Axiometrics was out with their National Monthly Apartment Trends report which includes a couple of cool charts, one is a map of their top 88 markets coded by rent growth (below). The one that caught my eye though was showing Occupancy, Effective Rents and Revenues:
In their June 2012 Economic Update, Freddie Mac says: “Over the year ending March 2012, an additional 1.5 million households moved into rental housing. That’s a 4 percent increase in renter-occupied dwellings in a single year.”
The increase in apartment demand has helped to enhance property values, on average up about 25 percent during the past two years from their trough during the first quarter of 2010…
1) The availability of attractive financing. Plus, the spread between fixed-rate financing and actual year one cap rates is certainly the widest that it’s been in recent history, perhaps ever. (There’s rumor that there was a bigger spread during the Roman Empire, but that may just be an old wives’ tale.)
From a macro perspective, the spreads between the treasury indexes and the premium on multifamily interest rates will almost certainly widen in the near term, but cap rates should remain stable in Class-C properties. They will probably continue to compress to a certain degree for Class-B assets.
With so many online ad sources to choose from, how can you be sure which is best for your apartment building investment? Below Jason Velazquez, VP of Strategic Initiatives at Colliers of offers 5 tips for choosing a great ILS:
Does their traffic measure up? Most Internet Listing Services (ILS) will happily provide you with their web statistics. Take the time to thoroughly review any report offered to you before you sign on the dotted line.
Check whether they’re popular in your city. Simply because an ILS is nationwide, doesn’t necessarily mean they have high web traffic in your city. A simple way to gauge an ILS’s regional market penetration is to google the keywords – apartments in city name, and then scroll through the search results until you see their site. Don’t just search using the city you are located in; type other city names that your prospects move from.
If the ILS isn’t on the front page of Google, you may want to find an alternative ad source. Studies have consistently shown the majority of renters look for their apartment using search engines.
As the next building cycle for the Portland area is still another year out, vacancy rates are expected to fall to historic lows across the metro. The overall vacancy rate will match the lowest on record at 2.7 percent, while the area’s lower-tier vacancy will fall to as low as 2 percent.
Marcus & Millichap notes that a lack of multifamily construction and the expansion of jobs in the region will be the prime factors behind the extraordinarily high rates of occupancy. Job growth is expected to rise 3.1 percent—from 20,500 positions created in 2011 to 31,000 positions created in 2012. Of particular significance will be the development of a new Intel facility, which is expected to create thousands of construction jobs and spur large demand for Class B and C apartments.
How do apartment building residents actually want to live? Do they want sidewalks in front of their apartments and actual places to walk to—“Leave the car in the garage!” is a common refrain on real estate sites—or are Americans happy, as transportation analyst Alan Pisarski puts it, to “drive to where they can walk?” The truth is there are relatively few places in America that today would pass what architect Hal Box has dubbed the “Popsicle Rule”—“a child must be able to walk safely from home to buy a Popsicle within five minutes.”
How ‘walkable’ is your property? Your next apartment building investment? How do you figure that out?
Walk Score is a website that takes a physical address—enter yours here—and computes, using proprietary algorithms and various data streams, a measure of its walkability. More recently it’s started tracking how transit-friendly neighborhoods are too. What drives the score is choice and proximity—the more amenities (restaurants, movie theaters, schools) you have around you, and the closer they are, the higher your Walk Score.