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New York Multifamily Rent and Occupancy Forecast 2020

Expanded Rent Stabilization Law Freezes NYC Stabilized Multifamily Property Market, Generates Buying Opportunities for Intrepid Investors

by Sarah Daniels February 21, 2020

New York state authorities last year passed legislation designed to maintain rental affordability and housing stability in the Empire State. Mandated changes for units not currently subject to stabilization were mostly technical in nature — relating to rent increase notification periods, evictions and security deposits — but the impact on the New York City’s nearly 1 million regulated units was significant. Previously, an owner’s ability to raise stabilized unit rents was limited by a city board, except upon vacancy or after major property or unit improvements were made. These exceptions were curtailed by the legislation, largely negating the appeal of buying, renovating and repositioning older properties. The regulations sent a chill through the recently hot New York City multifamily property market. Sales volume dropped by half last year to about $3.3 billion, with the largest declines coming after the law took effect at mid-year. Indeed, volume in the typically busy fourth quarter plunged to less than $200 million, the lowest single-quarter sales total since recessionary 2010. Although obscured by thin volume, cap rates appeared to rise. After hovering near 4 percent throughout 2018, institutional B/B+ quality asset purchase yields gapped higher, drifting up to about 4.25 percent at mid-year and …

February 21, 2020

Boston Multifamily Rent and Occupancy Forecast 2020

Content Partner Features Loans Lument Massachusetts Northeast RED Capital Group

RED Mortgage Capital: Strong Economy Boosts Boston Multifamily Performance, but Looming Supply Likely to Hinder Returns

by Jaime Lackey February 19, 2020

The country’s largest commercial real estate services firm recently selected Boston as its choice for strongest U.S. gateway multifamily market performer for 2020, and with good reason. The Eastern Massachusetts economy gained momentum in 2019, propelled by its world class “Eds and Meds” cluster and resurgent high tech, R&D and financial management communities. Income growth and job creation ran ahead of national averages and apartment markets remained tight and rent growth robust regardless of elevated supply. Investor demand for metro apartment properties surged, especially after mid-year, while cap rates remained accessible by primary market standards, especially in the suburban Class B segment. Metro job creation trends fell into a bit of a funk in the fall and winter of 2018-2019 but rebounded vigorously in the second half. Payrolls increased at a brisk 31,200-job, 1.7 percent year-on-year pace after mid-year, representing the fastest growth recorded in three years. Sector leadership was provided by Boston’s top knowledge industry sectors, headed by higher education (8.5 percent), research and development (9.8 percent), software and computer network design (4.9 percent) and financial management (2.6 percent). Only softness in the consumer-driven side of the labor market – construction, retail trade, personal services and government – held …

February 19, 2020

Content Partner Development Features Massachusetts Multifamily Northeast Northeast Feature Archive Walker & Dunlop

Can Boston Keep Up with Multifamily Demand?

by Sarah Daniels February 11, 2020

Think Boston multifamily is overbuilt or overheated? Think again. Due to superb fundamentals and a slowing development pipeline, Boston is now regarded as the number one metro area for multifamily investment. From 2019–2030, Boston will need to add 51,007 units to accommodate population growth, an average of 4,637 units per year. Recent development (2014–2017) averaged 3,334 units per year. Population and job growth are expected to remain strong, fueling continued demand for multifamily housing and countering arguments that the Boston market is overbuilt. Many developers nationally are interested in the market. The construction pipeline for multifamily properties features organizations with headquarters as far away as Portland, Phoenix, and Dallas. The Houston-based Hanover Company, for example, has four properties totaling over a thousand units in the Boston development pipeline. Boston is a seller’s market as well, with deals typically attracting multiple bids, and it is easy to see why. For investors, Boston is a market with an average cap rate of roughly 4.5 percent. This is the same cap rate as Raleigh or Central Florida — two markets generally considered to be more volatile than Boston in the case of a recession. A Reliable Hub Becomes a Vibrant City “Historically, people …

February 11, 2020

Affordable Housing Content Partner Development Features Georgia Mixed-Use Multifamily Southeast Southeast Feature Archive Walker & Dunlop

Egbert Perry and Affordable Housing: How One Man’s Vision Launched a National Movement

by Jaime Lackey January 12, 2020

When picturing the rebirth of downtown Atlanta, one of the first images to come to mind is the skyline — the iconic high-rises. Another, often overlooked, part of this picture includes Atlanta’s skywalks. In the early days of redevelopment, these walkways connected luxury buildings above urban neighborhoods that many had abandoned, and effectively furthered the separation of the “haves” from the “have-nots.” Iconic Atlanta developer Egbert Perry was driven to challenge development that emphasized the separation. From his perspective, perpetuating the separation of community members simply perpetuated the issues of inequity and injustice that plagued the city. Perry was motivated to bring people together in a different way, in neighborhoods that would appeal to everyone. Where others saw poverty, blight, and dilapidated housing projects, Perry saw potential — and pioneered a new approach to affordable and workforce housing, commercial real estate development, and community development and investment. The Story Begins at Centennial Place In 1994, when Perry left H.J. Russell & Company to start The Integral Group, he quickly came upon an opportunity to redevelop the area now home to Centennial Place. The 60-acre property was located in the heart of downtown Atlanta, and was considered to be the most …

January 12, 2020

Bob Yoshimura of Lee & Associates: I would characterize the industrial sector as the most sought-after asset class across all commercial property types.

Content Partner Features Heartland Feature Archive Industrial Lee & Associates Midwest Northeast Northeast Feature Archive

Robust Industrial Investment Shows No Signs of Slowing

by Jaime Lackey December 4, 2019

Real estate buyers spent a record-setting amount of cash in the sector in the third quarter and remain bullish on the properties amid healthy absorption and rent growth. The industrial real estate sector, traditionally known as the land of big, boring boxes, has become the darling of real estate amid the growth of e-commerce. Investors have poured hundreds of billions of dollars into industrial properties over the last five years alone, and not even the prospect of new construction potentially outpacing demand has tempered enthusiasm. “With online sales continuing to grow at a faster rate than general retail sales, there is no lack of continued tenant demand for industrial warehouses and flex and distribution space,” says Rebecca Wells, CCIM, senior vice president and principal of commercial real estate service provider Lee & Associates in Indianapolis. “We expect investment activity will continue at a red-hot rate through the end of this year and into 2020.” Industrial sales totaled $40.6 billion in the third quarter this year, the highest dollar volume ever recorded in a single quarter for the property type, according to Real Capital Analytics, a New York-based researcher that tracks commercial property deals of $2.5 million or more. An $18.7 …

December 4, 2019

Kenneth Salzman of Lee & Associates says Last-mile distribution centers are fetching rental rates of $35 to $50 a square foot in the New York metro area on a triple net-lease basis — generally double or more than typical warehouses.

Content Partner Features Industrial Lee & Associates

Last-Mile Access to Customers Drives Distribution Center Conversions

by Jaime Lackey August 20, 2019

E-commerce has been driving demand for industrial real estate for several years, but steadily increasing online sales coupled with growing consumer expectations for speedier delivery continues to put pressure on merchants to bridge the last mile to their customers. Considering that these projects are located in densely populated areas where land and available product are typically scarce, developers are increasingly converting obsolete warehouse and other properties into fulfillment centers. For space that matches their needs, tenants are less price-sensitive than they have been historically, says Kenneth Salzman, SIOR, executive managing director and principal for commercial real estate service provider Lee & Associates. But tenants are avoiding taking more space than they need just to have it available in the future, he adds. “It’s less a space race and more that businesses want to reach their customers more quickly,” explains Salzman, who is located in the company’s New York office. “And the demand is not just coming from Amazon and other online retailers — traditional companies want to be able to ship their products to their customers more quickly because they’re competing with online resources, as well.” Online retailers and shippers are typical tenants of the buildings — even the U.S. …

August 20, 2019

Content Partner Features Hospitality

Hospitality Lending: Whose Market?

by Jeff Shaw June 20, 2019

As the economy continues its upward trajectory, hotels are enjoying the benefits of strong demand from both personal and business travel. Despite these solid operating fundamentals, many lenders are apprehensive about the record length of the current economic expansion and the impact that a future downturn may have on room rates and occupancy levels. In response to these growing fears, many capital sources have either tightened their lending criteria or decided to cease hospitality lending all together. As traditional sources of financing retreat, hospitality owners have had to look far and wide for lenders that remain receptive to this asset class. This has created opportunities for lesser-known sources of capital, like Chicago-based Alliant Credit Union, to finance high quality properties. By going against the trend and utilizing internal specialization, Alliant has been able to exercise a level of selectivity that a more crowded field prevented until recently. This has resulted in loans on well-located properties with demonstrable operating results that are run by highly experienced owners with the financial resources to withstand a downturn. The emergence of non-household name lenders has enabled an accomplished subset of borrowers to access needed liquidity and obtain favorable loan terms in light of the …

June 20, 2019

Content Partner Features Self-Storage

The Stability of Self-Storage

by Taylor Williams April 5, 2019

Through economic ebbs and flows, the self-storage sector continues to prove its strength. Although real estate industry players are wary about labeling any sector as recession-proof, the self-storage sector tends to be a stable asset class during economic booms and downturns, according to Paul Letourneau, manager of commercial real estate lending with Chicago-based Alliant Credit Union. And over the last decade, self-storage facilities have become more flexible spaces, which is driving greater demand for the product. Across the country, these facilities are being used in novel ways, such as short-term product warehousing for small businesses; incubator space; personal workspaces; and wine storage in climate-controlled units. These new uses, coupled with traditional storage needs, create increasing demand and stability in the self-storage sector. According to Letourneau, self-storage facilities have adjusted to urban environments and their residents’ needs with multi-story climate-controlled properties that feature customer lounges and high-tech monitoring and security systems. Meanwhile, suburban markets show greater demand for traditional single-story self-storage facilities with space for RV and vehicle storage. However many suburban facilities are adding climate-controlled units and more security to meet customers’ needs. “The bottom line is that customers — from baby boomers and millennials to small business owners — …

April 5, 2019

Content Partner Features Lument RED Capital Group Western

RED Capital Group: The Northwest Enters 2019 with Strong Momentum, Rising Risks

by Jeff Shaw February 1, 2019

For decades, the Pacific Coast has defined the American avant garde. From the Beats and Hippies of the Fifties and Sixties to today’s coders, gamers, software engineers and social network titans, the West Coast has set the standard for contemporary cutting edge social and life-style evolution. Lately, the region has emerged as a global economic leader as well. The rise of Big Tech operations in the five Pacific Northwest metro areas we cover — the East Bay, Portland, San Francisco, San Jose and Seattle (the “Pacific 5”) — has altered their economic landscapes profoundly. From 2014 to 2017, nominal metropolitan GDP per capita increased more than three times faster than the national average, and personal income per capita — already considerably higher than the U.S. mean — increased at an 80 percent faster rate than the metropolitan norm. Wealth creation and income growth on this scale fueled commensurate demand for rental housing space, especially the luxury infill product favored by investors and developers. Total Pacific 5-occupied apartment stock increased at a 2.4 percent annual rate over the three years ended in 3Q18 (Reis) — 20 percent faster than the balance of the RED 50, RED Capital Research’s large market peer …

February 1, 2019

Content Partner Features

E-Commerce Logistics Impact Industrial Property Loans

by Amy Works January 8, 2019

The evolution of retail logistics is cultivating a new industrial landscape. “With the explosion in popularity of e-commerce, logistics models have shifted from hub-and-spoke organization to a product-to-consumer model,” says Casey Martin, commercial real estate commercial loan underwriter with Chicago-based Alliant Credit Union. The traditional hub-and-spoke distribution model features a central warehouse supporting a few large distribution centers, allowing product to move within a day’s drive from facility to facility to storefronts. Product-to-consumer models seek to satisfy purchasers that expect one- or two-day shipping, which has become the norm with many online retailers. This expectation is driving retailers to seek non-traditional properties that are close to high-demand consumers to serve as distribution facilities. The old real estate adage “location, location, location” takes on new meaning with each evolution of the retail industry. Retailers are utilizing smaller in-fill industrial properties in land-constrained markets in an effort to meet consumers’ increasing demands for faster delivery, notes Martin. He adds that older facilities or properties with atypical warehousing clear heights are of interest to smaller retailers who want their products to be closer to consumers. Retailers Compete on Delivery Guarantees The Federal Reserve Economic Data shows that the inventories-to-sales ratio of total business …

January 8, 2019

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