THE DANIEL KAUFMAN REAL ESTATE NEWS REPORT

Kaufman & Company // Real Estate Intelligence
Vol. 4, Issue 19 // May 2026 // Daniel Kaufman, Principal & CEO

Austin is down. Fort Myers is bleeding concessions. San Francisco is back. The apartment market isn’t cooling — it’s splitting. And if you’re still underwriting to 2023 assumptions in the wrong markets, you’re already behind.

Let me be direct: the Sun Belt isn’t broken. But the media narrative — the one that’s been running since 2020 about endless migration, insatiable demand, and can’t-miss development returns — is now running headfirst into a supply wave that took years to deliver and is arriving all at once. The developers who chased that narrative at peak cap rates are now handing out free months of rent to fill units.

That’s not a crisis. It’s a correction. And corrections create opportunities — if you know where to look.

The Bifurcation Is Real. The Data Is Decisive.
The Apartments.com May 2026 RentPulse Index tells the story cleanly. Markets that got flooded with new multifamily deliveries are struggling to absorb inventory. Texas rents fell 2.1% year over year. Florida dropped 1.6%. Austin and San Antonio are seeing the sharpest individual market declines as developers compete to fill identical product in the same submarkets simultaneously.

Meanwhile, San Francisco posted 8.2% annual rent growth — average one-bedroom at $3,351/month. The AI hiring boom from OpenAI, Anthropic, Nvidia, and the broader ecosystem is doing what years of remote work narrative said couldn’t happen: bringing workers back to the Bay. Norfolk is up 4.2%. Virginia Beach and Newport News above 3%. Rhode Island running above inflation.

The Concession Economy Tells the Real Story

Stop looking at advertised rents. Effective rents — what landlords are actually collecting after concessions — are the number that matters for underwriting and NOI modeling. And the concession data coming out of the Sun Belt right now is a flashing yellow light.

Fort Myers is leading the nation at a 5.3% concession rate. Asheville at 4.4%. Denver, Austin, and Phoenix all clustered near or above 4%. When you’re giving back a month or more on a 12-month lease just to fill a unit, your pro forma is fiction.

I’ve been saying for over a year: Florida at current valuations is not where we’re deploying capital. This data confirms it. The Gulf Coast — Fort Myers, Sarasota, Tampa — is experiencing the combined pressure of rising vacancy and elevated new supply simultaneously. That’s a painful combination for operators who need occupancy to service construction debt.

“By the time a market is on the cover of a magazine, we’re already positioning the exit. The Sun Belt was on every magazine cover in 2022. We knew then what the data is confirming now.”

Chicago Is the Signal Worth Watching

Apartment searches in Chicago rose 16% quarter-over-quarter from late 2025 levels. That doesn’t surprise me. We’ve been bullish on Chicago throughout a period when most institutional capital was talking about the city like it was uninvestable. We see a market with durable employment, a diversified economy, genuine affordability relative to coastal peers, and an operator-friendly supply environment. The search trend is early confirmation that renter sentiment is catching up to what the fundamentals have been saying for two years.
Compare that to Milwaukee — searches down 35.6% QOQ, the largest decline in the country. The city absorbed one of its largest apartment supply waves on record in 2025 and is now digesting. That’s the cycle playing out in real time.

The Affordability Math Is Structural

The national average one-bedroom rent consumes 23.3% of median household income — technically below the 30% threshold. Don’t let that number give you false comfort. It masks extraordinary geographic variance.

New York City: average one-bedroom at $4,104/month, equaling 69% of median household income. Miami, Boston, Brooklyn, Queens — all above 50%. These are not correctable problems. They are structural conditions that will sustain demand for alternative housing formats, including co-living, modular workforce housing, and suburban multifamily in commutable secondary markets.

This is exactly why we built Oldivai around modular workforce housing and why Convivium Living is focused on co-living and co-working formats. The affordability gap isn’t closing. We’re building for the world as it is, not as the headlines describe it.

The Coworking Story the Big Brands Don’t Want You to Read

WeWork’s implosion was supposed to kill the sector. Instead, independent operators in Midwest secondary markets are quietly building durable businesses where institutional players can’t compete on price, identity, or neighborhood trust.

Here’s the conventional wisdom: coworking is a WeWork story. A cautionary tale about growth-at-all-costs, celebrity operators, and venture capital funding a real estate company dressed as a tech company. The sector is damaged. Institutional capital is cautious. Move on.

Here’s what the data is actually showing: independent coworking operators in secondary Midwest markets are posting their strongest fundamentals on record. They’re profitable, locally rooted, competitively priced, and building genuine community assets that no national chain can replicate. And they’re doing it in exactly the markets where we’ve been deploying development capital.

The Midwest Is Lapping the Field

A new CoworkingCafe analysis of 73 US cities with populations above 200,000 found that seven of the top 15 cities for independent coworking presence are located in the Midwest. St. Paul leads nationally — 80% of coworking operators locally owned, eight independent providers serving the market, 2.6 indie spaces per 100,000 residents.

Wichita ranked second, with independent operators controlling 67% of the local market. Baltimore third, with 21 locally owned operators — the largest raw count among top-ranked cities. Milwaukee, Cleveland, Detroit, Omaha — the same cities seeing tech startup formation, hybrid work adoption, and organic economic diversification that precedes institutional recognition.

This is a pattern I know well. We were in Bentonville and Raleigh before the institutional money arrived. The Midwest coworking data is describing the same early-signal environment.

These numbers matter because they represent price points that WeWork, Industrious, and other national chains simply cannot operate at profitably given their overhead structures, lease obligations, and investor return requirements.

Independent operators in secondary markets aren’t competing with the nationals on amenities or scale. They’re competing on affordability, neighborhood identity, and community curation. In New Orleans, operators are building spaces specifically for women executives, nonprofits, and creative professionals. That’s a level of specificity that a national brand’s standardized playbook can’t match.

What This Means for Office Repositioning

We’ve watched downtown office vacancy compound for three years. The conventional answer — convert to residential — is expensive, slow, and not always structurally feasible. There’s a different play emerging in secondary markets: landlords with underutilized office assets partnering with established local coworking operators to activate space at below-market rents in exchange for revenue share or equity participation.

The CoworkingCafe data supports this thesis. Indie operators are growing in markets where office vacancy is elevated and traditional tenants aren’t returning. They solve two problems simultaneously: they fill space for landlords and they provide the flexible work environment that an increasingly distributed workforce actually needs.

Hybrid work isn’t disappearing. That was another media narrative that got ahead of reality. What’s actually happening is stabilization — a new equilibrium where proximity, flexibility, and local community identity are the core product attributes. The operators who understood that two years ago are now the ones with waitlists.

“Nine of the top 15 indie coworking cities have populations under 500,000. The institutional capital hasn’t arrived yet. That’s not a warning — that’s a window.”

We were built around the thesis that co-living, co-working, and hospitality formats serve a workforce the traditional apartment and office markets are failing. The indie coworking data from the Midwest validates the demand side of that thesis. Workers in Milwaukee, Cleveland, and St. Paul are actively seeking flexible, community-rooted workspace — and they’re finding it through local operators, not national chains. That’s the market we’re building for. Secondary cities, durable demand, locally differentiated product.

The Daniel Kaufman Real Estate News Report is published by Daniel Kaufman, Principal & CEO of Kaufman & Company, a vertically integrated real estate development and investment platform based in Los Angeles, California. Daniel Kaufman real estate news covers multifamily market analysis, contrarian investment strategy, workforce housing, modular construction, and private lending across US markets including Chicago, San Francisco, New York, Vermont, and the Sun Belt.

Each issue of the Daniel Kaufman Real Estate News Report delivers data-driven commentary on the trends reshaping apartment markets, commercial real estate, and flexible office demand — before institutional capital arrives. Daniel Kaufman’s real estate analysis draws on 25+ years of operator experience and more than 10,000 multifamily units developed nationwide.

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