Drilling Down Into the Hot Apartment Submarkets

Areas near Phoenix and Dallas are poised to perform well in 2022.

There are hot apartment markets such as Phoenix and Dallas projected to do well this year, but understanding the fundamentals in those areas’ key submarkets can prove even more valuable to investors and developers.

Much has been written about the scorching hot Phoenix market, for example. Greg Willett, Vice President of Marcus & Millichap’s Institutional Property Advisors (IPA) multifamily research, points more specifically to its nearby cities such as Tempe, Chandler, and Gilbert on the west side of metro Phoenix.

Development is the heaviest downtown and in West Valley suburbs such as Glendale, Ariz., according to Marcus & Millichap’s report. Net absorption surpasses 19,000 units, the highest annual total since at least 2000. Still, the record-setting wave of supply results in a slight vacancy increase to 2.8 percent.

Rent growth will settle from last year’s 21.9 percent gain but remain strong. The mean will jump to $1,630 per month in 2022, aligning with the 2016-2020 annual average growth rate.

More buyers pursue Class B and C assets Downtown and in North Phoenix. These may better align with the budgets of some renters in the area amid a wave of new modern facilities.

A Closer Look at Dallas

Likewise in the Dallas metro, Willett said nearby locations such as Frisco, Allen, and McKinney on the north side of metro Dallas were ones to watch.

Amid rapid population growth and household formation, assets in Dallas-Fort Worth are attractive to investors throughout the world, according to the report.

“The sizable field of buyers eager to acquire properties in the Metroplex is pushing up sale prices and compressing yields. From 2013 to 2020 the mean sale price increased by an average of more than 10 percent per year, a trajectory sustained in 2021.

“The average cap rate also dipped below 5 percent for the first time on record last year. Many buyers are following household formation trends to North Dallas suburbs, with deal velocity ramping up in locations beyond Interstate 635 like Carrollton, Frisco, and Garland.

“Areas that will receive the most new supply include Frisco, South Arlington-Mansfield, and Intown Dallas. Following a 190-basis-point drop in 2021, downward vacancy movement continues this year as net absorption exceeds new supply. The rate will fall to a two-plus decade low of 3.6 percent. It will be difficult to mirror the 12 percent gain from last year, but rent growth in 2022 will be the second-fastest in the past six years.”

The mean effective rate will reach $1,395 per month, Marcus & Millichap forecasted. Competition for assets in North Dallas suburbs, Downtown, and in the Mid-Cities will lead buyers to search farther out. Denton, McKinney, and Waxahachie may offer compelling prospects.

Willett added that key suburban job centers across the entire state of Florida continue to perform well.

Looking Elsewhere

“Performances lagged to some degree in most urban core settings across the country, but even the worst-performing neighborhoods generally made progress viewed relative to 2020 results,” Willett said. “By the end of 2021, the only places where rents had not fully recovered to pre-pandemic levels were in the San Francisco Bay area and select neighborhoods in metro New York.”

Marcus & Millichap this week released its full 2022 apartment market forecast, citing Orlando and Las Vegas as its best bets overall for 2022.

 

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Source: Drilling Down Into the Hot Apartment Submarkets

https://www.creconsult.net/market-trends/drilling-down-into-the-hot-apartment-submarkets/

Goldman Sachs Says Rent Increases Should Slow Down This Year

 

• The rent-price surge seen through 2021 likely peaked in the fourth quarter, Goldman Sachs said Tuesday.
• Shelter inflation gauges suggest price growth will start to slow faster by mid-2022, the bank added.
• The bank sees rent growth peaking at 5.1% in 2021 and slowing to 4.2% by the end of 2024.

Renters have been on a rollercoaster ride throughout the pandemic. That choppiness is cooling down soon, according to Goldman Sachs.

City rents have been on a tear. Prices were up 11.5% year-over-year in November, according to CoreLogic's Single-Family Rent Index, much higher than the 3.8% annual growth rate in November 2020 and marking the fastest inflation in at least 16 years. Popular pandemic moving destinations like Austin, Las Vegas, and Miami led the charge in 2021, and rents in major metro areas like New York City and San Francisco more recently roared back as people prepared to return to offices.

The surge raised concerns that the affordability crisis in the housing market could bleed into rentals. Yet early signs suggest the US is past peak rent inflation, and apartment prices should start to stabilize this year, Goldman analysts led by Jan Hatzius said in a Tuesday note.

Shelter inflation accelerated to an annualized rate of 5.1% in the fourth quarter, according to the Census Bureau. Trends in other inflation measures, however, show rent growth starting to ease through the end of last year. The Consumer Price Index's rent and owners-equivalent rent measures both decelerated in December. The gauges track prices of new and continuing leases, and it takes longer for the latter to follow price increases in the former. By modeling when the new leases saw the biggest price hikes, the economists estimate that the rent-price surge was the strongest in the fourth quarter and will fade moving forward.

The cooldown won't be quick. Shelter inflation will linger at a year-over-year pace of about 5% through the third quarter before dropping to 4.8% at the end of 2022, Goldman said. Price growth will continue to ease to 4.5% at the end of 2023 and to 4.2% at the end of the following year, the team added. The forecast offers new hope that the country's broader inflation problem will also improve. Rent growth is a "sticky" form of inflation, meaning prices are not likely to decline after soaring higher.

Persistently strong rent inflation is potentially a bigger problem for the economy than more temporary price increases for things like gasoline or food, as it could spark a new inflation crisis and the need for large-scale intervention. Goldman's outlook, then, assuages some concerns that the rent boom of 2021 would keep inflation stuck at its four-decade highs.

Still, risks exist on both sides of the bank's forecast. Rent inflation could accelerate again in 2022 if less of the bump from new-lease rents has made its way to renewals than expected, the team said. That would prolong the cycle and likely drive shelter inflation higher. Conversely, rent growth could drop even faster if most of the new-lease boost has already hit renewal inflation, the team said. Weaker underlying shelter-inflation trends could also drag on rent growth, they added.

For now, rent is still growing at its fastest rate since the financial crisis, according to BLS data. Even the weaker inflation rates forecasted by Goldman sit above the pre-pandemic trend, but after a year of skyrocketing shelter prices, the bank's projected peak offers some respite for those struggling to keep up.

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Source: Goldman Sachs Says Rent Increases Should Slow Down This Year

https://www.creconsult.net/market-trends/goldman-sachs-says-rent-increases-should-slow-down-this-year/

Goldman Sachs Says Rent Increases Should Slow Down This Year

 

• The rent-price surge seen through 2021 likely peaked in the fourth quarter, Goldman Sachs said Tuesday.
• Shelter inflation gauges suggest price growth will start to slow faster by mid-2022, the bank added.
• The bank sees rent growth peaking at 5.1% in 2021 and slowing to 4.2% by the end of 2024.

Renters have been on a rollercoaster ride throughout the pandemic. That choppiness is cooling down soon, according to Goldman Sachs.

City rents have been on a tear. Prices were up 11.5% year-over-year in November, according to CoreLogic's Single-Family Rent Index, much higher than the 3.8% annual growth rate in November 2020 and marking the fastest inflation in at least 16 years. Popular pandemic moving destinations like Austin, Las Vegas, and Miami led the charge in 2021, and rents in major metro areas like New York City and San Francisco more recently roared back as people prepared to return to offices.

The surge raised concerns that the affordability crisis in the housing market could bleed into rentals. Yet early signs suggest the US is past peak rent inflation, and apartment prices should start to stabilize this year, Goldman analysts led by Jan Hatzius said in a Tuesday note.

Shelter inflation accelerated to an annualized rate of 5.1% in the fourth quarter, according to the Census Bureau. Trends in other inflation measures, however, show rent growth starting to ease through the end of last year. The Consumer Price Index's rent and owners-equivalent rent measures both decelerated in December. The gauges track prices of new and continuing leases, and it takes longer for the latter to follow price increases in the former. By modeling when the new leases saw the biggest price hikes, the economists estimate that the rent-price surge was the strongest in the fourth quarter and will fade moving forward.

The cooldown won't be quick. Shelter inflation will linger at a year-over-year pace of about 5% through the third quarter before dropping to 4.8% at the end of 2022, Goldman said. Price growth will continue to ease to 4.5% at the end of 2023 and to 4.2% at the end of the following year, the team added. The forecast offers new hope that the country's broader inflation problem will also improve. Rent growth is a "sticky" form of inflation, meaning prices are not likely to decline after soaring higher.

Persistently strong rent inflation is potentially a bigger problem for the economy than more temporary price increases for things like gasoline or food, as it could spark a new inflation crisis and the need for large-scale intervention. Goldman's outlook, then, assuages some concerns that the rent boom of 2021 would keep inflation stuck at its four-decade highs.

Still, risks exist on both sides of the bank's forecast. Rent inflation could accelerate again in 2022 if less of the bump from new-lease rents has made its way to renewals than expected, the team said. That would prolong the cycle and likely drive shelter inflation higher. Conversely, rent growth could drop even faster if most of the new-lease boost has already hit renewal inflation, the team said. Weaker underlying shelter-inflation trends could also drag on rent growth, they added.

For now, rent is still growing at its fastest rate since the financial crisis, according to BLS data. Even the weaker inflation rates forecasted by Goldman sit above the pre-pandemic trend, but after a year of skyrocketing shelter prices, the bank's projected peak offers some respite for those struggling to keep up.

---

Source: Goldman Sachs Says Rent Increases Should Slow Down This Year

https://www.creconsult.net/market-trends/goldman-sachs-says-rent-increases-should-slow-down-this-year/

State of Commercial Real Estate 2022

 

On Tuesday, Feb. 15, eXp Commercial hosted a free virtual seminar in the eXp Commercial Campus metaverse featuring founder and president of Red Shoe Economics, KC Conway as the keynote speaker. The 60-minute "State of the Commercial Real Estate Industry" seminar is open to all eXp Commercial agents and other interested parties. 

With more than three decades of experience as an economist, Conway will provide industry research, data, analytics, and economic insight on the complex and changing commercial real estate market.

 

 

 

About KC Conway:

Economist and Futurist Kiernan “KC” Conway, CCIM, CRE, MAI is the mind trust behind Red Shoe Economics, LLC, an independent economic forecasting and consulting firm furthering KC’s mission as The Red Shoe Economist by providing organic research initiatives, reporting, and insights on the impact of Economics within the commercial real estate industry.  A proud graduate of Emory University with more than 30 years experience as a lender, credit officer, appraiser, instructor, and economist; KC is recognized for accurately forecasting real estate trends and ever-changing influences on markets all across the United States. With credentials from the CCIM Institute, Counselors of Real Estate, and the Appraisal Institute, KC currently serves as Chief Economist of the CCIM Institute and as an Independent Director for Monmouth REIT MNR. A gifted and prolific speaker KC has made more than 850 presentations to industry, regulatory and academic organizations in the last decade, and has been published in many national and regional newspapers and journals with frequent contributions to radio and television programming.

 

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https://www.creconsult.net/market-trends/state-of-commercial-real-estate-2022/

Illinois RE Journal Forecast Chicago 20th Anniversary Conference

 

Marcus & Millichap is proud to be a Gold Sponsor of the Forecast Chicago 20th Anniversary Conference presented by Illinois Real Estate Journal in Rosemont, IL on January 6, 2022. Steven D. Weinstock, FVP/National Director, Self-Storage Division and Regional Manager of the Chicago Oak Brook office, is a panelist on the Investment Breakout Session at 11:00 a.m. CT. Joe Powers, Regional Manager of the Chicago Downtown office, is a panelist on the concurrent Multifamily Breakout Session, also at 11:00 a.m. CT. Join the Marcus & Millichap team at this event and learn how our 50 years of experience can help you reach your investment goals.

 

REGISTER

 

https://www.creconsult.net/market-trends/illinois-re-journal-forecast-chicago-20th-anniversary-conference/

Multifamily Forum Southeast

 

The Marcus & Millichap / IPA Multifamily Forum Southeast brings together the most active multifamily developers, investors, owners, and operators in the region to create a marketplace for learning, discovery, networking, and deal-making. The event will be held on Thursday, March 31, 2022, at the Loudermilk Convention Center in Atlanta, GA. Meet with our multifamily and financial advisors and discover how our unique combination of expertise and experience can help you achieve your investment goals.

 

REGISTER

 

https://www.creconsult.net/market-trends/multifamily-forum-southeast/

State of Commercial Real Estate 2022

 

On Tuesday, Feb. 15, eXp Commercial hosted a free virtual seminar in the eXp Commercial Campus metaverse featuring founder and president of Red Shoe Economics, KC Conway as the keynote speaker. The 60-minute "State of the Commercial Real Estate Industry" seminar is open to all eXp Commercial agents and other interested parties. 

With more than three decades of experience as an economist, Conway will provide industry research, data, analytics, and economic insight on the complex and changing commercial real estate market.

 

 

About KC Conway:

Economist and Futurist Kiernan “KC” Conway, CCIM, CRE, MAI is the mind trust behind Red Shoe Economics, LLC, an independent economic forecasting and consulting firm furthering KC’s mission as The Red Shoe Economist by providing organic research initiatives, reporting, and insights on the impact of Economics within the commercial real estate industry.  A proud graduate of Emory University with more than 30 years experience as a lender, credit officer, appraiser, instructor, and economist; KC is recognized for accurately forecasting real estate trends and ever-changing influences on markets all across the United States. With credentials from the CCIM Institute, Counselors of Real Estate, and the Appraisal Institute, KC currently serves as Chief Economist of the CCIM Institute and as an Independent Director for Monmouth REIT MNR. A gifted and prolific speaker KC has made more than 850 presentations to industry, regulatory and academic organizations in the last decade, and has been published in many national and regional newspapers and journals with frequent contributions to radio and television programming.

 

how Can We Help You?

Are you looking to Buy, Sell or Finance Multifamily Property?

contact us

https://www.creconsult.net/market-trends/state-of-commercial-real-estate-2022/