WASHINGTON, DC-Washington’s red-hot multifamily space is entering a new phase—one in which institutional buyers elbow aside smaller buyers to grab as many units as possible in one swoop. Portfolio sales, in other words, are about to step up significantly, Al Cissel, managing director of Jones Lang LaSalle’s Mid-Atlantic Multifamily Capital Markets, tells GlobeSt.com.
JLL is working on three to four possible off-market portfolio sales here and elsewhere in the Mid-Atlantic region, he says. Their average size is between 1,200 to 1,500 to 3,000 units. There is growing demand for such deals, he says. “We are hearing from buyers that more and more they are looking for multifamily portfolios, because of the cost and operational efficiencies.”
Indeed, this trend has been percolating for some time. Investor demand for bulk transactions caused class B portfolio sales to account for more than 20% of the more than $4 billion in total transaction volume in the DC metro area in 2011, JLL notes.
A sudden flurry of deals now, however, should not be surprising because the fourth quarter was so strange. Buyers pulled back from the market, spooked by the troubles in Europe and the US fiscal issues bogging down Congress, Cissel says.
New buyers are also entering the market, namely from overseas markets. “There is a lot of international capital out there interested in Washington-area product. A lot of equity, in general, in fact, that can handle and prefers large transactions.”
Smaller deals, though, are not off the table, Cissel adds—those too are getting attention, just by different buyers. “All parts of the multifamily market right now are very active.”
Price points for these deals vary widely, he notes, depending of course on the complex and its location. “We are seeing prices discussed that range from $100,000 per unit to $150,000 per unit to $275,000 per unit.”
That 2012 will be a strong investment year for multifamily was one of the findings of an informal survey of the more than 300 multifamily brokers, investors and developers who attended RealShare’s Apartments East conference in Washington, D.C. in mid-February.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
