Top 5 Markets for Multifamily Transactions
April 24, 2020 I Razvan Cimpean I MULTIHOUSINGNEWS.com[/fusion_text][fusion_content_boxes layout="icon-with-title" columns="1" heading_size="2" iconspin="no" icon_align="left" animation_direction="left" animation_speed="0.3" hide_on_mobile="small-visibility,medium-visibility,large-visibility"][fusion_content_box title="" backgroundcolor="" icon="" iconflip="" iconrotate="" iconspin="" iconcolor="" circlecolor="" circlebordercolor="" image="" image_id="" image_max_width="" link="https://www.multihousingnews.com/post/top-5-markets-for-multifamily-transactions/" linktext="Read More" animation_type="" animation_direction="left" animation_speed="0.3" link_target="_blank"]The COVID-19 outbreak has heavily impacted the multifamily market, both in terms of transaction and construction activity. Compared to the first quarter of 2019, investment volume dropped nationwide by more than 85 percent in the first three months of 2020, according to Yardi Matrix data.
Investment activity in the first quarter has been concentrated in major multifamily metros. As a result, the five markets on this list accounted for more than a third of the total transaction volume for the quarter.
Second fastest growing city in Florida is Orlando
Its outstanding demographic gains positioned Orlando as one of Florida’s fastest-growing markets in 2019, as well as one of the most sought-after multifamily markets in the nation. The metro’s population expanded by more than 20 percent between 2010 and July 2019. Employers added almost 55,000 jobs in the 12 months ending in February, the bulk of which were in the leisure and hospitality and professional and business services sectors. However, with more than 1.5 million unemployment claims submitted between March 15 and April 20 throughout Florida, the state’s hospitality market has been hit hard by the outbreak, which undoubtedly means deep job cuts for Orlando as well.
With strong multifamily fundamentals prior to the global health crisis, investors closed 17 deals totaling $818 million during the first quarter. That’s a 70 percent decline in transaction volume compared to the same period of last year. In Orlando’s largest multifamily transaction this year so far, CBRE Global Investors paid $160 million to Unicorp National Developments for a two-community portfolio totaling a little more than 600 units. Other big-dollar transactions in the first quarter included Harbor Group International’s $1.9 deal with Aragon Holdings to acquire 36 communities in eight states, including Arizona and Florida. Two of the 36 assets are in Orlando.
The metro’s diversified economy, relatively low cost of living and doing business translated into strong employment and demographic gains in recent years. Atlanta’s population increased by 13.9 percent from the most recent Census data, according to July 2019 estimates. Before the outbreak, employment growth showed no signs of slowing down—71,000 positions were added in the 12 months ending in February, equal to a 2.4 percent increase. But as the city took measures to curb the spread of the virus, the robust performance of the employment market felt the impact. According to State Labor Commissioner Mark Butler, unemployment claims in Georgia are expected to surpass 1 million, with more than 850,000 processed so far.
Investors closed deals totaling $893 million in the first quarter, a drop of more than 85 percent compared to the same interval in 2019. The largest multifamily deal in Atlanta during the first three months of 2020 was Nuveen Real Estate’s $88.1 million acquisition of Modera Vinings from Mill Creek Residential Trust. Over the past two years, Nuveen has expanded its Atlanta portfolio by more than 1,000 units.
Its efforts to diversify its economy, coupled with a skilled workforce and a business-friendly climate, shaped Dallas into a great destination for companies looking to expand in new markets. As a result, the metro’s financial activities sector expanded significantly, adding the most jobs for the sector in the country last year. A strong economy also contributed to a spike in population growth, which rose 19.0 percent between April 2010 and July 2019. However, current economic conditions have put Dallas’ outstanding expansion on hold. Almost 1.6 million workers have submitted unemployment claims in Texas so far.
Transaction volume over the first quarter totaled $910 million, a decline of more than 80 percent compared to the same period of last year. Nine of the 36 assets Aragon Holdings sold to Harbor Group International are in Dallas. Additionally, Intercontinental Real Estate closed one of the biggest deals in the metro this year through March—the $98.3 million acquisition of The Kincaid at Legacy, sold by Trammell Crow Residential.
The metro is one of the more affordable multifamily markets on this list, with an average rent of $1,216 as of March, 17.5 percent below the national average of $1,474. As a result, Phoenix has witnessed a significant population increase, up by 18.0 percent from the 2010 Census, according to July 2019 estimates. That also boosted the employment market, with 76,900 jobs added in the 12 months ending in February, equal to a 3.4 percent uptick. However, the pandemic has impacted the employment sector, with Arizona paying a record $151 million in unemployment benefits as of last week. More than 400,000 workers have filed for unemployment over the past five weeks.
In line with national trends, compared to the same period of last year, the metro’s transaction volume plummeted in the first quarter to $1 billion. That represents almost an 85 percent decline, as investors closed 35 percent fewer deals and focused increasingly on Class B and C properties. FSC Realty paid $78.5 million to Evergreen Development for the 306-unit Parc Midtown. The deal brings FSC Realty’s Phoenix portfolio to more than 1,500 units. Last year, the company also acquired the 225-unit Thomas at Midtown from Wood Partners for $52 million.
Image via Pixabay
Bolstered by steady employment and population growth, Denver’s multifamily market expanded at record levels in recent years. The metro, which was among the top 5 markets for deliveries in 2019, added 48,000 jobs in the 12 months ending in February, equal to a 2.4 percent increase. The majority of these jobs were in the education and health services and professional and business services sectors. Denver’s population grew by 16.7 percent since the most recent Census data, according to July 2019 projections. But with more than 230,000 workers filing for unemployment benefits throughout Colorado, Denver’s job market is also burdened by the pandemic.
Investment activity in the metro has been heavily impacted by the outbreak as well, with investors closing 21 deals totaling $1.1 billion, a 76 percent decline compared to the same interval in 2019. Harbor Group International was the biggest buyer in the first quarter in Denver, paying Aragon Holdings $505 million for eight assets totaling 2,500 apartments. Additionally, Oak Coast Properties continued its buying spree over the first three months of 2020 by purchasing The Courtyards at Buckley from JRK Property Holdings for $143 million.
Yardi Matrix covers all multifamily properties of 50+ units in size across 133 markets in the United States. This ranking reflects transactions for properties within that sample group.
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