Loading
Apartments, distressed condominiums and senior housing — if it's residential, chances are its selling along the entire Gulf Coast. Multifamily, the drab, dead-end investment of the early 2000s, is now the investment du jour of everyone from institutional to mom-and-pop buyers. Occupancies are growing locally just as they are nationally, and with the shake up in the foreclosure housing crisis and associated residential devaluations, there is a large and growing population of renters.
This rental pool is hard to calculate locally, but David Brickman, Freddie Mac's senior vice president of multifamily, says nationally, in just the 12 months ended in June, 1.4 million households moved into the rental housing market. He says that: “. . . $1 trillion in capital and 10 million additional apartment units are needed in the next 10 years as more individuals turn to apartment living.”
WHAT'S HOT: Class A properties and top-tier locations, although the supply of these is low. Additionally, properties with in-place income and distressed prices are popular.
WHAT'S NOT: Depressed geographic areas are still depressing rent rolls and have hurting occupancies. Over-priced properties and sub B-grade properties are also stagnant.
TRANSACTION TRENDS: The CoStar Group's comparison of quarterly sales shows that transactions of multifamily properties are up greatly starting in the fourth quarter of 2010. Sales peaked in Southwest Florida in the first and second quarters with 15 total sales each, five more than quarter on record through at least the fourth quarter of 2006. In Tampa Bay, transactions hit their most recent peak in the fourth quarter of 2010 at 50 — the highest quarter period since the fourth quarter of 2006 — and sales on a quarterly basis have been steadily growing since their trough in 2009.
“It's a surprisingly a good time to be a seller in multifamily again,” says Darron Kattan, a partner in the Tampa brokerage Franklin Street. “It comes down to alternative investments being higher risk than multifamily.”
PRICING TRENDS: Although well down from the residential peak, pricing has been on the upswing, especially for performing properties. In Southwest Florida, multifamily median prices per square foot have improved from the lowest level during the second quarter of 2009. In Tampa Bay, prices have rebounded from the $30 per square foot range to more than $40. The median price hit more than $50 in the third quarter.
Tampa's median capitalization rates (a ratio of income to purchase price) hit bottom, 6.5%, in the fourth quarter of 2007 and have stayed above 7% ever since.
John Burpee, of NAI Tampa Bay, says that because of multifamily's short lease terms, usually a year or less, it adjusted to the recession much quicker than the rest of the commercial market. In a two-year span, a portfolio of 5,500 rental units the firm manages went from 75% occupied and heavy concessions to 96% occupied and no concessions.
“In the last 18 months, we've seen prices increase 20% to 25%,” he says. “Now that may be from $30,000 a unit to $40,000, but that's for something that sold in 2006 for $60,000 a unit.”
Plus, after months of news reports that foreign investment was waiting on the sidelines, that investment has started to hit the local market with most of it coming from Canadian, European and South American investors.
Kattan, whose firm is active in the Tampa multifamily market, is predicting that after several years of high activity, 2012 may be a pull-back year.
“I hope I'm wrong,” he says “But I think a lot of the deals have worked through their challenges and investors are going to start pulling back feeling that the market is getting a little too frothy.”
Your free article limit has been reached this month.
Subscribe now for unlimited digital access to our award-winning business news.
Join thousands of executives who rely on us for insights spanning Tampa Bay to Naples.
