Sellers are watching asking prices plummet by hundreds of thousands.

Properties sitting for months.

Price cuts happening weekly.

The market has flipped, and it's "absolutely brutal."

Here's the reality:

Nearly 500,000 more sellers than buyers nationwide—the highest gap ever recorded.

Southern markets are leading the bloodbath with massive seller-to-buyer ratios.

The irony?

These same sellers were kings two years ago.

Now they're using inflated comps from the peak, refusing to accept reality.

Meanwhile, nearly half of listings are rotting on the market for months.

Smart money is already pivoting—rent it out, wait for the cycle to turn.

The market always wins.

Chicago's X Company, once promising to revolutionize urban living, is now watching $325 million in debt hit the auction block.

Two flagship towers in Phoenix and Denver?

Both in default.

The numbers tell the brutal story: $470K per unit in Phoenix debt, $374K per unit in Denver.

Both loans matured and went sideways.

The lender isn't waiting around—they're marketing the whole mess through Newmark with bids due mid-June.

This company spun out of a Miami developer, branded itself as "social living," and burned through cash building amenity-heavy towers with co-working spaces and members' clubs.

Classic growth-at-all-costs playbook that worked—until it didn’t.

And this isn’t an isolated collapse.

Other co-living ventures—Common, Starcity, Quarters—have already stumbled.

It’s starting to look like the shine is wearing off.

Whether co-living reinvents itself or fades further remains to be seen.

But the cracks are showing—and investors are watching closely.

The Fed's May meeting minutes came out on Wednesday.

They showed a troubling situation: the Fed is worried about both lasting inflation and recession risks.

It's like being told to hit the gas and brake at the same time.

Here's what went down behind closed doors: "Almost all" Fed officials are freaking out that inflation could stick around longer than expected, especially with Trump's trade wars creating price chaos.

But Fed staff are saying recession odds are coin-flip high, with unemployment expected to spike by year-end and stay elevated through 2027.

This explains Thursday's awkward Trump-Powell White House meeting perfectly.

Trump kept pushing for rate cuts while Powell doubled down on his "data-driven" approach.

For real estate investors, this is the new normal.

The Fed's holding rates at 4.25%-4.5% until they figure out whether Trump's policies cause inflation or recession first.

Investors thinks the Fed will panic and cut rates to save the economy.

Most economists think Powell's serious about fighting inflation first.

What do you do when the deals dry up?

Most operators complain.

Some give up.

But the smartest ones?

They stop chasing deals and start creating them.

If you read about him in last month's newsletter, you'll remember Shoaib "SHO" Kabani — the former consultant turned commercial real estate operator who went from cold-calling for storage units to structuring seller-financed flex deals in Florida.

This time, SHO isn't buying value — he's creating it.

When acquisition opportunities in small-bay industrial became scarce and overpriced, he made a move that could change everything for operators like you.

He went from buying forgotten flex warehouses to building them from scratch.

The potential returns?

A 12-cap on cost basis in a market where deals are trading at 7-8 caps.

In my opinion, this is where the game really starts to change.

Because when you can't find deals at the right basis anymore, the smartest operators don't just wait around complaining about the market.

They pivot and adapt to what they wish to buy. 

Sho's pivot to development didn't happen overnight.

It started with a reality check that every operator faces eventually.

After his Port Charlotte, FL flex deal (more on that success story later), Sho was hungry for more.

But the market had other plans.

💡 Finding quality small-bay assets at the right basis gets harder every month.

Here's the problem every small-bay operator faces: going direct to sellers has become increasingly difficult.

Meanwhile, the deals hitting the market are simply too expensive for the returns operators want on their capital.

It's much harder to pencil out deals compared to how it used to be before.

Sellers have gotten smarter.

And in the hottest submarkets — like Florida and Texas — inventory has dried up completely.

Instead of chasing another tired asset, he decided to build one from scratch.

📍 Location: ~45 minutes north of Houston, in Montgomery County

📍 Size: 3 acres under contract

📍 Product Type: Ground-up flex warehouse (small-bay industrial)

📍 Planned GLA: ~35,000 square feet across 3 buildings

📍 Lease Strategy: Buildings under 12,000 SF to avoid sprinkler requirements

📍 Target Rents: $15–16 NNN

📍 Est. Exit Valuation: ~$7.7M

📍 All-In Cost Basis: ~$4.4M

Here's what's exciting — Sho's pre-development leasing marketing (just basic Facebook and Marketplace ads) has already generated 50+ leads.

The demand for small-bay space in that market is so strong that newer flex projects lease up at premium rates with virtually no concessions.

And here's the kicker — market occupancy sits at 95%+.

"I started finding pockets across the US using tools like Perplexity and AI research to identify markets with strong population growth, business growth, high occupancy, and high rates." Sho explained about his systematic approach to market selection.

This is what I love about this deal: it's a simple, repeatable blueprint.

This isn't some Class A tilt-wall shell in a tertiary logistics hub.

This is a steel-frame, metal-roof, under-the-radar flex park — no frills, no fluff.

Just basic 1,000–2,000 SF units with bathrooms, minimal office build-out, and a roll-up door.

It's the kind of project you don't need to overthink.

You just need to execute cleanly.

📍 Most tenants cover their own TIs.

📍 Tenants are tradespeople and micro-businesses.

📍 They'll often pay for their own office build-out.

📍 Low turnover.

📍 High stickiness.

📍 Minimal operational drag.

As Sho said, "With storage, you're running a business — with flex, you put in the effort upfront to secure quality tenants on 3-5 year leases, then it practically runs itself with very little hands-on management.”

Sho is refreshingly honest about where he stands in the process.

He's not pretending to have it all figured out — but he's making smart decisions early.

And his learning curve?

It started way before this development deal.

Sho's education in small-bay began with a moment many of us can relate to.

During his Port Charlotte deal, he was staring at market rents and saw "$12 on Crexi and LoopNet."

His reaction?

"I don't even know what triple net was. I just saw $12... and I was like, okay, I'm gonna rent this for $12 a square foot."

The facility leap-frogged from $5 gross to $12 NNN leases.

Pure value-add gold — the kind of transformation that makes the deal pop. 

If you missed the story about Port Charlotte deal, you can read it here.

The first architect or engineer who saves you 10% on a fee may cost you 6 months on a correction letter.

Just because the land is zoned for industrial doesn't mean you're entitled to permits. Sho ran a pre-development meeting with the county early to validate site layout, detention requirements, and get informal buy-in.

Before pouring a dollar on concrete, Sho already had 50+ local tenants interested. That kind of feedback loop helps you validate rent assumptions before finalizing your construction budget.

Sho's plan is to sell once stabilized. But if the market turns, he's underwriting to refinance and hold. That dual-path strategy is critical right now, especially on construction risk.

Small-bay development is one of the most approachable types of commercial ground-up construction.

No elevators.

No massive TI budgets.

No lease-up roulette with national credit tenants.

Just good dirt, clear zoning, and solving a real problem for local businesses.

Yes, it takes time.

Yes, it takes risks.

But when your total basis is $130 PSF and your market rent is $15–16 NNN, you're looking at a 12-cap on cost.

In this environment, that kind of spread is rare.

"If you think about this, there's obviously your hard cost — your cost of construction — plus the soft costs like engineers, architects, lawyers. But one thing people forget is your carrying cost. The holding costs are huge," Sho explained.

We'll definitely follow up on this project later in the year to show you how it's progressing — whether Sho stays on target with construction costs, timelines, and lease-up velocity.

Because you never know — this may end up being more than just one guy's pivot.

It might be the move for many of you reading this — especially those already operating in small-bay industrial and wondering what comes next.

So stay tuned.

This story isn't over — I'll be tracking his progress in future newsletters and getting him back on the pod once the building is off the ground and costs are tallied up.

But here's what really struck me.

Most operators see market constraints as problems to endure.

Sho saw them as opportunities to evolve.

When acquisition deals became too expensive, he didn't wait for the market to shift back in his favor.

He transformed his entire approach.

Sometimes, the best deals aren't the ones you find—they're the ones you create.

Until next Sunday 9:07 am. 

Be well,

Saul

P.S. Got questions or thoughts? Hit reply—I actually read these and I'm invested in seeing you win.

Random Saul Fact: When I'm not talking real estate, you might find me on epic hikes or climbing mountains. Here's a picture of me and my group of friends who climbed Mount Kilimanjaro.