A strengthening rental market is drawing more multifamily investors toward the New Haven metro area. Property fundamentals are rapidly improving, aided by greater renter demand and a lack of new supply pressure. Solid apartment performance, an array of multifamily assets well-positioned for upgrades and region-leading yields offer opportunities for investors, contributing to a record level of deal volume for the market in 2018. Apartment properties in New Haven have performed better over the past 24 months than they have at any point in the last 10 years. Positive job growth has renewed renter demand, facilitating vacancy declines and rent gains. Vacancy has fallen 350 basis points since September 2016 to its current rate of 4.1 percent, and as vacancy contracted, rent growth accelerated. Effective rents began rising in 2017. The pace of growth has been trending upward in 2018, reaching a trailing 12-month appreciation rate of 5.9 percent in September, a four-year high. These improvements are just as evident in the surrounding suburbs south along the I-95 Corridor and north along the I-91 Corridor as they are in the city of New Haven. The increase in absorption and the resulting impact on multifamily operations has been positive in part because …
From its near-perfect weather, parks and beaches to its commerce-friendly environment and well-educated workforce, Orange County has plenty of attractions to offer residents, businesses and multifamily investors. Add to that list well-paying jobs in the expanding professional and business services, and tech and healthcare sectors, and you can see why demand for housing in the county is on the rise. Job growth has pushed the unemployment rate to below 3 percent, a level not seen since the fourth quarter of 1999. The strengthening economy has created a tremendous tailwind for apartment demand in a metro where the cost of a single-family home is out of reach for most households. As a result, Orange County’s multifamily vacancy rate stood at the extremely low level of 3.8 percent at the end of the third quarter. The low level of apartment vacancy has also been positively affected by a change in the rate of new construction. After several years of increased supply, the amount of new housing in the pipeline has begun to decrease, having reached the apex of the current cycle in 2017. This year and next, the county will receive about 4,000 new apartments, down from the more than 4,800 units …
Driven by continued job and population growth, metro Atlanta’s multifamily market remains strong. Rarely a week goes by without an announcement of another corporate relocation or expansion somewhere throughout the metro area. This, in addition to an increasing population seeking the region’s quality of life, relative affordability and dynamic economy, has sustained the current cycle of development in the multifamily market. Investors appear to share this conclusion and have made Atlanta a top destination for acquisitions over the past several years. Despite some potential challenges on the horizon, namely rising construction costs, metro Atlanta’s apartment market is poised to continue its expansion over the near term. Market Fundamentals While new supply has outpaced absorption, most data providers still show metro Atlanta’s overall occupancy rate above 94 percent. Many market observers estimate that the multifamily market is on the cusp of, or has just moved past, its short-term peak of deliveries. Spiraling land and construction costs, coupled with the current labor shortage being felt across the economy, are acting governors of future supply expansion. These increases in costs are also translating into much higher required rents, which are testing the size of the renter pool capable of affording them. Despite concerns …
Houston continues its trajectory as an exemplary market with strong multifamily fundamentals that continue to attract large-scale investment nationwide. The positive trends of strong job growth and sustained apartment demand are forecast to hold thanks to a confluence of factors. To better understand the dynamics shaping Houston’s multifamily market, it is important to look closely at several major drivers, including residual demand from Hurricane Harvey and record employment growth, as well as the impact of rising interest rates and incentives introduced by the Opportunity Zone legislation. More than a year since Hurricane Harvey made landfall, Houston’s multifamily market continues to rebound. Overall occupancy has risen 180 basis points year over year to its current rate of 90 percent. Residents displaced by Harvey’s flooding, particularly in hard-hit areas like the Energy Corridor, contributed to the increased demand for apartments. In the third quarter of 2018 alone, absorption greatly outpaced deliveries, with almost 9,200 units newly occupied and less than 6,000 units delivered. As developers taper new apartment deliveries, we expect demand to continue to outpace deliveries for the foreseeable future. Rents advanced 3 percent between October of 2017 and 2018 — almost twice the rate of growth of the previous 12 months. …
For the remainder of 2018, positive demand drivers will alter new apartment supply’s impact on operations in Louisville. The metro has had a large volume of new apartments to open this business cycle. Since 2013, an annual average of 1,500 units has been completed, totaling approximately 7,400 apartment units. As this new supply entered the market, initially strong leasing helped push vacancy down 100 basis points to 4.6 percent at the end of 2016. However, absorption of apartments softened last year as new units continued to open, lifting vacancy back up 90 basis points to 5.6 percent. This year, approximately 2,800 apartment units will be completed, further testing demand for luxury rentals in Louisville. A team of factors should fuel positive absorption, preventing an alarming uptick and keeping the vacancy rate in the mid-5 percent range. Payroll expansions by tech firms, manufacturing companies and hospitals will support consistent year-over-year hiring and income growth this year. Sub-4 percent unemployment suggests employers will recruit from outside the market to fill open positions or hire recent graduates from the University of Louisville and other local colleges. These job gains should increase the rate of household formations and bolster the market’s millennial base, an …
In the world of multifamily development, it’s rare to find a market that quite literally checks every box. But in Dallas-Fort Worth’s (DFW) Far Northeast submarket, which encompasses Plano, Frisco, Allen and McKinney, that’s precisely the case. In terms of fundamental demand drivers, Collin County is growing by about 80 new residents per day, one of the fastest rates in the country. The county’s population is expected to increase by nearly 800,000 over the next two decades, and to add more than 300,000 new jobs during that stretch as well. The region also epitomizes the corporate relocations for which DFW has become renowned. The arrivals of Toyota North America, JPMorgan Chase, Liberty Mutual and FedEx have already brought thousands of high-paying jobs to the Far Northeast submarket. Just as important, these companies have established precedents for medium-sized companies to follow suit and keep the job growth train rolling. The impacts of those demand drivers on multifamily growth in the region has been tremendous. But there’s more to the story of this area’s multifamily explosion than the increase in jobs and population. Lesser-Known Factors While corporate relocations have brought swaths of millennials to the area — in Frisco, that group comprises …
With the demand for apartments in Chicago rising, many real estate developers have discovered a previously untapped supply of potential acquisition targets — residential condominium buildings. This includes older condominium properties plagued by large deferred maintenance obligations and stagnating or declining unit sales prices. While the process for converting condominium buildings into rental properties can be more time consuming and labor-intensive than acquiring an existing apartment building, patient investors often see hidden value opportunities. They are able to capitalize on the spread between a building’s higher value as a rental property versus its lower value as an owner-occupied condominium building. Purchasing all of the condominium units in an existing building is not your typical real estate purchase. Because of the unique issues involved and the potential voluminous amount of documents involved, both the condominium association (the Association) and the buyer should be represented by experienced counsel with the bandwidth to handle the simultaneous closing of potentially hundreds of units. The counsel should also have a deep familiarity with condominium law, and in particular, Section 15 of the Illinois Condominium Property Act (the Act). Statutory overview Deconversion is the term that has become widely used in the real estate industry to …
Apartments in Philadelphia’s urban core command premium rent, prompting more renters to consider living in the surrounding suburbs. Rising demand for apartments in submarkets both near and far from Center City have helped lower vacancy and improve rent growth. Southwest Philadelphia, in particular, has exhibited these trends despite elevated construction activity. The combination of favorable property fundamentals amid supply additions draws strong investor interest, leading to increased transactions and higher sales prices. Multifamily properties in Southwest Philadelphia are outperforming those in Center City. Over the past four years, apartment inventory in both submarkets rose by almost proportional amounts, 10 percent versus 14 percent, respectively. Yet, over that time, vacancy in the suburban submarket dropped 100 basis points to a rate of 4.2 percent while the downtown rate went up 70 basis points to 5.3 percent. Rent growth showed a similar disparity. In the same four-year span, average effective rent appreciated 18 percent in Southwest Philadelphia but only 6 percent in Center City. The steep decline in vacancy and strong rent growth during this construction wave have demonstrated a healthy amount of demand in the submarket as residents seek more affordable housing options. As of June 2018, the average apartment in …
Despite being located 80 miles apart, the Austin and San Antonio metros might as well be on different planets when comparing growth and multifamily operations during the current business cycle. While both multifamily markets have been in growth mode since the Great Recession, Austin has outpaced San Antonio with a rapid rate of expansion during this time. Austin’s job growth has risen steadily at an average annual pace near 4 percent since 2010. In addition, strong migration to the metro has contributed to the 20,000-plus households that have been created annually during this span. In comparison, San Antonio’s total employment has risen by an average of 2.7 percent annually for the past eight years, though the rate has dipped below 2 percent over the past four quarters. The pace of migration remains healthy, but the rate of household formation has been slower in the Alamo City. These differences in job growth, migration and household formation have impacted each metro’s apartment market differently. Development Disparities Developers have targeted Austin over the past few years, and the market has received significant supply additions. The metro has consistently ranked in the top 10 markets across the country for new deliveries over the past …
Fundamentals in the Orlando multifamily market are exceptionally strong and should remain healthy as long as this economic cycle continues. Following a period of no construction after the recession, new supply is finally starting to catch up with pent-up demand held in check during the downturn. Even with over 7,000 units projected to be delivered annually for the next several years, occupancy rates should hold strong between 95 and 96 percent. Supported by continued economic expansion in the Orlando metro area as well as strong population and job growth, we remain bullish on the multifamily market and do not see the potential risk of oversupply any time in the near future. The justification for continued new construction makes sense given Orlando’s history. As in most markets throughout the country, the recession halted new multifamily development in Orlando. From 2007 to 2009, there was virtually no new supply added to the market. It was not until 2010 that construction picked up again, and by that time, post-recession job creation had already taken off, causing a tremendous amount of pent up demand for housing. Each year since, new supply has been quickly leased, and it has not yet slowed. As of July …