"We literally have 50 buyers for class A properties and maybe five to 10 for class C multifamily product when they come up," says Steven H. Rubin, managing broker for Oak Brook, IL-based Inland Real Estate Sales Inc. "Everybody's buying and not too many people are selling."

Capitalization rates for class A in the strongest sectors such as Lincoln Park are often down to 6%, as apartment operators compete with condominium converters, Rubin tells Midwest bureau chief Mark Ruda. Cap rates in other neighborhoods are 8% to 9%.

Higher caps, up to 12%, may be found in older Chicago sectors such as Humboldt Park on the west side or Washington Park on the south side. "We keep scratching our heads, trying to find out what areas aren't hot yet," Rubin states.

Per-unit prices are moving up quickly in all of the submarkets. In East Rogers Park on the north end of the city's lakefront, for example, $20,000-per-unit properties two years ago are now asking $50,000 per unit. East of Sheridan Road, $70,000 per unit is not uncommon.

In Berwyn, IL, a blue-collar west suburb, Kevin List, one of Rubin's brokers, sold a 10-unit building in eight days for $20,000 over the listing price--$505,000 or $50,500 per unit. "There's such a huge demand for apartment product because of all the underdevelopment," Rubin says.

In the Southwest, Dallas-Ft. Worth brokers are moving a lot of class C properties upwards of $25,000 per unit, low compared to class A and class B product but still in strong demand. Properties are selling 30 to 45 days after hitting the market.

"It's as short as I've seen it in years," Sam Lewis, vice president of Grubb & Ellis in Dallas, tells GlobeSt.com Southwest bureau chief Connie Gore. "This year, prices overall have been up."

Jeff Pritchard of O'Boyle Properties Inc., also in Dallas, is seeing B product going for $45,000 to $65,000 per unit and class A is getting $70,000 to $100,000 per unit. North Dallas remains the hottest apartment investment market. "The long-term interest rate for debt has been very good to the marketplace," Pritchard tells Gore.

Supply of all product classes is a critical issue in the Northeast, especially in Connecticut from Fairfield to Greenwich. "There are fewer and fewer units on the market at this time," Guy Bocicaut, a broker at Coldwell Banker's Norwalk, CT branch, tells GlobeSt.com Northeast bureau chief Glen Thompson. "As the gap between salaries and the price of single-family homes continues to widen, more people are going into multifamily situations." That's why well-located properties don't stay on the market long, he tells Thompson.

In metro Orlando, sales are in the basement. In fact, only seven investment transactions were recorded in the first half. In the 12 months ending June 30, 12 sales occurred. There are 129,000 apartment units in metro Orlando. "Demand for product remains high, but the supply of properties for sale has been low," Robert W. Miller, senior vice president, CB Richard Ellis Inc. in Orlando, tells GlobeSt.com.

The seven properties totaled 1,298 units and sold for a total $68.15 million or an average $52,505 per unit. That performance compares with 24 recorded sales last year, which yielded $308.1 million or an average $49,093 per unit.

Of the seven sales in the first six months of this year, only one was a class A property and only two consisted of more than 160 units. "Transaction volume was down 67% from the same period last year," Miller says.

Instant Insights /

GlobeSt.com BIG PICTURE: Investors Take Second Look at B and C Multifamily Product

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