Apartment property performance in 2015 continued to outperform even the strong performance seen in 2014 and 2013, according to the latest financial data collected on thousands of multifamily complexes. And the net operating income performance for the property sector may still head higher. The combined 2015 net operating income at nearly 5,900 conventional multifamily complexes reporting year-end numbers totaled $8.16 billion, according to Fannie Mae and Freddie Mac data collected through April and analyzed by CoStar Group. Those complexes contained 1.16 million apartment units — consequently representing NOI per unit of $7,044.
Vancouver, BC-based Macdonald Development Corporation (MDC) is expanding its Arizona presence with the purchase of 0.403 acres of CC-zoned land, which is located at 6th Street and College Avenue in a premier downtown location. MDC purchased a 50% interest in the land parcel from property owner, Spike Lawrence, co-founder of Tempe-based Lawrence & Geyser Development Corp. Lawrence will maintain 50% ownership in the land, and work with MDC and Bill Borders of Phoenix-based ARC Construction to create the vision for the development.
While real estate sales across all major property types dropped 20 percent in the first quarter, apartments were the only sector that reported a year-over-year increase. U.S. apartment sales surged 33 percent last year to $151.8 billion, and that momentum has carried over into first quarter of this year with another $38.6 billion in sales, according a recent report by apartment listing and data specialist Abodo, citing Real Capital Analytics data.
The U.S. retail real estate market recorded 11 million square feet of net absorption in the first quarter of 2016, causing the nation’s average vacancy rate to tick down to 6%, the lowest quarterly level since the Great Recession. Despite a new wave of store closings and weaker-than-expected retail sales in the first quarter, solid U.S. job growth and wage gains suggest that retail demand should rebound over the remainder of 2016, said Suzanne Mulvee, CoStar Portfolio Strategy director of U.S. research, retail, during CoStar’s first-quarter State of the U.S. Retail Market Review and Forecast. Mulvee noted that a similarly weak first quarter occurred in 2015, followed by accelerated activity in the second half of the year.
For most of this cycle, luxury apartments have been opening in gateway markets, like San Francisco and Washington, D.C. But RentCafe’s Nadia Balint says this luxury trend is spreading to under-the-radar locales, like Kansas City and Milwaukee too. Ultimately, that just shifts the scales even further in favor of luxury.
Whether it seems like it or not, Arizona’s economy is doing well for now and is expected to post its best year in a decade, state economists said Wednesday. Jobs, wages and population should continue to set new post-recession marks for Arizona, which has seen a burst of growth in industries such as finance and health care, as well as construction and service-sector work, said Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at the W.P. Carey School of Business at Arizona State University.
Looking for a great place to conduct business? Well, look no further: Arizona has been ranked one of the best places in the country to do business, according to a recent survey. Chief Executive Magazine’s annual “Best & Worst States for Business” found that Arizona ranked No. 6 in the country for business, climbing three spots from last year.
Cushman & Wakefield announced today the sale of the Presson Portfolio, a 312,155 square foot (sf), three property portfolio in Tempe and Mesa, Ariz. Birtcher Anderson Realty, based out of San Juan Capistrano, Calif., purchased the portfolio for $26.57 million from Presson Companies.
The City of Scottsdale Development Review Board will consider a new mixed-use project, which will bring a five-story, 77-unit apartment complex to the NWC of Scottsdale Road and Earll Drive. Developer Cypress Developments, LLC seeks to rezone a pair of commercial parcels and raze three rundown commercial buildings to make way for the new development, to be called L’Esperance. In addition to 107KSF of residential space, the complex will include a 5,225SF commercial/retail space along Scottsdale Road.
Preliminary construction work on the next leg of Mesa’s light rail line could begin as soon as August, according to city transportation officials. Engineers are expected to have a detailed design for the $153M, 1.9-mile addition — which would extend tracks east along Main Street from Mesa Drive to Gilbert Road — nearly finished by July. The extension would add two stations and a park-and-ride to the line.
Net lease retail investment is hitting new lows, but that’s a sign of its high esteem among investors. During the first quarter, median cap rates for single-tenant retail properties dropped to 6.18 percent, setting a record, according to a report published in April by The Boulder Group. That represents a decline of 7 basis points from the previous quarter and a 22-basis-point decline year over year.
The economic data released last week was mixed but mostly positive. The growth in employment for April was a disappointment compared to the trend of the last 12 months and bears watching. Labor force participation also dipped slightly, reversing gains from prior months.
It’s no surprise to hear that the Phoenix-Mesa Greater Metro area is currently undergoing billions of dollars of development–anyone that drives around can see the money being spent: buildings going up, old facilities being renovated, new facilities being created from nothing. Coming along with this development has been the rise of the ‘Master Planned Community’, as they call it.
Grand Canyon Education Inc. (Nasdaq: LOPE) plans to spend $180 million in construction projects this year, but that number is expected to drop as supply finally catches up with demand. The Phoenix-based operator of Grand Canyon University spent $49.8 million during the first quarter of 2016.
More people are renting than buying these days and they’re not just millennials. Renters occupied about 36.3% of households last year, the highest figure in a decade, according to a new Census Bureau report out last week. At the same time, homeownership dropped to 63.6% compared to 69% ten years ago.
Institutional investors continue to buy single-family rental homes. “We think this is a great business,” says Jonathan Olsen, managing director and head of capital markets for Invitation Homes, an owner and investor in rental houses, founded by Blackstone Group. “We are still actively buying today.”
From a capital markets and investment perspective, last year was one for the history books for the apartment market. Apartment transactions rose to an all-time record of $150 billion in 2015, according to Real Capital Analytics, toppling the previous year’s record. Total units sold surpassed 1.2 million for the first time ever. And the average price of new apartment homes set yet another new record, at $136,130, while cap rates correspondingly fell to all-time lows.
The Upside: Increased Quality of Newly Issued CMBS Loans. Bank and CMBS loan originators tightened their lending standards for all types of commercial real estate loans during the first quarter, a marked reversal from the previous few years.
There’s no doubt that now is an interesting time in the mortgage market for multifamily assets located in secondary locations, brimming with potential, promise and uncertainty. With cap rates compressed in the majority of primary markets located in coastal cities across the U.S., many of the industry’s largest players are turning to secondary markets for opportunities to purchase properties with higher growth, and therefore yield potential. This is driving aggressive capital activity in these markets and resulting in upward pressure on multifamily rental rates.
Colliers International in Greater Phoenix released its Retail Research and Forecast Report for first quarter 2016. The Greater Phoenix retail market opened 2016 on a fairly high note, with net absorption surging during a time that is typically a soft period. Net absorption topped 675KSF, the strongest first quarter for net tenant demand since 2008. Continued absorption is anticipated in the quarters ahead, bringing the forecast total for all of 2016 to approximately 2.2MSF.
The City of Chandler Planning and Zoning Commission at its May 4 meeting approved rezoning 5.4 acres of a golf course’s former driving range to be redeveloped into a luxury multifamily community. From developer Wood Partners, the Alta San Marcos project would be located along the south side of Chandler Boulevard, just a few blocks west of Arizona Avenue.
As the cooling effect of higher cost of debt and elevated prices factored into market sentiment earlier this year the results are showing up in the readings of the CoStar Commercial Repeat-Sale Indices (CCRSI), reflecting a slow down in activity from the robust growth in commercial real estate prices and transaction volume seen over the past two years.
The borrowers who depend on CMBS loans can breathe a little easier. “CMBS has come back substantially and all CMBS lenders are quoting and actively chasing deals,” says John Manning, managing director for commercial real estate services firm JLL.
The Federal Housing Finance Agency (FHFA) today increased the 2016 multifamily lending caps for Fannie Mae and Freddie Mac from $31 billion to $35 billion, effective immediately. The adjustment is based on increased estimates of the overall size of the 2016 multifamily finance market, which the FHFA said is larger than it had previously estimated due to continued high levels of property acquisitions and deliveries of newly constructed apartment units, as well as record levels of loan maturities requiring refinancing.
Optima Kierland, a high-rise luxury condominium community in the North Scottsdale Kierland neighborhood, has opened for sales to a highly receptive market, with an exuberant homebuyer response to the $500 million project, which represents the next evolution of sophisticated urban living and design for Optima, designer and developer of distinctive, architecturally significant communities in Phoenix, Scottsdale and the Chicago metropolitan area.