14C —April 26 - May 9, 2019 — Spring Preview — M id A tlantic

Real Estate Journal

V irginia M ultifamily By Altay Uzun, Marcus & Millichap Southeast Virginia multifamily market update


than half the jobs. The hiring dropped the unemployment rate below 3%, the lowest level

annual 30 basis points to 4.1% at the end the first quarter and the rate has dropped 270

cancy rate and improving rent growth are encouraging apartment construction. Dur- ing the past 12 months, 1,900 units were delivered, slightly above the five-year average. This year, deliveries will reach a 13-year annual high as al- most 2,300 rentals are due for completion, which will likely bump vacancy up and could expand concessions in select areas whenmultiple buildings begin leasing efforts. HAMPTON ROADS Hampton Roads’ local econ- omy is best known for tourism and defense but advanced

manufacturing, maritime and logistics, cybersecurity and biomedical technology are growing sectors that also con- tribute to apartment demand. In the year ahead, the rental market should also benefit from Dollar Tree relocating roughly 700 Family Dollar em- ployees to its new headquar- ters near Chesapeake. The facility is scheduled to open in 2020. During the past year, however, sizable job losses in the trade and transportation sector suppressed employ- ment as net 400 positions were eliminated. The tide seems to be turning as employers created 3,900 in the first two months of 2019. Robust de- mand for rentals in the past four quarters contracted va- cancy 90 basis points to 4.6% at the end of March. The rate is down 190 basis points from the recent peak at the end of 2013, even as developers placed nearly 11,000 apart- ments into service since then. As vacancy tightened, rent growth has increased. After a 2.8% gain one year ago, effec- tive rent climbed 3.4% to end the first quarter at an average of $1,064 per month. During 2019, builders are scheduled to complete less than 1,000 units, the lowest level of deliveries in more than five years, which should further reduce vacancy and push rent higher. SOUTHEAST VIRGINIA INVESTMENT SALES Strengthening apartment operations and the potential for higher returns are luring a wider range of buyers to Southeast Virginia. Out-of- state buyers, especially from New York, Washington, D.C., and California, stepped up purchasing and overtook the number of transactions by local buyers in 2018. Some investors focused on class A/B assets less than 15 years old with more than 150 units. These assets traded at cap rates that were generally in the high-5 to low-6% range. Most investors, however, tar- geted class C buildings over 40 years old that contained more than 100 units at first-year returns that were typically in the high-5 to mid-7% span. As- sets in downtown Richmond, Newport News and Norfolk were most sought after. Altay Uzun is a multi- family specialist in Mar- cus &Millichap’s Virginia office. 

ICHMOND Employment gains and students at local

universities c o n t r i bu t e t o s t e a d y demand for apartments in Virginia’s capital. Last y e a r , t h e a p a r tme n t market was

The higher rate of employment is prompting an increased demand for housing as more people can afford to move out on their own and many are choosing to rent.

since 2000. The higher rate of employment is prompting an increased demand for hous- ing as more people can afford to move out on their own and many are choosing to rent. As a result, vacancy tightened an

basis points over the past five years. During this time, the average effective rent jumped 23% to $1,073 per month in March. This includes a 5.4% gain in the most recent four quarters. The tightening va-

Altay Uzun

bolstered by job gains that reached a three-year high of 9,700 positions. The govern- ment and financial activities sectors accounted for more

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