Multifamily Investors Venturing Beyond Core Assets, Primary Markets
Bloomberg reports: A recent article by Bloomberg columnist Oshrat Carmiel detailed the current state of the booming multifamily sector. Citing data aggregated by Real Capital Analytics (RCA), apartment sales spiked in 2010 by 96 percent, to $33.7 billion, as competition among investors has grown very heated. And as confidence in the apartment sector's fundamentals and future grows, investors are seeking yields and branching out from the nation’s leading markets, where most of the activity remained in 2010.
As last year unfolded, smaller investors and those looking for riskier but higher-yielding opportunities began to seek lower-quality properties outside of primary markets. Stated RCA’s Global Chief Economist Dr Sam Chandan, “Value-add” apartments -- class B properties, distressed acquisitions, real estate that requires renovation and buildings where cash flow can be increased -- accounted for 33 percent of sales in the fourth quarter, compared with 25 percent a year earlier. Those improving fundamentals are driving the willingness of investors to explore value-add opportunities as opposed to paying premium prices for core properties…That is a feature of the multifamily market that we do not see to the same degree in other sectors.”
Still, investors have by no means abandoned core properties and quality, visible markets. Well-leased properties and trophy assets have been a huge draw for investors over the past year to markets such as New York, where cap rates have fallen as low as 5.1 percent in the fourth quarter, and Washington, DC, where cap rates averaged 4.8 percent during the same period. This compared with a 6.6 percent national cap rate average and 7.7 percent in the secondary market of Atlanta.
View the full article on Bloomberg: Multifamily Investors Venturing Beyond Core Assets, Primary Markets
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Posted by: Nina Turner