Two Fundamental Risks in the Near Future: Demand for apartment will not be as robust. Home prices have shown a clear upward trend in recent months, and as home prices rise, households may feel a greater impetus to consider buying homes while mortgage rates remain low. A big wave of new construction is expected to come online starting in 2013.As always, real estate remains a local game: some metros and submarkets will see greater building and a subsequent dampening of demand that will hurt the prospects of rentals. Others will take increased inventory growth in stride. Certain metros like Seattle, Washington, DC and Suburban Maryland appear to be at risk, given that their occupancies have only just recovered to 2006 levels. On the other hand, although there are a lot of new projects coming online in Austin, it can be argued that demand for apartments will remain strong, given Austin’s large share of workers employed in the tech and energy sectors.
via Risk in the Multifamily Market | ReisReports.
LOS ANGELES-With the multifamily market being touted as both white-hot and a safe bet, a new trend is emerging in this industry sector: Small groups of investors who are inexperienced in owning and operating multifamily properties are outbidding savvier investors for these assets and driving up prices in the market. While this is good news for sellers—and who could blame them for shaking hands with the highest bidder?—CRE experts say it may not ultimately bode well for these investors and the market five years down the road, when rents haven’t risen appreciably enough to cover operating costs and mortgage payments, and these owners are forced to sell at a loss.
via GlobeSt.com – Inexperienced Multifamily Investors Could Damage Sector – Daily News Article.
News Date: 06/12/2012
Tightening occupancy and increasing effective rents, especially among class B and C properties, have contributed to a 48.5 percent year-over-year increase in new multifamily construction permits, according to Axiometrics. Its April report also found that national effective rents are up 2.5 percent year to date.
Class C multifamily properties showed the most momentum, posting a 2.7 percent year-to-date increase in effective rent and an occupancy rate of 91.9 percent. Improvements in class C occupancy account for much of the 33-basis-point increase in occupancy across all multifamily property types from March to April, according to the report. Class B properties followed closely with 2.7 percent year-to-date growth, while class A effective rents increased nearly 2.5 percent. The U.S. surpassed its previous peak for national effective rents, but occupancy has not reached the 2000 peak of 95.7 percent.
via Class B and C Multifamily Rents Rise | CCIM Institute.
After peaking in the fourth quarter of 2007, new construction in the REIT industry decreased sharply over the next two and half years. Steven Marks, managing director with Fitch Ratings, attributes that decrease to a demand slowdown coupled with REITs desire to preserve liquidity and reduce leverage. Although it has been slow and primarily concentrated in the multifamily and industrial sectors, Marks says sees the growth as a signal that REITs are organically building their portfolios.
via REITs Ramping Up Development.
The multifamily sector is in good shape for the foreseeable future, according to Calvin Schnure, NAREIT’s vice president of research and industry information, despite some market concerns about a rebound in new construction. He pointed out that there are approximately 3 million households that have “doubled up” since 2008, and many of those residents will be looking for a place of their own as the job market improves.The vacancy rate for apartments fell 60 basis points in the first quarter, to 8.8 percent. Schnure said that’s down more than 2 percentage points from its 2009 peak. Additionally, he said that in the first quarter alone, the number of occupied apartments jumped 8 percent, the strongest growth in demand for rental apartments since 1993.“So we’re seeing that the apartment sector still has quite a bit of momentum,” he explained.
via Multifamily Momentum Will Continue.
Since mid-2010, Master Lock, a manufacturer of padlocks and other security products, has brought 100 jobs back to Milwaukee that had previously been off-shored. Obama used the factory to discuss his Blueprint for an America Built to Last, which seeks to incentivize further creation of manufacturing jobs within the U.S. while removing deductions for shipping jobs overseas.
Other, larger examples dot the industrial landscape.
Japanese automaker Honda has plans to invest $98 million in its largest auto engine plant in Anna, Ohio. Heavy equipment manufacturer Caterpillar is opening an 850,000-sq.-ft. facility in Victoria, Texas, in the process of shifting production from Japan back to the U.S. In February, the firm announced it would also shutter a 62-year-old plant in London, Ontario that makes locomotives and move production to Muncie, Indiana.
via Made in the USA Again: What Onshoring Means for Commercial Real Estate.
A record-high was reached among Fannie Mae, Freddie Mac and the Federal Housing Administration who were responsible for originating $57.6 billion of last year’s $184.3 billion total, the most among investor groups. Life insurance companies and pension funds saw the second highest volume with $49.3 billion.Multifamily properties accounted for the greatest origination volume in terms of property types with $77.4 billion, while office properties made up $34.4 billion of originations. First liens represented 93% of the total dollar volume closed, the MBA said.
via National Mortgage News – Commercial and Multifamily Originations Increase in 2011 by 55% – News Briefing Article.
Real estate: the wealthy still believe
Real estate has long been a favourite asset class of the wealthy. Indeed, real estate remains one of the primary sources of wealth for many of the world’s wealthiest families. There is no reason to believe this will change in the future.
via The Globe and Mail: What high net worth investors are doing right now.
A Coming Deluge of Apartment ConstructionApr 10, 2012 12:18 PM, By Victor Calanog, Contributing ColumnistApartment fundamentals are performing at robust levels, with vacancies cratering to levels unseen in more than a decade. With few other real estate sectors offering such promising returns, developers are planning to open hundreds of thousands of new rental units in the next few years. Will the growth in new supply arrest improvements in occupancy and rents?
via A Coming Deluge of Apartment Construction.
At 94.2 percent, the occupancy rate for apartments in the Fort Myers/Naples area is the highest in the state, according to a report by ALN Apartment Data.Carrollton, Texas-based ALN, which tracks apartment complex data in six Southern states, said Fort Myers-Naples occupancy rose from 91.9 percent from February 2011 to February 2012.In the same period, the average monthly rent increased from $779 to $794, according to ALN.Authorities said the high occupancy reflects the plight of people losing their houses to foreclosure — plus some who have simply soured on home ownership.
via Southwest Florida apartments fullest in state | The News-Press | news-press.com.