The TreppWire Podcast: A Commercial Real Estate Show 343. Commercial vs. Residential Real Estate Value Drivers, Hottest Markets Leading the Way, & Transactions from the Week
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Jul 25, 2025 Explore the dynamic world of commercial versus residential real estate as experts dissect key value drivers. Discover which U.S. markets are leading the CRE charge, with insights on economic factors at play. Recent high-profile transactions, including a hefty $103 million purchase in NYC, showcase evolving trends. Get a glimpse into the multifamily market's challenges and the impact of rising mortgage rates on housing affordability. Tune in for a deep dive into the resilience and future potential of multifamily housing in the Sunbelt.
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Residential Affordability Shapes CRE
- The residential affordability crunch drives strong demand for single-family rentals and built-to-rent developments.
- Institutional investment in single-family rentals is just beginning, with significant growth potential geographically.
Distinct Value Drivers in CRE vs Residential
- Commercial property value comes from the present value of future anticipated cash flow and sale price.
- Residential property value is driven by utility and substitution theory, affected more directly by supply and demand.
CRE Cash Flows Follow Martingale Process
- Commercial real estate cash flows are often modeled as a martingale process, where next period's cash flow is expected to equal the current value.
- Last year's net operating income typically serves as the baseline estimate for underwriting future cash flows.
