Multifamily

Positive Economic, Demographic Trends Fuel Detroit’s Apartment Rental Market

by Kristin Harlow July 12, 2018

Throughout metro Detroit, employment and population gains are bolstering apartment demand. Following the creation of 40,200 jobs one year ago, employers in the metro area added 22,200 people to payrolls during the past four quarters. The hiring brought the unemployment rate to 4.5 percent in March, down 10 basis points year over year. The tighter rate may make it more difficult for some employers to find qualified workers to fill openings. During the past 12 months, the hospitality sector led hiring with 8,200 additional workers. New hotel openings contributed to the increase. Sustained job growth has helped to boost the metro population by nearly 11,700 people and 6,600 households over the past year. Many of these residents are opting to rent, as rising home prices place homeownership beyond the reach of more households. During the past five years, the median price of a single-family home has soared 68 percent to $177,053 as of March. Highly amenitized homes or properties in desired areas such as downtown Detroit, Troy or Royal Oak, have much higher median prices, making renting a more affordable option in numerous areas of the region. Construction concentrations Multifamily construction is gaining traction in the suburbs. Completions in the …

July 12, 2018

Market Reports Multifamily Texas Texas Market Reports

Soaring Home Prices Drive Multifamily Absorption, Sales in Fort Worth

by Taylor Williams June 29, 2018

The Dallas-Fort Worth (DFW) metroplex will lead the nation in absolute job creation for a third consecutive year in 2018. Strong employment gains have produced healthy household formation trends as new residents migrate to the market and young adults continue to move out on their own. As a result, many new residents are filtering into apartments as homeownership in the metro falls out of reach. Pricing Concerns Since the end of 2012, median home prices in DFW have increased nearly 60 percent to more than a quarter of a million dollars, with median prices in some core neighborhoods reaching well above half a million dollars. At the same time, the projected minimum qualifying income rose marginally in comparison. The gap in growth between these two metrics makes single-family homeownership unattainable for a number of residents. And although the homeownership rate has ticked up over the past couple of years, it remained below the national average in the first quarter of 2018. These trends bode well for the apartment sector, ensuring overall absorption will be healthy at a time when developers are adding a record number of units to inventory. Households, whether renting or owning, are searching for affordable living options …

June 29, 2018

Florida Market Reports Multifamily Property Type Southeast Southeast Market Reports

Miami’s Multifamily Market Sees Prolonged Sales Activity for First Time in Years

by John Nelson June 25, 2018

Driven by the delivery of new product, the Miami multifamily market is experiencing a period of increased transaction activity. Always in high demand, but generally a thinly traded market, Miami has seen a significantly higher volume of market-rate multifamily sales in the last two years. While Miami-Dade County has maintained strong fundamentals overall, its sales volume has historically trailed nearby markets in Broward and Palm Beach counties. In 2014 and 2015, Miami saw an average total sales volume of $150 million, compared to $935 million in Broward County and $675 million in Palm Beach County. Although Miami-Dade County is home to half of South Florida’s population, it has historically accounted for just 20 percent of South Florida’s multifamily sales volume. Part of the reason is that Miami is in high demand because institutional, foreign and private investors are enamored with Miami-Dade County and want these multifamily assets in their portfolio. Likewise, each of these groups tend to hold Miami-Dade properties for extended periods of time. Further, in the early 2000s, the condo conversion trend eliminated much of Miami’s Class A rental inventory, increasing the scarcity of this type of multifamily product. In 2017, however, Miami saw over $820 million in …

June 25, 2018

Market Reports Multifamily Nevada Western Western Market Reports

Reno Multifamily Rent Growth Among Nation’s Highest as Vacancy Remains Low

by Taylor Williams June 19, 2018

Reno’s proximity to the Bay Area is supporting an economy beyond the gaming industry. The area’s lower cost of living is also attractive for Bay Area transplants attempting to further stretch their income. Tesla is the most notable utilizer of the metro’s favorable location and business-friendly environment. The company pulled 112 permits last year to build out internal areas of the factory. The introduction of Tesla’s electric semitruck necessitates a further expansion of production in the coming years. On the supply side, development is ramping up quickly as builders finally move away from primary markets to relieve housing pressure in tertiary metros. Inventory will expand by more than 4 percent this year, representing the largest increase on record. The South Reno submarket contains a majority of the completions slated this year. More than 1,400 units are underway in the submarket, including nearly 1,000 scheduled for delivery in 2019. Builders are also active in the Sparks submarket, where 600 units are underway and scheduled for completion. The introduction of new units has pushed up the percentage of properties offering leasing incentives to 16 percent. Still-tight conditions are limiting the average incentive to just nine days of free rent. An influx of …

June 19, 2018

Illinois Market Reports Midwest Midwest Market Reports Multifamily

Deconversions, Adaptive Reuse Drive Chicago Multifamily Investment

by Kristin Harlow June 7, 2018

Resilience in the Chicago apartment market amid a historic construction boom is creating opportunities for multifamily investors, particularly those who are willing to go the extra mile — sometimes literally — to capitalize on rent growth outside the downtown core. Across the city in outlying neighborhoods like Uptown, Rogers Park and Pilsen, value is being discovered in vintage buildings due to their high appreciation potential. In addition to circumventing rising material and labor costs, buyers of existing buildings are benefiting from their ability to collect rents now, while there’s still room for growth, rather than going through the time-consuming development process that has cast a shadow over some pipeline projects. Wave of deconversions Condo deconversions have been a popular choice among investors in recent years, with nearly 2,000 units deconverted at a combined market value of approximately $437 million since late 2016 in Chicago, according to data from CoStar Group and Interra Realty. When executed well, these transactions create a win-win for both parties involved. Condo owners, some of whom are still trying to recover value lost during the recession, can usually sell their units at a higher price than they would have achieved on their own, particularly in older …

June 7, 2018

Market Reports Multifamily Texas Texas Market Reports

Rio Grande Valley Multifamily Market Playing Catch-Up on Class A Product

by Taylor Williams May 18, 2018

Commercial real estate sectors in secondary and tertiary markets often suffer from a lack of current, comprehensive data and metrics. Until a few years ago, the multifamily market of the Rio Grande Valley (RGV) was no exception. Much of the region’s multifamily product consists of “clusters” of fourplexes. In many cases, different investors own different units within these properties, which generally do not have management and leasing offices with hard data. Consequently, for years multifamily developers and brokers in Hidalgo and Cameron counties operated without reliable information on their market, generally ceding to the ideas that it was overbuilt. Turns out they were incorrect. Year-over-year rent growth in this market tends to be flat. Fluctuations are short-lived and back-and-forth in nature. But beginning in 2015 and carrying over into 2016, multifamily players in the RGV began to realize that their market was not overbuilt and that in fact, demand for better product was rising. Volatile Vacancy To better grasp the ebbs and flows of this market, we revert to 2008 and pre-recession data. To simplify our analysis, we use the McAllen-Edinburg-Mission MSA as a proxy for the region. In 2008, multifamily vacancy stood at approximately 6 percent. By 2011, when …

May 18, 2018

Alabama Market Reports Multifamily Southeast Southeast Market Reports

Birmingham’s Multifamily Market Sees a Turnaround in Highway 280 Corridor

by John Nelson May 14, 2018

Birmingham’s multifamily market closed out 2017 with an average 7 percent vacancy rate and effective rents that flirted with the $900 per unit ceiling. On the investment side, multifamily assets in the market demonstrated some notable pricing trends through year-end 2017. The market outperformed the region and the nation in terms of value appreciation on a per unit basis. The average price per unit in Birmingham increased by more than 20 percent from fourth-quarter 2016 to fourth-quarter 2017. And, among these assets, garden-style properties stood out with a 36 percent increase in average price per unit. One explanation for this trend is the combination of value-add upgrades to garden-style properties in the market, as well as new construction that is lifting values in the market. To that end, Birmingham’s Highway 280 Corridor makes for a great case study. Stabilization of 280 Corridor What was a soft submarket in 2017, the Highway 280 Corridor in Birmingham has now rapidly tightened up in the first quarter of 2018. This one corridor spans various Birmingham submarkets ranging from urban Central City and Southside to Birmingham’s southeastern suburbs of Meadowbrook and Lake Purdy. According to Alabama Traffic Data (ATD), the average annual daily traffic …

May 14, 2018

Market Reports Multifamily Office Texas Texas Market Reports

Downtown Renaissance Drives El Paso Office Market, Multifamily Growth

by Taylor Williams May 4, 2018

For decades, El Paso was a big, sleepy town nestled on the banks of the Rio Grande that relied on a slow-paced, but consistent economy. In those days, housing was always affordable. Pricing levels for single- and multifamily properties were below national averages, but so too were wages. The city’s office market, which has traditionally served as a leading indicator for multifamily growth, hummed along without ever experiencing strong asset appreciation or interest from outside investors. Taken at face value, this activity would suggest that there was a firm ceiling for new development and rent growth for both of these markets. In recent years, however, El Paso natives have seen their city experience enormous growth fueled by exceptionally low crime rates and expanding population at Fort Bliss Army base. Development of both single- and multifamily product really took off between 2011 and 2014, causing rent growth to subside and vacancies to rise from 5 percent a few years ago to roughly 9 percent today. The market returned to a more sustainable pace of new development in subsequent years. Looking ahead, the metro’s job growth should remain a factor of its population of military personnel and federal employees. As El Paso …

May 4, 2018

Market Reports Michigan Midwest Midwest Market Reports Multifamily

Surging Demand for Apartments in Downtown Detroit Is Testament to the City

by Kristin Harlow May 3, 2018

At a time when downtown Detroit is in the midst of a civic renaissance, the state of the city’s multifamily real estate market is both a reflection of larger trends and a sign of what might be in store for the Motor City in the years ahead. To keep a pulse on the market, Broder & Sachse Real Estate compiles a market study twice a year to evaluate the rental and occupancy rates of all multifamily properties downtown. Through this research, the continued strength of Detroit’s multifamily market is abundantly clear, with an average occupancy rate of 95.6 percent across downtown in winter 2018. This occupancy rate indicates demand is high, especially coupled by the findings in the Downtown Detroit Partnership’s third Greater Downtown Residential Market Study released in 2017. The study estimated that an additional 10,000 units will be needed over the next five years. The need for these additional 10,000 units means supply — or a relative lack thereof — is also part of the equation. While the number of residential units in Detroit has increased by a great deal on a percentage basis, in relative terms the volume of quality residential product is still somewhat limited. Today, …

May 3, 2018

Market Reports Midwest Midwest Market Reports Multifamily Nebraska

National, Regional Investors Are Drawn to Omaha’s Apartment Market

by Kristin Harlow April 26, 2018

With asking rental rates increasing, an average vacancy rate of 5.7 percent and a low average asking rent per unit of just $855 per month, Omaha’s apartment market is increasingly attractive to national and regional investors. According to apartment research firm Reis, Omaha’s average asking rental rate has increased in every quarter for the past seven years, and is expected to increase by another 2.2 percent in 2018. While not stellar growth, it continues a steady march upward that has benefited owners in Omaha for quite some time. Driving the growth in rents is the balanced nature of the Omaha market coupled with Omaha’s strong underlying economy. From a population growth perspective, census data shows that Omaha’s metropolitan statistical area (MSA) has grown 1.2 percent per year since 2010, and is now estimated at 939,000 people. That steady trend is expected to continue for the foreseeable future, as Omaha’s population is projected to grow another 1.1 percent per year through 2022. In terms of absorption, Omaha has averaged an annual addition of 4,000 households over the past 10 years, according to Reis. Renters account for 34.3 percent of Omaha MSA’s housing units, translating to roughly 1,372 new renter households each …

April 26, 2018

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