Apartment Sector Sustains Positive Outlook; Marcus & Millichap Report
Accelerating household formation, underpinned by the tight U.S. labor market, will continue to support apartment rental demand in 2019, predicts Marcus & Millichap in its 2019 Multifamily Investment Forecast Report. The report points out evolving recruiting practices and shifting demographics will favor a variety of metros, including several smaller cities.
In addition, tax reform and subdued single-family home sales will restrain the national vacancy rate, despite record apartment construction levels. The coming year offers a dynamic climate for investors, according to the Marcus & Millichap report.
Key report findings include:
Minneapolis-St. Paul climbed two spots to head this year’s National Multifamily Index. It is the only Midwest market to break into the top 20. San Diego also inched up two notches on solid rent growth to claim second place.
Neighboring Florida metros Orlando (No. 6) and Tampa-St. Petersburg (No. 12) registered the largest advances in this year’s Index, leaping 11 and nine places, respectively.
As new households are formed next year, much of the rental demand will center on apartments that serve the traditional workforce: Class B and C properties.
New inventory largely caters to more affluent renters. As a result, Class A vacancy is expected to rise to 5.8%, while Class B apartment vacancy remains relatively stable at 4.7%. The most affordable segment of the market, Class C apartments, faces strong demand, and vacancy for these rentals is expected to tighten to 3.9%, its lowest year-end level in 19 years.
While primary markets such as Boston, Los Angeles, the Bay Area and New York City are expected to see the largest dollar rent increases, smaller metros are generating faster increases on a percentage basis. Metros across the Southeast and Midwest in particular are generating outsize employment growth and housing demand.
Marcus & Millichap notes, upward pressure on short-term yields has increased concern an inverted yield curve could occur, thus weighing down confidence levels and possibly eroding consumption and stalling the growth cycle.
Most lenders, particularly FannieMae and FreddieMac, have adapted to a more fluid financial climate. When Treasury rates increased in the third quarter, many lenders tightened their spreads to cushion volatility. Marcus & Millichap reports lenders remain cautious, adopting tighter underwriting standards, but aggressively competing to place capital into apartment assets.
Strong demand drivers supporting long-term yield models will counter-balance much of today’s market volatility, encouraging investors to look beyond any short-term turbulence, predicts Marcus & Millichap.
Dennis Kaiser is Vice President of Content and Public Relations for Connect Commercial Real Estate. Dennis is a communications leader with more than 30 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect’s client content operations and is involved in a range of initiatives ranging from content strategy, message development, copywriting, media relations, social media and content marketing services.
In his most recent corporate communications roles, he led a regional public relations effort across Southern California for CBRE, played a key marketing role on JLL’s national retail team, and was responsible for directing the global public relations effort at ValleyCrest, the nation’s largest commercial landscape services company.
In addition to his vast commercial real estate experience, Dennis has worked on communications and launch strategies for a number of residential projects such as Disney’s Celebration in Florida, Ritter Ranch in Palmdale California (7,200 homes, 22,000 acres), WaterColor in Florida and PremierGarage in Phoenix.
Dennis’s agency background included firms such as Idea Hall and Macy + Associates. He has earned an outstanding reputation with organization leaders as a trusted advisor, strategic program implementer, consensus builder and exceptional collaborator.
Dennis has developed and managed national communications programs for Fortune 500 companies to start-ups, both public and private. He’s successfully worked with journalists across the globe representing clients involved in major-breaking news stories, product launches, media tours, and company news announcements.
Dennis has been involved in a host of charitable and community organizations including the American Cancer Society, Easter Seals, BoyScouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and Thunderbirds Charities.
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