake Norman board rejected a mega community to loud applause and $2.5 million shoreline townhomes are coming. We do not have RVIA shipment counts or a collector car index in today's feed.

Industrial Paper Clears, Mortgage REITs Take Losses

The 10-year sits at 5.05%, up six basis points. SOFR is flat at 3.94%. The 10Y minus 2Y spread narrowed to 0.37 from 0.38. High yield spreads widened 12 basis points to 3.26%. The 30 year mortgage eased to 7.24% from 7.32%. Bank CRE delinquency improved to 1.53% from 1.56%. That is a credit market that is tight on the long end and still orderly on the loss side.

What is actually clearing: industrial. BREIT lined up $1.7 billion of CMBS, Blackstone's UK industrial CMBS swelled to £1 billion on demand, and industrial issuance is gaining share through single asset single borrower structures. Town Lane closed a $1.9 billion fundraise above target. On the other side, Blackstone Mortgage Trust posted a Q3 net loss that hit the stock. Translation for a garage condo sponsor: stabilized, granular industrial income gets a bid. Ground up still needs real sponsor equity and presales to pencil at a 5.05% base rate.

Cost Segregation Splits A Garage Condo Four Ways

A garage condominium is not one asset for depreciation. The shell and roof are nonresidential real property depreciated over 39 years. But a cost segregation study carves out the components that carry five, seven and fifteen year lives: asphalt and concrete paving, curbing, site utilities, fencing and gates, landscaping, exterior lighting, security and camera systems, and dedicated electrical runs to a lift or compressor. On a 1,080 square foot unit with 20 foot clear and a 14x14 door, that reallocation is often a meaningful slice of basis. Those shorter life classes are the ones eligible for bonus depreciation, and a business owner user may also look at Section 179 on qualifying property.

Separately, the Federal Register published updated Qualified Opportunity Fund certification and decertification procedures plus new information reporting rules on September 28, 2026. If your site sits in a designated zone, self certification is not set and forget. Compliance reporting is getting heavier. This is general information, not tax advice. Run it with your own CPA.

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