Category: Commercial Real Estate

Phoenix, Seattle and Washington, DC apartment markets at risk of overbuilding says NMHC panel

Report on the state of apartment building investment markets from the good folks at Joseph Bernard Investment Real Estate in Portland:

there is a wall of private equity wanting to buy apartment building investmentsContinued positive multifamily demand fundamentals and ready access to capital at attractive rates is fueling a surge in new apartment development, according to industry executives.

Several hundred senior-level apartment executives gathered in Scottsdale, AZ, last week for National Multi Housing Council’s (NMHC) Apartment Strategies/Finance Conference and Spring Board of Directors Meeting. The following is the NMHC’s summary of what was discussed.

Continued low levels of new supply have led to a big bounce-back in rents as demand outpaces new construction. According to one panel of apartment executives, the new supply shortfall may be larger than once thought — as many as 700,000 to 1 million units — because many of the apartments built in recent years have been in the affordable, rather than market-rate, section of the market. Moreover, much of the current apartment stock dates back to the 1970s and is becoming obsolete, creating additional demand for new supply.

Select areas have seen such large upticks in the number of planned and under construction units that could turn into hot spots for potential overbuilding. In particular, certain submarkets of Phoenix, Seattle and Washington, D.C., appear somewhat at risk.

But, overall, new completions are still a very low percentage of total inventory.

Money Flowing for Multifamily

There is a wall of private capital that wants into the multifamily space. More than 250 private equity funds currently are Continue reading Phoenix, Seattle and Washington, DC apartment markets at risk of overbuilding says NMHC panel

Research shows that Apartment Building and CRE cap rate spreads shouldn’t be modeled as constant

From Serguei Chervachidze, Capital Markets Economist at CBRE Econometrics: “What’s the long-term spread between cap rates and Treasurys?” This question, with a few variations, comes from all types of clients—from small investment shops to large hedge funds staffed with many quants.

Apartment Building & CRE historical cap rate spreads to 10yr T-Bond Yields

This is the wrong question to be asking, however, in that it assumes Continue reading Research shows that Apartment Building and CRE cap rate spreads shouldn’t be modeled as constant

This recovery is “basically normal if not a bit better than expected” historically speaking says Hassam Nadji in GlobeSt.com

“History reminds us that a recovery from the simultaneous shocks of a financial crisis and a major recession require significantly more time and stimulus than a cyclical contraction, a process that could extend five to eight years compared to the more typical two- to three-year span following a cyclical recession. The pattern observed thus far since the recovery began is basically normal if not a bit better than expected.”

Remember that 2.5 million of the jobs lost were in construction and financial services (including mortgage origination mills and RMBS/CDO/CDS manufacture) so that returning to the same level of employment in those sectors would imply another bubble formation.

Now on the other handif job creation continues to fall off… See the whole GlobeSt. piece here: Weak Jobs Report Another Bump in Road to Recovery

Commercial Real Estate added $260 Billion to GDP last year- Hessam Nadji video via Marcus & Millichap

See the video here: http://bit.ly/JpqMck Sorry, couldn’t figure out how to load their video directly into this post. Any suggestions? Thanks.

Apartment Building Investment Sales Jump 31% in Q1 2012 says Real Capital Analytics.

Apartment building investment sales continued their ascent in the first quarter of 2012, jumping 31 percent over the same time frame in 2011, according to New York–based commercial real estate research firm Real Capital Analytics (RCA).

  • Garden properties, totaling $7.1 billion in sales, drove most of the volume
  • High-rises rose $4.8 billion.
  • Both sectors jumped 30 percent from a year ago.
  • Portfolio deals also boosted the first-quarter totals, with 52 transactions involving 185 properties adding $2.6 billion in volume.
  • Distressed sales provided 13 percent of total sales, a 9 percent increase from the fourth quarter of 2011.

The volume trends are consistent across tertiary, primary, and secondary markets, but cap rate trends vary. In secondary markets, they remain unchanged; in tertiary markets, they’ve increased slightly; and in major markets, they’ve compressed.

See the whole MFE article: Apartment Sales Jump 31 Percent in Q1 2012

Tertiary markets still represent a value opportunity and at Ashworth Partners we’ve identified a few markets with unique drivers that catch the upswing. Contact us to find out more.

 

Denver Job Growth catching up with Apartment Building occupancy and rent gains.

Apartment building investment buoyed by job growth in Denver

Video via Property Management Insider: http://youtu.be/uFjpYSbVdRg

Apartment fundamentals are strong essentially across the board in Denver, which ranked among the nation’s best with year-over-year rent growth of 6.5%

The 10 Commandments of Network Building by Duke Long

Duke is one of the top thought leaders on how commercial real estate (CRE) and online social networking should work together… and where they don’t. HE posted this on his blog 10 Real World Examples of How I Built My Commercial Real Estate Network and in an ironically karmic sort of way I just saw it on Klout’s homepage today. It is so good and to the point in true Duke style that it would be a great guest post. I believe these steps work online and off, in CRE or any other industry so take it away Duke:

Duke Long commercial real estate investments

1.What are the relevant commercial real estate communities of interest?  What are the needs wants of the participants within these communities?

I started simply looking for the groups and associations that I already had and affiliation with. My state commercial board.  NAR because I had already made several connections over the years. CCIM,SIOR,IREM,BOMA etc. Why connect? Hell, why go to the meetings and get on the conference calls, why volunteer? I needed build and cultivate a network. Online connection was a revelation. I would listen learn and ask simple questions. The needs and wants were pretty obvious.People wanted to connect to make deals. But then something interesting started to happen.Human interaction.

2.Participate where your presence is advantageous and mandatory, don’t just participate anywhere and everywhere or solely in your own domains (Facebook,LinkedIN, Twitter conversations related to your brand, etc.)

Seems pretty obvious does it not? Let me give you and example. I do everything in my power to eliminate and and all feeds emails discussions and spam from lenders. You say What? We need that lender connection. Not me. All and I mean all they do is spam and pitch. How does this help me or my clients. You would think lenders pitching brokers is a natural fit. Wrong. Go find the client before they get to me and leave me the hell alone. The “we only are taking clients in the 30-75 mil bracket ” pitch is total bullshit. So, your are in commercial real estate who and where should you be ? Start-ups, Logistics Companies, Medical Associations,Industrial Data Centers…let your brain flow.Maybe some other brokers also they need to know what your stuff is but not in a spammy way!

3. Determine the identity, character, and personality of your Continue reading The 10 Commandments of Network Building by Duke Long

M&M Apartment Building Investment call: Opportunities exist in secondary mkts & value add, tertiary still lagging

Marcus & Millichap Q1 call on the apartment building investment climate this morning:

  • Year over year manufacturing jobs grew 238k. Manufacturing = 20% of GDP but gets no press, where as single family housing < 2% gets all the coverage.
  • There is a historic % of 18-34 Y/Os still living ‘with the parents’ but they are also getting a larger proportion of the new jobs. (See chart) Good for apartment building investors as these people typically become renters when they do move out.

pent up apartment building demand

Building Porn

Barry is one of my favorite writers on finance, the economy and politics but I don’t want to just be a feed for his blog. Some days however he’s got too much good stuff and today is a prime example… in a fun way. Check out this chart of the Skyscraper Index Building Bubble. Clicking on this link will take you to a large image. Clicking on the image below will take you to the original post on Barry’s blog:

Skyscraper porn and building bubbles

 

New AIG apartment building investments likely to total 100s of $millions annually.

Big apartment investment news from bailed-out insurance company AIG:

“AIG plans to make fresh domestic investments later this year and has already reached out to developers of new apartment buildings in major metro areas.” AIG’s new investments will likely amount to hundreds of millions of dollars a year, though it  hasn’t set specific targets yet

AIG apartment building investment moves

Specifically, AIG has expressed interest in a $100 million project in Montclair, N.J. aimed at transforming a former Jaguar dealership into an apartment complex that will include retail and office space, the paper said. AIG, which is still 70%-owned by taxpayers, is also eying property in California and the Southeast U.S

See the whole article here:

Continue reading New AIG apartment building investments likely to total 100s of $millions annually.