How does transaction velocity in 2021 compare to past years?
What's driving such aggressive investment activity?
How does sales volume vary by property type?
Friday, December 17, 2021
How Was Commercial Real Estate Sales Activity in 2021?
Thursday, December 16, 2021
CRE Is Outperforming Amid Rising Inflation
CRE prices have increased considerably this year, up 12.7% in Q3 compared to 2019.
Commercial real estate prices have increased measurably this year delivering positive results for investors, John Chang, Senior Vice President and National Director Research Services at Marcus & Millichap said in a recent video.
In the third quarter CRE sales are up 12.7% over 2019 and the preliminary data for the fourth quarter look promising, he pointed out.
While pundits and consumers are worried headline inflation has risen to 6.2% compared to 1.3% a year ago this month, Chang said in times like this when inflation pressure is elevated, CRE can outperform.
“Commercial real estate is a long investment,” he stressed.
Speaking to the strength of CRE currently, the Marcus & Millichap research leader said self-storage property transactions have surged by 56% in the third quarter of this year compared to the third quarter in 2019 with hospitality deals up 46% and industrial property transactions up 17.4% while apartment sales are up 15.4%.and retail up 7.9%
The only property transaction lagging is office, down 4.6% from 2019.
Industrial has been an investor darling throughout the pandemic, with prices increasing steadily among booming demand for space. More than $100 billion has been spent on industrial properties this year, according to Real Capital Analytics, and the asset class saw the fastest annual and monthly price upticks of all sectors at 18.9% in October from a year ago and 1.9% from September.
“Investors are purchasing these properties based on rising demand driven by e-commerce and supply chain disruptions,” said Chang. “But even though industrial absorption is at a record level, so is construction, and new development could ultimately bypass demand.”
Wednesday, December 15, 2021
Just Closed Victorian Apartments 152 Unit Multifamily Property Montgomery IL
Just Closed!
Montgomery, IL, December 15th, 2021 – Marcus & Millichap (NYSE: MMI), a leading commercial real estate brokerage firm specializing in investment sales, financing, research and advisory services, announced today the sale of Victorian Apartments, a 152-unit multifamily property located in Montgomery, IL, according to Steven D. Weinstock, regional manager and first vice president of the firm’s Chicago Oak Brook office. The asset sold for $13,500,000.
The offering was an exclusive listing of Marcus & Millichap and both Buyer and Seller were represented by Randolph Taylor, Senior Associate, and an investment specialist in the National Multi Housing Division in Marcus & Millichap’s Chicago Oak Brook office.
The property is located at 834 Victoria Drive in Montgomery, Illinois approximately 40 miles southwest of downtown Chicago. Victorian Apartments consists of 32 large studios, 72 one-bedrooms, and 48 two-bedroom apartment homes.
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About Marcus & Millichap (NYSE: MMI)
With over 2,000 investment sales and financing professionals located throughout the United States and Canada, Marcus & Millichap is a leading specialist in commercial real estate investment sales, financing, research and advisory services. Founded in 1971, the firm closed 8.954 transactions in 2021 with a value of approximately $43.4 billion. Marcus & Millichap has perfected a powerful system for marketing properties that combines investment specialization, local market expertise, the industry’s most comprehensive research, state-of-the-art technology, and relationships with the largest pool of qualified investors.
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The U.S. Apartment Market Continues to Tighten
Florida Rents Are Soaring
Across the nation’s 150 largest metros, 104 of them managed to eke out at least a little monthly rent growth during November. The nation’s four strongest monthly rent increases registered in Naples, Cape Coral, North Port/Sarasota and West Palm Beach. Monthly price bumps also proved substantial in Gainesville, Lakeland and Miami. Turning to annual price shifts in the 50 largest metros, West Palm Beach, Tampa and Phoenix were on top, posting growth of 26% to 28%.
The slowest growth rates as of November were increases of about 2% in small Youngstown, OH and Champaign/Urbana, IL. The top 50 metro with the slowest growth was Minneapolis/St. Paul, where pricing climbed 4.1% during the year-ending in November.
Tuesday, December 14, 2021
December Rent Payments at 77%
In its most recent survey, the National Multifamily Housing Council (NMHC)’s Rent Payment Tracker found significantly more than three in four apartment households paid rent in full or part by early this month. The survey of 11.8 million units of professionally managed apartment properties across the country revealed 77.1 percent made a full or partial payment by December 6. The figure represents a 1.7 percentage point increase from the share who paid rent through December 6 of last year, and compares with the 83.2 percent that paid rent through December 6 as of two years ago.
“This concluding release for the NMHC Rent Payment Tracker continues a relatively stable pattern that we’ve observed since early in the pandemic, namely, apartment residents in professionally managed communities have continued to meet their housing obligations,” Caitlin Walter, NMHC vice president for research, told Multi-Housing News.
“Because of the swift efforts by property owners to support their residents early in the pandemic, significant government funds and, more recently, federal rental assistance, apartment residents continue to pay their rent,” she added.
Payment behavior
The data in studies in the Rent Payment Tracker encompasses a broad array of market-rate rental properties across the U.S., which can vary by size, type and average rental price. The metric furnishes insight into the changes in resident rent payment behavior over the course of each month, and, as the dataset ages, between months. Intended to serve as an indicator of resident financial challenges, the tracker also is intended to monitor recovery, including government stimulus and subsidies’ effectiveness.
The December 2021 Rent Payment Tracker data is the last to be released under the NMHC Rent Payment Tracker. Full-month December rent payment numbers will be posted on the NMHC Rent Payment webpage in January 2022.Monday, December 13, 2021
Rising Lumber Prices Are Back With a Vengeance
An expected détente of predictable pricing for planning purposes went elsewhere.
As recently as October, lumber prices seemed to be moving to a new sustainable norm. It seemed as though prices in the $500 to $600 range per thousand board feet might become the new normal for the next year or so.
Or so it seemed … until the middle of November, when prices again began to rise. Yesterday closed at $979.30.
“The factors that caused the rise in lumber prices earlier in the year are still at play today,” Chip Setzer, director of trading and growth at commodities platform Mickey, tells GlobeSt.com. “Weather continues to be a driving factor for both supply and demand. We’ve seen unseasonably warmer temperatures across the US which has allowed construction to continue well into the start of winter. This has allowed the demand for building materials to remain strong. Also worth noting is that interest rates remain low, which is continuing to fuel housing demands.” Canada has also seen ongoing bad weather conditions, including major flooding affecting highway systems, that delayed and even stopped many lumber shipments into the U.S.
Prices “may continue to rise to above $1,000, which was last seen in Spring 2021,” Ross Price, director of finance at Mickey, tells GlobeSt.com. “This has been driven by a combination of strong construction activity, limited supply due to labor shortages, flooding in Canada, and an announcement by the US government that it would double tariffs on Canada’s lumber.”
The tariffs had been about 9%, but just before Thanksgiving, the U.S. decided to double duties to 17.9% on Canadian softwood lumber. Softwood is the material used in such applications as framing and concrete forms.
“As a result, the cost of home prices is expected to increase, which will continue to cause issues to homebuilders,” Price continues. “At some point, demand for new housing should subside which will lower the demand for lumber and prices could potentially fall.”
The housing market’s growth has shown recent signs of slowing, although the S&P CoreLogic Case-Shiller Index has still been above the 2006 through 2019 average.
“Traditionally in Q4 we see a large push for orders to be filled prior to the holidays,” Alex Meyers, Mickey’s director of operations, says. “In export markets to Asia for example, manufacturers and distributors will take larger than normal inventory positions to ensure sufficient levels of stock are arriving prior to and after lunar new year, which typically grinds the market to a halt for 3-4 weeks.” Given existing low availability of materials and ongoing supply chain problems, “demand far outweighs available supply and prices trend up as a result.”
Call it a lump of coal in the stocking of development and construction.
Sunday, December 12, 2021
A Huge Demand for Housing Leads to a Spike in Multifamily Conversions
Apartment developers will create more new apartments in 2021 in old office, retail, and hotel buildings than at any time in the last decade.
The pandemic didn’t slow down apartment developers who adaptively reuse old buildings. Rising apartment rents allow investors to spend more to buy and redevelopment old buildings—income from the finished apartments should eventually pay for the high cost of development.
“We will likely see a fair amount of this—redevelopment and converting properties to apartments—over the next few years,” says John Sebree, senior vice president and national director of multifamily for Marcus & Millichap, working in the firm’s Chicago offices. “That is the result of being in a housing crisis, and without new product being built at the same pace as demand.” Developers are likely to finish a record 20,100 new apartments in 2021 in buildings converted from other uses, according to Yardi Matrix. That will make 2021 the busiest year for conversions in the last 10 years. It’s also up sharply from an average of about 12,000 a year over the last five years. “The pandemic has accelerated the need for a rapid supply of housing stock,” says Doug Ressler, manager of business intelligence for Yardi Matrix, working in the firm’s Scottsdale, Ariz., offices. The number of new apartments created in converted buildings grew steadily from about 5,000 in 2010 to 15,000 in 2017. It dipped to less than 9,000 in 2018… but quickly recovered to close to 12,000 a year in both 2019 and the pandemic year of 2020. The cost of redevelopment varies a lot depending on the building being repurposed—but it is generally significantly cheaper than building similar new apartments from the ground up.“One estimate could be that renovations could cost about 30 to 40 percent less than new construction for the same number of units,” says Emil E. Malizia, a research professor in the Department of City and Regional Planning at the University of North Carolina at Chapel Hill. “Total development cost per unit should be less as long as the cost of the site and building is not significantly more expensive than the cost of site acquisition for new construction.”
The pandemic has hurt demand for hotels, offices, and retail space—but the occupancy rate for apartments is still well above 90 percent and rents continue to grow on average, even in the once-bustling downtown areas hurt the most by the pandemic. The relatively strong demand for apartments compared to the demand for office space and hotels is helping to make more deals work to adaptively reuse these buildings.Nearly half (41 percent) of the conversions being completed in 2020 and 2021 are in former office buildings.
“The trend toward office conversions is a significant departure from the last decade when hotel conversions were popular,” says Ressler. Old hotels were relatively easy to turn into apartment buildings because the existing floorplans and utilities were already a good fit with residential use. “However, consistent urban demand and increased preference for open-plan layouts and out-of-the-box designs revealed the housing potential in non-residential buildings.” In cities like Philadelphia and Washington, D.C., the return of capital and demand in submarkets in and around the central business district has made it possible for developers to create thousands of new apartments in converted buildings. The top cities where developers created the most new apartments in converted office building in 2020 and 2021 include Washington D.C. (1,091 apartments) and Chicago (1,020 apartments).
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