SAN DIEGO—One of the reasons apartments have remained so strong in the real estate industry is they are much more than just a place to sleep, Gerson Law Firm APC‘s Gordon Gerson tells GlobeSt.com. In fact, many of today’s apartments have become lifestyle venues for residents, who view them as their long-term or even permanent home rather than a temporary place to live.
As GlobeSt.com reported last week, summer has been a strong season for apartment lending from Fannie Mae and Freddie Mac, at least from Gerson’s perspective. During the month of July, the firm closed loans on lender engagements that included 18 Fannie Mae and Freddie Mac multifamily loans for more than $62 million, as well as several CMBS, SBA credit union and bank loans, loan assumptions and modifications for a volume of transactions that exceeded $85 million.
Gerson says he sees no flattening out of this trend toward more apartment lending, and one of the reasons is how apartment living is shifting in the eyes of residents. “We’re closing loans on some apartments that are designed to keep people as permanent residents, not just to transition as part of their life. Some of the new apartment buildings that are going up are really incredible places. From the outside, they look like fortresses, but inside they’re self-contained communities. What looks like an urban fortress is really just the veneer of a castle-type setting. Inside, you have everything from pet spas and hair salons to full gyms. They’re built so you never want to leave there.”
What’s more, Gerson adds, the apartment boom is indicative that homeownership is not necessarily the golden ring for Americans anymore. “It’s scary as you see some of your friends want to sell their homes in nice towns like Encinitas, CA, and other suburbs and move downtown to rent. They have no interest in moving lawns.” Lack of affordability in the single-family-home sector is another reason for the apartment boom, he adds.
Gerson is also seeing a trend toward small-balance loans of less than $5 million for small projects since there has been a surge in the need for that product—not so much in California but in other parts of the country. “It’s project that this will be an important part of the market, not so much boutique properties, but smaller apartment projects.”
He also emphasizes the need for affordable housing. “Where are we going to put the hotel workers if we don’t have low-income housing?”