Record-low vacancy rates mean a good second half of 2022 for multifamily

Resilient. That’s how a new report from The Laramar Group describes the multifamily market across the nation and the Midwest.

According to the Laramar Group’s Mid-Year Multifamily Review, record-low vacancy rates and double-digit rent growth will continue to fuel the multifamily market across the United States.

This doesn’t mean that this sector won’t face challenges throughout the rest of 2022 and into next year.

Interest rates remain a major concern. Laramar Group says that rising interest rates during the second quarter of this year have already had an effect on capital markets, resulting in lower loan-to-value ratios, increased borrowing costs, and an uneven transaction market.

“We are expecting a continued upward trajectory for rents in the multifamily sector, especially in the Southeast and Mountain states where demand drivers such as job and population growth are strong,” said Bennett Neuman, a chief investment officer with Laramar. “At the same time, the recent dislocation in the capital markets may present interesting acquisition opportunities on a selective basis.”

According to Laramar, investment volume will remain elevated but may decrease from recent record levels. The multifamily market saw $63 billion in sales in the first quarter of 2022, a year-over-year increase of 56%.

This was the strongest first quarter on record for overall multifamily activity, according to CBRE research. But rising interest rates will have an impact on investment activity and pricing through the remainder of 2022.

Laramar predicts that multifamily construction will continue at a steady pace. Given population shifts and housing demand, Gateway and Texas markets are leading the way for new supply.

During the first quarter of 2022, the multifamily market saw the highest absorption in more than 20 years. New York topped the list for absorption in the first quarter, with 105,600 units.

Among the other top 15 markets noted by CBRE are high-population growth markets such as Denver, which ranked ninth, and Orlando, which ranked 12th, as well as mature markets such as Chicago, which ranked fifth, and Washington, D.C. which ranked sixth.

Another study, commissioned by the National Multifamily Housing Council and the National Apartment Association, said that the United States needs 4.3 million new apartments by 2035.

In the Midwest, markets such as Indianapolis and Columbus will each need 3,000 additional units annually by 2035 to meet market demand. Apartment construction represents a notable segment of the economy, generating $984 million for the local economy in Columbus and $779.5 million in Indianapolis, according to the NMHC/NAA study.

CBRE research from the first quarter of this year shows several Midwest markets with 10% or higher yearly rent growth, including Detroit (10.4%), St. Louis (10.4%), Kansas City (10.5%), Cincinnati (10.6%) and Indianapolis (13.0%).

 

Source: Laramar Group: Record-low vacancy rates mean a good second half of 2022 for multifamily

https://www.creconsult.net/market-trends/laramar-group-record-low-vacancy-rates-mean-a-good-second-half-of-2022-for-multifamily/

Apartment rental rates drop for first time in two years

The spike in rental property rates across much of the United States is finally starting to level out, according to a September analysis by data company CoStar Group.

The fall is good news for millions of renters who have seen prices jump 23% to record highs over the past two years. CoStar reported that August month-to-month asking prices fell 0.1% from July — the first decrease in the multifamily market since the pandemic began.

COVID-19 coupled with the boom in home sales boosted the rental market demand, which pushed prices to new highs. However, increases in new apartment construction and shifts in consumer sentiment have prevented renters from signing pricey multiyear leases, contributing to lower rent prices, the Wall Street Journal reported.

“After a 20-month run of positive monthly growth dating back to December 2020, the market finally witnessed negative asking rent growth on a monthly sequential basis from July to August, with rents down 0.1% in July,” said Jay Lybik, the national director of multifamily analytics for CoStar Group. “We’re seeing a complete reversal of market conditions in just 12 months, going from demand significantly outstripping available units to now new deliveries outpacing lackluster demand.”

While the slight decrease has some economists cheering, others warn that apartment rents in most of the country are still much higher than they were a year ago.

August 2022 rents were 7.1% higher than the year before, according to CoStar.

How much relief renters will see depends largely on where they live.

For example, Florida's West Palm Beach has seen rental prices go down 0.5%, but in San Diego, rent has continued to climb.

Still, CoStar analysts seem optimistic that more declines may be on the way.

 

Source: Apartment rental rates drop for first time in two years

https://www.creconsult.net/market-trends/apartment-rental-rates-drop-for-first-time-in-two-years/

eXp Commercial Partner O’Connor Focuses on Property Tax Reduction

When asked about the greatest challenges their clients face, real estate agents often mention cash flow and high commercial and residential real estate costs. To provide solutions to these hurdles, the eXp Partners program has partnered with O’Connor, a property tax consulting firm.

 

Through O’Connor, eXp Realty residential and commercial agents can help their clients reduce high costs through property tax reduction, federal tax reduction through cost segregation, and commercial appraisals. O’Connor only charges clients a fee if they successfully reduce their taxes.

eXp real estate agents and their clients have access to the following through eXp Partner O’Connor:

• Residential Property Tax Reduction: O’Connor’s tax consultants provide valuation intelligence and work with the assessor, appraisal review board, and judicial appeal process.
• Commercial Property Tax Reduction: Licensed tax agents help eXp Commercial clients by filing an appeal, reviewing financials, protesting over-assessed property values, and pursuing every legal avenue to lower taxes.
• Federal Tax Reduction: O’Connor helps eXp Commercial clients increase cash flow by reducing taxable income through cost segregation, a tool that allocates property components for federal income tax depreciation calculations.
• Commercial Appraisal: O’Connor’s appraisers gather and analyze data to make informed decisions about real estate values.

To enroll or learn more about services, contact us.

Interested in jump-starting your real estate career? Join Us

 

Source: eXp Commercial Partner O’Connor Focuses on Property Tax Reduction

https://www.creconsult.net/market-trends/exp-commercial-partner-oconnor-focuses-on-property-tax-reduction/

Multifamily great place to be

Multifamily is a great place to be. One of the reasons for that is due to the Agencies, Fannie and Freddie, that provide liquidity to that market. There isn't that liquidity in the other commercial real estate asset classes. As well, apartment buildings across the country are full and they are able to push rents right now. Until we see more supply come online rents will continue to go up. #multifamily #commercialrealestate https://www.cnbc.com/video/2022/10/12/banks-pull-back-loans-from-the-commercial-real-estate-sector.html?

Legislation Introduced to End Federal CARES Act Notice to Vacate

On September 30, 2022, Rep. Barry Loudermilk (R-GA)introduced the “Respect State Housing Laws Act,” federal legislation that would end the CARES Act notice to vacate requirement. The National Apartment Association (NAA), working alongside the National Association of Residential Property Managers (NARPM), collaborated with Rep. Loudermilk to secure the introduction of this important bill.

In immediate response, NAA and the National Multifamily Housing Council (NMHC) released a statement applauding the introduction of legislation that would help restore normalcy and balance to rental housing operations.

In March 2020, Congress passed the CARES Act, legislation that included a temporary 120-day moratorium on evictions and late fees for federally-backed and federally-assisted housing. The moratorium featured what should have been a temporary notice to vacate requirement. Due to a drafting error in the legislation, however, this provision – which intrudes state and local notice periods – has remained in place long past the moratorium’s expiration, and remains a disputed issue in courts today. Read more on the notice to vacate requirement.

For more than three years, rental housing providers have navigated immense operational hurdles and financial challenges, only exacerbated by federal interference into state and local law. The introduction of this bill is a critical step in the right direction, and NAA will steadfastly advocate to ensure it crosses the finish line.

 

Source: Legislation Introduced to End Federal CARES Act Notice to Vacate | National Apartment Association

https://www.creconsult.net/market-trends/legislation-introduced-to-end-federal-cares-act-notice-to-vacate-national-apartment-association/

Just Sold! Former UAW Local No 145 Office Building Montgomery IL

Montgomery, IL September 29th, 2022 – eXp Commercial (NASDAQ: EXPI), the fastest growing national commercial real estate brokerage firm, announced today the sale of a 6,758 SF Office Building located in Montgomery, IL.

The property is located at 1700 Oakton Rd in West Suburban Chicago Montgomery, IL and consists of a free-standing 6,758 SF Office Building/Meeting Hall on a 4.7 acre lot. This surplus property intended for the expansion of the adjacent 152 Unit Multifamily Property Victorian Apartments also sold by Randolph Taylor, was formerly owned and operated by the United Auto Workers Local No 145 in Montgomery. The Buyers of the property will be operating the property as a Church. 

This was an exclusive listing and the transaction was brokered and both Buyer and Seller were represented by Randolph Taylor a Senior Associate and Multifamily Investment Sales Broker with the Chicago-Naperville eXp Commercial office.

Randolph can be contacted at (630) 474-6441  |  rtaylor@creconsult.net  

https://www.creconsult.net/company-news/just-sold-former-uaw-local-no-145-office-building-montgomery-il/

The most active downtown areas for apartment construction? Chicago is ranked No. 12

Downtown multifamily construction has flourished across the U.S. over the last decade in response to people’s changing preferences. Even with many people’s shift to suburban life caused by COVID-19, the shine of city living has yet to be dimmed.

A majority of the country’s biggest cities have experienced a resurgence of multifamily construction in their central neighborhoods, according to a recent study by StorageCafe. The study looked at the cores of 100 U.S. cities and ranked them based on the number of apartment units delivered since 2013—Downtown Chicago was reported to have had the 12th most impressive transformation.

No less than 9,000 new apartments were added during the decade, increasing the downtown apartment inventory by nearly 50%.

Sure. It’s no secret that office workers aren’t yet returning in droves, but people still seem interested in living there. Downtown has 2,312 new units currently under construction, scheduled to deliver in the next two years, based on the report. Last year was very active in terms of apartment construction, despite pandemic setbacks, as people were eager to return to the hustle and bustle. Over 1,000 new units were delivered in 2021 alone.

But in talking about multifamily construction, one thing must be acknowledged: cost. The cost of renting has risen dramatically, and though that hasn’t at all squashed interest in neighborhoods like Gold Coast, Streeterville or the Loop, it has caused prospective tenants to settle for less when it comes to size. The need for self-storage has skyrocketed because of this, and Downtown Chicago has seen the addition of around 239,000 square feet of self-storage space from 2013 to 2022.

As for the other cities on StorageCafe’s list? Atlanta, Los Angeles and Houston stand in the lead, with the most active markets for new apartment construction. Atlanta alone saw 21,500 new units added to the local inventory during the decade.

Yardi Matrix Business Intelligence Manager Doug Ressler said places like these, which have long attracted workers with in-demand skills, have transformed into hubs where residents can work, live and have easy access to after-work entertainment.

“The massive shifts in housing preferences we’ve witnessed in relation to the health crisis are still bound to have ripple effects for years to come,” Ressler said. “The hybrid or remote working trend, for one, has created a context for a reversed type of migration—it’s not just the employees following available jobs and housing options anymore, but jobs and new construction coming to places where people want to live.”

 

Source: The most active downtown areas for apartment construction? Chicago is ranked No. 12

https://www.creconsult.net/market-trends/the-most-active-downtown-areas-for-apartment-construction-chicago-is-ranked-no-12/