Tag: multifamily development

Is the Decline in Cap Rates Coming to an End for Apartment Building Investments?

In a piece just out today from Reis Reports says that: “We have seen declining cap rates fueled by a variety of key factors such as declining interest rates, risk-aversion in the wake of the recession with investors training their sights on what they perceive to be a less-risky property type, and the improvement in property fundamentals, especially in the apartment sector.”

Cap rate stabilizing for apartment building investments

But: “With the sale of high-quality assets dominating the marketplace, this has fueled the ongoing disconnect in pricing between buyers and sellers, preventing many assets that are not of the highest quality from trading. With sellers taking their cues from current market statistics, they are being relatively aggressive regarding the prices that they are willing to accept to consummate a transaction. However, frustrated buyers feel that many assets should not command the same premium that the highest-quality assets currently command in the market and consequently buyers are unwilling to pay such vertiginous prices.”

What are you seeing in your markets?

 

Is Bellevue’s Spring District The Next South Lake Union? Apartment developers are saying yes-

A piece in the Seattle Real Estate BisNow is talking about the new mixed use development that will be starting up around the planned light rail station in the Bel-Red area. The area has now got a fancy new name too: The Spring District. Kevin Wallace, Pres. of Wallace properties compares it to South Lake Union (only with better, ok, less worse traffic if you ask me).

Mixed Use Development in Bellevue's Spring District

Also mentioned that downtown Bellevue’s office space is just a couple big tenants short of being full, full of tech tenants including game developers that is.

Is now a good time to make Apartment Building Investments?

MHN Online has an interview with Dean Henry, president of Legacy Partners Residential, one of the big apartment building investment trusts (REITs). What I like is that he speaks in bullet points, just the way I think! Here’s my exec sum (in bullet points) of his bullet points:

Now is the time for Apartment Building Investment

“There are several important reasons why now is a great time to acquire existing multifamily assets. Let’s start with demand and supply:

Return of the Phoenix Apartment Building Bubble?

Is Phoenix apartment building investment overheating already?

Phoenix apartment building investment bubble rising again?

My exec sum from the Apartment Finance Today* article Apartments Rising in Phoenix Again

Updated CRE and Apartment Market Cycle Charts Now Posted by Glenn Mueller at Dividend Capital

Dr. Mueller is one of the leading researchers on the commercial and apartment building investment cycle but I have big questions about Seattle being placed at the bottom of the cycle in his latest Cycle Monitor report. According to MPF Research there currently are 6,000 new units under construction in Seattle (see here) and Essex Property Trust estimates that there will be 10,000 units coming on line in the next three years (see here). In fact the NMHC lists Seattle as one of three US markets in danger of overbuilding (see here).

Apartment building investment cycle chart May 2012

Reis Reports is showing that while rents are up about 1% QoQ in Q1 2012, vacancy is starting Continue reading Updated CRE and Apartment Market Cycle Charts Now Posted by Glenn Mueller at Dividend Capital

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

Seattle Apartment Market has 6k units under construction says MPF Research video

2/3rds of those are located in downtown, Capital Hill and Ballard. Owners of existing properties in those areas are about to have a bunch of new competition. With rent growth slowing to just about the national average what does that say about where we are in the apartment building investment cycle?

Seattle Apartment Building Investment Cycle 6k new units on the way

Click on the image to see the MPF Research video

Top 10 US Cities for new apartment building permits.

Coming soon to these big MSAs, lots of new apartments:

  1. New York-Northern New Jersey-Long Island
  2. Dallas-Fort Worth-Arlington
  3. Washington, D.C.-Arlington, Alexandria
  4. Los Angeles, Long Beach-Santa Ana
  5. Houston-Sugar Land-Baytown
  6. Seattle-Tacoma-Bellevue
  7. Austin-Round Rock-San Marcos
  8. San Francisco-Oakland-Fremont
  9. Chicago-Joliet-Naperville
  10. Miami-Fort Lauderdale-Pompano Beach

For details see: MFE Mag online

Will they be able to fill them all? How will older properties in these markets fare? Let us know what you’re seeing-

Essex Prop. Trust on Seattle Apartment Building Investment: rents up 6.5%, NOI +11% but 10k new units coming

My Exec Sum: Seattle apartment building investment results from Essex Property Trust Q1 call:

  • Seattle demonstrated exceptional same-store NOI and revenue growth of 11.2% driven by very limited supplies of housing and job growth that exceeds national averages
  • On operating expenses we expect a 2.3% increase for the second quarter ’12 over the second quarter in ’11
  • Seattle rents were up 6.5% compared to the first quarter of 2011. So depending on the submarket, we are now 4% below to even with our prior rent peaks.
  • renewal offers for June and July averaged +6% to 8% in Seattle
  • As of April 30, its occupancy was 96.1% with a net availability of 5.1%.
  • We view this turnover activity (50-55% YoY) as healthy because it provides us with more opportunity to grow rents. Additionally, we only saw a nominal increase in move-outs due to home purchases and affordability.
  • Cap rates continue Continue reading Essex Prop. Trust on Seattle Apartment Building Investment: rents up 6.5%, NOI +11% but 10k new units coming

Are we overbuilding multifamily already? Or just the wrong kind? Research from CBRE Econometrics

At a Seattle apartment building investment conference recently one of the main speakers was saying that everyone who’d ever held a hammer, and their brother, was trying to build apartments in that market. That really struck a nerve in my market cycle conscious brain and was looking to get some perspective on that when a CBRE piece crossed my desk with this chart on it:

apartment building unit new construction starts 1959 to 2012

So while new unit construction starts are up significantly from the 2009 lows they are still well below the 89-08 average of about 250k. More importantly in relation to demographics we will be seeing increasing demand from growth in two of the prime renter groups, my exec sum from the piece below: Continue reading Are we overbuilding multifamily already? Or just the wrong kind? Research from CBRE Econometrics