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The Southwest continues to outperform nationally in rental housing and industrial demand, but headwinds are emerging in tourism and capital flows. Phoenix now has over 10,000 build-to-rent units underway — part of a South region pipeline of ~37,700 units ( +2.3% since June ) — while Las Vegas visitation through summer was down 8% year-on-year. Underwriting is shifting toward caution as hospitality softens and cap rates edge higher
📊 Quick Dive
Phoenix industrial vacancy remains in single digits as Southern California logistics spill into Arizona.
Phoenix employment +1.3% YoY, outpacing the U.S. (+0.9%).
Las Vegas H1 2025 room-nights 22.3 M ( –6% YoY ); operators discount rates to sustain occupancy.
South region BTR pipeline > all other regions combined.
Read the full Signal
Texas: Sun Belt Resilience Amid Cooling Supply
Texas markets continue to absorb space with remarkable stability. Houston retail vacancy held near 5.7% (Q3), flat for four years, and Dallas apartments maintained >94% occupancy. Investors remain active — Dallas-Fort Worth logged $3.05 B in Q2 multifamily sales ( + $1 B QoQ ) — making it the nation’s top investment metro for a fourth year. Lenders are tight but confident: Houston job growth (+1.1% YoY) is outpacing the U.S. average, keeping NOI and valuation bases firm. Expect flat to low-single-digit rent growth as operators prioritize occupancy over pricing power.
Florida: Sun-Splashed Strength and Supply Gaps
Florida leads the U.S. in retail tightness and tourism. Tampa retail vacancy is just 3.4% — among the lowest nationally — while Q2 2025 tourism set a record at 34.4 M visitors (+ ~9% YoY). A housing shortfall of ~120,000 units statewide ( Miami-Dade 12k, Broward 10k + ) keeps multifamily occupancy ≈ 96%. Cap rates average 6.5%, drawing steady institutional and foreign capital. Insurance costs and affordability remain the chief underwriting guardrails.
Midwest: Industrial Belt Momentum
The nation’s “flyover” region quietly delivers top-tier yields. Midwest multifamily rents +3.2% YoY — about double the U.S. average — and industrial vacancy (~5.4%) is the tightest regionally versus the U.S. average 7.3%. Investors favor steady cash flow and 6–7% yields as manufacturing investment ($300 M Whirlpool upgrade in Ohio) revives local demand. Regional banks and pension funds continue to finance Midwest portfolios at moderate LTVs.
Sun Belt markets still command investor attention, but the story is discipline, not euphoria. Texas and the Southwest show that occupancy-first strategies are winning in a higher-rate cycle. Operators anchored in BTR and industrial assets should tighten assumptions and stress-test cash flows for rate durability. Lenders are rewarding stabilized income and conservative leverage far more than rent-growth projections. For developers, pipeline discipline — especially in Phoenix and Dallas — will separate durable performers from over-builders in 2026.
Watch Phoenix’s BTR absorption this winter — key test of Sun Belt renter demand.
Texas capital flows should stay resilient as DFW leads U.S. deal volume.
Florida multifamily rents may rise another 2–3% by year-end as vacancies stay sub-4%.
Midwest industrial vacancy likely bottoming in Q4; watch for rate-cut impact on cap rates.
Cross-border capital still selective — Canadian and Middle Eastern funds active in Sun Belt industrial.
