👋👋 Good morning real estate watchers! Today, we are going to talk about...

1. Commercial landlords argue that fair notice for rent hikes in California is unnecessary because it’s ‘just business.’ Well, Karen, if doubling the rent is 'just business,' then me leaving your Yelp review about the roaches is 'just community service.'

2. Dive into President-elect Trump’s plan to Make Housing Affordable Again, which might lower prices but requires cooperation across government. Because nothing says “smooth sailing” like relying on Congress to agree on housing policy.

3. Explore how manufactured home prices are up 60%, making them the affordable option… if you don’t mind your house doubling as a getaway vehicle in a Pixar movie.

Let’s go!

TOP STORY

COMMERCIAL RIGHTS

In a bold move aimed ostensibly to protect small businesses, California's new commercial tenant rights law is reshaping the landscape of retail corridors across the state. Signed by Governor Gavin Newsom, the legislation aims to create a more equitable playing field for commercial tenants grappling with skyrocketing rents, unpredictable maintenance fees, and abrupt evictions.

While proponents herald this as a victory for mom-and-pop shops, critics argue it could dampen investor enthusiasm and slow down commercial development.

The Upsides: Stability for Small Businesses

California's new protections apply to small businesses with up to five employees, restaurants with up to ten employees, and nonprofits with a workforce of no more than 20. Among the law’s highlights:

1. Transparent Maintenance Fees: Tenants now have the right to detailed breakdowns of common area maintenance fees—a move inspired by reports of dramatic, often unexplained fee hikes.

2. Fair Notice Requirements: Similar to existing residential tenant laws, landlords must provide at least 30 days' notice for rent increases of up to 10% and 90 days for hikes exceeding 10%.

3. Language Equity: Leases must be provided in the language used during negotiation, ensuring clear communication for California’s diverse business owners.

Doug Smith, Senior Director of Policy and Legal Strategy for Inclusive Action for the City, emphasizes the importance of these changes. “This isn’t about giving small businesses an advantage; it’s about addressing an inherent imbalance in negotiating power. For too long, commercial leases have been a David-versus-Goliath scenario, with tenants often left in the dark.”

The Crenshaw Corridor in Los Angeles is a case study of how these measures could work. Deandrea Jones, owner of Wah Gwaan Jamaican Kitchen & Bar, recalls a 67% surge in maintenance fees that left her scrambling for answers. With the new law, landlords like hers will face stricter requirements to justify such increases.

The Downsides: Investors Cry Foul

Not everyone is toasting the new regulations. Critics argue the added bureaucracy and tenant protections could deter institutional investors and slow much-needed development in commercial zones.

“Investors thrive on predictability, and this law introduces a layer of uncertainty,” says Marcus Green, a commercial real estate analyst. “If landlords face heightened scrutiny and reduced flexibility, some may decide it’s simply not worth the hassle, leading to stagnation in the market.”

Green also points to the risk of unintended consequences. For instance, landlords might compensate for the new rules by demanding higher base rents upfront or avoiding leases with smaller tenants altogether.

The Broader Context: Speculation and Displacement

California’s move is part of a larger conversation about the impact of institutional investors on local communities. Once hyperlocal, commercial real estate is now dominated by pension funds, real estate investment trusts, and private equity firms. Their focus on maximizing profits has turned neighborhoods into speculative battlegrounds.

This trend is particularly evident in transit-adjacent areas. Take Los Angeles’ Leimert Park, where the construction of a light rail station sparked a wave of investor interest, driving up rents and displacing long-standing businesses. Similar stories unfold in Little Tokyo, where commercial tenants face steep rent hikes and redevelopment pressures.

“We’re not anti-investor,” clarifies Smith. “But unchecked speculation often leaves a wake of displacement and hollowed-out communities. This law is a necessary step to curb those effects.”

Community Ownership: A Vision for the Future

Advocates see these tenant protections as a stepping stone toward more ambitious solutions, like community ownership. Organizations such as Liberty Community Land Trust are acquiring commercial properties to shield them from market pressures and preserve local culture.

“The ultimate goal is sustainability,” says Smith. “If we can stabilize these corridors and give businesses a fighting chance, we’re paving the way for a model that benefits everyone—tenants, landlords, and communities alike.”

California’s commercial tenant rights law is an audacious attempt to level the playing field in a sector long dominated by powerful landlords and speculative investors. While the jury is still out on its economic impact, one thing is clear: small businesses now have tools to push back, and the state has taken a firm stand in prioritizing community stability over unchecked profit.

For local businesses like Wah Gwaan Jamaican Kitchen & Bar, the new law isn’t just legislation—it’s a lifeline. Whether it’s a game-changer or just a temporary reprieve will depend on how landlords, tenants, and policymakers navigate this new terrain.

SNIPPETS

1️⃣ Trump Bump or Dump: As President-elect Trump gears up to take office, analysts ponder whether his proposed deregulation and federal land expansion policies will spark a "Trump bump" in the U.S. housing market. Promising to "Make Housing Affordable Again," his team claims these changes could slash home prices and supercharge supply, though experts caution that translating campaign rhetoric into reality requires substantial government cooperation. Meanwhile, realtor.com forecasts a mixed 2025, predicting modest home price growth, steady rents, and increased single-family construction—offering hope for balance in a market long starved for it. (MPA)

2️⃣ Home Sweet (Mobile) Home: An analysis of data from HUD and the U.S. Census Bureau reveals that prices for manufactured homes in the United States have increased by nearly 60% over the past five years, outpacing the price growth of traditional single-family homes. Despite this significant increase, manufactured homes remain a more affordable housing option, with an average price of $124,300 compared to $409,872 for site-built homes. The study highlights the ongoing housing affordability crisis and inventory shortage, with states like Washington, California, and Arizona experiencing the highest manufactured home prices. (HW)

3️⃣ Renters’ Paradise: With 90,000 build-to-rent (BTR) units underway across the U.S., the housing market is doubling down on renting as the next best thing to homeownership. The Sun Belt is leading the charge with 57,000 units, thanks to sprawling land and renter-friendly amenities. But while this trend offers refuge from mortgage volatility and tight inventories, inflation and economic uncertainties loom, making BTR the housing version of "close enough.” (RealPage)

4️⃣ Hybrid Havoc: Office delinquencies are projected to surpass 14% by late 2025 as hybrid work continues to batter the sector, Moody's warns. Despite slight improvements in repayment rates, persistent vacancies and feeble rents spell trouble. While some metro areas fare better, the office market overall seems stuck in a game of "musical chairs" without enough tenants for the seats. (Globe St)

5️⃣ Fed Up Soon? The U.S. economy’s strong momentum, with GDP growth hitting 2.8% in Q3 and a projected 3.3% in Q4, has economists bracing for potential interest rate hikes in 2025. As inflation ticks up, the Fed could mirror its mid-1990s playbook, shifting from cuts to hikes. It's an economic seesaw that might leave borrowers nervously checking their balance sheets. (Appolo)

6️⃣ Rent Premium Compression: A record-breaking 557,000 new apartment units delivered nationwide in the past year have compressed rent premiums across asset classes. Class A rents, once a pricey leap from Class B, now sit just 24.8% higher, while Class C units trail B by only 19.5%. With increased concessions and lower lease-up prices, renters are playing musical chairs, snagging higher-end units at bargain prices, leaving economists to call it "filtering" and landlords to call it "a headache." (RealPage)