16A — January 16 - 29, 2015 — M id A tlantic
Real Estate Journal
www.marejournal.com
2015 F orecast By Ken Uranowitz, Gebroe-Hammer Associates
Multi-family investment outlook: White-hot investor demand to set new benchmarks
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re-recession pricing, abundant retrofit op- portunities, historically
unit. This white-hot environ- ment and widespread shortage of supply, however, are breed- ing competition. Gaining entry can be challenging, at best, and off-market transactions have become the norm. Now more than ever, it is imperative to partner with an investment brokerage firm with decades of experience, depth of market expertise and long-term owner relationships. In both suburban and urban areas, older, post-World War II garden-style and mid-rise apartments will outpace their newer counterparts in the com-
ing year. This is due to supply constraints and the high-barri- er-to-entry of Class-A product. Age allows investors the great- est opportunity to breathe new life into an outdated building through unit renovations and modernization of common area features. Both have proven to increase revenue and de- crease turnover rates, while also reducing maintenance costs following the initial up- grade investment. Kitchens, bathrooms and common area renovations have become the “standard” for capital improve- ment programs.
These repositioned proper- ties, along with a weak single- family home market, have contributed toward a steady rental uptick that peaked in November at its highest point nationally since August 2011, according to Zillow. The same study reports a 3.6% and 4.4% increase in the New York/ New Jersey and Philadelphia MSAs, respectively. Major strides are expected to be the theme in 2015 as well, with asking rents advancing at a pace commensurate with 2014. Even if the jobmarket makes miraculous strides this year,
occupancy rates will not waver. In-place tenants, the major- ity of whom are hard-working families unable to qualify for a residential mortgage and/or don’t have access to ready cash for a down payment, will stay put while a strong renter-base pipeline builds. From Millennials to Baby Boomers, rental living has gained greater momentum as the lifestyle of choice. Retirees are shedding their empty nests at a faster pace now that hous- ing prices are no longer signifi- cantly undervalued. Simulta- neously, the 25- to 35-year-old demographic continues to reject homeownership alto- gether, based on their parents’ losses during the mortgage crisis, lack of creditworthiness and disinterest in home main- tenance. Despite the 30+ year age gap between Millennials and Baby Boomers, both want the same thing – a live/work/ play rental lifestyle. While multi-family construc- tion starts are on the rise, there is no immediate “health” threat to existing properties in the Mid-Atlantic region. Largely confined to cities im- plementing more efficient ur- ban planning and mass transit infrastructure improvements, many abandoned industrial properties are now being con- verted to residential Class-A properties. Existing class B+ or val- ue-add-opportunity B and C property investors need not be concerned. Historically, these properties are in greatest demand among workforce ten- ants. And by rendering older buildings more competitive, owners are leveraging city- wide gentrification associated with new construction in the neighborhood. Even in suburban locales like densely populated North- ern New Jersey, mixed-use projects that have been stalled for years are now underway with positive rippling effects. This holds true in Passaic and Bergen County, which coinci- dentally is one of the highest- barrier-to-entry markets in the region. While 2014 was the stron- gest post-Great Recession year for multi-family investments on record, with firms like Gebroe-Hammer recording more than 105 deals involving 7,200+ units, 2015’s theme will be major rent growth. Among continued on page 18A
low interest r a t e s a n d free-flowing c a p i t a l – these are a few of multi- family inves- tors’ favorite things. Just l i k e t h e
Ken Uranowitz
years since the Great Reces- sion leading up to 2015, un- precedented investor demand will continue to be fed by falling cap rates and rising prices per
DOMINANCE.
Dominance: “...most in uential, having a commanding position.” (Webster’s) New Jersey’s dominant brokerage rm specializing in the sale of multi-family, retail, and commercial investment properties for private investors, REITS, and other institutional clients.
EPIC 2014 105 Deals 7,200+ Units Sold
INVESTMENT REAL ESTATE
2 West North eld Road, Livingston, NJ 07039 Tel. (973) 994-4500 Fax (973) 994-9752
Visit us on the web at: www.gebroehammer.com Email: info@gebroehammer.com
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