Investors bet big time on demand for rental properties over homeownership in 2014, when sales of apartment buildings hit a record $110.1 billion, or nearly 15% higher than the previous year, according to Jones Lang LaSalle (JLL), a professional services and investment management firm.
Nearly half of those transactions were for buildings in six metros: New York, Los Angeles, Atlanta, Houston, Dallas, and Washington D.C. And the allure of owning rental properties in America’s largest cities continues into 2015, the Wall Street Journal reported.
Blackstone Group, the world’s largest private equity holder of real estate, in late January agreed to pay $1.7 billion for 36 properties with an estimated 11,000 apartment units, half of which are in Washington D.C. and Boston. The seller was Praedium Group, which JLL and Evercore Partners advised. The deal increases to 43,000 the number of apartment units managed by LivCor, Blackstone’s multifamily real estate unit, according to Crain’s Chicago Business.
The multifamily sector “has become the preferred asset class of institutional investors” since the last economic downturn, says Jubeen Vaghefi, managing director of JLL’s capital markets division. That opinion is consistent with what Vaghefi wrote in JLL’s Fall 2014 Multifamily Outlook: “The ability for multifamily starts to occur 3.5 times faster than the overall market is due to the combination of higher oversupply of single-family homes throughout the United States, a marked preference for multi-unit buildings, and residential development in core submarkets, which continue to post high occupancy rates.”
The question now is how long investors will ride this gravy train, especially if increasing supply adversely impacts rent appreciation.
The Census Bureau’s latest data for housing starts, which it released on January 21, 2015, estimates that 456,000 units were under construction in buildings with five or more units at the end of December 2014, or 26% more than in December 2013. The possibility that this market may be overheating, though, is reflected in annualized multifamily starts, which inched up by only 0.3% in December to 339,000 units. Annualized multifamily permits issued stood at 338,000 units in December, down 12.4% from December 2013
On a less ambiguous note, rents increased by 3.6% nationwide in 2014, according to Reis, the real-estate research firm. Apartment vacancy rates, at 4.2%, were near their lowest levels in 2001. And the days of excess demand that has kept rents under control “are likely over,” Ryan Severino, Reis’ senior economist, stated.
JLL contends that with vacancies stabilizing and with the market average of inventory under construction at 4.4% and growing, “the pace of multifamily tightening is softening, with projected rent growth between 2% and 3% over the next 18 months.”
Related Stories
Mixed-Use | Oct 18, 2022
Mixed-use San Diego tower inspired by coastal experience and luxury travel
The new 525 Olive mixed use San Diego tower was inspired by the coastal experience and luxury travel.
University Buildings | Oct 18, 2022
A carbon-neutral-ready university campus opens in Hong Kong
In early September, the Hong Kong University of Science and Technology (HKUST) officially opened its new, KPF-designed campus in Nansha, Guangzhou (GZ).
Market Data | Oct 17, 2022
Calling all AEC professionals! BD+C editors need your expertise for our 2023 market forecast survey
The BD+C editorial team needs your help with an important research project. We are conducting research to understand the current state of the U.S. design and construction industry.
Codes and Standards | Oct 17, 2022
Ambitious state EV adoption goals put pressure on multifamily owners to provide chargers
California’s recently announced ban on the sale of new gas-powered vehicles starting in 2035—and New York’s recent decision to follow suit—are putting pressure on multifamily property owners to install charging stations for tenants.
Justice Facilities | Oct 17, 2022
San Antonio’s new courthouse aims to provide safety and security while also welcoming the public
The San Antonio Federal Courthouse, which opened earlier this year, replaces a courthouse that had been constructed as a pavilion for the 1968 World’s Fair.
Market Data | Oct 14, 2022
ABC’s Construction Backlog Indicator Jumps in September; Contractor Confidence Remains Steady
Associated Builders and Contractors reports today that its Construction Backlog Indicator increased to 9.0 months in September, according to an ABC member survey conducted Sept. 20 to Oct. 5.
| Oct 13, 2022
Boston’s proposed net-zero emissions code has developers concerned
Developers have raised serious concerns over a proposed new energy code by the City of Boston that would require newly constructed buildings over 20,000 sf to immediately hit net-zero emissions goals.
Education Facilities | Oct 13, 2022
A 44-acre campus serves as a professional retreat for public-school educators in Texas
A first-of-its-kind facility for public schools in Texas, the Holdsworth Center serves as a retreat for public educators, supporting reflection and dialogue.
Building Team | Oct 12, 2022
Real estate development practices worsened impact of Hurricane Ian
A century ago, the southwest Florida coast was mostly swamps and shoals, prone to frequent flooding and almost impossible to navigate by boat.
Market Data | Oct 12, 2022
ABC: Construction Input Prices Inched Down in September; Up 41% Since February 2020
Construction input prices dipped 0.1% in September compared to the previous month, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data released today.