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Q&A: Population, Job Growth Driving Southeast Multifamily Growth

Ongoing population growth has been fueling commercial real estate growth in the Southeast for the past several years, and the multifamily sector has been one of the major beneficiaries of that boost, experiencing a level of development and investment that has been much higher than other sectors.

We caught up with Mark Boyce, managing director at Berkadia, to chat about the Southeast multifamily market and what he expects for the sector this year.

Q: What are some trends you see playing out in the Southeast multifamily market as we head into 2020?

A: We’re still seeing new capital flood the Southeast multifamily markets. Job growth continues to climb and net migration to the Southeast continues to outpace the rest of the country. Year-over-year, we’ve seen 50 basis points to 100 basis points in cap rate compression throughout the Carolinas. A lot of this compression is the result of rent growth and renter demand, which remains very strong and still has a significant runway, especially for Class B and C assets. Buyers have been willing to take on assets with light renovation strategies, given the rental increase that comes with that and improved operations. The renter demand for these Class B and C assets has also organically created meaningful rent growth. In many cases, an argument can be made that light renovation (i.e. kitchens, bathrooms, amenities) can yield ROI in the 30% range. It’s very challenging to replicate that type of return outside of real estate.

Q: There has been so much growth in the Southeast multifamily market over the past several years. Are developers/investors still bullish on the segment? How much longer can this growth continue?

A: Our team remains extremely bullish on the Southeast and specifically the Carolinas. There’s a sizable amount of the population moving towards the southeast and particularly the Carolinas. Job growth is currently booming, and the quality of life and cost of living are extremely attractive in the area. The tremendous growth in manufacturing jobs and wages in the Carolinas has driven value-add rent growth, and value-add and workforce product will continue to be a large focus in the apartment market. The delta between rents on 70’s, 80’s, and 90’s-built products when compared with new construction is extremely compelling.

Q: What are some of the areas and cities in the Southeast where there’s still a lot of opportunity for multifamily development, redevelopment and value-add investment?

A: I can only speak towards the Carolinas, but the major cities including Raleigh, Durham, Charlotte, Greenville and Charleston are all growing well above the national average.  We see a strong emphasis on the I-85 corridor as well as the coastal Carolinas, east of the I-95 corridor.

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For comments, questions or concerns, please contact David Cohen


Inside The Story

Connect With Berkadia’s Boyce

About David Cohen

David Cohen is Southeast Editorial Director at Connect Commercial Real Estate. David is a media veteran with more than 10 years of experience in journalism, copywriting and communications across a variety of roles. He is responsible for covering commercial real estate news and trends in the Southeast, Florida, Washington D.C. and Boston at Connect CRE as well as specializing in the Student Housing sector. Prior to joining Connect, David was the editor of Northeast Real Estate Business magazine and Student Housing Business magazine at France Media as well as spending time freelancing for ESPN and the Associated Press in the fast-paced field of live sports event production. He is also an owner and investor in multifamily real estate in Atlanta, GA. David currently resides in Atlanta and graduated from the College of Communication & Information at the University of Tennessee Knoxville.

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