Multifamily Proposal Activity Stays Hot Single-Family Flattens

Multifamily Proposal Activity Stays Hot, Single-Family Flattens

Architecture, engineering, and construction firms express a telling forecast, according to PSM

Proposal activity for single-family homes and residential developments plummeted in the third quarter but remained solid for multifamily-for-rent and senior/assisted living properties, according to PSMJ Resources’ Quarterly Market Forecast (QMF) survey of architecture, engineering, and construction (A/E/C) firm leaders.

David Burstein, PE, director and senior consultant at PSMJ, an A/E/C industry consulting and publishing firm said he’s seeing a divergence in the A/E housing markets.

“The homeownership markets – new single-family homes, condos, and subdivisions – are feeling the effects of higher interest rates and tighter lending policies,” Burstein said. “The rental markets aren’t feeling the same pinch, at least not yet.”

Even Multifamily Index Cooling Some

Burstein often highlights the influence that the housing sector has on all markets served by A/E/C firms, estimating that it directly or indirectly impacts approximately 80 percent of the industry’s total revenue.

Even though multifamily proposal activity continues to be relatively strong, the index has cooled somewhat, likely due to the rising cost of borrowing money to finance new projects, says Burstein.

PSMJ created the net plus/minus index (NPMI) to measure proposal activity and assess the A/E/C market outlook when it began its QMF survey in 2003. The NPMI is the delta between the percentage of respondents in a given category seeing an increase in proposal activity for the quarter, and those experiencing a decrease.

For several quarters after the initial rebound from the COVID-19-related downturn in late 2020, all segments of the housing market reported proposal activity at elevated levels rarely seen in the history of the QMF.

In Q1 2020, the overall housing market’s NPMI fell well into the negative (minus 19.3), but rebounded to set its record-high index score of 77.4 one year later.

Single-Family and Condo Proposal Activity Sinking

Activity remained robust across the board in the first half of 2022, but the Q3 report saw housing’s NPMI fall 33.6 index points (from 55.0 to 21.4), quarter over quarter, and 49.1 points, year over year.

More telling are the results from the five submarkets measured in the survey. While multifamily (NPMI of 44.8) and senior/assisted living (17.0) remained positive in Q3, proposal activity for single-family individual homes (-2.4), single-family developments (-3.9), and condominiums (-6.8) all sank into negative territory.

PSMJ chose proposal activity because it is among the earliest stages of the design and construction project lifecycle, thereby offering a look at the longer-term outlook for markets, submarkets, and the overall industry.

 

Source: Multifamily Proposal Activity Stays Hot Single-Family Flattens

https://www.creconsult.net/market-trends/multifamily-proposal-activity-stays-hot-single-family-flattens/

Why Sell

Why Should I Sell My Multifamily Property? There are a number of reasons why people decide to sell their multifamily property, but most can be categorized into three groups: Problems, Opportunities, and Changes. With this decision though comes the consideration of capital gains tax and how to ensure you are getting the most for the sale of your property. https://www.creconsult.net/market-trends/why-should-i-sell-my-multifamily-property/ Randolph Taylor MBA, CCIM Multifamily Investment Sales Broker (630) 474-6441 | rtaylor@creconsult.net https://www.creconsult.net/market-trends/why-should-i-sell-my-multifamily-property/

Why Should I Sell My Multifamily Property?

Why should I Sell My Multifamily Property?

There are several reasons why people do sell:

Problems:              Management, Vacancy, Maintenance, Stress, Health, Debt, Neighborhood, Interest Rates
Opportunities:   Strong Market Values, Alternate Investment, End of the Hold Period, Tax Savings
Changes:                Divorce, Death, Retirement, Partnership Split, Relocation, Consolidation, Diversification

What do I do with the sales proceeds? I don't want to pay Capital Gains Tax!

There are several options for sellers to defer or minimize capital gains taxes:

• 1031 Exchange
• Delaware Statutory Trust/Deferred Sales Trust  (DST)
• Tenancy in Common Investment (TIC)
• Installment Sale

How do I know I am getting the most money for my property?

We not only market properties for sale. We make a market for properties we represent. Each offering is thoroughly underwritten, aggressively priced, and accompanied by loan quotes to expedite the sales process. We leverage our broad national marketing platform syndicating to the top CRE Listing Sites with direct outreach to our investor database and an orchestrated competitive bidding process that yields higher sales prices. 

What is my property worth?

Contact Us to discuss what information is needed to complete a Complimentary Commercial Broker Opinion of Value (BOV). 

I’m not interested in selling at this time.

This is understandable as only about 5% of the market trades in any given year. We are also happy discuss any purchase or refinance interests and recommend some physical and operational changes you can make to add value to your property you will appreciate when you eventually sell.  

 

Author:
Randolph Taylor MBA, CCIM
(630) 474-6441
rtaylor@creconsult.net

Randolph Taylor MBA, CCIM is a Multifamily Investment Sales Broker in the National Multifamily Division with eXp Commercial. Randolph focuses on the Listing and Sale of Multifamily Properties in the Greater Chicago area and Suburbs. Randolph has over 24 years of Commercial Real Estate experience including Corporate Real Estate, Asset Management, and Commercial Real Estate Brokerage. Randolph’s broad knowledge of the Commercial Real Estate Industry, financial analysis, marketing, and negotiating skills uniquely position him to provide a superior level of service to his clients.

https://www.creconsult.net/market-trends/why-should-i-sell-my-multifamily-property/

The Keys to Multifamily Transactional Success This Year

During a quick-fire session geared towards the experienced transactional investor at the GlobeSt. Multifamily national conference Monday morning, a panel of experts examined current multifamily transactions and deconstructed various challenges and opportunities given the current state of the market. 

LOS ANGELES—“We are going through a tricky time. It has never been more important to focus on the basis when looking at a transaction.” Those thoughts are according to panelist Bobby Khorshidi, president and chief credit officer at Archway Capital.

Khorshidi joined other multifamily experts during a transactions panel Monday morning at the GlobeSt. Multifamily national conference event here at the JW Marriott LA LIVE. Moderator Laurie Lustig-Bower, an EVP at CBRE, began with asking panelists what is happening with bridge debt.

Interest rates have gone up and there will be some uncomfortable conversations between lenders and their borrowers and between investment sales and their clients, explained Khorshidi. “In underwriting, we have to apply a stress test because we don’t know where things are going to go. It is hard to find deals that will pencil.”

UNDEWRITING, WHAT ARE THE METRICS?

His company is using 7% as the exit on transactions. “We are looking at construction loans that are coming due or over budget and they are looking difficult to find exit financing,” he explained. “This is a transitional period where we are going to find new footing… It will just take time to figure out the new normal.”

When underwriting deals today, James D’Argenio, senior principal of acquisitions at The Bascom Group, said that what hasn’t changed is understanding a property’s characteristics, strengths, and weaknesses. “Something that has changed is maybe the metrics, but we are really trying to stick to the basics and the stuff that we can control.”

When asked at a class A building versus a B-minus fixer-upper, and what cap rates would be looked at for each, D’Argenio said that they don’t make any money off the cap rate and are return focused. “We are trying to focus on levered versus unlevered returns…not just what is our cap rate to our coupon is because then you will be waiting a long time to transact… I don’t think that is an important metric when you are looking at the total success a project can have.”

BUYERS AND SELLERS ADJUST

Buyers and sellers have to adjust to the new normal, say panelists. Panelist Otto Ozen, executive vice president at The Mogharebi Group, said that the rapid interest rate increase created a bit of dysfunction. “Sellers historically have been relatively slow to respond to these kinds of shifts,” he said. “That is where you have the gap between buyers and sellers.”

He continued that buyers are quick to adapt their response and continue to adjust. “What is happening though is that a year ago, assumption of debt was really not an attractive option,” Ozen said. ‘What looked unattractive a year ago is being revisited.”

David Harrington, EVP and managing director of Matthews Real Estate Investment Services added that the profile of buyers right now are the ones who are able to stomach the long-term horizon.

LENDING OPTIONS

Switching gears, Lustig–Bower asked panelists about lending and what options look like for the buyer on bridge debt. Khorshidi explained that the goalpost is shifting. “We are in the business of lending and are going to lend.”

Having said that, he explained that his company needs to anticipate where the market is going. “Fundamentals and the economy feel like business as usual other than the fact that rates have moved,” he said. “Everyone will use the same criteria and the same underwriting.”

This is eerily familiar to the beginning of Covid, he continued, but then, the issue was valuation.” It is similar now. We just need to figure out the bid/ask. That is the way that we are underwriting things. The challenge is to figure out how someone is going to refinance.”

Khorshidi noted that it is a weird transitory time and it will take some time for these conversations to flush out. The pace that rates have been going up have been really extreme and has put some uncertainty in the markets and without trust in the Fed, it is hard to know where things are going. “We were told that all of this was transitory. That is not how it has played out. As lenders, and you all out there as investors, you have to guess, and whoever guesses right wins.”

 

Source: The Keys to Multifamily Transactional Success This Year

https://www.creconsult.net/market-trends/the-keys-to-multifamily-transactional-success-this-year/

2023 State of The Commercial Real Estate Industry

2023 State of The Commercial Real Estate Industry

Join eXp Commercial President James Huang and Economist KC Conway on January 17 for a fireside chat as they discuss the state of the 2023 economy and how you can prepare your business for success in the changing market.

Date: January 17, 2023
Time: 9 a.m. PT / Noon ET
Location: eXp World > eXp Commercial Auditorium

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September Marked Turning Point for Multifamily Rents

September Marked Turning Point for Multifamily Rents

Year-over-year rent increases slowed but are still up 8.8 percent last month.

September apartment rents are down month-over-month, in what experts from Rent.com call “a hopeful sign” the market is stabilizing.

Year-over-year rent increases slowed but are still up 8.8 percent last month; in August, rent prices increased by 12.3 percent. September also marks the first time year-over-year changes dipped into the single digits since September 2021 and the lowest year-over-year increase since October 2021.

In addition, 61 percent of state-level markets saw decreased rents in September compared to the prior month, with New York posting the largest decrease at just over 17 percent month-over-month followed by Illinois and Massachusetts at 4.6 percent and 4.0 percent, respectively. In addition, 31 of the 50 metros analyzed by Rent.com were down month-over-month, led by Cincinnati and Columbus with increases of nearly 7 and 6 percent. Median rent is also down month over month in 60 percent of markets surveyed, in what analysts call a “promising sign of a market beginning to cool.”

New York, Wisconsin, Minnesota, Massachusetts, and Oregon showed year-over-year declines, with just New York and Wisconsin down by more than a full percentage point at -10.01 percent and -7.39 percent respectively.

Jeff Adler, VP of Yardi Matrix and industry principal of self-storage at Yardi, recently told GlobeSt.com that “suburbs in major gateway metros and migration market favorites have seen greater rent growth since the start of the pandemic, but that the direction going forward is more balanced.”

 

Source: September Marked Turning Point for Multifamily Rents

https://www.creconsult.net/market-trends/september-marked-turning-point-for-multifamily-rents/

Multifamily Fundamentals Are Still Fairly Strong Say Panelists

The GlobeSt. Multifamily national conference kicked off with standing room only, complete with a new agenda at a new venue as some of the most influential dealmakers in multifamily came together to discuss the state of the industry.

LOS ANGELES—The GlobeSt. Multifamily national conference kicked off this morning with a state of the industry panel that brought together the most influential dealmakers in the U.S. multifamily real estate market. The panelists discussed key trends, major market shifts, the impacts of inflation on the multifamily sector, the road to economic recovery, and their expectations for another record year in multifamily.

Moderated by John Sebree, SVP and national director of multifamily at Marcus & Millichap, the panel kicked things off by making one thing clear: while many are trying to figure out if we are in a recession yet or not, fundamentals in multifamily are “still fairly strong.”

Still, it is undeniable that the sector is facing some headwinds.

According to panelist Robert LaFever, managing director of development at Greystar, the company is still actively pursuing deals and are studying macro locations, he said, but is being “much more selective.”

Chad Sanderson, senior principal of business development and acquisitions at the Bascom Group, advised that the industry needs to “buckle up, because there will be pain, but you have to do what you have to do.” He also said it has never been more important than ever to study the characteristics of a particular deal because there are so many moving pieces. “A lot of things coming out on the market right now are just not trading. There are times when you can have a macro approach to markets…you have to be mindful of supply, are there specific sectors that have higher unemployment. If those things are in check, then you are looking at the specific deal… Just getting a loan right now has changed so dramatically and that is driving your underwriting.”

Sanderson added that you have to think about your strategy, think about how to mitigate risk with uncertainty and figure out how to manage your investment portfolio. “Everyone had their thoughts of how things were going to unfold. One camp said that inflation and rates will come back down but then inflation took off even further.”

Next year, the environment should stabilize, especially as interest rates are expected to level off, said panelist Jeff Adler, VP of Yardi Matrix and industry principal of self-storage at Yardi. On the rental front, panelist Adler also recently told GlobeSt.com that “Suburbs in major gateway metros and migration market favorites have seen greater rent growth since the start of the pandemic, but that the direction going forward is more balanced.”

He says that there has been a recovery in the downtown areas back to pre-pandemic levels (except for San Francisco, although rents have rebounded from their previous lows). The spread between urban and suburban living (monthly rental rates) has narrowed, as well as the spread Between Gateway and Sunbelt cities, “although it still exists,” Adler says.

We have seen an incredible shift of people to these tertiary markets, added Sanderson. “I think inflation really caught a lot of people by surprise,” added Sanderson. “We are in this new paradigm where everyone’s mood has really changed.”

We are not going back to the way things were in terms of return to office and renter profile, explained Adler. In terms of demand, it has started to tail down, as the absorption-to-completion ratio in 2022 is a sharp reversal from the strong levels of household formation a year ago. “Many of these renter suburbs belong to the Miami, Washington, D.C., and Los Angeles metros… Suburban living has been rewritten throughout the past decade.”

Kitty Wallace senior executive VP at Collier's, says that while there have been many people leaving the state of California, they are now coming back. “Los Angeles, New York, and San Francisco, have always been top markets but during Covid, they went to bottom markets,” she said. “I look at my international investors, and they might take a lower market return with less risk to be where they want to be…while we have seen movement out of state, many have come back.” She added that “We had unfortunate legislation here in California that impeded our growth during the beginning of Covid, but some of that is coming back because it is where people want to be. We are working with about 15%-20% of buyers now as compared to before.”

 

Source: Multifamily Fundamentals Are Still Fairly Strong Say Panelists

https://www.creconsult.net/market-trends/multifamily-fundamentals-are-still-fairly-strong-say-panelists/