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The Hospitality Markets Nobody Is Talking About, But Should Be

By LRE Companies,

For years, hospitality investment has been dominated by a familiar list of markets. New York. Los Angeles. Miami. Nashville. Austin. Las Vegas.

These destinations continue to attract travelers, investors, and developers, but they are increasingly competitive, expensive, and saturated.

The next wave of hospitality opportunities is emerging elsewhere.

Across the country, a growing number of secondary and tertiary markets are quietly outperforming expectations as travelers seek authentic experiences, businesses expand into new regions, and local economies diversify. While major cities continue to receive most of the attention, some of the strongest long-term hospitality opportunities may be found in places that rarely make national headlines.

For developers and investors willing to look beyond traditional gateway cities, the opportunity is significant.

The Shift Away from Traditional Hospitality Hubs

The hospitality industry has undergone a major transformation over the past several years. Travelers increasingly prioritize experiences over destinations. Remote work has expanded travel flexibility. Population growth has accelerated across many secondary markets, particularly throughout the Sun Belt.

At the same time, rising land costs, labor challenges, and development expenses in major metropolitan areas have made secondary markets increasingly attractive to investors.

According to PwC’s 2026 hospitality outlook, leisure travel demand is increasingly concentrated in warmer-weather and secondary markets, with demand growth expected to outpace new supply growth in the lodging sector. RevPAR (Revenue Per Available Room), one of hospitality’s key performance indicators, is projected to grow 2.9% in 2026 as demand continues to broaden beyond traditional urban centers.

The trend is clear: travelers are expanding their horizons, and developers should be doing the same.

The Rise of Lifestyle Destinations

One of the most overlooked opportunities today is the growth of smaller, lifestyle-oriented destinations. These are not necessarily major tourism hubs. Instead, they are communities with strong local identity, outdoor recreation, walkable downtowns, culinary scenes, wineries, cultural attractions, or unique natural assets.

Travelers increasingly want authentic experiences rather than manufactured ones. They are seeking places that offer character, connection, and a sense of discovery.

This shift has fueled demand for boutique hotels and experience-driven hospitality concepts. The global boutique hotel market reached approximately $28.5 billion in 2025 and is projected to exceed $50 billion by 2033. Leisure travelers account for more than 70% of boutique hotel demand, reflecting a growing preference for unique accommodations over standardized lodging. For developers, this creates opportunities in markets that may have previously been overlooked by institutional capital.

Secondary Markets Are Becoming Primary Opportunities

Population migration patterns are creating entirely new hospitality demand centers. Cities across Texas, Idaho, Montana, Utah, Tennessee, Arizona, and the Carolinas have seen significant population growth over the past decade. Businesses have followed. So have conferences, sporting events, healthcare investments, and tourism infrastructure.

As a result, many secondary markets now support hospitality demand levels that would have been hard to imagine just a few years ago.

Industry observers note that investors are increasingly targeting secondary and tertiary markets because of population growth, economic diversification, and lower barriers to entry than in primary gateway cities. These markets often offer stronger development economics and greater upside potential for long-term investors.

The opportunity is not simply building hotels where people live.

It is creating destinations where people want to stay.

Convention and Event Markets Are Quietly Winning

Another underappreciated hospitality segment is the emerging convention and events markets.

While major convention cities remain important, a growing number of mid-sized markets are successfully attracting meetings, conferences, sporting events, and regional gatherings.

These events create year-round occupancy drivers that help reduce seasonality and stabilize hotel performance.

Recent industry data highlight strong convention-driven hospitality growth in markets such as Louisville and St. Louis, where meeting and event activity has significantly boosted hotel demand and occupancy. In downtown St. Louis, occupancy increased by more than 8% year-over-year, while RevPAR grew by more than 9%, outperforming national trends.

Developers who understand the relationship between event infrastructure and hospitality demand may find opportunities where others see only secondary cities.

Outdoor Recreation and Wellness Destinations

One of the strongest trends shaping hospitality today is the convergence of wellness, recreation, and travel.

Travelers increasingly prioritize outdoor experiences, wellness-focused getaways, and destinations that offer meaningful escapes from urban environments.

This trend is creating opportunities across mountain communities, lake destinations, wine regions, coastal towns, and outdoor recreation hubs.

Luxury hospitality brands are investing heavily in wellness-oriented experiences, while boutique operators continue to capitalize on travelers seeking immersive, personalized stays. Industry research shows that experiential travel and wellness-focused hospitality remain among the sector’s fastest-growing segments.

For developers, this often means looking beyond traditional tourism metrics and focusing on lifestyle demand drivers.

Why Timing Matters

Perhaps the biggest reason these markets deserve attention is timing.

Competition remains significantly lower than in major hospitality hubs. Land costs are often more manageable, and development pipelines are less crowded. Local governments are frequently more supportive of investment and economic development initiatives.

Meanwhile, hotel investment activity continues to strengthen. U.S. hotel transaction volume reached approximately $24 billion in 2025, a 17.5% increase year-over-year, as investors returned to the hospitality sector.

The window to establish a presence in many emerging hospitality markets may not remain open indefinitely.

Looking Ahead

The future of hospitality development will not be defined solely by the largest cities.

It will be shaped by communities that offer authenticity, lifestyle appeal, economic growth, and unique experiences travelers can’t find elsewhere.

The markets attracting the most attention today may not necessarily offer the best opportunities tomorrow.

For developers willing to think differently, some of the most compelling hospitality investments may be hiding in plain sight.

The smartest hospitality strategy isn’t always to follow the crowd.

Sometimes it’s finding the markets nobody is talking about—before everyone else starts talking about them.

LRE & Co. | Commercial Real Estate Management and Development

CategoriesNews & Blog

Looking for a Development Partner in the West?

By LRE Companies,

The western United States is one of the most dynamic real estate development environments in the country. Population growth, infrastructure investment, and shifting tenant demand are reshaping markets from the Wasatch Front to the Inland Empire. For capital partners and landowners entering these markets, choosing the right development partner is one of the most consequential decisions in the deal stack.

Unlike markets in the Northeast or Southeast, the West carries a distinct set of development risks: long entitlement timelines, politically active communities, constrained infrastructure capacity, and rapid cost escalation. A development partner who performs well in Dallas or Atlanta may be entirely unprepared for what a high-growth municipality in Utah or Arizona demands. Here’s what to evaluate before committing to a relationship.

Why Western Markets Require a Different Playbook

Western real estate markets have consistently outperformed national benchmarks. Utah’s population grew by 18.4% between 2010 and 2020, making it the fastest-growing state in the country, according to U.S. Census data. The greater Phoenix metro added more than 90,000 residents in a single year, and the Boise metro has ranked among the top 10 fastest-growing metros nationally for multiple consecutive years.

Commercial real estate has followed the population. CBRE reports that the Mountain West region saw industrial vacancy rates fall below 4% in 2023, and retail vacancy in high-growth suburban corridors has reached historic lows. JLL data indicates that net absorption of retail space in the Intermountain West has been positive for 12 consecutive quarters.

What this means practically: development in the West is competitive, entitlement timelines are long, and community relationships directly affect project outcomes. Developers who treat these markets as transactional opportunities consistently underperform against those who invest in genuine local presence.

The Three Phases Where Partner Quality Gets Tested

Most development partnerships are evaluated at the wrong moment, during a pitch, when every firm presents its best projects and smoothest execution. A more reliable test is to ask how a partner performs across three phases where the real work happens: pre-development underwriting, entitlement navigation, and execution through lease-up. The quality of each phase compounds into the final project outcome.

The strongest western-focused developers share a common trait: they maintain internal teams with sustained local knowledge rather than rotating generalist consultants across markets. Depth of local presence, measured in years of municipal relationships, not just closed deals, is one of the strongest predictors of entitlement success in the West.

Phase One: Market Intelligence and Site Selection

Rigorous pre-development underwriting is the first place to differentiate serious Western developers from opportunistic ones. The evaluation process should cover trade-area demographics, traffic counts, competitive supply pipelines, and tenant demand signals, all before a site goes under contract. This discipline matters more than ever as costs have surged: according to the Associated General Contractors of America, construction input costs rose by more than 41% between 2020 and 2023, making accurate underwriting a prerequisite for project viability rather than a formality.

For capital partners and institutional co-investors, the benchmark to set is simple: every site decision should be documented with supporting data on absorption trends, population growth, employment density, and comparable project performance. If a development partner cannot produce that framework on demand, it signals how decisions are made throughout the project lifecycle.

Phase Two: Entitlements and Community Partnership

Entitlement risk is one of the most underappreciated variables in Western development. In high-growth markets, planning departments are often understaffed relative to the volume of applications, and community opposition can delay or derail projects that aren’t carefully positioned. The National Association of Realtors estimates that entitlement delays add an average of 14 months to residential project timelines; commercial timelines face similar headwinds.

The development partners who consistently shorten entitlement timelines in the West share one practice: they engage municipalities early, well before formal application, presenting projects as community assets rather than external impositions. Public-private dialogue built into the process from the outset does not guarantee frictionless approvals, but it meaningfully reduces timeline variability and builds the kind of goodwill that translates into long-term market access.

When evaluating a partner’s entitlement track record, ask specifically about contested approvals, not just clean ones. The willingness to show how a firm navigated community opposition, adjusted design, or worked through planning department delays reveals far more than a highlight reel of quick approvals.

Phase Three: Execution and Lease-Up

Execution quality in Western development comes down to two things: delivering on time and on budget, and leasing the project efficiently. On the leasing side, the key question is whether a development partner has active tenant relationships in place before delivery or plans to build them after the ribbon-cutting. In markets where retail vacancy in premium western corridors is running below 5% per CBRE benchmarks, well-located product leases quickly, but the relationships to place tenants efficiently are built over years, not during lease-up.

For capital partners, the reporting standard to expect is straightforward: regular construction milestone updates, early-stage leasing progress, and no surprises buried in quarterly reports. Transparency from groundbreaking through stabilization is not a courtesy; it is a structural requirement for any well-run development relationship.

Who Should Be Evaluating a Western Development Partner

The investor profiles most active in western development partnerships tend to fall into a few categories: institutional capital partners and family offices seeking direct exposure to western commercial real estate without building internal development infrastructure, and landowners or municipalities seeking a capable private-sector partner for sites with complex entitlements or phased development challenges. Each brings different priorities to the relationship, but all share the same fundamental need: a partner with demonstrable local knowledge and a full-lifecycle track record.

The right fit for a western development partnership is a capital partner or landowner who values transparency, takes a long-term view of market positioning, and understands that community relationships are structural — not soft — variables that affect project returns. Firms that treat entitlement goodwill as optional tend to discover its value only after a project stalls.

The Bottom Line

Western real estate is not a market for generalists. Population growth is real, tenant demand is strong, and the development pipeline in high-quality submarkets is constrained by entitlement complexity rather than a lack of capital. What separates successful projects from stalled ones is execution quality and community credibility.

When evaluating partners for a Western project, the question is not just who can raise capital or close a site. The question is who can deliver across all three phases, underwriting, entitlements, and execution, in markets that demand genuine local credibility. That combination is rarer than it appears on most pitch decks.

 

CategoriesNews & Blog

The Shopping Center Isn’t Dead. It Just Needed Better Tenants.

By LRE Companies,

For the better part of a decade, the retail real estate industry sat through an extended funeral that never quite concluded. “Retail apocalypse” became the phrase of record. Anchor tenants filed for bankruptcy in waves: Sears, JCPenney, Pier 1, and Tuesday Morning. Vacancy rates climbed. Investors pulled back. Journalists wrote obituaries for the American shopping center with the confidence of people who hadn’t visited one in a while.

Here’s what they missed: the shopping center wasn’t dying. It was being filtered.

The centers that struggled deserved to struggle. They were built around a tenancy model that prioritized lease volume over experience, treated retail as a warehouse function rather than a community one, and offered no answer to the convenience that e-commerce delivered at scale. But the centers that invested in their tenant mix, physical environment, and role in the surrounding community? Those didn’t just survive. They’re outperforming.

What the Data Actually Shows

The headline vacancy numbers from the peak of the so-called apocalypse masked a more nuanced story. Yes, enclosed-mall vacancies climbed. CoStar data showed regional mall vacancy rates hitting approximately 11.4% in 2022, the highest in decades. But strip centers, open-air lifestyle centers, and well-curated neighborhood retail told a different story entirely. According to CBRE’s 2023 U.S. Retail Outlook, availability rates for neighborhood and community centers dropped to their lowest levels since 2007, finishing the year near 10.2%, driven by sustained demand from service-oriented and experiential tenants filling the void left by struggling big-box chains.

The market wasn’t rejecting retail real estate. It was rejecting bad retail real estate.

And perhaps the most clarifying data point: e-commerce, despite its explosive growth, has plateaued as a share of total retail sales. The U.S. Census Bureau consistently reports that e-commerce accounts for roughly 15–16% of total retail sales, significant but far from the full displacement story that dominated the narrative a decade ago. The other 84% still happens in physical space. The question was never whether people would stop shopping in person. It was whether landlords would evolve their properties to give them a reason to show up.

The Tenant Revolution

The transformation happening across well-managed retail centers right now is a tenant story. The operators who are filling vacancies and driving traffic aren’t the ones from the legacy retail playbook. They’re fitness studios, medical and dental practices, urgent care providers, specialty grocery concepts, chef-driven restaurants, pickleball facilities, and local boutique operators who understand that their physical space is their brand.

This shift has been staggering in scale. Healthcare-related tenants, including urgent care clinics, physical therapy practices, and dental groups, have become among the most active retail leasing categories nationwide. JLL reported that healthcare tenants accounted for nearly 25% of all new retail leasing activity in 2023, a figure unimaginable in 2005. These tenants generate steady foot traffic, maintain strong credit profiles, and serve non-discretionary demand that no e-commerce platform can replicate.

Food and beverages have undergone a parallel transformation. Regional and local restaurant concepts are outpacing national chains in leasing velocity. According to the National Restaurant Association, independent restaurant operators account for approximately 67% of all U.S. restaurant locations. Landlords who once chased national credit tenants are increasingly recognizing that a beloved local operator with community loyalty drives stickier traffic than a chain with 20 other locations in the market.

The Experience Imperative

None of this is accidental. The retail centers performing today have made a deliberate bet on experience, on the idea that a shopping center’s job is no longer to aggregate products but to aggregate reasons to be there.

That means design matters. A 2022 Placer.ai study found that open-air retail centers with dedicated food-and-beverage clusters drove 34% more repeat visits per quarter than centers without them. It means programming matters, with events, markets, fitness classes, and community gatherings that give the center a presence in the neighborhood’s weekly rhythm. And it means tenant curation matters more than almost anything else. One wrong tenant, a use that generates no traffic, no energy, and no reason for a neighboring tenant to benefit, can hollow out a center’s momentum faster than vacancy can.

The landlords winning right now are operators, not just owners. They think about their tenant mix the way a hotel operator thinks about its food-and-beverage concept, as an integral part of the experience, not an afterthought.

The Opportunity Ahead

The filtered landscape over the past decade has left a significant runway for well-capitalized, operationally sophisticated retail owners. Distressed or undermanaged centers in strong demographic markets offer some of the most compelling repositioning opportunities in commercial real estate today. The physical infrastructure is often sound, and location fundamentals haven’t changed. What’s needed is a curation strategy, a capital commitment to the physical environment, and the patience to build a tenant ecosystem rather than simply fill square footage.

The shopping center isn’t dead. It just needed someone to take it seriously again.

CategoriesNews & Blog

How We Think About Development in America’s Fastest-Growing State

By LRE Companies,

Utah doesn’t whisper its ambitions. The numbers announce them. The Beehive State has consistently grown in population to earn a permanent place at the top of the national growth rankings. As of the most recent U.S. Census Bureau data, it is the fifth-fastest-growing state in the country, and its real GDP growth rate led the nation at 4.5% in 2024. The state’s nominal GDP crossed $300 billion for the first time in history. Unemployment sits at 3.1%, well below the national rate of 4.0%. These are not the statistics of a market you watch from a distance. These are the numbers that tell a developer where to be.

Here is how we think about it.

The Demand Story Is Structural, Not Cyclical

The first question any developer should ask about a market is whether the growth is real or borrowed. In Utah, the answer is unambiguously the former.

Utah’s population reached approximately 3.55 million as of mid-2025, up more than 18% over the past decade alone. Utah County, anchoring the Provo-Lehi corridor and the state’s booming tech sector, added nearly 16,000 residents in a single year, accounting for 36% of the state’s total growth. Cities like Saratoga Springs and Eagle Mountain, which barely existed three decades ago, are now among the fastest-growing communities in the country, posting annual growth rates of 8.4% and 6.8%, respectively, in 2025.

Crucially, this growth is not purely migration-driven, which would make it more susceptible to economic shocks. Natural population change, with more births than deaths, now accounts for 57% of Utah’s annual growth, a structural demographic tailwind that holds up across economic cycles. A young, family-forming population base creates durable, compounding demand for housing, services, hospitality, and the built environment broadly.

For a developer, that distinction matters enormously. Markets built on migration alone can reverse. Markets built on natural demographic vitality don’t.

Where We Focus — And Why

Not all of Utah’s growth is created equal, and our playbook reflects that geography matters as much as headline statistics.

The Wasatch Front remains the economic engine. Salt Lake, Utah, Davis, and Weber counties together account for two-thirds of the state’s annual population growth and the vast majority of its job creation. Utah’s information technology and professional services sectors — clustered in what’s increasingly called the “Silicon Slopes” corridor — have made outsized contributions to GDP, with the information industry growing to more than 2.7 times its 2015 output as of 2025. Construction costs on the Wasatch Front range from $280 to $550 per square foot for residential development, reflecting both the depth of demand and the constraints of a market that, by some estimates, is short by more than 37,000 housing units.

Washington County and St. George arguably represent the most compelling secondary market in the Mountain West. Washington County posted 2.3% population growth over the past year — among the highest in the state — and St. George ranked third statewide in residential permit activity. The combination of year-round sunshine, proximity to recreation, second-home demand, and retiree migration creates a hospitality and mixed-use opportunity that few comparable markets in the country can match.

Emerging ring counties — Tooele and Iron, each posting 3.0% population growth over the past year — are attracting our attention as well. These are the markets where land basis still makes sense, entitlement timelines are more manageable, and the Wasatch Front’s overflow growth is inevitably landing.

The Hospitality Lens

Utah’s five national parks, world-class ski resorts, and growing convention infrastructure drive leisure demand that spans the year rather than concentrating in a traditional peak season. At the same time, the Silicon Slopes tech corridor has built a legitimate corporate travel base — business demand that stabilizes performance across cycles when pure leisure markets soften.

Nationally, the lodging market has shown steady resilience. ADR and RevPAR have stayed near record levels through 2025, with upper-midscale and upscale select-service properties — our target segment — continuing to outperform. The select-service model aligns well with Utah’s growth profile: it serves both the business traveler driving Highway 15 between Salt Lake and Provo and the family road-tripping from Zion to Bryce. That dual demand base is rare and valuable.

We focus our hotel development on submarkets where demand generators are layered — proximity to employment corridors, access to recreational assets, and positioning within growing residential catchment areas. A hotel built purely on ski demand is a seasonal bet. A hotel built where skiing, business travel, and a growing residential population converge is a fundamentally different underwriting story.

What We Respect About This Market

Utah rewards patience and punishes shortcuts. Entitlement processes are increasingly complex as communities grapple with rapid growth and strained infrastructure. The state needs about 28,000 new housing units per year just to keep pace with population growth — yet residential permitting has contracted, falling to roughly 22,000 units in 2024, the lowest since 2016. That supply-demand gap has consequences for commercial development too: labor is tighter, construction costs are higher, and community sentiment toward new development is more nuanced than the growth headlines suggest.

We don’t ignore those friction points. We build them into our underwriting, timelines, and community engagement strategies. The developers who treat Utah as an easy market because the population curve points up are the ones who get surprised by permitting or stabilization.

The developers who do the hard work of understanding which submarkets, product types, and demand generators are truly durable — those are the ones building the portfolio this market deserves.

CategoriesNews & Blog

Nyah Patel – Internship Interview

By LRE Companies,

At LRE & Co, mentoring the next generation has always been more than a good idea — it’s a genuine passion. We believe that the lessons learned early in a career can shape a person for life. I started my first job at 15½, working at McDonald’s, and the values that experience instilled in me — hard work, accountability, and showing up — still guide everything I do today. That’s why we are committed to building a robust internship and mentorship program that gives young people real, hands-on experience in real estate development throughout the year. We want students to leave our doors with a lasting skill set, a stronger professional foundation, and a genuine understanding of how this industry works.

Today, we are proud to welcome Nyah Patel to the LRE family. Nyah has hit the ground running — diving into tenant research, sharpening her professional communication skills, and bringing an energy and curiosity that has impressed our entire team. We hope this experience is the foundation of something lasting for her.

Here’s what she had to say about her time with us so far.

What made you interested in interning at LRE?  I’ve always been interested in business and in learning how different buildings and developments come to life. When this opportunity was offered to me, I was very excited to gain hands-on experience in a real professional environment.

What kind of work have you been helping with so far? I’ve been researching potential tenants for our development sites, which has given me a closer look at how the leasing and retail sides of real estate work.

What has been the biggest thing you have learned during your internship? I’ve learned how to stay focused and organized in a professional setting. I’ve also developed practical skills in professional communication, such as writing effective emails and understanding how important it is to follow up consistently.

What part of the business has been most interesting to you: hotels, retail, restaurants, construction, finance, or operations? Finance and retail have stood out the most to me. Both areas feel closely connected to the bigger picture of how a development comes together and succeeds.

What is one task or project that surprised you? I was surprised by how much persistence it takes to move a deal forward. If you want something to happen, you have to keep pushing and reaching out because these deals don’t close on their own.

What skill do you feel you are building through this internship? I’m building confidence in communicating professionally with adults and learning how to ask the right questions. I’ve also improved my ability to research thoroughly and develop a solid understanding of topics I wasn’t familiar with before.

How is working in a real business environment different from school? In school, you’re usually given clear instructions to follow. But here, you have to think independently and approach problems creatively. 

What have you learned about responsibility, communication, and deadlines? I’ve learned that communication is everything, including asking questions and staying in contact with your team, which shows dedication and keeps things moving. I’ve also taken on a greater sense of responsibility, knowing that my work affects not just me but the people I’m working with.

What is something you understand better now about real estate development? I have a much better understanding of the full process behind how the buildings around us are developed and just how long and complex that process really is.

What advice would you give another high school student starting their first internship? Never stop asking questions, as it’s one of the most valuable lessons I’ve learned. It shows that you care and helps you gain a better understanding of whatever you’re working on. 

What has been your favorite part of the internship so far? My favorite part has been learning about the many steps involved in developing a building. There’s so much more to it than most people realize, and seeing that process up close has been really eye-opening.

What do you hope to learn by the end of your internship? I hope to leave as a stronger communicator and a more creative thinker. I hope to approach challenges with confidence and find solutions that aren’t always obvious at first.

 

CategoriesNews & Blog

The Case for Select-Service Hotels: Why Smart CRE Capital Is Moving Into This Sector

By LRE Companies,

In commercial real estate, the search for yield rarely comes with simplicity. Most asset classes that deliver strong returns also carry complexity, including layered operating risk, volatile demand cycles, or structural headwinds that require constant navigation. Select-service hotels are a notable exception. In today’s environment, that exception matters.

For investors and operators who understand hospitality real estate, select-service and extended-stay hotels have quietly become one of the most compelling allocations in the CRE landscape. The numbers back it up. The fundamentals are sound. And the opportunity window, shaped by limited new supply, evolving traveler behavior, and a maturing lending environment, is one that sophisticated capital is actively seeking to capture.

Record Performance in a Challenging Market

The headline stat is hard to ignore: according to JLL’s U.S. Select-Service and Extended-Stay Hotel Outlook 2025, RevPAR (revenue per available room) in this sector reached a record $78 in 2024, 14% above 2019 pre-pandemic levels. Demand surged by 232,000 room nights year-over-year, nearly completing a full recovery from the COVID disruption.

This isn’t a one-cycle story. It’s a structural shift.

What drove it? The convergence of the select-service and extended-stay categories into a unified market. Properties in this space now blend amenities, in-room kitchenettes, flexible workspaces, and self-service food and beverage options to appeal to a broader, more diverse traveler base. Business travelers, remote workers, and leisure guests are all finding value in the same product. That demand for diversity is exactly what CRE investors look for when underwriting long-term asset performance.

The Margin Story Is the Real Headline

For anyone deploying capital into operating real estate, margins are the metric that separates good assets from great ones. This is where select service truly distinguishes itself from the broader hospitality landscape.

Gross Operating Profit (GOP) margins in select-service properties averaged about 26%, compared with just 15% for full-service hotels — a gap driven by leaner labor costs and the absence of food and beverage operations, which are notoriously difficult to run profitably. Full-service hotels carry complex staffing structures, multiple food and beverage outlets, and conference infrastructure that consumes revenue as quickly as it generates it. Select service strips away that complexity without sacrificing the guest experience.

The result is a cleaner, more durable income stream. EBITDA per available room (EBITDA/PAR) in the select-service sector has grown at a 23% CAGR since 2020, while CPI averaged about 5% over the same period, meaning this asset class has meaningfully outpaced inflation in profitability growth. For a CRE investor focused on real returns, that spread is significant.

Investment Volume and Liquidity

Institutional conviction in this sector is no longer speculative; it’s measurable. Since 2021, select-service and extended-stay hotels have generated $62.6 billion in investment liquidity, accounting for nearly 50% of all U.S. hotel transaction volume, according to JLL.

This level of capital concentration is meaningful for two reasons. First, it signals consensus among sophisticated investors on the sector’s risk-adjusted return profile. Second, it creates liquidity, the ability to transact, refinance, and exit, which many CRE niches lack.

JLL also notes that this sector exhibits the lowest yield volatility over the past 16 years among major property categories. In a macro environment defined by rate uncertainty, inflationary pressure, and shifting demand patterns across office and retail, low volatility is not a minor advantage. It is an advantage.

Supply Discipline Creating Pricing Power

One of the more overlooked tailwinds in this sector is the supply picture. New select-service and extended-stay construction has slowed to below 2.6% of existing inventory, below its historical average. Meanwhile, the number of brands in the sector has grown from 184 in 2000 to 214 today, representing 74% of the sector’s total room supply, according to JLL. Marriott, Hilton, and IHG are all expanding aggressively through franchise-driven growth, conversions, and targeted acquisitions.

The implication for asset values is straightforward: when demand is growing and new supply is constrained, existing assets gain pricing power. ADR growth and occupancy stability follow. Investors entering this space now are capturing assets before that compression fully plays out.

What LRE & Co Sees in This Sector

From a commercial real estate perspective, the select-service hotel thesis aligns with what we seek across asset classes: durable cash flows, margin resilience, supply constraints, and a broadening base of institutional capital that provides exit liquidity.

The lending landscape is also evolving favorably. While banks remain dominant in this space, JLL notes increased participation by insurance companies, CMBS lenders, and investor-driven debt sources, a diversification that reduces refinancing risk and offers greater structuring flexibility for acquisitions and development.

The broader U.S. hospitality real estate market is expected to grow from approximately $1.03 trillion in 2025 to $1.39 trillion by 2031, at a 5.1% CAGR, according to Mordor Intelligence. Within that growth trajectory, select-service is positioned to capture a disproportionate share, driven by its operational model, adaptability to evolving traveler preferences, and the simple fact that it delivers better returns with less complexity.

The Bottom Line

In commercial real estate, the assets that compound quietly, deliver consistent yields, attract durable institutional capital, and remain relevant across economic cycles tend to reward patient, disciplined investors most.

Select-service hotels have earned that designation. The data for 2024 and early 2025 isn’t a short-term spike; it reflects a sector that has matured, evolved, and positioned itself as one of the more defensible income plays in the current CRE environment.

At LRE & Co, we continue to evaluate select-service opportunities with the rigor this asset class deserves and with the conviction that the fundamentals support them

CategoriesNews & Blog

The QSR Tenant You Want in Your Strip Center: What Brokers Need to Know About Fast Food Credit

By LRE Companies,

Understanding NNN lease structures, corporate vs. franchisee guarantees, and why QSR anchors drive 1031 demand

Not All QSR Tenants Are Created Equal

When a broker brings a strip center deal to market, one of the first questions sophisticated investors ask is: Who are the tenants, and what’s their credit quality? In the QSR space, that answer can mean the difference between a cap-rate compression story and a credit-risk discount.

Understanding the difference between a corporate-guaranteed lease and a franchisee-backed lease is crucial knowledge for any broker advising investors in today’s market.

Corporate vs. Franchisee: The Credit Distinction That Matters

A QSR location backed by a corporate guarantee from the parent company, such as McDonald’s Corporation or Yum! Brands, essentially functions as a bond-like investment. The credit is solid, the covenants are strict, and the cap rates reflect this. These assets trade at premium prices because the investment risk is very low.

Franchisee-guaranteed leases are a different matter. A franchisee with 200 units and many years of operation may still be a strong credit, but investors will evaluate it differently. Brokers need to help clients understand the distinction and price accordingly. A single-unit franchisee guarantee on a 15-year NNN lease isn’t the same as a corporate guarantee, even if the rent checks look identical.

Why QSR Drives 1031 Exchange Demand

The 1031 exchange buyer pool is among the most active in commercial real estate, and QSR NNN assets are among its top choices. The reasons are simple: passive income, long lease terms, and strong residual value even after the lease ends.

For brokers, this means QSR assets, particularly those with 10 or more years of lease term remaining, tend to trade quickly and at competitive cap rates. Listing a well-located, credit-tenanted QSR asset engages a motivated national buyer pool from day one.

What to Look for When Advising Seller Clients

If you’re representing an owner of a QSR-anchored strip center, the key value drivers are clear: remaining lease term, rent escalation schedule, tenant credit quality, and location relative to growth corridors. In Idaho markets, the growth story adds another layer of upside that institutional buyers increasingly recognize.

Brokers who understand the nuances of QSR credit and lease structures are better equipped to price deals accurately, attract suitable buyers, and close transactions efficiently.

Ready to explore opportunities in Idaho’s commercial real estate market? Contact LRE & Co today.

 

CategoriesNews & Blog

Why I Always Walk the Site Before I Read the Report

By LRE Companies,

The Report Is Always a Backward-Looking Document

I want to say something that I know will make some of my colleagues in commercial real estate uncomfortable: demographic reports, traffic studies, and broker packages are useful, but they always describe the market that existed when the data was collected — not the market that exists when your project opens, and certainly not the market that will exist when your lease matures.

I don’t say this to dismiss the analytical tools that inform sound development decisions. I use them. My team relies on them. Rigorous quantitative analysis is non-negotiable in any development I’m involved in. But I have learned, through deals that worked and deals that didn’t, that the most important information about a market is almost never in the report. It’s in the market itself, waiting for someone willing to go look.

What You See That the Data Cannot Show You

When I walk a site, I’m looking for specific things no demographic report can capture. The first is the quality of the surrounding development. Not whether development is occurring (the data tells you that), but what kind. New residential construction that attracts young families with children signals a different market than apartment development that attracts transient renters. The physical quality of the housing stock, the presence of parks and schools, and the condition of the adjacent commercial development tell you something about the community’s trajectory that a traffic count simply cannot.

The second thing I’m looking for is evidence of unmet demand. How far do residents drive to reach the retail and food-service options that should be available closer to home? Are there long lines at the limited options that do exist? Are there empty buildings that suggest failed attempts to serve a market that wasn’t ready, or successful businesses that suggest a market that is ready but underserved? These questions require eyes, not spreadsheets.

Third, I look at the infrastructure. This includes the condition of the roads, the quality of the intersections, and the utility infrastructure that will support development. A beautiful demographic profile in a market with inadequate infrastructure is a warning sign. A market with modest current demographics but serious infrastructure investment signals that the people making long-term bets on that corridor believe its best days are ahead.

The Conversations That Change Everything

Some of the most valuable site intelligence I have gathered over the years has come from conversations with people who would not appear on any analyst’s list of recommended contacts. Gas station attendants. Grocery store employees. Local police officers, as my team documented during our Oregon site hunt. The person running the only fast-food restaurant in a thirty-mile radius.

These are the people who know what residents are asking for. Who understands what the community needs but isn’t getting? Who can tell you, in five minutes of honest conversation, more about a market’s character and its unmet demand than any third-party research package?

I’m not romanticizing this. I’m reporting what works. The developers who are consistently early to the right markets are almost universally the ones who are physically present in those markets, talking to the people who live and work there, and building the local knowledge no report can substitute for.

A Practice Worth Building Into Your Process

For any broker or developer reading this who is evaluating a market you don’t know well: before you read the report, before you build the pro forma, before you engage a broker for comparable data, get in the car and go look.

Spend a day in the market. Drive every major arterial. Walk the available sites. Have lunch somewhere local. Talk to people. Let your direct experience inform your interpretation of the data rather than the other way around.

You will see things that change your analysis. You will miss opportunities the data flagged and discover opportunities the data missed. Over time, the discipline of ground-level market presence will become one of your most durable competitive advantages in a business where everyone has access to the same reports.

Read more from Akki Patel at https://akkipatel.com/

Akki Patel is the founder and CEO of LRE & Co., a commercial real estate development company operating across California, Idaho, Oregon, Nevada, Colorado, and Utah. He writes about entrepreneurship, development, and community impact at https://akkipatel.com/

 

CategoriesCommunity News & Blog

Habit Burger finally opens in Eureka, bringing drive-thru bites and 50-plus jobs

By Veonna King,

EUREKA, Calif. — After what felt like an extra-long wait, Habit Burger has officially landed in Eureka—and it’s already serving up burgers and buzz.

The drive-thru restaurant opened its doors today on Fifth Street in Eureka, behind the old Starbucks. The menu includes a range of options, from burgers and chicken sandwiches to salads.

Beyond the food, the new location is also bringing new jobs to the area. “We want to be part of the Humboldt County community. We’ve hired over 50 folks from not just Eureka, but from the entire Humboldt community, from Rio Dell to Blue Lake and everywhere in between,” an operator for the new location said, Operator at Eureka’s Habit Burger, Alia Ganem.

The new location is open 10 a.m. to 10 p.m. Sunday through Thursday, and 10 a.m. to 11 p.m. Friday and Saturday.

It is located at 1917 5th St, Eureka, CA 95501

CategoriesNews & Blog

Spring Construction Season: What Developers Need to Know About California’s 2026 Building Code Updates

By LRE Companies,

If you’re breaking ground this spring, California’s regulatory landscape looks materially different from a year ago. The 2025 California Building Standards Code, codified in Title 24 of the California Code of Regulations, took effect on January 1, 2026, and applies to all permit applications submitted on or after that date. There is no grace period, no grandfather clause for projects still in design, and no waiting out the cycle: due to AB 130, this is the last major update to the code until at least 2031.

That six-year freeze makes understanding the 2026 requirements more urgent, not less. Whatever you build this spring will last for years. Here’s what developers with active commercial projects need to know before submitting for permits.

The Permit Date Is the Line That Matters

The most important thing to understand about the 2026 code is the trigger. Projects with permit applications submitted before January 1, 2026, may continue under the previous 2022 code cycle, provided the permit has not expired. Everything submitted after that date, including spring 2026 groundbreakings, must fully comply with the updated Title 24 standards. If your project is in design now, assume you’re building to the new code.

The Five Changes With the Biggest Commercial Impact

  1. Electrification: Bigger Scope, More Coordination Required

Electrification mandates are the most operationally disruptive change in the 2026 code. Requirements are embedded across multiple sections of Title 24 — Parts 2 (California Building Code), 6 (Energy Code), and 11 (CALGreen) — and they materially expand the electrical scope of work on virtually every commercial project.

For commercial kitchens, the new energy code introduces “electric-ready” infrastructure requirements, meaning new builds must be pre-wired to accommodate future all-electric appliances, even if gas equipment is installed at opening. Service sizing requirements have increased, load calculation constraints have tightened, and EV-ready and EV-capable infrastructure is now mandatory for commercial parking structures, with ratios based on occupancy type.

The practical implication is that electrical, mechanical, and framing trades now need to be coordinated earlier in the design process than most project teams are accustomed to. Compliance is no longer determined solely at the design stage; field verification, commissioning, and documentation, including HERS testing, are now required for sign-off.

  1. Solar + Battery Storage: No Longer Optional Together

New commercial buildings that require solar photovoltaic systems must now pair them with battery energy storage systems (BESS). This pairing requirement adds planning complexity around roof space, load calculations, and system design that wasn’t previously required. Developers who have pre-designed rooftop configurations without BESS integration may need to redesign before permit approval.

The California Energy Commission projects that, taken together, these energy code updates will generate an estimated $4.8 billion in energy savings over 30 years and reduce greenhouse gas emissions by approximately 4 million metric tons, equivalent to the annual energy consumption of more than half a million homes.

  1. Embodied Carbon: A New Requirement for Large Commercial Projects

California became the first state to regulate embodied carbon, the emissions produced during the manufacturing and assembly of building materials, directly in its building code. Starting in 2026, the CalGreen requirements apply to commercial buildings over 50,000 square feet, requiring developers to address embodied carbon through material reuse, life-cycle assessments, or low-carbon material choices.

For large-footprint commercial projects, office campuses, retail centers, and industrial facilities, this is a new design and procurement constraint that will affect material-sourcing timelines and potentially cost assumptions for steel, concrete, and glass. Budget for the assessment work early; it cannot be retrofitted late in the design process.

  1. A Standalone Wildfire Code — With Real Teeth

Previously, wildfire-resistant construction standards were scattered across three sections of the California Building Code. The 2026 update consolidates them into a single, standalone California Wildland-Urban Interface (WUI) Code, codified as Title 24, Part 7. The new WUI Code applies to approximately 4.5 million California properties in fire-prone areas and requires ignition-resistant exterior materials, ember-resistant vents, and compliance with defensible space requirements for all new construction and major renovations in designated zones.

For commercial developers building anywhere near WUI-designated territory, the standalone code means stricter oversight of materials, installation sequencing, and inspection, and less room for jurisdictional interpretation than the old dispersed standards allowed.

  1. Accessibility Upgrades Now Easier to Trigger

Updates to the California Existing Building Code have increased the likelihood that even modest renovation projects trigger broader accessibility compliance upgrades. Developers planning tenant improvements or partial renovations should budget for the possibility that their scope of work triggers accessibility requirements beyond the immediate work area. For commercial projects in older buildings, this warrants a code analysis before finalizing the construction documents.

New Contract Rules That Change Your Cash Flow Math

Two new laws that took effect on January 1, 2026, will affect how commercial construction contracts are structured and will apply regardless of project type.

SB 61 establishes a mandatory 5% retention cap for most private construction contracts. The cap applies across all subcontracting tiers and cannot be waived by contract. If your standard contract language has historically included 10% retention, that provision is no longer enforceable. Review and update all contract templates before spring procurement.

SB 440, the Private Works Change Order Fair Payment Act, establishes standardized statutory procedures for change-order disputes on large private projects, including defined timelines for claims involving delays, additional costs, and time extensions. The law sunsets in 2030 unless extended. During that period, documentation discipline and timely notice will be legally significant in dispute resolution.

What This Means for Spring Timelines

Developers with projects permitting this spring should pressure-test the following:

  • Design coordination: Has your electrical engineer been engaged early enough to address expanded service sizing, EV infrastructure, and BESS integration prior to permit submittal?
  • Roof planning: If your project requires solar, does the roof layout account for paired battery storage? Has the load capacity been evaluated?
  • Material procurement: For projects over 50,000 square feet, has embodied carbon been addressed in your material specifications?
  • WUI exposure: Has your site been evaluated using updated WUI zone designations?
  • Contract review: Have the retention clauses and change-order procedures been updated to comply with SB 61 and SB 440?

The 2026 code cycle is the most comprehensive update to California’s building standards in recent memory. With a six-year freeze now in place, it will be the standard your projects are measured against for the foreseeable future. Developers who treat code compliance as a late-stage checklist rather than an early design input will feel the consequences in permitting delays, redesigning costs, and project timelines. The spring groundbreaking window is still open, but the margin for error is smaller than it used to be.

 

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4302 Redwood Hwy Suite 200

San Rafael, CA 94903

email

info@lrecompanies.com

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The LRE & Co is a family organization that has been in real estate development, construction and the food and beverage businesses since 1999. It has been present in major markets throughout northern California and northwest Nevada.

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