Private Equity Leading Multifamily Investments

Kevin May Director, GRS Group (310) 614-9329kmay@grs-global.com

Kevin May
Director, GRS Group
(310) 614-9329
kmay@grs-global.com

Though construction of multifamily might be slowing down from its prior pace, transactions in this commercial real estate sector don’t appear to be waning.

Private equity firms are leading the purchasers of apartment assets, according to a recent JLL multifamily report. Of the $35.4 billion in multifamily investment that took place during this year’s first quarter, private equity comprised $8.2 billion of total transactions, the firm said. The overall transaction activity rose 8.6 percent year over year in the quarter.

Meanwhile, pricing has continued to increase, with Washington. D.C., leading the way with a major 43 percent year-on-year jump. Orlando followed in the rankings of major metro areas with a 41 percent rise, and the national average transaction increase for multifamily properties jumped 12.6 percent.

With a slight letup in construction, vacancy rates are remaining strong, at 4.4 percent nationally during the period, marking the fourth straight quarter of them being below five percent. This displays that the market is still strong, and we aren’t seeing the expected multifamily bubble that some have predicted.

Marcus & Millichap views the continued success in the apartment sector due to improvements in the overall economy. Its summer multifamily report stated that job growth, particularly in the retail and healthcare industries are helping to drive this, along with the millennial generation being more focused on living in rental assets as opposed to purchasing single-family homes. About two thirds of this generation are living in apartments in urban areas, as opposed to deciding to buy a house.

This is causing an uptick in rental rates. Marcus said that in the first-quarter rents increased by 5.9 percent, besting the 5.5-percent average boost for all of 2015.

It also noted that Fannie Mae and Freddie Mac were continuing to offer loans of about 80 percent of the overall value of an asset being purchased. Additionally, with problems in the global economy, foreign investment into U.S. multifamily product should remain high, spiking more demand, and compressing capitalization rates.

It seems as though the fears of a multifamily bubble have not yet been realized, and this sector of commercial real estate is going strong.

On the assessment, title insurance and due diligence front, GRS Group is capable of handling the needs of both investors and brokers as the transactions continue to keep going strong. Please call me at 310.614.9329 or email me at kmay@grs-global.com if we can ever be of assistance. 

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