Indianapolis Sees Rising Demand for Multifamily Housing

Indianapolis Sees Rising Demand for Multifamily Housing

Indianapolis is known for its strong industrial real estate market, but it’s the Midwestern hub’s multifamily

Multifamily trend

Multifamily rent trends in Indianapolis via Multihousing News and Yardi Matrix.

sector that is making news right now.

Multihousing News broke down the Yardi Matrix “Indianapolis Rebounds” report, highlighting the surging demand for multifamily housing in Indy. With steady job creation, rising wages and low cost of living, Indiana’s capital has the perfect environment for multifamily growth.

As the story points out, Indianapolis has added more than 10,000 jobs in the transportation and distribution sector over the past year, further cementing its status as a major player in the Midwest. Its centralized location makes it attractive to companies like Amazon and Walmart (as well as others), and those companies are expanding. More of the same is expected going forward.

The addition of those jobs – plus jobs in the hospitality and health care sectors – attracts workers, and those workers need somewhere to live. Indianapolis has also added downtown hotels in the past year.

San Diego's downtown is a big draw for multifamily developers.

San Diego’s downtown is a big draw for multifamily developers.

Is Indianapolis a top multifamily market on par with California cities like Oakland, San Diego, San Francisco and San Jose, or even spots like Portland, Miami or Houston? Not quite. Multihousing News points out that even though multifamily demand has a record number of units coming by the end of the year, Indianapolis’ rent growth rate is expected to remain modest. However, it is clear that multifamily demand is picking up.

 

 

Millennials, Baby Boomers Still Driving CRE

Millennials, Baby Boomers Still Driving CRE

July 2016

The retail, healthcare, multifamily and hospitality sectors are all seeing gains from America’s two biggest generations — the Baby Boomers and the Millennials, as each reaches a different life stage.  According to research from Marcus & Millichap, these two groups comprise 150 million Americans whose spending makes up 30 percent of the U.S. GDP.  That’s a lot of buying power and a boost for the commercial real estate industry. Here’s a look at some key findings:

Bisnow multifamily yardi

Multifamily Gains — Millennials, the renting generation, have fueled the completion of 215,000 new apartment units over the past 12 months. With the absorption of 237,000 units, vacancy has fallen to 4.2 percent, leaving developers room to build even more.

Restaurants Rules — Because they’re not spending on houses and goods, many millennials are spending more on experiences. The bar and restaurant industry has seen a 6.5 percent gain in sales over the last year.

Hotel occupancy is up — to 60.7 percent in the first quarter of 2016, making it the second highest quarter on record, according to Marcus & Millichap.

Retail is stronger — SoBeverly Hills Marriottme millennial are starting to settle down and buy homes or move out from roommate situations, leading to a large increase in spending in several retail sectors. Both home furnishing and home improvement retail stores have seen a 3.6 percent increase over the past year.

Retail

Image via NREI Online

Don’t forget the Boomers — Medication sales, plus an expanded pool of Boomers with insurance pushed sales at drug stores up 8.3 percent from a year ago.

By 2020, 57 million people — 16 percent of the population — will be over 65. Don’t count this age group out, as the spending is likely to continue to drive these key sectors.

Multifamily growth expected to be slow, steady in Q2

Multifamily growth expected to be slow, steady in Q2

Multifamily growth

Multifamily growth in Houston was downgraded in a recent report by Yardi.

April 2016

After adjusting their estimates for the second quarter of 2016, commercial real estate experts are anticipating a period of slow, but steady, multifamily growth over the next three months.

Rents on multifamily properties reached an all-time high of $1,181 last month, rising 0.5 percent over February, according to the Yardi Matrix Monthly report. But the report also predicts that rent appreciation will taper off soon. National rents are already showing the signs, decreasing by 20 basis points from February 2015.

Of the 30 major metropolitan markets for which Yardi creates forecasts, 13 were downgraded from the end of first quarter, 11 were increased and six remain the same. The top markets and their expected rent growth included:

  • Portland (14.1 percent)
  • San Francisco (11 percent)
  • Sacramento (10.6 percent)
  • Denver (10.3 percent)

Mid-Atlantic markets Richmond, Va.; Washington, D.C.; and Baltimore were the only markets to fall below their long-term average for growth. This is likely due to their weakness in the high-end lifestyle rent sector.

See this Commercial Property Executive story for more.

(Somewhat) Affordable Housing

(Somewhat) Affordable Housing

March 2016Affordable housing

Nearly every day, we hear news of a new high-end apartment complex being built in a major metropolitan area. But new construction with lots of amenities is not what every renter is looking for, says David Schwartz, CEO and co-chairman of Waterton. His investment firm has spent much of the last few years looking for Class B and Class C value-add apartment properties, and renovating them for middle-income renters seeking affordable housing.

Industry experts see more of this from private investors on the horizon.

One current project for Waterton is the Vida Hollywood, a 25-year-old apartment complex in Hollywood, California. The company is renovating its 345 units, but rents in the building will still remain about $800 less than they would be at a Class-A building in the same area.

Barbara Byrne Denham, an economist with New York City research firm Reis, Inc., urges redevelopers not to interfere with Class B and Class C apartment buildings that are already fully occupied. In areas with high job growth and salaries to match, the existing renters might pay the higher prices to live in the renovated building. But in areas where people are just staying stable in their careers, the tenants looking for affordable housing might move out.

What should they do instead? And, what are investors chasing? Click here for more.

Origin Investments Hits it Big with $35M Sale of Lux24

Origin Investments Hits it Big with $35M Sale of Lux24

Origin Investments

March 2016

Origin Investments and Randolph Street Realty Capital hit it big for investors this week with the $35 million sale of Lux24, a 73-unit condominium project they repositioned after the condo meltdown.

The JV purchased the project out of bankruptcy in 2013, after its original developers ran into financial troubles. With a $19 million total investment, the team converted the property at 24 S. Morgan into a rental building, tapping into the hot downtown apartment market and the West Loop’s revitalization.

As reported in Crain’s, the team invested about $2.3 million to finish construction, reconfigure unfinished units, and move the fitness center. They also bought back a few condos that had been sold and leased up the ground floor retail space.

This project shows:

  • Buying right is important, but creatively repackaging an asset can help create tremendous value
  • Timing is everything and a great location doesn’t hurt
  • The West Loop/Fulton Market just keeps on going
Multifamily Market Draws Optimism From Freddie Mac

Multifamily Market Draws Optimism From Freddie Mac

February 2016

The year 2015 is one that multifamily investors will remember fondly.Multifamily

Higher-than-expected demand helped absorb most of the rental supply, keeping vacancy rates low. Meanwhile, rent continued to rise in many markets. Experts are split as to what investors should expect from multifamily in 2016. But Freddie Mac struck a cautiously optimistic tone in its newest Multifamily Outlook 2016 report.

Freddie Mac based its outlook on continued economic growth and the following key drivers:

  • Strength in the job market
  • Reduced affordability of owning a home

So, more people have jobs, and fewer people can afford to own homes. That makes renting an attractive option, especially in metropolitan markets.

Multifamily

Freddie Mac is cautiously optimistic about the multifamily market.

Freddie Mac does expect growth rates to moderate in 2016, but not as much as the more dire projections indicate. Relatively low vacancy rates in most markets will contribute to rent growth in the year ahead.

You might ask why Freddie Mac is being cautious. Well, it admits that turmoil in the financial markets is a cause for some concern. Still, it’s not nearly enough for Freddie Mac to be scared of the multifamily market anytime soon.

Read more about Freddie Mac’s multifamily outlook from Multi-Housing News.

Multifamily Markets Expected to Shine in 2016

Multifamily Markets Expected to Shine in 2016

Multifamily markets

The multifamily market of Washington, D.C., is poised to do well in 2016. (Photo by Ad Meskens/Wikimedia Commons)

January 2016

Experts from around the country hinted at their expectations for the year ahead in a recent wide-ranging GlobeSt.com feature on multifamily markets.

Much of the conversation centered on which multifamily markets will do well in terms of transactional activity in 2016. Multifamily performance has been strong in most markets during the economic recovery. But there are a few places to watch as investors continue to seek out rent growth and low vacancy rates.

Multifamily investment sales

Multifamily investment sales set records in 2015.

Multifamily investment sales set records in 2015.

Start with the old standbys New York, Washington, D.C., Miami and San Francisco. Bryan Sullivan, VP of acquisitions and investment at the Habitat Co., said those primary markets are still pulling in institutional and foreign capital. That’s especially good to see in the case of Washington, D.C., which underperformed in the first half of 2015 before seeing a drop in vacancy rates and some mild rent increases. Its multifamily market is on the mend.

Investors will also look to changing markets like Denver, Chicago, Atlanta, Charlotte and Nashville. What makes them changing markets? An influx of young professionals and companies that has legitimized some overlooked neighborhoods. Sullivan cited the example of Chicago’s West Loop, which has seen its growth start to accelerate.

As per usual, Millennials will be a factor. Gary Goodman, SVP of Acquisitions at Passco Cos., made a point to highlight Southeastern markets like Atlanta, Nashville and Tampa as especially appealing to that demographic. As a result, they are expected to be strong multifamily markets. These are trends we’ll keep an eye on!

Can multifamily investment sales continue record-setting ways?

Can multifamily investment sales continue record-setting ways?

Multifamily investment sales

Multifamily investment sales set records in 2015.

January 2016

After a record-setting 2015 for multifamily investment sales, there is some uncertainty regarding the market’s future performance.

A fourth-quarter surge resulted in investors pouring a record $150.6 billion into apartment properties in 2015. That figure was up 16 percent from 2014, according to data from CoStar. The $47.3 billion in apartment sales for the fourth-quarter of 2015 also broke a record, crushing a $38.4-billion quarter from 2014.

But despite the giant leap forward from 2014-15, early projections for multifamily investment sales in 2016 are strong, yet modest. That may be due to a variety of factors, including:

  • The high price of multifamily properties in many markets
  • A slowdown in the leasing of new properties
  • The downturn of apartment rents late in 2015

Hopes for a robust 2016 can be pinned to an influx of foreign buyers, according to research from JLL. That same research suggested a growth pace of between 5 and 10 percent for multifamily investment sales in the year ahead.

In an interview with CoStar, JLL international director David Williams said, “While institutional investors made up the majority of buyers in 2015, we expect foreign dollars to be the wild card in the year ahead.” The apartment sector should see more cross-border investment in 2016, giving multifamily sales a boost.

Maybe the record books are safe, but there’s still reason to believe multifamily investment sales will be strong in the year ahead.

93-Story Multifamily Planned in Chicago

93-Story Multifamily Planned in Chicago

Nov. 2015

New Multifamily Brings High Life to Chicago

79962_1445957199_2015_10_27_wandavista-large

The 93-story Wanda Vista Tower will bring 406 multifamily units, plus hotel rooms to Chicago

The proposed $1.6M Wanda Vista Tower in Lakeshore East will bring new heights to the downtown landscape. The 93-story multifamily tower is slated to include:

  • 406 luxury condos
  • 205 hotel rooms
  • 346 parking spaces

It would be the third-tallest skyscraper in Chicago at 1,144 feet tall. Magellan, the main developer of Lakeshore East, is partnering with Chinese investors the Wanda Group on the project.

In addition to the residential and hotel spaces, the Jeanne Gang-designed multifamily tower will contain two restaurants—the all-day Vista Eye and the Zhen Chinese restaurant on the 10th and 11th floors. With a connection to the Chicago Riverwalk, the developers will create an open space complete with public art to give back to the community.

Read more in Bisnow .

Multifamily Pushes Back On E-Commerce

Multifamily Pushes Back On E-Commerce

small-business-inventory-software1

Some multifamily managers are stopping package deliveries

Multifamily renters, beware! Don’t be so quick to ask Amazon to deliver your packages to the building’s management office. The strong e-commerce sales are hitting multifamily managers in the wallet. The time it takes for employees to check in and safeguard those packages is adding up!

Camden Property Trust, which has 59,000 multifamily units in 10 states, recently stopped accepting packages in its management offices after adding up $3.3 M in lost productivity on an estimated 1 million packages annually. 

Multifamily Tidbits

Consider this:

  • U.S. e-commerce sales are expected to reach $334 billion in 2015, up from $263 billion in 2013, according to Forrester Research.
  • U.S. e-commerce sales are expected to increase to $480 billion in 2019.
  • AvalonBay Communities, with 83K apartments, has tried installing electronic lockers in some properties to give residents access to packages. Other companies are testing this approach. 

Check out The Wall Street Journal for more. Will other multifamily management companies follow suit? Stay tuned! 

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