Multifamily transaction activity increased 13 percent year over year in San Diego in 2012. Although many people predicted a dramatic increase in year-end closings to avoid the uncertainty of tax reform, owners continued to shelter their money in apartments. Economic Drivers San Diego’s diverse economic base added 24,600 jobs over the past 12 months, and year-over-year employment gains were positive in all sectors except manufacturing. • Unemployment has decreased 1.1 percent since November 2011, and as of November 2012, is 1.3 percent below state levels. • Home prices increased about 8.6 percent in 2012, but remained 35 percent below the peak levels of 2006, with a median priced home at $397,000, and a mere 50 percent homeownership rate in the metro area compared to 66 percent nationally. • San Diego’s population has increased 5.81 percent since 2008. Projections call for solid 1.5 percent annual growth through 2017. Performance San Diego remains a supply constrained market with a vacancy rate of 5.3 percent countywide, including Class A, B and C product. Coastal and core submarkets routinely log less than 3 percent vacancy. San Diego’s year-over-year rent growth is expected to be 2.2 percent in 2013. It is expected to increase to …
Multifamily
After several years with virtually no new construction of multifamily homes, the Metro Phoenix market looks to rebound with a pipeline of projects that could result in 5,000 to 7,000 new units built per year in 2013, 2014 and 2015. That returns our market to construction levels last seen in 2007. In order to see this volume of construction, developers will need to be successful in raising the required equity, which has been a challenge. At the end of 2012, the Valley had 17 projects (of 50 units or greater) under construction, totaling a little more than 4,200 units. Building on that, we expect to see 15 to 20 projects per year through 2015. This is just a fraction of the more than 20,000 units filling the development pipeline. The demand for all these units, however, will hinge on Phoenix’s population and job growth. It will also be influenced by the national and global economies. Developers are capitalizing on the recent purchases of properties in prime, upscale locations that were not previously considered for strictly rental housing. Alliance Residential, P.B. Bell and JLB have all either begun construction or have plans in the works for rental developments in premium Phoenix …
The Atlanta metro has been named one of the top cities for job growth and the population is rising at one of the fastest paces in the country, creating high demand for rental housing that will persist. Last year, an average of 200 residents per day moved into the area, and nearly 21 percent of the entire metro population falls within the prime renter cohort, which includes people between 20 and 34 years old. Uncertainty in the housing market is driving up the age of the first-time homebuyer. As many young adults form rental households in lieu of ownership, they will likely choose to live in modern, luxury apartments near entertainment and business districts. Meanwhile, in the single-family market, permitting activity remains well below prerecession levels and sales of existing single-family homes are just 57 percent of peaks reached before the recession, confirming that many of these new residents are looking for rentals. Apartment construction is at an all-time low this year, and demand for units will outpace new supply by more than seven times. As a result, vacancy will fall to the lowest point in over a decade, allowing operators to boost rents and match prerecession peaks. Looking at …
Multifamily markets around the country are thriving and Connecticut is no exception, particularly with regard to Class B and Class C properties. The regional mortgage markets have opened up dramatically, approving deals that would have been snubbed a year ago as the market rebounded from the economic downturn. Today, the multifamily sector is alive and well in all classes and markets throughout Connecticut. When the rebound first began roughly 18 months ago, premium core properties were getting all the attention because of discretionary equity and debt. Lending agencies at the time showed a strong preference for garden-variety Class A suburban and high-rise assets. Terms like “value-add” were barely in their vocabulary then, but now closings labeled as such occur all the time. Outside of the New Haven, Fairfield and Stamford core markets, however, plenty of REO and distressed real estate is still working its way through the pipeline, from markets like urban Hartford to outlying suburban areas. Why the delay? For a long time, investors felt repercussions from the market crash, so we had a case of “a falling tide sinking all boats.” Now, while there’s still no urgency to invest in bank-owned real estate, these assets are slowly but …
The Nashville metropolitan statistical area (MSA) comprises 13 counties and a population of approximately 1.45 million, which represents a 47.2 percent increase since 1990, nearly 2.5 times the national average of 19.2 percent for the same period. With a host of world-class companies like Dell, Nissan, HCA and Sprint PCS, Nashville has become a destination for a young, progressive generation of families. Over the past decade, the Nashville area saw tremendous increases in several areas: population growth in the region has gone from 53rd in the United States to 38th and income growth in the region rose from 138th in the United States to 49th. That takes the region from five percent below the U.S. median household income average to seven percent above it. Diverse and Growing Economy The Nashville region’s economy is diverse and thriving. Low unemployment, consistent job growth, substantial outside investment, and a well-trained labor force combine to make Nashville an attractive city for business. Nashville enjoys an unemployment rate that is historically below the national average, ending the year at 6.95 percent (compared to 8.3 percent for the nation). Nashville’s diverse economic mix is led by the manufacturing and healthcare industries, followed by publishing and printing, …
The Charlotte, N.C., apartment market is well into its recovery; 2012 proved to be a strong year with improving fundamentals, healthy transaction volume and the formation of a robust new development pipeline. The exceptional year that Charlotte experienced in 2012 was not fully anticipated at year’s end 2011. However, MPF Research’s second quarter report (July 2012) showed Charlotte’s year-over-year rent growth at 6.8 percent, placing it third in the top 10 markets for rent growth nationally (of the top 50 national markets). This trend was reinforced by MPF’s third quarter publication which reported year-over-year rent growth of 6.3 percent. This marked the fourth straight quarter of year-over-year rent growth in excess of 6 percent. In addition, the report showed overall market occupancy levels of 95.9 percent, the second highest achieved in 14 years. Such favorable news serves as confirmation that the Charlotte economy has remained strong through the financial crisis, as banking sector jobs have remained largely intact and the overall economy of Charlotte is more diverse than many once thought. As a result of the favorable market dynamics, Charlotte’s visibility amidst the national investment landscape has increased, causing investors, developers and lenders alike to take note. Charlotte has quickly …
Downtown Cleveland is in the midst of a redevelopment boom. During the last 12 months, the city has seen a new $350 million casino and a new $33 million aquarium open. And over the next 24 months, it will see a new $465 million convention center complex, a new $275 million multi-tenant office building and hotel and a $180 million redevelopment that will include a new 220,000-square-foot office tower as a part of consolidation efforts for the Cuyahoga County government. However, one of the most impactful and long-lasting components is the development of more than 1,100 new residential housing units that have either been announced or are under construction. If all come to fruition, it will increase downtown’s residential inventory by over 20 percent. Market Drivers Although there are numerous factors contributing to this residential building boom, the following stand out as key components. • Build it and they will come? They are already here. As of January 2012, the downtown area had just under 4,200 residential units. Of this, approximately 25 percent were developed in the past five years. However, this delivery schedule was much lower as compared to the blossoming demand. The source of this demand has come …
A tight retail market, rising rents, and record low interest rates led to a jump in New York City multifamily investment sales in 2012. Multifamily building sales in New York City rose to $7.3 billion in 2012, a 45 percent increase compared to 2011, according to Ariel Property Advisors’ Multifamily 2012 Year in Review: New York City. There were 639 multifamily transactions comprised of 965 buildings in 2012, a year-over-year increase of 36 percent and 42 percent, respectively. The fourth quarter was particularly robust as investors rushed to close deals before tax increases took effect. In 2012, we also saw prices for multifamily buildings in prime New York City locations return to pre-financial crisis levels. In Manhattan, cap rates averaged below 4.75 percent and value-added assets traded at below 4 percent. Manhattan multifamily buildings operating at market rental rates even saw prices climb above $1,000 per square foot. One example of this was 105 West 29th Street, where a sale closed in June for $280 million, or $1,056 per square foot. This same institutional investor paid $475 million, or $498 per square foot, in January 2010 for a portfolio comprised of similar core assets at 415 East 53rd Street, 777 …
The Tampa Bay multifamily market is a tale of “have” and “have not.” The market has plenty of buyers and tremendous amounts of capital, and it has seen huge moves in valuation over the last 24 months. However, the market does not a large supply of available inventory or a steady supply of REO assets from lenders or special servicers. Let’s look at the amount of increased deal volume in the last 24 months, according to several sources such as LoopNet, CoStar and Real Capital Analytics. According to compiled sales comps, more than 250 multifamily properties ranging from 20 to more than 600 units have sold in the last 24 months. Compared to the prior two years, this number demonstrates an increase in sales volume of more than 200 percent. Sales prices range from $9,000 per unit on the low end of the scale for Class D fully vacant, REO, boarded-up properties to more than $150,000 per unit for several Class A fractured condo complexes that were 100 percent occupied at the time of sale. Lenders and REO special servicers have taken notice of this trend and have started pricing assets accordingly when they are brought to market through REO …
Although apartment construction has heated up in Minneapolis, renter demand remains healthy as many renters are wary of homeownership. As a result, vacancy is still below market equilibrium. Many renters in the market are young professionals who, before the housing market collapse, would have been looking to purchase a condominium. To appeal to renters, new apartment developments are adding higher-end finishes and features such as a concierge service, pub or cafe, outdoor gathering space, rooftop decks, dog runs and pet-care areas. In the process, builders have established a new rent ceiling and redefined the Class A segment. Supply-Demand Balance As a wave of new high-end projects are injected into the market, owners with existing top-tier properties could be at a disadvantage and will need to increase concessions to maintain occupancy levels. Approximately 131 apartment units came on line in the second quarter, for a total of 405 units finalized in the first half of 2012, expanding overall inventory by 0.3 percent. In the first six months of last year, 175 units were added. Development activity is expected to continue at a heightened pace. Some 2,450 units are under construction with completions scheduled through 2013. Also, there are more than 9,300 …